<PAGE>
SMITH BARNEY
APPRECIATION
1994 FUND INC.
ANNUAL
REPORT ..............................
DECEMBER 31, 1994
SMITH BARNEY MUTUAL FUNDS
[LOGO] INVESTING FOR YOUR FUTURE.
EVERY DAY.
<PAGE>
DEAR SHAREHOLDER:
APPRECIATION FUND INC.
On the surface, 1994 was not very exciting for the stock markets, with the
popular averages finishing the year about where they began. The volatility of
the averages was not exceptional either, with no move of more than 10% in
either direction. However, it was a very easy year in which to lose money, and
a very difficult one to sustain any profits. Because of the lack of a sustained
move in either direction by the averages, many managers tried to swing in or
out of holdings quickly, accentuating moves in individual securities. Laborious
gains in individual stocks often evaporated in hours, as so-called investors
shot first and asked questions later, or more likely, never bothered to ask.
For the full year, the Fund declined 0.77%, 1.53%, 1.41% and 0.41%,
respectively, for Class A, Class B, Class C and Class Z shares as compared to
an increase in the Standard & Poor's 500 Stock Index of 1.31%. In the fifteen
years since we assumed management of this Fund, we have stated repeatedly that
our goal is to earn consistent positive returns for shareholders. While we
regret the minus sign, this was only the second year out of fifteen that we
have not achieved a positive return and on both occasions we have contained the
decline to less than 2%. The good news is that, as we outline below, we believe
1995 will offer diversified portfolios, such as the Fund, a better foundation
on which to earn positive returns.
In our opinion, there were two general reasons for the tough environment last
year. One was very straight-forward -- the sharp rise in interest rates. The
other was more subtle -- the slow unwinding of prior speculative excesses.
Interestingly, we believe both factors may have set the stage for a better
market environment in 1995. We have found that the best stock markets come out
of an environment of skepticism, coupled with a perceived ending of Federal
Reserve tightening. The first condition is in place, and the second is becoming
increasingly likely and could turn out to be a positive surprise if business
cools faster than is expected.
When the Federal Reserve began to raise short-term interest rates to deal with a
perceived inflation threat, it set off a chain reaction in the fixed-income
markets. First, a deleveraging began, whereby speculators who had borrowed
heavily to buy bonds had to liquidate unprofitable positions. That sent
long-term interest rates soaring, and led to a liquidation of bond funds by
investors who earlier had sought higher yields on short-term savings. The
accelerated selling caused the worst bond market collapse since the 1920s.
While overall we did not provide strong returns in 1994, there were some good
winners in the Fund, including Johnson & Johnson, Amoco, American International
Group, Gillette, and Coca Cola. Part of the difficulty with the market has been
the rapidity with which stocks decline on either no news, or even on news which
is
1
<PAGE>
positive, but does not exceed high expectations. Stocks such as Eastman Kodak,
DuPont, Fannie Mae and Xerox, which were big winners earlier in the year, saw
their gains erased in a matter of days. We have also had our share of poor
performers, most prominently in the auto and financial sectors which, despite
good earnings results, went down as interest rates rose. We believe that the
fundamental outlook for these companies remains good, and that the stocks have
over-reacted on the downside. Auto stocks, while not a huge sector of the
portfolio, seem particularly cheap even if sales begin to flatten.
A year ago, we expressed considerable caution about the stock market, not
because we thought interest rates would go up as much as they have, but because
of the overly exuberant attitude of equity investors. In fact, in 1994 there was
a correction of these speculative excesses as: the NASDAQ market had an
intra-year tumble; the new-issue market dried up considerably; and the emerging
market craze was dealt a crushing blow by the Mexican market collapse. Finally,
the potential penalty for stretching for extra yield was hammered home by the
Orange County, California bankruptcy. Meanwhile, the economy has been very good,
and inflation for the year was only 2.7% (and we believe this rate is probably
overstated because of all the competition at the retail level). 1995 is likely
to be another good year for business, though the Federal Reserve seems
determined to materially slow things down.
The dilemma for the stock market seems to be that there are very few valuation
extremes. Stocks are neither compellingly cheap, nor particularly expensive.
Therefore, a sustained move in either direction seems unlikely. However, we are
finding and emphasizing plenty of companies with good fundamental prospects that
have had potential disappointments factored into their stock prices or suffered
from disbelieving investors. American Home Products and Boeing are important new
positions for the Fund which fall into this category. We have also made a slight
shift in our diversification policies. We will continue to have 100 or so issues
in the Fund, but we want our most current favorite positions to carry more
weight. Therefore, we will gradually increase the top twenty holdings to
represent 40-50% of the portfolio. We will retain the more optimistic outlook
discussed above until speculative excesses begin to return.
2
<PAGE>
In closing, we note with sadness the passing of Harry W. Knight, one of the
original Directors of the Fund. We are grateful for his committed service and
valuable contribution to the Fund over the years.
We value highly your support, and as always we welcome any inquiries.
Sincerely,
/s/ Heath B. McLendon /s/ Harry D. Cohen
Heath B. McLendon Harry D. Cohen
Chairman of the Board Vice President
and Investment Officer and Investment Officer
February 20, 1995
3
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS A (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended Net Asset Value Capital Gains Dividends Total
December 31 Beginning Ending Distributed Paid Return*
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
1985 $ 4.45 $ 5.82 $ 0.09 $0.04 34.38%
- -------------------------------------------------------------------------------------
1986 5.82 6.54 0.41 -- 19.93
- -------------------------------------------------------------------------------------
1987 6.54 6.49 0.25 0.26 6.95
- -------------------------------------------------------------------------------------
1988 6.49 7.04 0.13 0.19 13.45
- -------------------------------------------------------------------------------------
1989 7.04 8.66 0.22 0.24 29.55
- -------------------------------------------------------------------------------------
1990 8.66 8.30 0.08 0.25 (0.27)
- -------------------------------------------------------------------------------------
1991 8.30 10.26 0.07 0.20 26.94
- -------------------------------------------------------------------------------------
1992 10.26 10.66 0.09 0.15 6.29
- -------------------------------------------------------------------------------------
1993 10.66 11.01 0.36 0.16 8.13
- -------------------------------------------------------------------------------------
1994 11.01 10.15 0.60 0.18 (0.77)
- -------------------------------------------------------------------------------------
Total $ 2.30 $1.67
- -------------------------------------------------------------------------------------
Cumulative Total Return -- (1/1/85 through 12/31/94) 265.78%
- -------------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains
distributions at net asset value and do not assume deduction of the sales
charge (maximum 5.00%).
</TABLE>
THE FUND'S POLICY IS TO DISTRIBUTE DIVIDENDS
AND CAPITAL GAINS, IF ANY, ANNUALLY.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS A SHARES
<TABLE>
<CAPTION>
Without With
Sales Charge Sales Charge***
<S> <C> <C>
- -------------------------------------------------------------------------------------
Year Ended 12/31/94 (0.77)% (5.73)%
- -------------------------------------------------------------------------------------
Five Years Ended 12/31/94 7.62 % 6.53 %
- -------------------------------------------------------------------------------------
Ten Years Ended 12/31/94 13.85 % 13.26 %
- -------------------------------------------------------------------------------------
<FN>
** All average annual total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value.
*** Average annual total return figures shown assume the deduction of the
maximum 5.00% sales charge at the time of investment.
