Registration Nos. 2-34576
811-1940
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 41 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 28 X
SMITH BARNEY APPRECIATION FUND INC.
(Exact name of Registrant as specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
(212) 723-9218
(Registrant's telephone number, including Area Code)
Christina T. Sydor
Secretary
Smith Barney Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
(22nd Floor)
(Name and address of agent for service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to Rule
485(b)
on ________ pursuant to Rule 485(b)
on pursuant to Rule 485(a)
The Registrant has previously filed a declaration of
indefinite registration of its shares pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule
24f-2 Notice for the fiscal year ended December 31, 1995 was
filed on February 29, 1996 as Accession Number 89558-96-
000001.
CONTENTS OF REGISTRATION STATEMENT
Front Cover
Contents Page
Cross-Reference Sheet
Part A - Prospectus dated March 1, 1996 for Class A, Class
B, Class C and Class Y Shares
Prospectus dated March 1, 1996 for Class Z Shares
Part B - Statement of Additional Information dated March 1,
1996
Part C - Other Information
SMITH BARNEY APPRECIATION FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary (Not
applicable for Class
Z Prospectus)
3. Condensed Financial Information Financial
Highlights
4. General Description of Registrant Cover Page;
Prospectus Summary (Not
applicable for Class Z
Prospectus) ;
Investment Objective and
Management Policies; Additional
Information;
Annual Report
5. Management of the Fund Management of the
Fund; Distributor
(Not applicable for Class Z
Prospectus) ;
Additional Information; Annual
Report
6. Capital Stock and Other Securities Investment
Objective and Management Policies;
Dividends, Distributions and
Taxes;
Additional Information
7. Purchase of Securities Being Offered Valuation
of Shares; Purchase of Shares;
Exchange Privilege; Redemption
of Shares;
Minimum Account Size;
Distributor; ( In
Class Z Prospectus, see
Purchase, Exchange and
Redemption of Shares)
8. Redemption or Repurchase Purchase of Shares;
Redemption of Shares;
Exchange Privilege; ( In
Class Z Prospectus, see
Purchase, Exchange and
Redemption of Shares)
9. Legal Proceedings Not Applicable
Part B Statement of
Item No. Additional Information Caption
10. Cover Cover Page
11. Table of Contents Table of Contents
12. General Information Distributor;
Additional Information
13. Investment Objective and Policies Investment
Objective and Management
Policies
14. Management of the Fund Management of the
Fund; Distributor
15. Control Persons and Principal Management of
the Fund
Holders of Securities
16. Investment Advisory and Other Services Management of
the Fund; Distributor
17. Brokerage Allocation Investment
Objective and Management Policies
18. Capital Stock and Other Securities Purchase of
Shares; Redemption of Shares;
Taxes
19. Purchase, Redemption and Pricing of Valuation
of Shares; Purchase of Shares;
Securities Being Offered Exchange
Privilege; Redemption of Shares
Distributor
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Data Performance
Data; (In Class Z Prospectus,
see Performance)
23. Financial Statements Financial
Statements
SMITH BARNEY APPRECIATION FUND INC.
PART A
<PAGE>
P R O S P E C T U S
SMITH BARNEY
Appreciation
Fund Inc.
MARCH 1, 1996
PROSPECTUS BEGINS ON PAGE ONE
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS MARCH
1, 1995
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Appreciation Fund Inc. (the "Fund") is a
mutual fund which seeks
long-term appreciation of shareholders' capital through
investments primarily
in equity securities.
This Prospectus sets forth concisely certain information
about the Fund,
including sales charges, distribution and service fees and
expenses, that pro-
spective investors will find helpful in making an investment
decision. Invest-
ors are encouraged to read this Prospectus carefully and
retain it for future
reference.
Additional information about the Fund is contained in a
Statement of Addi-
tional Information dated March 1, 1996, as amended or
supplemented from time to
time, that is available upon request and without charge by
calling or writing
the Fund at the telephone number or address set forth above
or by contacting a
Smith Barney Financial Consultant. The Statement of
Additional Information has
been filed with the Securities and Exchange Commission (the
"SEC") and is
incorporated by reference into this Prospectus in its
entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
- -------------------------------------------------
FINANCIAL HIGHLIGHTS 10
- -------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 14
- -------------------------------------------------
VALUATION OF SHARES 17
- -------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 17
- -------------------------------------------------
PURCHASE OF SHARES 18
- -------------------------------------------------
EXCHANGE PRIVILEGE 29
- -------------------------------------------------
REDEMPTION OF SHARES 33
- -------------------------------------------------
MINIMUM ACCOUNT SIZE 35
- -------------------------------------------------
PERFORMANCE 36
- -------------------------------------------------
MANAGEMENT OF THE FUND 37
- -------------------------------------------------
DISTRIBUTOR 38
- -------------------------------------------------
ADDITIONAL INFORMATION 39
- -------------------------------------------------
</TABLE>
No person has been authorized to give any information or
to make any
representations in connection with this offering other than
those contained
in this Prospectus and, if given or made, such other
information or
representations must not be relied upon as having been
authorized by the
Fund or the distributor. This Prospectus does not
constitute an offer by the
Fund or the distributor to sell or a solicitation of an
offer to buy any of
the securities offered hereby in any jurisdiction to any
person to whom it
is unlawful to make such offer or solicitation in such
jurisdiction.
2
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
detailed information
appearing elsewhere in this Prospectus and in the Statement
of Additional
Information. Cross references in this summary are to
headings in the Prospec-
tus. See "Table of Contents."
INVESTMENT OBJECTIVE The Fund is an open-end, diversified,
management invest-
ment company whose sole investment objective is to seek long-
term appreciation
of shareholders' capital through investments primarily in
equity securities.
See "Investment Objective and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several
classes of shares
("Classes") to investors designed to provide them with the
flexibility of
selecting an investment best suited to their needs. The
general public is
offered three classes of shares: Class A shares, Class B
shares and Class C
shares, which differ principally in terms of sales charges
and rates of
expenses to which they are subject. A fourth Class of
shares, Class Y shares,
is offered only to investors meeting an initial investment
minimum of
$5,000,000. In addition, a fifth Class, Class Z shares,
which is offered pur-
suant to a separate prospectus, is offered exclusively to
(a) tax-exempt
employee benefit and retirement plans of Smith Barney Inc.
("Smith Barney")
and its affiliates and (b) unit investment trusts ("UITs")
sponsored by Smith
Barney and its affiliates. See "Purchase of Shares" and
"Redemption of
Shares."
Class A Shares. Class A shares are sold at net asset value
plus an initial
sales charge of up to 5.00% and are subject to an annual
service fee of 0.25%
of the average daily net assets of the Class. The initial
sales charge may be
reduced or waived for certain purchases. Purchases of Class
A shares, which
when combined with current holdings of Class A shares
offered with a sales
charge equal or exceed $500,000 in the aggregate, will be
made at net asset
value with no initial sales charge, but will be subject to a
contingent
deferred sales charge ("CDSC") of 1.00% on redemptions made
within 12 months
of purchase. See "Prospectus Summary -- Reduced or No
Initial Sales Charge."
Class B Shares. Class B shares are offered at net asset
value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by
1.00% each year
after the date of purchase to zero. This CDSC may be waived
for certain
redemptions. Class B shares are subject to an annual service
fee of 0.25% and
an annual distribution fee of 0.75% of the average daily net
assets of the
Class. The Class B shares' distribution fee may cause that
Class to have
higher expenses and pay lower dividends than Class A shares.
3
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
Class B Shares Conversion Feature. Class B shares will
convert automatically
to Class A shares, based on relative net asset value, eight
years after the
date of the original purchase. Upon conversion, these shares
will no longer be
subject to an annual distribution fee. In addition, a
certain portion of Class
B shares that have been acquired through the reinvestment of
dividends and dis-
tributions ("Class B Dividend Shares") will be converted at
that time. See
"Purchase of Shares -- Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value
with no initial
sales charge. They are subject to an annual service fee of
0.25% and an annual
distribution fee of 0.75% of the average daily net assets of
the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares
within 12 months of
purchase. The CDSC may be waived for certain redemptions.
The Class C shares'
distribution fee may cause that Class to have higher
expenses and pay lower
dividends than Class A shares. Purchases of Fund shares,
which when combined
with current holdings of Class C shares of the Fund equal or
exceed $500,000 in
the aggregate, should be made in Class A shares at net asset
value with no
sales charge, and will be subject to a CDSC of 1.00% on
redemptions made within
12 months of purchase.
Class Y Shares. Class Y shares are available only to
investors meeting an
initial investment minimum of $5,000,000. Class Y shares are
sold at net asset
value with no initial sales charge or CDSC. They are not
subject to any service
or distribution fees.
In deciding which Class of Fund shares to purchase,
investors should consider
the following factors, as well as any other relevant facts
and circumstances:
Intended Holding Period. The decision as to which Class of
shares is more
beneficial to an investor depends on the amount and intended
duration of his or
her investment. Shareholders who are planning to establish a
program of regular
investment may wish to consider Class A shares; as the
investment accumulates,
shareholders may qualify for reduced sales charges and the
shares are subject
to lower ongoing expenses over the term of the investment.
As an alternative,
Class B and Class C shares are sold without any initial
sales charge so the
entire purchase price is immediately invested in the Fund.
Any investment
return on these additional invested amounts may partially or
wholly offset the
higher annual expenses of these Classes. Because the Fund's
future return can-
not be predicted, however, there can be no assurance that
this would be the
case.
4
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
Finally, investors should consider the effect of the CDSC
period and any con-
version rights of the Classes in the context of their own
investment time
frame. For example, while Class C shares have a shorter CDSC
period than Class
B shares, they do not have a conversion feature and
therefore are subject to an
ongoing distribution fee. Thus, Class B shares may be more
attractive than
Class C shares to investors with longer term investment
outlooks.
Investors investing a minimum of $5,000,000 must purchase
Class Y shares,
which are not subject to an initial sales charge, CDSC or
service or distribu-
tion fee. The maximum purchase amount for Class A shares is
$4,999,999, Class B
shares is $249,999 and Class C shares is $499,999. There is
no maximum purchase
amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales
charge on Class A
shares may be waived for certain eligible purchasers, and
the entire purchase
price will be immediately invested in the Fund. In addition,
Class A share pur-
chases, which when combined with current holdings of Class A
shares offered
with a sales charge equal or exceed $500,000 in the
aggregate, will be made at
net asset value with no initial sales charge, but will be
subject to a CDSC of
1.00% on redemptions made within 12 months of purchase. The
$500,000 aggregate
investment may be met by adding the purchase to the net
asset value of all
Class A shares offered with a sales charge held in funds
sponsored by Smith
Barney listed under "Exchange Privilege." Class A share
purchases may also be
eligible for a reduced initial sales charge. See "Purchase
of Shares." Because
the ongoing expenses of Class A shares may be lower than
those for Class B and
Class C shares, purchasers eligible to purchase Class A
shares at net asset
value or at a reduced sales charge should consider doing so.
Smith Barney Financial Consultants may receive different
compensation for
selling each Class of shares. Investors should understand
that the purpose of
the CDSC on the Class B and Class C shares is the same as
that of the initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Fund" for
a complete descrip-
tion of the sales charges and service and distribution fees
for each Class of
shares and "Valuation of Shares," "Dividends, Distributions
and Taxes" and "Ex-
change Privilege" for other differences between the Classes
of shares.
SMITH BARNEY 401(K) PROGRAM Investors may be eligible to
participate in the
Smith Barney 401(k) Program, which is generally designed to
assist plan spon-
sors in the creation and operation of retirement plans under
Section 401(a)
5
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as other
types of participant directed, tax-qualified employee
benefit plans (collec-
tively, "Participating Plans"). Class A, Class B, Class C
and Class Y shares
are available as investment alternatives for Participating
Plans. See "Purchase
of Shares -- Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the
Fund's distributor,
Smith Barney, a broker that clears securities transactions
through Smith Barney
on a fully disclosed basis (an "Introducing Broker") or an
investment dealer in
the selling group. Direct purchases by certain retirement
plans may be made
through the Fund's transfer agent, First Data Investor
Services Group, Inc.