</TABLE>
NOTE: On November 6, 1992, shares of the Fund were designated as Class A
shares. Class A shares are subject to a maximum 5.00% front-end sales charge and
an annual service fee of 0.25% of the value of the average daily net assets
attributable to that class. The Fund's average annual rates of return would have
been lower had service fees been in effect prior to November 6, 1992.
4
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS A SHARES
OF SMITH BARNEY APPRECIATION FUND INC.
VS. THE STANDARD & POOR'S 500 STOCK INDEX+
- --------------------------------------------------------------------------------
December 31, 1984 - December 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN COVERS (CLASS A)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Smith Barney
Appreciation Fund Inc. Class A shares on December 31, 1984 through December 31,
1994 as compared with the growth of a $10,000 investment in the Standard &
Poor's 500 Stock Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
GROWTH OF $10,000 STANDARD & POOR'S
INVESTED IN CLASS A SHARES 500
MONTH ENDED OF THE FUND STOCK INDEX
<S> <C> <C>
12/84 $ 9,500 $10,000
3/85 $10,357 $10,918
6/85 $10,979 $11,720
9/85 $11,015 $11,240
12/85 $12,766 $13,174
3/86 $14,655 $15,032
6/86 $15,796 $15,919
9/86 $14,419 $14,808
12/86 $15,310 $15,634
3/87 $18,180 $18,973
6/87 $18,976 $19,924
9/87 $20,289 $21,239
12/87 $16,375 $16,457
3/88 $17,075 $17,391
6/88 $18,010 $18,548
9/88 $18,111 $18,611
12/88 $18,577 $19,183
3/89 $19,804 $20,542
6/89 $21,381 $22,354
8/89 $23,723 $24,743
12/89 $24,067 $25,252
3/90 $23,539 $24,493
6/90 $25,151 $26,032
9/90 $22,411 $22,458
12/90 $24,003 $24,468
3/91 $26,952 $28,015
6/91 $26,808 $27,948
9/91 $28,196 $29,441
12/91 $30,469 $31,906
3/92 $29,548 $31,101
6/92 $29,845 $31,690
9/92 $30,825 $32,691
12/92 $32,385 $34,335
3/93 $33,388 $35,835
6/93 $33,205 $36,005
9/93 $33,995 $36,934
12/93 $35,019 $37,792
3/94 $34,033 $36,364
6/94 $34,319 $36,513
9/94 $35,019 $38,295
12/94 $34,749 $38,286
<FN>
+ Illustration of $10,000 invested in Class A shares on December 31, 1984,
assuming deduction of the maximum 5.00% sales charge at the time of
investment and reinvestment of dividends and capital gains at net asset
value through December 31, 1994.
</TABLE>
The Standard & Poor's 500 Stock Index ("S&P 500") is a market capitalization
index composed of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and over-the-counter market. The S&P 500
is useful in depicting the general movement of the stock market, but because
it is unmanaged, it is not subject to the same management and trading
expenses as a mutual fund.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not
guarantee future results.
5
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS B (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended Net Asset Value Capital Gains Dividends Total
December 31 Beginning Ending Distributed Paid Return*
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------
11/6/92 -
12/31/92 $ 10.55 $10.65 $ 0.09 $0.16 3.28 %
- ---------------------------------------------------------------------------------
1993 10.65 11.00 0.36 0.08 7.38
- ---------------------------------------------------------------------------------
1994 11.00 10.14 0.60 0.10 (1.53)
- ---------------------------------------------------------------------------------
Total $ 1.05 $0.34
- ---------------------------------------------------------------------------------
Cumulative Total Return -- (11/6/92 through 12/31/94) 9.21 %
- ---------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains distributions
at net asset value and do not assume deduction of the contingent deferred
sales charge ("CDSC").
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS B SHARES
<TABLE>
<CAPTION>
Without CDSC With CDSC***
<S> <C> <C>
- -----------------------------------------------------------------------------
Year Ended 12/31/94 (1.53)% (6.14)%
- -----------------------------------------------------------------------------
Inception 11/6/92 through 12/31/94 4.18 % 2.89 %
- -----------------------------------------------------------------------------
<FN>
** All average annual total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value.
*** Average annual total return figures shown assume the deduction of the
maximum applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: The Fund began offering Class B shares on November 6, 1992. Class
B shares are subject to a maximum 5.00% CDSC and annual service and
distribution fees of 0.25% and 0.75%, respectively, of the value of the
average daily net assets attributable to that class.
6
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS B SHARES
OF SMITH BARNEY APPRECIATION FUND INC.
VS. THE STANDARD & POOR'S 500 STOCK INDEX+
- --------------------------------------------------------------------------------
November 6, 1992 - December 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN COVERS (CLASS B)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of the hypothetical investment of $10,000 in Smith Barney
Appreciation Fund Inc. Class B shares on November 6, 1992 through December 31,
1994 as compared with the growth of a $10,000 investment in the Standard &
Poor's 500 Stock Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
GROWTH OF $10,000 STANDARD & POOR'S
INVESTED IN CLASS B SHARES 500
MONTH ENDED OF THE FUND STOCK INDEX
<S> <C> <C>
10/92 $ -- $10,000
11/06/92 $10,000 $ --
11/92 $10,289 $10,340
12/92 $10,328 $10,467
3/93 $10,629 $10,924
6/93 $10,561 $10,976
9/93 $10,784 $11,259
12/93 $11,090 $11,521
3/94 $10,758 $11,086
6/94 $10,828 $11,131
9/94 $11,030 $11,674
12/94 $10,921 $11,672
<FN>
+ Illustration of $10,000 invested in Class B shares on November 6, 1992,
assuming deduction of the maximum applicable CDSC at the time of
redemption and reinvestment of dividends and capital gains at net asset
value through December 31, 1994.
* Value does not assume deduction of applicable CDSC.
** Value assumes deduction of applicable CDSC (assuming redemption on
December 31, 1994).
</TABLE>
The Standard & Poor's 500 Stock Index ("S&P 500") is a market capitalization
index composed of 500 widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and over-the-counter market. The S&P 500
is useful in depicting the general movement of the stock market, but because
it is unmanaged, it is not subject to the same management and trading
expenses as a mutual fund.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not
guarantee future results.
7
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS C (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended Net Asset Value Capital Gains Dividends Total
December 31 Beginning Ending Distributed Paid Return*
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2/4/93 -
12/31/93 $ 10.99 $11.00 $ 0.36 $0.08 4.09%
- ----------------------------------------------------------------------------------
1994 11.00 10.14 0.60 0.11 (1.41)
- ----------------------------------------------------------------------------------
Total $ 0.96 $0.19
- ----------------------------------------------------------------------------------
Cumulative Total Return -- (2/4/93 through 12/31/94) 2.62%
- ----------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains distributions
at net asset value and do not assume deduction of the CDSC.
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS C SHARES
<TABLE>
<CAPTION>
Without CDSC With CDSC***
- -----------------------------------------------------------------------------
<S> <C> <C>
Year Ended 12/31/94 (1.41)% (2.34)%
- -----------------------------------------------------------------------------
Inception 2/4/93 through 12/31/94 1.37% 1.37%
- -----------------------------------------------------------------------------
<FN>
** All average total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value.
*** Average annual total return figures shown assume the deduction of the
maximum applicable CDSC which is described in the prospectus.
</TABLE>
NOTE: The Fund began offering Class C shares (formerly "Class D" shares)
on February 4, 1993. Class C shares are subject to a maximum 1.00% CDSC
and annual service and distribution fees of 0.25% and 0.75%,
respectively, of the value of the average daily net assets attributable
to that class.
8
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS C SHARES
OF SMITH BARNEY APPRECIATION FUND INC.
VS. THE STANDARD & POOR'S 500 STOCK INDEX+
- --------------------------------------------------------------------------------
February 4, 1993 - December 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN COVERS (CLASS C)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Smith Barney
Appreciation Fund Inc. Class C shares on February 4, 1993 through December 31,
1994 as compared with the growth of a $10,000 investment in the Standard &
Poor's 500 Stock Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
GROWTH OF $10,000 STANDARD & POOR'S
INVESTED IN CLASS C SHARES 500
MONTH ENDED OF THE FUND STOCK INDEX
<S> <C> <C>
1/93 -- $10,000
02/04/93 $10,000 --
2/93 $ 9,809 $10,136
3/93 $ 9,973 $10,350
6/93 $ 9,909 $10,399
9/93 $10,118 $10,667
12/93 $12,409 $10,915
3/94 $10,097 $10,503
6/94 $10,163 $10,546
9/94 $10,352 $11,060
12/94 $10,262 $11,058
<FN>
+ Illustration of $10,000 invested in Class C shares on February 4, 1993,
assuming reinvestment of dividends and capital gains at net asset value
through December 31, 1994.
</TABLE>
The Standard & Poor's 500 Stock Index ("S&P 500") is a market
capitalization index composed of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange and
over-the-counter market. The S&P 500 is useful in depicting the general
movement of the stock market, but because it is unmanaged, it is not
subject to the same management and trading expenses as a mutual fund.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not
guarantee future results.
9
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
HISTORICAL PERFORMANCE -- CLASS Z (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended Net Asset Value Capital Gains Dividends Total
December 31 Beginning Ending Distributed Paid Return*
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
11/6/92 -
12/31/92 $ 10.55 $10.66 $ 0.09 $0.16 3.38%
- ----------------------------------------------------------------------------------
1993 10.66 11.02 0.36 0.18 8.47
- ----------------------------------------------------------------------------------
1994 11.02 10.16 0.60 0.22 (0.41)
- ----------------------------------------------------------------------------------
Total $ 1.05 $0.56
- ----------------------------------------------------------------------------------
Cumulative Total Return - (11/6/92 through 12/31/94) 11.68%
- ----------------------------------------------------------------------------------
<FN>
* Figures assume reinvestment of all dividends and capital gains distributions
at net asset value.
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN** -- CLASS Z SHARES
<TABLE>
<S> <C>
Year Ended 12/31/94 (0.41)%
- -----------------------------------------------------------------------------
Inception 11/6/92 through 12/31/94 5.27%
- -----------------------------------------------------------------------------
<FN>
** All average annual total return figures shown reflect the reinvestment of
dividends and capital gains distributions at net asset value.
</TABLE>
NOTE: The Fund began offering Class Z shares (formerly "Class C" shares)
on November 6, 1992. Class Z shares are offered without any sales
charge, CDSC, service or distribution fees, exclusively to: (a)
tax-exempt employee benefit and retirement plans of Smith Barney
Inc. and its affiliates and (b) certain unit investment trusts
sponsored by Smith Barney Inc. and its affiliates.
10
<PAGE>
GROWTH OF $10,000 INVESTED IN CLASS Z SHARES
OF SMITH BARNEY APPRECIATION FUND INC.
VS. THE STANDARD & POOR'S 500 STOCK INDEX+
- --------------------------------------------------------------------------------
November 6, 1992 - December 31, 1994
DESCRIPTION OF MOUNTAIN CHART IN COVERS (CLASS Z)
A line graph depicting the total growth (including reinvestment of dividends
and capital gains) of a hypothetical investment of $10,000 in Smith Barney
Appreciation Fund Inc. Class Z shares on November 6, 1992 through December 31,
1994 as compared with the growth of a $10,000 investment in the Standard &
Poor's 500 Stock Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE
GROWTH OF $10,000 STANDARD & POOR'S
INVESTED IN CLASS Z SHARES 500
MONTH ENDED OF THE FUND STOCK INDEX
<S> <C> <C>
10/84 -- $10,000
11/06/92 $10,000 --
11/92 $10,290 $10,340
12/92 $10,338 $10,467
3/93 $10,668 $10,924
6/93 $10,619 $10,976
9/93 $10,881 $11,259
12/93 $11,214 $11,521
3/94 $10,909 $11,086
6/94 $11,000 $11,131
9/94 $11,245 $11,674
12/94 $11,168 $11,672
<FN>
+ Illustration of $10,000 invested in Class Z shares on November 6, 1992,
assuming reinvestment of dividends and capital gains at net asset value
through December 31, 1994.
</TABLE>
The Standard & Poor's 500 Stock Index ("S&P 500") is a market
capitalization index composed of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange and
over-the-counter market. The S&P 500 is useful in depicting the general
movement of the stock market, but because it is unmanaged, it is not
subject to the same management and trading expenses as a mutual fund.
Index information is available at month-end only; therefore, the closest
month-end to inception date of the Fund has been used.
NOTE: All figures cited here represent past performance and do not
guarantee future results.