(the "Transfer Agent"). See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class
C shares may open
an account by making an initial investment of at least
$1,000 for each account,
or $250 for an individual retirement account ("IRA") or a
Self-Employed Retire-
ment Plan. Investors in Class Y shares may open an account
for an initial
investment of $5,000,000. Subsequent investments of at least
$50 may be made
for all Classes. For participants in retirement plans
qualified under Section
403(b)(7) or Section 401(a) of the Code, the minimum initial
investment
requirement for Class A, Class B and Class C shares and the
subsequent invest-
ment requirement for all Classes is $25. The minimum initial
investment
requirement for Class A, Class B and Class C shares and the
subsequent invest-
ment requirement for all Classes through the Systematic
Investment Plan
described below is $50. There is no minimum investment
requirement in Class A
shares for unitholders who invest distributions from a unit
investment trust
("UIT") sponsored by Smith Barney. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a
Systematic Investment
Plan under which they may authorize the automatic placement
of a purchase order
each month or quarter for Fund shares in an amount of at
least $50. See "Pur-
chase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the
New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase
of Shares" and "Re-
demption of Shares."
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management
Inc. ("SBMFM")
serves as the Fund's investment adviser and administrator.
SBMFM (formerly
known as Smith, Barney Advisers, Inc.) is a wholly owned
subsidiary of Smith
Barney Holdings Inc. ("Holdings"). Holdings is a wholly
owned subsidi
6
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
ary of Travelers Group Inc. ("Travelers"), a diversified
financial services
holding company engaged, through its subsidiaries,
principally in four business
segments: Investment Services, Consumer Finance Services,
Life Insurance Serv-
ices and Property & Casualty Insurance Services. See
"Management of Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for
shares of the same
Class of certain Smith Barney Mutual Funds at the respective
net asset values
next determined, plus any applicable sales charge
differential. See "Exchange
Privilege."
VALUATION OF SHARES Net asset value of the Fund for the
prior day generally is
quoted daily in the financial section of most newspapers and
is also available
from Smith Barney Financial Consultants. See "Valuation of
Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment
income and distribu-
tions of net realized capital gains, if any, are declared
and paid annually.
See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid
on shares of a Class
will be reinvested automatically, unless otherwise specified
by an investor, in
additional shares of the same Class at current net asset
value. Shares acquired
by dividend and distribution reinvestments will not be
subject to any sales
charge or CDSC. Class B shares acquired through dividend and
distribution rein-
vestments will become eligible for conversion to Class A
shares on a pro rata
basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no
assurance that the
Fund's investment objective will be achieved. The value of
the Fund's invest-
ments will fluctuate in response to changes in market and
economic conditions,
as well as the financial condition and prospects of issuers
in which the Fund
invests. The Fund may invest in foreign securities, though
management intends
to limit such investments to 10% of the Fund's assets.
Foreign investments may
include additional risks associated with currency exchange
rates, less complete
financial information about individual companies, less
market liquidity and
political instability. See "Investment Objective and
Management Policies."
7
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES The following expense table lists the
costs and expenses an
investor will incur either directly or indirectly as a
shareholder of the Fund,
based on the maximum sales charge or maximum CDSC that may
be incurred at the
time of purchase or redemption and, unless otherwise noted,
the Fund's operat-
ing expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS
B CLASS C CLASS Y
- ------------------------------------------------------------
- ------------------
<S> <C> <C>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
None None
Maximum CDSC (as a percentage of original
cost or redemption proceeds, whichever
is lower) None*
5.00% 1.00% None
- ------------------------------------------------------------
- ------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.62%
0.62% 0.62% 0.62%
12b-1 fees** 0.25 1.00
1.00 None
Other expenses*** 0.15 0.15
0.15 0.15
- ------------------------------------------------------------
- ------------------
TOTAL FUND OPERATING EXPENSES 1.02%
1.77% 1.77% 0.77%
- ------------------------------------------------------------
- ------------------
</TABLE>
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or
exceed $500,000 in the
aggregate, will be made at net asset value with no sales
charge, but will
be subject to a CDSC of 1.00% on redemptions made within
12 months.
** Upon conversion of Class B shares to Class A shares,
such shares will no
longer be subject to a distribution fee. Class C shares
do not have a
conversion feature and, therefore, are subject to an
ongoing distribution
fee. As a result, long-term shareholders of Class C
shares may pay more
than the economic equivalent of the maximum front-end
sales charge
permitted by the National Association of Securities
Dealers, Inc.
*** For Class Y shares, "Other Expenses" have been estimated
based on expenses
incurred by the Class A shares because there were no
Class Y shares
outstanding as of December 31, 1995.
The sales charge and CDSC set forth in the above table are
the maximum
charges imposed on purchases or redemptions of Fund shares
and investors
may actually pay lower or no charges, depending on the
amount purchased and, in
the case of Class B, Class C and certain Class A shares, the
length of time the
shares are held and whether the shares are held through the
Smith Barney 401(k)
Program. See "Purchase of Shares" and "Redemption of
Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value
of average daily net
assets of Class A shares. Smith Barney also receives, with
respect to Class B
and Class C shares, an annual 12b-1 fee of 1.00% of the
value of average daily
net assets of each respective Class, consisting of a 0.75%
distribution fee and
a 0.25% service fee. "Other expenses" in the above table
include fees for
shareholder services, custodial fees, legal and accounting
fees, printing costs
and registration fees.
8
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PROSPECTUS SUMMARY (CONTINUED)
EXAMPLE
The following example is intended to assist an investor in
understanding the
various costs that an investor in the Fund will bear
directly or indirectly.
The example assumes payment by the Fund of operating
expenses at the levels set
forth in the table above. See "Purchase of Shares,"
"Redemption of Shares" and
"Management of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
5 YEARS 10 YEARS*
- ------------------------------------------------------------
- -----------------
<S> <C> <C>
<C> <C>
An investor would pay the following
expenses on a $1,000 investment, assuming
(1) 5.00% annual return and
(2) redemption at the end of each time
period:
Class A $60 $81
$104 $169
Class B 68 86
106 189
Class C 28 56
96 208
Class Y 8 25
43 95
An investor would pay the following
expenses on the same investment, assuming
the same annual return and no redemption:
Class A $60 $81
$104 $169
Class B 18 56
96 189
Class C 18 56
96 208
Class Y 8 25
43 95
- ------------------------------------------------------------
- -----------------
</TABLE>
* Ten-year figures assume conversion of Class B shares to
Class A shares at
the end of the eighth year following the date of
purchase.
The example also provides a means for the investor to
compare expense levels
of funds with different fee structures over varying
investment periods. To
facilitate such comparison, all funds are required to
utilize a 5.00% annual
return assumption. However, the Fund's actual return will
vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTA-
TION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN
THOSE SHOWN.
9
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
FINANCIAL HIGHLIGHTS
The following information for the fiscal year ended December
31, 1995 has been
audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon
appears in the Fund's Annual Report dated December 31, 1995.
The information
for the fiscal years ended December 31, 1986 through
December 31, 1994 has
been audited by Coopers & Lybrand L.L.P. The information set
out below should
be read in conjunction with the financial statements and
related notes that
also appear in the Fund's Annual Report, which is
incorporated by reference
into the Statement of Additional Information. As of December
31, 1995, no
Class Y shares were outstanding and, accordingly, no
comparable information is
available at this time for that Class.
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
CLASS A 1995(1) 1994
1993(1) 1992 1991
- ------------------------------------------------------------
- ---------------------------
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $10.15 $11.01
$10.66 $10.26 $8.30
- ------------------------------------------------------------
- ---------------------------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income 0.20 0.16
0.15 0.18 0.18
Net realized and
unrealized gain/(loss) 2.75 (0.24)
0.72 0.46 2.05
- ------------------------------------------------------------
- ---------------------------
Total Income (Loss) From
Operations 2.95 (0.08)
0.87 0.64 2.23
- ------------------------------------------------------------
- ---------------------------
LESS DISTRIBUTION FROM:
Net investment income (0.20) (0.18)
(0.16) (0.15) (0.20)
Net realized gains (1.00) (0.60)
(0.36) (0.09) (0.07)
- ------------------------------------------------------------
- ---------------------------
Total Distributions (1.20) (0.78)
(0.52) (0.24) (0.27)
- ------------------------------------------------------------
- ---------------------------
NET ASSET VALUE, END OF
YEAR $11.90 $10.15
$11.01 $10.66 $10.26
- ------------------------------------------------------------
- ---------------------------
TOTAL RETURN+ 29.26% (0.77)%
8.13% 6.29% 26.94%
- ------------------------------------------------------------
- ---------------------------
NET ASSETS, END OF YEAR
(000S) $1,932,573 $1,689,268
$1,579,248 $1,712,411 $1,752,884
- ------------------------------------------------------------
- ---------------------------
RATIOS TO AVERAGE NET
ASSETS:
Expenses 1.02% 1.02%
1.03% 0.88% 0.80%
Net investment income 1.71 1.61
1.35 1.58 2.20
- ------------------------------------------------------------
- ---------------------------
PORTFOLIO TURNOVER RATE 57% 52%
52% 21% 19%
- ------------------------------------------------------------
- ---------------------------
AVERAGE COMMISSIONS PAID
ON
EQUITY SECURITY
TRANSACTIONS(2) $0.06 --
- -- -- --
- ------------------------------------------------------------
- ---------------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly
average shares
method, which more appropriately presents per share data
for this year
since the use of the undistributed income method did not
accord with
results of operations.
(2) New SEC disclosure guidelines require that the average
commission per
share be calculated for the current year only.
++Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
10
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
1990 1989 1988
1987 1986
- ------------------------------------------------------------
- --------------------
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $8.66 $7.04 $6.49
$6.54 $5.82
- ------------------------------------------------------------
- --------------------
INCOME (LOSS) FROM
OPERATIONS:
Net investment income 0.23 0.18 0.18
0.14 0.12
Net realized and
unrealized gain/(loss) (0.26) 1.90 0.69
0.32 1.01
- ------------------------------------------------------------
- --------------------
Total Income (Loss) From
Operations (0.03) 2.08 0.87
0.46 1.13
- ------------------------------------------------------------
- --------------------
LESS DISTRIBUTION FROM:
Net investment income (0.25) (0.24) (0.19)
(0.26) --
Net realized gains (0.08) (0.22) (0.13)
(0.25) (0.41)
- ------------------------------------------------------------
- --------------------
Total Distributions (0.33) (0.46) (0.32)
(0.51) (0.41)
- ------------------------------------------------------------
- --------------------
NET ASSET VALUE, END OF
YEAR $8.30 $8.66 $7.04
$6.49 $6.54
- ------------------------------------------------------------
- --------------------
TOTAL RETURN+ (0.27)% 29.55% 13.45%
6.95% 19.93%
- ------------------------------------------------------------
- --------------------
NET ASSETS, END OF YEAR
(000S) $1,103,293 $1,000,433 $491,397
$431,092 $315,804
- ------------------------------------------------------------
- --------------------
RATIOS TO AVERAGE NET
ASSETS:
Expenses 0.80% 0.90% 0.90%
0.90% 1.00%
Net investment income 2.90% 3.20% 2.70%
2.20% 2.10%
- ------------------------------------------------------------
- --------------------
PORTFOLIO TURNOVER RATE 30% 24% 25%
26% 30%
- ------------------------------------------------------------
- --------------------
</TABLE>
11
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH
YEAR:
<TABLE>
<CAPTION>
CLASS B SHARES 1995(1) 1994
1993(1) 1992(1)(2)
- ------------------------------------------------------------
- --------------------
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF
YEAR $ 10.14 $ 11.00 $
10.65 $ 10.55
- ------------------------------------------------------------
- --------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.11 0.13
0.06 0.01
Net realized and unrealized gain
(loss) 2.74 (0.29)
0.73 0.34
- ------------------------------------------------------------
- --------------------
Total Income (Loss) From
Operations 2.85 (0.16)
0.79 0.35
- ------------------------------------------------------------
- --------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.11) (0.10)
(0.08) (0.16)
Net realized gains (1.00) (0.60)
(0.36) (0.09)
- ------------------------------------------------------------
- --------------------
Total Distributions (1.11) (0.70)
(0.44) (0.25)
- ------------------------------------------------------------
- --------------------
NET ASSET VALUE, END OF YEAR $11.88 $10.14
$11.00 $10.65
- ------------------------------------------------------------
- --------------------
TOTAL RETURN 28.29% (1.53)%
7.38% 3.28%++
- ------------------------------------------------------------
- --------------------
NET ASSETS, END OF YEAR (IN 000S) $988,069 $761,000
$1,285,966 $1,122,249
- ------------------------------------------------------------
- --------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.77% 1.80%
1.83% 1.82%+
Net investment income 0.96 0.83
0.56 0.64+
- ------------------------------------------------------------
- --------------------
PORTFOLIO TURNOVER RATE 57% 52%
52% 21%
- ------------------------------------------------------------
- --------------------
AVERAGE COMMISSIONS PAID ON
EQUITY SECURITY TRANSACTIONS(3) $0.06 --
- -- --
- ------------------------------------------------------------
- --------------------
</TABLE>
(1) Per share amounts have been calculated using the
monthly average shares
method, which more appropriately presents per share
data for this year
since the use of the undistributed income method did
not accord with
results of operations.