11
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS DECEMBER 31, 1994 (UNAUDITED)
INDUSTRY BREAKDOWN
<TABLE>
<S> <C>
Consumer Services 15.3%
Consumer Non-Durables 9.5%
U.S. Treasury Obligations, Time Deposit,
Repurchase Agreements and Net Other Assets
and Liabilities 12.3%
Financial Services 10.0%
Energy 9.3%
Technology 7.5%
Basic Industries 6.7%
Health Care 6.9%
Conglomerates 5.4%
Consumer Durables 5.4%
Capital Goods 5.0%
Other Common Stock 6.7%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Company Net Assets
- ----------------------------------------------------------------------
<S> <C>
EASTMAN KODAK COMPANY 3.7%
AMERICAN TELEPHONE & TELEGRAPH COMPANY 3.5
MINNESOTA MINING & MANUFACTURING COMPANY 3.4
MOBIL CORPORATION 2.5
DUPONT (E.I.) DE NEMOURS & COMPANY 2.3
XEROX CORPORATION 1.9
AMOCO CORPORATION 1.8
AMERICAN INTERNATIONAL GROUP INCORPORATED 1.7
ROYAL DUTCH PETROLEUM COMPANY 1.7
TIME-WARNER INCORPORATED 1.6
</TABLE>
12
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS DECEMBER 31, 1994
MARKET VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------
COMMON STOCKS - 87.7%
CONSUMER SERVICES - 15.3%
<C> <S> <C>
37,500 A Plus Communications Incorporated+ $ 506,250
50,000 Arch Communications Group, Incorporated+ 881,250
175,000 Capital Cities ABC Incorporated 14,918,750
500,000 CBS Incorporated 27,687,500
100,000 Clark (Dick) Productions Incorporated+ 775,000
800,000 Comcast Corporation, Class A 12,550,000
400,000 CPC International Incorporated 21,300,000
600,000 Disney (Walt) Company 27,675,000
1,400,000 Donnelley R R & Sons Company 41,300,000
200,000 Federated Department Stores Incorporated+ 3,850,000
325,000 Gannett Company 17,306,250
240,000 Gaylord Entertainment Corporation, Class A 5,460,000
200,000 GC Companies Incorporated + 5,250,000
200,000 Grupo Televisa SA ADR++ 6,350,000
250,000 Harcourt General Incorporated 8,812,500
450,000 Home Depot Incorporated 20,700,000
700,000 McDonald's Corporation 20,475,000
50,000 Paging Network Incorporated+ 1,700,000
200,000 Penney J.C. Incorporated 8,925,000
50,000 Pronet Incorporated+ 725,000
700,000 Savoy Pictures Entertainment Incorporated+ 4,550,000
336,500 Scandinavian Broadcasting System SA+ 6,898,250
1,200,000 Tele-Communications Incorporated, Class A+ 26,100,000
1,200,000 Time-Warner Incorporated 42,150,000
450,000 Toys "R" Us Incorporated+ 13,725,000
300,000 Tribune Company 16,425,000
200,000 Turner Broadcasting System Incorporated 3,275,000
1,500,000 Wal-Mart Stores Incorporated 31,875,000
- ------------------------------------------------------------------------------------------
392,145,750
- ------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 10.0%
400,000 Aetna Life and Casualty Company 18,850,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) DECEMBER 31, 1994
MARKET VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
FINANCIAL SERVICES (CONTINUED)
500,000 American Express Company $ 14,750,000
450,000 American International Group Incorporated 44,100,000
700,000 Bank of New York Incorporated 20,300,000
300,000 Barnett Banks Incorporated 11,512,500
700,000 Chemical Banking Corporation 25,112,500
400,000 Federal National Mortgage Association 29,150,000
200,000 First Data Corporation 9,475,000
300,000 First Virginia Banks Incorporated 9,600,000
5,000 Fund American Enterprises Holdings 361,250
150,000 John Nuveen Company, Class A 3,431,250
300,000 Keycorp New 7,500,000
251,000 Leucadia National Corporation 11,169,500
325,000 Republic New York Corporation 14,706,250
150,000 US Trust Corporation 9,525,000
175,000 Wells Fargo & Company 25,375,000
- ------------------------------------------------------------------------------------------
254,918,250
- ------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 9.5%
300,000 Coca-Cola Company 15,450,000
750,000 Crown Cork & Seal Incorporated+ 28,312,500
2,000,000 Eastman Kodak Company 95,500,000
375,000 Gillette Company 28,031,250
150,000 Hershey Foods Corporation 7,256,250
600,000 International Flavors & Fragrances Incorporated 27,750,000
200,000 McCormick & Company, Non-Voting 3,650,000
600,000 Procter & Gamble Company 37,200,000
- ------------------------------------------------------------------------------------------
243,150,000
- ------------------------------------------------------------------------------------------
ENERGY - 9.3%
500,000 Amerada Hess Corporation 22,812,500
800,000 Amoco Corporation 47,300,000
225,000 Atlantic Richfield Company 22,893,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) DECEMBER 31, 1994
MARKET VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
ENERGY (CONTINUED)
300,000 Baker Hughes Incorporated $ 5,475,000
150,000 British Petroleum Plc ADR 11,981,250
400,000 Burlington Resources Incorporated 14,000,000
200,000 Enron Corporation 6,100,000
750,000 Mobil Corporation 63,187,500
400,000 Royal Dutch Petroleum Company 43,000,000
- ------------------------------------------------------------------------------------------
236,750,000
- ------------------------------------------------------------------------------------------
TECHNOLOGY - 7.5%
50,000 Dallas Semiconductor Corporation+ 831,250
250,000 Eaton Corporation 12,375,000
200,000 ECI Telecommunications Limited 2,725,000
300,000 Fiserv Incorporated+ 6,450,000
350,000 Intel Corporation 22,356,250
350,000 International Business Machines Corporation 25,725,000
400,000 Microsoft Corporation 24,450,000
705,000 Motorola Incorporated 40,801,875
275,000 Reynolds & Reynolds, Class A 6,875,000
500,000 Xerox Corporation 49,500,000
- ------------------------------------------------------------------------------------------
192,089,375
- ------------------------------------------------------------------------------------------
HEALTH CARE - 6.9%
400,000 Abbott Laboratories 13,050,000
600,000 American Home Products Corporation 37,650,000
500,000 Bristol-Myers-Squibb Company 28,937,500
300,000 Forest Laboratories Incorporated, Class A+ 13,987,500
700,000 Johnson & Johnson 38,325,000
500,000 Merck and Company, Incorporated 19,062,500
200,000 Smithkline Beecham Plc ADR 6,850,000
250,000 Warner Lambert Company 19,250,000
- ------------------------------------------------------------------------------------------
177,112,500
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) DECEMBER 31, 1994
MARKET VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
BASIC INDUSTRIES - 6.7%
400,000 Cyprus Amax Minerals Company $ 10,450,000
1,050,000 duPont (E.I.) de Nemours & Company 59,062,500
400,000 Fluor Corporation 17,250,000
150,000 Hercules Incorporated 17,306,250
250,000 International Paper Company 18,843,750
250,000 Mead Corporation 12,156,250
200,000 Monsanto Corporation 14,100,000
100,000 Potash Corporation Saskatchewan Incorporated 3,400,000
290,000 St. Joe Paper Company 15,732,500
300,000 Santa Fe Pacific Gold Corporation+ 3,862,500
- ------------------------------------------------------------------------------------------
172,163,750
- ------------------------------------------------------------------------------------------
CONGLOMERATES - 5.4%
300,000 Allied Signal Incorporated 10,200,000
1,650,000 Minnesota Mining & Manufacturing Company 88,068,750
300,000 Questar Corporation 8,250,000
500,000 United Technologies Corporation 31,437,500
- ------------------------------------------------------------------------------------------
137,956,250
- ------------------------------------------------------------------------------------------
CONSUMER DURABLES - 5.4%
300,000 Alco Standard Corporation 18,825,000
500,000 Chrysler Corporation 24,500,000
1,200,000 Ford Motor Company 33,600,000
500,000 General Motors Corporation 21,125,000
300,000 Goodyear Tire & Rubber Company 10,087,500
800,000 Newell Company 16,800,000
250,000 Whirlpool Corporation 12,562,500
- ------------------------------------------------------------------------------------------
137,500,000
- ------------------------------------------------------------------------------------------
CAPITAL GOODS - 5.0%
550,000 AMP Incorporated 40,012,500