(2) For the period from November 6, 1992 (inception date)
to December 31,
1992.
(3) New SEC disclosure guidelines require that the average
commissions per
share be calculated for the current year only.
++Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
12
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
CLASS C SHARES 1995(1) 1994
1993(1)(2)
- ------------------------------------------------------------
- -----------
<S> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.14 $11.00
$10.99
- ------------------------------------------------------------
- -----------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.11 0.10
0.07
Net realized and unrealized gain (loss) 2.74 (0.25)
0.38
- ------------------------------------------------------------
- -----------
Total Income (Loss) From Operations 2.85 (0.15)
0.45
- ------------------------------------------------------------
- -----------
LESS DISTRIBUTIONS FROM:
Net investment income (0.11) (0.11)
(0.08)
Distributions from net investment income (1.00) (0.60)
(0.36)
- ------------------------------------------------------------
- -----------
Total Distributions (1.11) (0.71)
(0.44)
- ------------------------------------------------------------
- -----------
NET ASSET VALUE, END OF YEAR $11.88 $10.14
$11.00
- ------------------------------------------------------------
- -----------
TOTAL RETURN 28.29% (1.41)%
4.09%++
- ------------------------------------------------------------
- -----------
NET ASSET, END OF YEAR (000S) $14,653 $5,040
$2,214
- ------------------------------------------------------------
- -----------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.77% 1.66%
1.68%+
Net investment income 0.96 0.98
0.71+
- ------------------------------------------------------------
- -----------
PORTFOLIO TURNOVER RATE 57% 52%
52%
- ------------------------------------------------------------
- -----------
AVERAGE COMMISSIONS PAID ON
EQUITY SECURITY TRANSACTIONS(3) $0.06 --
- --
- ------------------------------------------------------------
- -----------
</TABLE>
(1) Per share amounts have been calculated using the monthly
average shares
method, which more appropriately presents per share data
for this year
since the use of the undistributed income method did not
accord with
results of operations.
(2) For the period from February 4, 1993 (inception date) to
December 31,
1993.
(3) New SEC disclosure guidelines require that average
commissions per share
be calculated for current year only.
++Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
13
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Fund's sole investment objective is long-term
appreciation of sharehold-
ers' capital through investments primarily in equity
securities. This invest-
ment objective may not be changed without the approval of
the holders of a
majority of the Fund's outstanding shares. There can be no
assurance that the
Fund's investment objective will be achieved.
The Fund attempts to achieve its investment objective by
investing primarily
in equity securities (consisting of common stocks, preferred
stocks, warrants,
rights and securities convertible into common stocks) which
are believed to
afford attractive opportunities for investment appreciation.
The core holdings
of the Fund are blue chip companies that are dominant in
their industries. At
the same time, the Fund may hold securities of companies
with prospects of sus-
tained earnings growth and/or companies with a cyclical
earnings record if it
is felt these offer attractive investment opportunities. For
example, the Fund
may invest in the securities of companies whose earnings are
expected to
increase, companies whose securities prices are lower than
are believed justi-
fied in relation to their underlying assets or earning
power, or companies in
which changes are anticipated that would result in improved
operations or prof-
itability. Typically, the Fund invests in middle- and larger-
sized companies,
though it does invest in smaller companies whose securities
may reasonably be
expected to appreciate. The Fund's investments are spread
broadly among differ-
ent industries. The Fund may hold issues traded over-the-
counter as well as
those listed on one or more national exchanges, and the Fund
may make invest-
ments in foreign securities though management intends to
limit such investments
to 10% of the Fund's assets. In analyzing securities for
investment, SBMFM con-
siders many different factors, including past growth
records, management capa-
bility, future earnings prospects and technological
innovation, as well as gen-
eral market and economic factors which can influence the
price of securities.
While SBMFM considers dividend potential in selecting
investments, current
income for distribution to shareholders is secondary to the
Fund's principal
objective of long-term capital appreciation. The value of
the Fund's invest-
ments, and thus the net asset value of the Fund's shares,
will fluctuate in
response to changes in market and economic conditions, as
well as the financial
condition and prospects of issuers in which the Fund
invests.
Under normal market conditions, the majority of the Fund's
portfolio consists
of common stocks, but it also may contain other equity
securities as described
above, as well as short-term money market instruments for
cash management pur-
poses. When SBMFM believes that market conditions warrant,
the Fund may adopt a
temporary defensive investment posture, and invest in debt
14
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
obligations, increase its investment in short-term money
market instruments, or
engage in repurchase agreement transactions with respect to
the securities it
is authorized to hold (as described below).
Further information about the Fund's investment policies,
including a list of
those restrictions on its investment activities that cannot
be changed without
shareholder approval, appears in the Statement of Additional
Information.
INVESTMENT AND STRATEGIES
Lending of Portfolio Securities. From time to time, the
Fund may lend its
portfolio securities to brokers, dealers and other financial
organizations.
These loans may not exceed 33 1/3% of the Fund's total
assets taken at value.
Loans of portfolio securities by the Fund will be
collateralized by cash, let-
ters of credit or obligations of the United States
government or its agencies
and instrumentalities ("U.S. government securities") which
are maintained at
all times in an amount equal to at least 100% of the current
market value of
the loaned securities. By lending its portfolio securities,
the Fund will seek
to generate income by continuing to receive interest on the
loaned securities,
by investing the cash collateral in short-term instruments
or by obtaining
yield in the form of interest paid by the borrower when U.S.
government securi-
ties are used as collateral. The risks in lending portfolio
securities, as with
other extensions of secured credit, consist of possible
delays in receiving
additional collateral or in the recovery of the securities
or possible loss of
rights in the collateral should the borrower fail
financially. Loans will be
made to firms deemed by SBMFM to be of good standing and
will not be made
unless, in the judgment of SBMFM, the consideration to be
earned from such
loans would justify the risk.