400,000 Boeing Company 18,700,000
250,000 Caterpillar Incorporated 13,781,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) DECEMBER 31, 1994
MARKET VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
<C> <S> <C>
CAPITAL GOODS (CONTINUED)
300,000 Emerson Electric Company $ 18,750,000
400,000 General Electric Company 20,400,000
500,000 Ingersoll-Rand Company 15,750,000
- ------------------------------------------------------------------------------------------
127,393,750
- ------------------------------------------------------------------------------------------
UTILITIES - 4.5%
1,800,000 American Telephone & Telegraph Company 90,450,000
325,000 Bell Atlantic Corporation 16,168,750
200,000 Southwestern Bell Corporation 8,075,000
- ------------------------------------------------------------------------------------------
114,693,750
- ------------------------------------------------------------------------------------------
TRANSPORTATION - 2.2%
500,000 Burlington Northern Incorporated 24,062,500
400,000 Southern Pacific Rail Corporation+ 7,250,000
550,000 Union Pacific Corporation 25,093,750
- ------------------------------------------------------------------------------------------
56,406,250
- ------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $1,876,850,168) 2,242,279,625
- ------------------------------------------------------------------------------------------
FACE VALUE
- -------------
U.S. TREASURY OBLIGATIONS - 1.0%
$ 25,000,000 U.S. Treasury Bond Stripped, 10.625% due 8/15/2015 4,902,498
100,000,000 U.S. Treasury Strip, Zero coupon due 8/15/2015 19,609,990
- ------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $24,584,098) 24,512,488
- ------------------------------------------------------------------------------------------
TIME DEPOSIT - 3.9% (COST $100,000,000)
100,000,000 Morgan Bank, Toronto, Euro Time Deposit,
6.500% due 1/3/1995 100,000,000
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) DECEMBER 31, 1994
MARKET VALUE
FACE VALUE (NOTE 1)
- ------------------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENTS - 7.3%
$100,000,000 Agreement with Salomon Brothers, 5.750% dated
12/30/1994, to be repurchased at $100,063,889 on
1/3/1995, collateralized by: $50,000,000 U.S.
Treasury Bond 12.750% due 11/15/2010; $31,934,000
U.S. Treasury Note 8.875% due 2/15/1999 $ 100,000,000
87,908,000 Agreement with Union Bank of Switzerland, 5.625%
dated 12/30/1994, to be repurchased at $87,962,943
on 1/3/1995, collateralized by: $10,460,000 U.S.
Treasury Note 6.750% due 6/30/1999; $50,000,000
U.S. Treasury Note 8.750% due 8/15/2000;
$26,385,000 U.S. Treasury Note 4.250% due
5/15/1996; $210,000 U.S. Treasury Note 6.875% due
7/31/1999 87,908,000
- ------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS (COST $187,908,000) 187,908,000
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $2,189,342,266*) 99.9% 2,554,700,113
- ------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (NET) 0.1 2,139,694
- ------------------------------------------------------------------------------------------
NET ASSETS 100.0% $2,556,839,807
- ------------------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of 1933, as
amended. These securities may be resold in transactions exempt from registration to
qualified institutional buyers.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
- ------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1994
<S> <C> <C>
ASSETS:
Investments, at value (Cost $2,189,342,266) (Note 1)
See accompanying schedule $2,554,700,113
Cash 450
Receivable for investment securities sold 13,669,429
Dividends receivable 4,754,774
Receivable for Fund shares sold 1,894,039
Interest receivable 95,527
- ------------------------------------------------------------------------------------------
TOTAL ASSETS 2,575,114,332
- ------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased $8,744,290
Dividends payable 5,684,632
Payable for Fund shares redeemed 1,094,557
Investment advisory fee payable (Note 2) 971,872
Service fee payable (Note 3) 489,777
Distribution fee payable (Note 3) 415,841
Administration fee payable (Note 2) 355,823
Transfer agent fees payable (Note 2) 307,091
Custodian fees payable (Note 2) 78,000
Accrued expenses and other payables 132,642
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 18,274,525
- ------------------------------------------------------------------------------------------
NET ASSETS $2,556,839,807
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (continued)
<S> <C>
NET ASSETS CONSIST OF:
Undistributed net investment income $ 1,640,913
Accumulated net realized gain on investments sold 53,090,046
Unrealized appreciation of investments 365,357,847
Par value 251,916
Paid-in capital in excess of par value 2,136,499,085
- ------------------------------------------------------------------------------------------
TOTAL NET ASSETS $2,556,839,807
- ------------------------------------------------------------------------------------------
NET ASSET VALUE:
CLASS A SHARES:
NET ASSET VALUE and redemption price per share
($1,689,268,265 / 166,368,611 shares of common stock
outstanding) $10.15
- ------------------------------------------------------------------------------------------
Maximum offering price per share ($10.15 / 0.95)
(based on a sales charge of 5.00% of the offering price on
December 31, 1994) $10.68
- ------------------------------------------------------------------------------------------
CLASS B SHARES:
NET ASSET VALUE and offering price per share+
($760,999,902 / 75,052,109 shares of common stock
outstanding) $10.14
- ------------------------------------------------------------------------------------------
CLASS C SHARES:
NET ASSET VALUE and offering price per share+
($5,039,531 / 496,923 shares of common stock outstanding) $10.14
- ------------------------------------------------------------------------------------------
CLASS Z SHARES:
NET ASSET VALUE, offering and redemption price per share
($101,532,109 / 9,998,137 shares of common stock
outstanding) $10.16
- ------------------------------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to net asset value less any applicable CDSC.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of $349,458) $ 56,210,598
Interest 17,105,388
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 73,315,986
- ------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) $12,564,785
Distribution fee (Note 3) 8,523,984
Service fee (Note 3) 6,660,041
Administration fee (Note 2) 4,602,535
Transfer agent fee (Notes 2 and 4) 3,789,016
Custodian fees (Note 2) 316,797
Legal and audit fees 89,663
Directors' fees and expenses (Note 2) 21,895
Other 324,143
- ------------------------------------------------------------------------------------------
TOTAL EXPENSES 36,892,859
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 36,423,127
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 5):
Net realized gain on investments sold during the year 173,322,683
Net unrealized depreciation of investments during the year (239,245,191)
- ------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (65,922,508)
- ------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (29,499,381)
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
12/31/94 12/31/93
<S> <C> <C>
Net investment income $ 36,423,127 $ 32,158,171
Net realized gain on investments during the year 173,322,683 201,138,801
Net unrealized depreciation on investments during the
year (239,245,191) (3,545,758)
- ------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting from
operations (29,499,381) 229,751,214
Distributions to shareholders from net investment
income:
Class A (27,831,343) (21,535,043)
Class B (6,728,136) (8,514,106)
Class C (formerly Class D shares) (50,088) (12,410)
Class Z (formerly Class C shares) (2,034,314) (2,531,375)
Distributions to shareholders from net realized gain
on investments:
Class A (92,601,153) (49,560,927)
Class B (41,989,861) (40,534,790)
Class C (formerly Class D shares) (275,140) (56,684)
Class Z (formerly Class C shares) (5,551,517) (4,988,013)
Net increase/(decrease) in net assets from Fund share
transactions (Note 6):
Class A 245,956,687 (190,964,503)
Class B (464,158,971) 125,455,511
Class C (formerly Class D shares) 3,204,246 2,222,163
Class Z (formerly Class C shares) (46,905,798) 486,408
- ------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets (468,464,769) 39,217,445
NET ASSETS:
Beginning of year 3,025,304,576 2,986,087,131
- ------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $1,640,913 and $1,861,667, respectively) $2,556,839,807 $3,025,304,576
- ------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/94 12/31/93# 12/31/92** 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year $ 11.01 $ 10.66 $ 10.26 $ 8.30 $ 8.66
- -------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.16 0.15 0.18 0.18 0.23
Net realized and unrealized
gain/(loss) on investments (0.24) 0.72 0.46 2.05 (0.26)
- -------------------------------------------------------------------------------------------
Total from investment
operations (0.08) 0.87 0.64 2.23 (0.03)
- -------------------------------------------------------------------------------------------
Less distributions:
Distributions from net
investment income (0.18) (0.16) (0.15) (0.20) (0.25)
Distributions from capital
gains (0.60) (0.36) (0.09) (0.07) (0.08)
- -------------------------------------------------------------------------------------------
Total distributions (0.78) (0.52) (0.24) (0.27) (0.33)
- -------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.15 $ 11.01 $ 10.66 $ 10.26 $ 8.30
- -------------------------------------------------------------------------------------------
Total Return+ (0.77)% 8.13% 6.29% 26.94% (0.27)%
- -------------------------------------------------------------------------------------------
Ratios to average net
assets/Supplemental Data:
Net assets, end of year (in
000's) $1,689,268 $1,579,248 $1,712,411 $1,752,884 $1,103,293
Ratio of expenses to average
net assets 1.02% 1.03% 0.88% 0.80% 0.80%
Ratio of net income to
average net assets 1.61% 1.35% 1.58% 2.20% 2.90%
Portfolio turnover rate 52% 52% 21% 19% 30%
- -------------------------------------------------------------------------------------------
<FN>
** All shares in existence prior to November 6, 1992 were designated as Class A shares.
+ Total return represents aggregate total return for the periods indicated and does not
reflect any applicable sales charge.
# Per share amounts have been calculated using the monthly average shares method, which
more appropriately presents per share data for this year since use of the
undistributed income method did not accord with results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/89* 12/31/88* 12/31/87* 12/31/86* 12/31/85*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.04 $ 6.49 $ 6.54 $ 5.82 $ 4.45
- ---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.18 0.14 0.12 0.12
Net realized and unrealized
gain/(loss) on investments 1.90 0.69 0.32 1.01 1.38
- ---------------------------------------------------------------------------------------------
Total from investment operations 2.08 0.87 0.46 1.13 1.50
- ---------------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment
income (0.24) (0.19) (0.26) -- (0.04)
Distributions from capital gains (0.22) (0.13) (0.25) (0.41) (0.09)
- ---------------------------------------------------------------------------------------------
Total distributions (0.46) (0.32) (0.51) (0.41) (0.13)
- ---------------------------------------------------------------------------------------------
Net asset value, end of year $ 8.66 $ 7.04 $ 6.49 $ 6.54 $ 5.82
- ---------------------------------------------------------------------------------------------
Total Return+ 29.55% 13.45% 6.95% 19.93% 34.38%
- ---------------------------------------------------------------------------------------------
Ratios to average net
assets/Supplemental Data:
Net assets, end of year (in 000's) $1,000,433 $491,397 $431,092 $315,804 $179,186
Ratio of expenses to average net
assets 0.90% 0.90% 0.90% 1.00% 1.00%
Ratio of net income to average net
assets 3.20% 2.70% 2.20% 2.10% 2.40%
Portfolio turnover rate 24% 25% 26% 30% 62%
- ---------------------------------------------------------------------------------------------
<FN>
* Per share data and shares outstanding data adjusted for 4-for-1 stock split which
occurred on August 7, 1989.
+ Total return represents aggregate total return for the periods indicated and does
not reflect any applicable sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/94 12/31/93# 12/31/92*#
<S> <C> <C> <C>
Net asset value, beginning of year $ 11.00 $ 10.65 $ 10.55
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13 0.06 0.01
Net realized and unrealized gain/(loss) on
investments (0.29) 0.73 0.34
- ----------------------------------------------------------------------------------------
Total from investment operations (0.16) 0.79 0.35
- ----------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.10) (0.08) (0.16)
Distributions from capital gains (0.60) (0.36) (0.09)
- ----------------------------------------------------------------------------------------
Total distributions (0.70) (0.44) (0.25)
- ----------------------------------------------------------------------------------------
Net asset value, end of year $ 10.14 $ 11.00 $ 10.65
- ----------------------------------------------------------------------------------------
Total Return++ (1.53)% 7.38% 3.28%
- ----------------------------------------------------------------------------------------
Ratios to average net assets/Supplemental
Data:
Net assets, end of year (in 000's) $761,000 $1,285,966 $1,122,249
Ratio of expenses to average net assets 1.80% 1.83% 1.82%+
Ratio of net income to average net assets 0.83% 0.56% 0.64%+
Portfolio turnover rate 52% 52% 21%
- ----------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and does not
reflect any applicable sales charge.
# Per share amounts have been calculated using the monthly average shares method, which
more appropriately presents per share data for this year since use of the
undistributed income method did not accord with results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
YEAR PERIOD
ENDED ENDED
12/31/94 12/31/93*#
<S> <C> <C>
Net asset value, beginning of period $11.00 $10.99
- ----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10 0.07
Net realized and unrealized gain/(loss) on investments (0.25) 0.38
- ----------------------------------------------------------------------------------------
Total from investment operations (0.15) 0.45
- ----------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment income (0.11) (0.08)
Distributions from capital gains (0.60) (0.36)
- ----------------------------------------------------------------------------------------
Total distributions (0.71) (0.44)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $10.14 $11.00
- ----------------------------------------------------------------------------------------
Total Return++ (1.41)% 4.09%
- ----------------------------------------------------------------------------------------
Ratios to average net assets/Supplemental Data:
Net assets, end of period (in 000's) $5,040 $2,214
Ratio of expenses to average net assets 1.66% 1.68%+
Ratio of net income to average net assets 0.98% 0.71%+
Portfolio turnover rate 52% 52%
- ------------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class C shares (formerly Class D shares) on February 4,
1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and does not
reflect any applicable sales charge.
# Per share amounts have been calculated using the monthly average shares method, which
more appropriately presents the per share data for this period since use of the
undistributed income method did not accord with results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
Smith Barney
Appreciation Fund Inc.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A CLASS Z SHARE OUTSTANDING THROUGHOUT EACH YEAR.