Short-Term Investments. As noted above, the Fund may
invest in short-term
money market instruments, such as: U.S. government
securities; certificates of
deposit, time deposits and bankers' acceptances issued by
domestic banks (in-
cluding their branches located outside the United States and
subsidiaries
located in Canada), domestic branches of foreign banks,
savings and loan asso-
ciations and similar institutions; high grade commercial
paper; and repurchase
agreements with respect to such instruments.
Repurchase Agreements. The Fund will enter into repurchase
agreements with
banks which are the issuers of instruments acceptable for
purchase by the Fund
and with certain dealers on the Federal Reserve Bank of New
York's list of
reporting dealers. Under the terms of a typical repurchase
agreement, the Fund
would acquire an underlying obligation for a relatively
short period (usu-
15
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ally not more than one week) subject to an obligation of the
seller to repur-
chase, 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. Further
information on repur-
chase agreements and the risks associated with such
investments appears in the
Statement of Additional Information.
Portfolio Transactions and Turnover. Portfolio securities
transactions on
behalf of the Fund are placed by SBMFM with a number of
brokers and dealers,
including Smith Barney Inc. ("Smith Barney"). Smith Barney
has advised the
Fund that in transactions with the Fund, Smith Barney
charges a commission
rate at least as favorable as the rate that Smith Barney
charges its compara-
ble unaffiliated customers in similar transactions.
The Fund generally does not engage in short-term trading
but intends to pur-
chase securities for long-term capital appreciation. While
the Fund's portfo-
lio turnover rate has in the past exceeded 100%, the Fund's
annual portfolio
turnover rate is not expected to exceed 100%.
Foreign Securities. The Fund may invest in securities of
non-U.S. issuers in
the form of American Depositary Receipts ("ADRs"), European
Depositary
Receipts ("EDRs") or similar securities representing
interests in the common
stock of foreign issuers. Management intends to limit the
Fund's investment in
these types of securities, together with other types of
foreign securities, to
10% of the Fund's net assets. ADRs are receipts, typically
issued by a U.S.
bank or trust company, which evidence ownership of
underlying securities
issued by a foreign corporation. EDRs are receipts issued in
Europe which evi-
dence a similar ownership arrangement. Generally, ADRs, in
registered form,
are designed for use in the U.S. securities markets and EDRs
are designed for
use in European securities markets. The underlying
securities are not always
denominated in the same currency as the ADRs or EDRs.
Although investment in
the form of ADRs or EDRs facilitates trading in foreign
securities, it does
not mitigate the risks associated with investing in foreign
securities.
Investments in foreign securities incur higher costs than
investments in
U.S. securities, including higher costs in making securities
transactions as
well as foreign government taxes which may reduce the
investment return of the
Fund. In addition, foreign investments may include
additional risks associated
with currency exchange rates, less complete financial
information about indi-
vidual companies, less market liquidity and political
instability.
16
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
VALUATION OF SHARES
The Fund's net asset value per share is determined as of
the close of regular
trading on the NYSE, on each day that the NYSE is open, by
dividing the value
of the Fund's net assets attributable to each Class by the
total number of
shares of the Class outstanding.
Generally, the Fund's investments are valued at market
value or, in the
absence of a market value with respect to any securities, at
fair value as
determined by or under the direction of the Fund's Board of
Directors. Short-
term investments that mature in 60 days or less are valued
at amortized cost
whenever the Fund's Board of Directors determines that
amortized cost is the
fair value of those instruments. Further information
regarding the Fund's valu-
ation policies is contained in the Statement of Additional
Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all its
net investment
income (that is, its income other than its net realized
capital gains) and net
realized capital gains, if any, once a year, normally at the
end of the year in
which earned or at the beginning of the next year.
If a shareholder does not otherwise instruct, dividends
and capital gains
distributions will be reinvested automatically in additional
shares of the same
Class at net asset value, subject to no sales charge or
CDSC. In order to avoid
the application of a 4.00% nondeductible excise tax on
certain undistributed
amounts of ordinary income and capital gains, the Fund may
make an additional
distribution, shortly before December 31 in each year, of
any undistributed
ordinary income or capital gains and expects to pay any
other dividends and
distributions necessary to avoid the application of this
tax. The per share
dividends on Class B and Class C shares of the Fund may be
lower than the per
share dividends on Class A and Class Y shares principally as
a result of the
distribution fee applicable with respect to Class B and
Class C shares. The per
share dividends on Class A shares of the Fund may be lower
than the per share
dividends on Class Y shares principally as a result of the
service fee applica-
ble to Class A shares. Distributions of capital gains, if
any, will be in the
same amount for Class A, Class B, Class C and Class Y
shares.
17
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
TAXES
The Fund has qualified and intends to continue to qualify
each year as a reg-
ulated investment company under the Code. Dividends paid
from net investment
income and distributions of net realized short-term capital
gains are taxable
to shareholders as ordinary income, regardless of how long
shareholders have
held their Fund shares and whether such dividends and
distributions are
received in cash or reinvested in additional Fund shares.
Distributions of net
realized long-term capital gains will be taxable to
shareholders as long-term
capital gains, regardless of how long shareholders have held
Fund shares and
whether such distributions are received in cash or are
reinvested in additional
Fund shares. Furthermore, as a general rule, a shareholder's
gain or loss on a
sale or redemption of Fund shares will be a long-term
capital gain or loss if
the shareholder has held the shares for more than one year
and will be a short-
term capital gain or loss if the shareholder has held the
shares for one year
or less. Some of the Fund's dividends declared from net
investment income may
qualify for the Federal dividends-received deduction for
corporations.
Statements as to the tax status of each shareholder's
dividends and distribu-
tions are mailed annually. Each shareholder also will
receive, if appropriate,
various written notices after the close of the Fund's prior
taxable year as to
the Federal income tax status of his or her dividends and
distributions which
were received from the Fund during the Fund's prior taxable
year. Shareholders
should consult their own tax advisors about the status of
the Fund's dividends
and distributions for state and local tax liabilities.
PURCHASE OF SHARES
GENERAL
The Fund offers the general public four Classes of shares.
Class A shares are
sold to investors with an initial sales charge and Class B
and Class C shares
are sold without an initial sales charge but are subject to
a CDSC payable upon
certain redemptions. Class Y shares are sold without an
initial sales charge or
CDSC and are available only to investors investing a minimum
of $5,000,000 (ex-
cept for purchases of Class Y shares by Smith Barney Concert
Series Inc., for
which there is no minimum purchase amount). Class Z shares
are offered without
a sales charge, CDSC, or service or distribution fee,
exclusively to: (a) tax-
exempt employee benefit and retirement plans of Smith Barney
and its affiliates
and (b) certain UITs sponsored by Smith Barney and its
affiliates. Investors
meet
18
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
ing either of these criteria who are interested in acquiring
Class Z shares
should contact a Smith Barney Financial Consultant for a
Class Z Shares Pro-
spectus. See "Prospectus Summary -- Alternative Purchase
Arrangements" for a
discussion of factors to consider in selecting which Class
of shares to pur-
chase.
Purchases of Fund shares must be made through a brokerage
account maintained
with Smith Barney, an Introducing Broker or an investment
dealer in the selling
group, except for investors purchasing shares of the Fund
through a qualified
retirement plan who may do so directly through the Transfer
Agent. When pur-
chasing shares of the Fund, investors must specify whether
the purchase is for
Class A, Class B, Class C or Class Y shares. No maintenance
fee will be charged
by the Fund in connection with a brokerage account through
which an investor
purchases or holds shares.
Investors in Class A, Class B and Class C shares may open
an account by mak-
ing an initial investment of at least $1,000 for each
account, or $250 for an
IRA or a Self-Employed Retirement Plan in the Fund.
Investors in Class Y shares
may open an account by making an initial investment of
$5,000,000.
Subsequent investments of at least $50 may be made for all
Classes. For par-
ticipants in retirement plans qualified under Section
403(b)(7) or Section
401(a) of the Code, the minimum initial investment
requirement for Class A,
Class B and Class C shares and the subsequent investment
requirement for all
Classes in the Fund is $25. For the Fund's Systematic
Investment Plan, the min-
imum initial investment requirement for Class A, Class B and
Class C shares and
the subsequent investment requirement for all Classes is
$50. There are no min-
imum investment requirements for Class A shares for
employees of Travelers and
its subsidiaries, including Smith Barney, Directors of the
Fund and their
spouses and children and unitholders who invest
distributions from a UIT spon-
sored by Smith Barney. The Fund reserves the right to waive
or change minimums,
to decline any order to purchase its shares and to suspend
the offering of
shares from time to time. Shares purchased will be held in
the shareholder's
account by the Transfer Agent. Share certificates are issued
only upon a share-
holder's written request to the Transfer Agent.
Purchase orders received by the Fund or Smith Barney prior
to the close of
regular trading on the NYSE, on any day the Fund calculates
its net asset val-
ue, are priced according to the net asset value determined
on that day. Orders
received by dealers or Introducing Brokers prior to the
close of regular trad-
ing on the NYSE, on any day the Fund calculates its net
asset value, are priced
according to the net asset value determined on that day,
provided the order is
19
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
received by the Fund or Smith Barney prior to Smith Barney's
close of business
(the "trade date"). For shares purchased through Smith
Barney or Introducing
Brokers purchasing through Smith Barney, payment for Fund
shares is due on the
third business day (the "settlement date") after the trade
date. In all other
cases, payment must be made with the purchase order.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any
time by purchasing
shares through a service known as the Systematic Investment
Plan. Under the
Systematic Investment Plan, Smith Barney or the Transfer
Agent is authorized,
through preauthorized transfers of $50 or more, to charge
the regular bank
account or other financial institution indicated by the
shareholder on a
monthly or quarterly basis to provide systematic additions
to the sharehold-
er's Fund account. A shareholder who has insufficient funds
to complete the
transfer will be charged a fee of up to $25 by Smith Barney
or the Transfer
Agent. The Systematic Investment Plan also authorizes Smith
Barney to apply
cash held in the shareholder's Smith Barney brokerage
account or redeem the
shareholder's shares of a Smith Barney money market fund to
make additions to
the account. Additional information is available from the
Fund or a Smith Bar-
ney Financial Consultant.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The sales charges applicable to purchases of Class A
shares of the Fund are
as follows:
<TABLE>
<CAPTION>
DEALERS
SALES CHARGE AS % SALES CHARGE AS %
REALLOWANCE AS %
AMOUNT OF INVESTMENT OF OFFERING PRICE OF AMOUNT
INVESTED OF OFFERING PRICE
- ------------------------------------------------------------
- -------------------
<S> <C> <C>
<C>
Less than $25,000 5.00% 5.26%
4.50%
$ 25,000 - $ 49,999 4.00 4.17
3.60
$ 50,000 - $ 99,999 3.50 3.63
3.15
$100,000 - $249,999 3.00 3.09
2.70
$250,000 - $499,999 2.00 2.04
1.80
$500,000 and over * *
*
- ------------------------------------------------------------
- -------------------
</TABLE>
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or exceed
$500,000 in the
aggregate, will be made at net asset value without any
initial sales charge
but will be subject to a CDSC of 1.00% on redemptions made
within 12 months
of purchase. The CDSC on Class A shares is payable to
Smith Barney, which
compensates Smith Barney Financial Consultants and other
dealers whose
clients make purchases of $500,000 or more. The CDSC is
waived in the same
circumstances in which the CDSC applicable to Class B and
Class C shares is
waived. See "Deferred Sales Charge Alternatives" and
"Waivers of CDSC."
20
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
Members of the selling group may receive up to 90% of the
sales charge and
may be deemed to be underwriters of the Fund as defined in
the Securities Act
of 1933, as amended.