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/94 12/31/93# 12/31/92*
<S> <C> <C> <C>
Net asset value, beginning of year $ 11.02 $ 10.66 $ 10.55
- ---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.20 0.19 0.03
Net realized and unrealized gain/(loss) on
investments (0.24) 0.71 0.33
- ---------------------------------------------------------------------------------------
Total from investment operations (0.04) 0.90 0.36
- ---------------------------------------------------------------------------------------
Less distributions:
Distributions from net investment
income (0.22) (0.18) (0.16)
Distributions from capital gains (0.60) (0.36) (0.09)
- ---------------------------------------------------------------------------------------
Total distributions (0.82) (0.54) (0.25)
- ---------------------------------------------------------------------------------------
Net asset value, end of period $ 10.16 $ 11.02 $ 10.66
- ---------------------------------------------------------------------------------------
Total Return++ (0.41)% 8.47% 3.38%
- ---------------------------------------------------------------------------------------
Ratios to average net assets/Supplemental
Data:
Net assets, end of year (in 000's) $101,532 $157,876 $151,427
Ratio of expenses to average net assets 0.64% 0.66% 0.80%+
Ratio of net income to average net assets 1.99% 1.73% 1.66%+
Portfolio turnover rate 52% 52% 21%
- ---------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class Z shares (formerly Class C shares) on November 6,
1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and does not
reflect any applicable sales charge.
# Per share amounts have been calculated using the average shares method, which more
appropriately presents per share data for this year since use of the undistributed
income method did not accord with results of operations.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Appreciation Fund Inc. (the "Fund") (formerly known as Smith Barney
Shearson Appreciation Fund Inc.) was incorporated under the laws of the State of
Maryland on September 2, 1969. The Fund is a diversified, open-end management
investment company registered with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended (the "1940 Act"). Effective
November 7, 1994, the Fund began offering Class Y shares and continued to offer
Class A, Class B, Class C (which were previously designated "Class D" shares)
and Class Z shares (which were previously designated "Class C" shares). As of
December 31, 1994, no Class Y shares had been sold. Class A shares are sold with
a front-end sales charge. Class B and Class C shares are sold at net asset value
and may be subject to a CDSC upon redemption. Class B shares will automatically
convert to Class A shares eight years after the original purchase date. Class Y
shares are available to investors making an initial investment of at least $5
million and are not subject to any sales charges, distribution or service fees.
Class Z shares are offered without any sales charge, CDSC, service or
distribution fees exclusively to tax-exempt employee benefit and retirement
plans of Smith Barney Inc. ("Smith Barney") and certain unit investment trusts
sponsored by Smith Barney and its affiliates. All classes of shares have
identical rights and privileges except with respect to the effect of the
respective sales charges, the distribution and/or service fees borne by each
class, expenses allocable exclusively to each class, voting rights on matters
affecting a single class, the exchange privilege of each class and the
conversion feature of Class B shares. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
Portfolio valuation: Listed securities traded on a national securities exchange
are valued at the last reported sales price; securities traded in the
over-the-counter market and listed securities for which no sale was reported are
valued at the bid price or, in the absence of a recent bid price, at the bid
equivalent obtained from one or more of the major market makers in the
securities. Investments in securities for which market quotations are not
available are valued at fair value as determined in good faith by the Fund's
Board of Directors. Short-term instruments maturing within 60 days of the
valuation date are valued at amortized cost.
Repurchase agreements: The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase,
28
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. The value of the collateral is at least equal at all
times to the total amount of the repurchase obligations, including interest. In
the event of counterparty default, the Fund has the right to use the collateral
to offset losses incurred. There is potential loss to the Fund in the event the
Fund is delayed or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment adviser and administrator or sub-administrator,
acting under the supervision of the Fund's Board of Directors, reviews the value
of the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
Securities transactions and investment income: Securities transactions are
recorded as of the trade date. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Investment income and realized gains and losses are allocated based upon
relative net assets of each class.
Dividends and distributions to shareholders: Dividends from net investment
income are determined on a class level. Distributions from net realized capital
gains, after utilization of any available capital loss carryforwards, are
determined on a Fund level. It is the policy of the Fund to distribute
substantially all of its net investment income and net realized capital gains
once a year. Additional distributions of net investment income and net capital
gains may be made at the discretion of the Fund's Board of Directors to avoid
the application of the 4% nondeductible excise tax imposed on certain
undistributed amounts of net investment income and capital gains. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund as
a whole.
Federal income taxes: It is the Fund's policy to qualify as a regulated
investment company, if such qualification is in the best interest of its
shareholders, by
29
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to registered investment companies and to distribute all of
its taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Smith Barney Mutual Funds Management Inc. (formerly known as
Smith, Barney Advisers, Inc.) ("SBMFM"), which is controlled by Smith Barney
Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary of The
Travelers Inc. Under the Advisory Agreement, the Fund pays a monthly fee at the
annual rates of: 0.55% of the value of the Fund's average daily net assets up to
$250 million; 0.513% of the value of the next $250 million of its average daily
net assets; 0.476% of the value of the next $500 million of its average daily
net assets; 0.439% of the value of the next $1 billion of its average daily net
assets; 0.402% of the value of the next $1 billion of its average daily net
assets; and 0.365% of the value of its average daily net assets in excess of $3
billion.
Prior to April 20, 1994, the Fund was party to an administration agreement (the
"Administration Agreement") with The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Under the Administration Agreement, the Fund paid a monthly fee
based on the annual rates of: 0.20% of the value of the Fund's average daily net
assets up to $250 million; 0.187% of the value of the next $250 million of its
average daily net assets; 0.174% of the value of the next $500 million of its
average daily net assets; 0.161% of the value of the next $1 billion of its
average daily net assets; 0.148% of the value of the next $1 billion of its
average daily net assets; and 0.135% of the value of its average daily net
assets in excess of $3 billion. As of the close of business on April 20, 1994,
SBMFM succeeded Boston Advisors as the Fund's administrator. The new agreement
contains substantially the same terms and conditions, including the same level
of fees, as the predecessor agreement.
As of the close of business on April 20, 1994, the Fund and SBMFM entered into a
sub-administration agreement (the "Sub-Administration Agreement") with Boston
Advisors. Under the Sub-Administration Agreement, SBMFM pays Boston Advisors a
portion of its administration fee at a rate agreed upon from time to time
between SBMFM and Boston Advisors.
30
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
For the year ended December 31, 1994, the Fund incurred total brokerage
commissions of $3,433,550, of which $487,202 was paid to Smith Barney.
For the year ended December 31, 1994, Smith Barney received $1,386,775 from
investors representing commissions (sales charges) on sales of Class A shares.
A CDSC is generally payable by a shareholder in connection with the redemption
of (a) Class B shares within five years (eight years in the case of purchases by
certain 401(k) plans) after the date of purchase and (b) Class C shares within
one year after the date of purchase. In circumstances in which the CDSC is
imposed on Class B shares, the amount of the charge ranges between 5.00% and
1.00% of net asset value depending on the number of years since the date of
purchase. In circumstances in which the CDSC is imposed on Class C shares, the
amount of the charge is 1.00%. For the year ended December 31, 1994, Smith
Barney received from investors $2,313,010 and $1 in CDSCs on the redemption of
Class B and Class C shares, respectively.
No officer, director or employee of Smith Barney or any of its affiliates
receives any compensation from the Fund for serving as a director or officer of
the Fund. The Fund pays each Director who is not an officer or employee of Smith
Barney or any of its affiliates $3,000 per annum plus $500 per meeting attended
and reimburses each such Director for travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Fund's transfer agent.
3. DISTRIBUTION PLAN
Smith Barney acts as distributor of the Fund's shares pursuant to a distribution
agreement with the Fund and sells shares of the Fund through Smith Barney or its
affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a services and
distribution plan (the "Plan"). Under this Plan, the Fund compensates Smith
Barney for servicing shareholder accounts for Class A, Class B and Class C
shareholders, and covers expenses incurred in distributing Class B and Class C
shares. Smith Barney is paid an annual service fee with respect to Class A,
Class B and Class C shares of the Fund at the rate of 0.25% of the value of the
average daily net assets of each respective class of shares. Smith Barney is
also paid an annual distribution fee with respect to Class B and Class C shares
at the rate of 0.75% of the value of the
31
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
average daily net assets attributable to those classes of shares. For the year
ended December 31, 1994, the Fund incurred $3,818,714, $2,832,127 and $9,200 in
service fees for Class A, Class B and Class C shares, respectively. For the year
ended December 31, 1994, the Fund incurred $8,496,382 and $27,602 in
distribution fees for Class B and Class C shares, respectively.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any class of
shares are prorated among the classes based upon the relative net assets of each
class. Operating expenses directly attributable to a class of shares are charged
to that class' operations. In addition to the above service and distribution
fees, class specific operating expenses include transfer agent fees for Class A,
Class B, Class C and Class Z shares of $1,983,030, $1,804,991, $459 and $536,
respectively.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales, excluding U.S. government securities
and short-term securities, during the year ended December 31, 1994, were
$1,236,230,408 and $1,646,521,680, respectively.
At December 31, 1994, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $401,125,272,
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $35,767,425.
6. COMMON STOCK
At December 31, 1994, the Fund had authorized 1 billion shares of common stock
with $0.001 par value which were divided into five classes (Class A, Class B,
Class C, Class Y and Class Z). Changes in common stock for the Fund were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/94 12/31/93
Class A Shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 44,094,284 $488,137,245 10,997,072 $ 120,660,013
Issued as reinvestment of
dividends 11,449,490 116,212,319 6,254,290 68,859,732
Redeemed (32,594,240) (358,392,877) (34,538,283) (380,484,248)
- ----------------------------------------------------------------------------------------------
Net increase/(decrease) 22,949,534 $245,956,687 (17,286,921) $(190,964,503)
- ----------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/94 12/31/93
Class B Shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 13,930,876 $ 152,849,192 28,375,760 $ 309,326,658
Issued as reinvestment of
dividends 4,660,147 47,253,894 4,339,424 47,733,667
Redeemed (60,436,380) (664,262,057) (21,181,807) (231,604,814)
- ----------------------------------------------------------------------------------------------
Net increase/(decrease) (41,845,357) $(464,158,971) 11,533,377 $ 125,455,511
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/94 12/31/93*
Class C Shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 327,092 $ 3,573,460 202,724 $ 2,239,355
Issued as reinvestment of
dividends 32,039 324,876 6,281 69,094
Redeemed (63,463) (694,090) (7,750) (86,286)
- ----------------------------------------------------------------------------------------------
Net increase 295,668 $ 3,204,246 201,255 $ 2,222,163
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
12/31/94 12/31/93+
Class Z Shares: Shares Amount Shares Amount
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Sold 2,221,990 $ 24,578,034 2,813,669 $ 30,661,609
Issued as reinvestment of
dividends 746,636 7,585,830 682,340 7,519,388
Redeemed (7,290,364) (79,069,662) (3,382,296) (37,694,589)
- ----------------------------------------------------------------------------------------------
Net increase/(decrease) (4,321,738) $(46,905,798) 113,713 $ 486,408
- ----------------------------------------------------------------------------------------------
<FN>
* The Fund commenced selling Class C shares (formerly Class D shares) on February 4,
1993.
+ The Fund commenced selling Class Z shares (formerly Class C shares) on November 6,
1992.
</TABLE>
As of December 31, 1994, no Class Y shares had been sold.
7. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line of
credit provided by Bank of America (formerly Continental Bank N.A.) under an
Amended and Restated Line of Credit Agreement (the "Agreement") dated April 30,
1992, and renewed effective May 31, 1994, primarily for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. The Fund may borrow up to the
lesser of $25 million or 25% of its net assets, adjusted for purposes of the
Agreement. Interest is payable either at the bank's Money Market Rate or the
London Interbank Offered Rate plus 0.375% on an annualized basis. Under the
terms of the Agreement, as
33
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
amended, the Fund and the other affiliated entities are charged an aggregate
commitment fee of $100,000 which is allocated equally among each of the
participants. The Agreement requires, among other provisions, each participating
fund to maintain a ratio of net assets (not including funds borrowed pursuant to
the Agreement) to aggregate amount of indebtedness pursuant to the Agreement of
no less than 5 to 1. During the year ended December 31, 1994, the Fund did not
borrow under the Agreement.
34
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
SMITH BARNEY APPRECIATION FUND INC.:
We have audited the accompanying statement of assets and liabilities of Smith
Barney Appreciation Fund Inc. (formerly Smith Barney Shearson Appreciation Fund
Inc.), including the schedule of portfolio investments, as of December 31, 1994,
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
the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. 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 Smith
Barney Appreciation Fund Inc. as of December 31, 1994, 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 ten years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 8, 1995
35
<PAGE>
Smith Barney
Appreciation Fund Inc.
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
FISCAL YEAR ENDED DECEMBER 31, 1994
The amount of long-term capital gains paid by the Fund to its shareholders for
the fiscal year ended December 31, 1994, was $140,417,671.
36
<PAGE>
APPRECIATION SMITH BARNEY
FUND INC.
A Member of TravelersGroup [logo]
DIRECTORS
Burt N. Dorsett
Isaac Grainger*
Elliot S. Jaffe
Heath B. McLendon
Cornelius C. Rose, Jr.
*Director Emeritus
OFFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
Jessica M. Bibliowicz
President This report is submitted for the
general information of the
Harry D. Cohen shareholders of Smith Barney
Vice President and Appreciation Fund Inc. It is not
Investment Officer authorized for distribution to
prospective investors unless
Lewis E. Daidone accompanied or preceded by an
Senior Vice President effective Prospectus for the Fund,
and Treasurer which contains information
concerning the Fund's investment
Christina T. Sydor policies, fees and expenses as well
Secretary as other pertinent information.
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York 10013
[LOGO] Recycled Fund 6, 171, 172, 248
Recyclable FD 0312 C5