The reduced sales charges shown above apply to the
aggregate of purchases of
Class A shares of the Fund made at one time by "any person,"
which includes an
individual, his or her spouse and children, or a trustee or
other fiduciary of
a single trust estate or single fiduciary account. The
reduced sales charge
minimums may also be met by aggregating the purchases with
the net asset value
of all Class A shares held in funds sponsored by Smith
Barney that are offered
with a sales charge listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value
without a sales
charge in the following circumstances: (a) sales of Class A
shares to Board
Members of any of the Smith Barney Mutual Funds and
employees of Travelers and
its subsidiaries and employees of members of the National
Association of Secu-
rities Dealers, Inc., or the spouses and children of such
persons (including
the surviving spouse of a deceased Board Member or employee,
and retired Board
Members or employees), or sales to any trust, pension,
profit-sharing or other
benefit plan for such persons provided such sales are made
upon the assurance
of the purchaser that the purchase is made for investment
purposes and that the
securities will not be re-sold except through redemption or
repurchase; (b)
offers of Class A shares to any other investment company in
connection with the
combination of such company with the Fund by merger,
acquisition of assets or
otherwise; (c) purchases of Class A shares by any client of
a newly employed
Smith Barney Financial Consultant (for a period up to 90
days from the com-
mencement of the Financial Consultant's employment with
Smith Barney), on the
condition the purchase of Class A shares is made with the
proceeds of the
redemption of shares of a mutual fund which (i) was
sponsored by the Financial
Consultant's prior employer, (ii) was sold to the client by
the Financial Con-
sultant and (iii) was subject to a sales charge; (d)
shareholders who have
redeemed Class A shares in the Fund (or Class A shares of
another Smith Barney
Mutual Fund that is offered with a sales charge equal to or
greater than the
maximum sales charge of the Fund) and who wish to reinvest
their redemption
proceeds in the Fund, provided the reinvestment is made
within 60 calendar days
of the redemption; (e) accounts managed by registered
investment advisory sub-
sidiaries of Travelers; and (f) investments of distributions
from a UIT spon-
sored by Smith Barney. In order to obtain such discounts,
the purchaser must
provide sufficient information at the time of purchase to
permit verification
that the purchase would qualify for the elimination of the
sales charge.
21
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any
person" (as defined
above) at a reduced sales charge or at net asset value
determined by aggregat-
ing the dollar amount of the new purchase and the total net
asset value of all
Class A shares of the Fund and of funds sponsored by Smith
Barney which are
offered with a sales charge listed under "Exchange
Privilege" then held by
such person and applying the sales charge applicable to such
aggregate. In
order to obtain such discount, the purchaser must provide
sufficient informa-
tion at the time of purchase to permit verification that the
purchase quali-
fies for the reduced sales charge. The right of accumulation
is subject to
modification or discontinuance at any time with respect to
all shares pur-
chased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced
sales charge or pur-
chase at net asset value will also be available to employees
(and partners) of
the same employer purchasing as a group, provided each
participant makes the
minimum initial investment required. The sales charge
applicable to purchases
by each member of such a group will be determined by the
table set forth above
under "Initial Sales Charge Alternative -- Class A Shares,"
and will be based
upon the aggregate sales of Class A shares of the Smith
Barney Mutual Funds
offered with a sales charge to, and share holdings of, all
members of the
group. To be eligible for such reduced sales charges or to
purchase at net
asset value, all purchases must be pursuant to an employer-
or partnership-
sanctioned plan meeting certain requirements. One such
requirement is that the
plan must be open to specified partners or employees of the
employer and its
subsidiaries, if any. Such plan may, but is not required to,
provide for pay-
roll deductions, IRAs or investments pursuant to retirement
plans under Sec-
tions 401 or 408 of the Code. Smith Barney may also offer a
reduced sales
charge or net asset value purchase for aggregating related
fiduciary accounts
under such conditions that Smith Barney will realize
economies of sales
efforts and sales related expenses. An individual who is a
member of a quali-
fied group may also purchase Class A shares at the reduced
sales charge appli-
cable to the group as a whole. The sales charge is based
upon the aggregate
dollar value of Class A shares offered with a sales charge
that have been pre-
viously purchased and are still owned by the group, plus the
amount of the
current purchase. A "qualified group" is one which (a) has
been in existence
for more than six months, (b) has a purpose other than
acquiring Fund shares
at a discount and (c) satisfies uniform criteria which
enable Smith Barney to
realize economies of scale in its costs of distribut-
22
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
ing shares. A qualified group must have more than 10
members, must be available
to arrange for group meetings between representatives of the
Fund and the mem-
bers, and must agree to include sales and other materials
related to the Fund
in its publications and mailings to members at no cost to
Smith Barney. In
order to obtain such reduced sales charge or to purchase at
net asset value,
the purchaser must provide sufficient information at the
time of purchase to
permit verification that the purchase qualifies for the
reduced sales charge.
Approval of group purchase reduced sales charge plans is
subject to the discre-
tion of Smith Barney.
LETTER OF INTENT
Class A Shares. A Letter of Intent for amounts of $50,000
or more provides an
opportunity for an investor to obtain a reduced sales charge
by aggregating
investments over a 13 month period, provided that the
investor refers to such
Letter when placing orders. For purposes of a Letter of
Intent, the "Amount of
Investment" as referred to in the preceding sales charge
table includes pur-
chases of all Class A shares of the Fund and other Smith
Barney Mutual Funds
offered with a sales charge over the 13 month period based
on the total amount
of intended purchases plus the value of all Class A shares
previously purchased
and still owned. An alternative is to compute the 13 month
period starting up
to 90 days before the date of execution of a Letter of
Intent. Each investment
made during the period receives the reduced sales charge
applicable to the
total amount of the investment goal. If the goal is not
achieved within the
period, the investor must pay the difference between the
sales charges applica-
ble to the purchases made and the charges previously paid,
or an appropriate
number of escrowed shares will be redeemed. Please contact a
Smith Barney
Financial Consultant or the Transfer Agent to obtain a
Letter of Intent appli-
cation.
Class Y Shares. A Letter of Intent may also be used as a
way for investors to
meet the minimum investment requirement for Class Y shares.
Such investors must
make an initial minimum purchase of $1,000,000 in Class Y
shares of the Fund
and agree to purchase a total of $5,000,000 of Class Y
shares of the Fund
within six months from the date of the Letter. If a total
investment of
$5,000,000 is not made within the six-month period, all
Class Y shares pur-
chased to date will be transferred to Class A shares, where
they will be sub-
ject to all fees (including a service fee of 0.25%) and
expenses applicable to
the Fund's Class A shares, which may include a CDSC of
1.00%. The Fund expects
that such transfer will not be subject to Federal income
taxes. Please contact
a Smith Barney Financial Consultant or the Transfer Agent
for further informa-
tion.
23
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at the net asset value next
determined without an
initial sales charge so that the full amount of an
investor's purchase payment
may be immediately invested in the Fund. A CDSC, however,
may be imposed on
certain redemptions of these shares. CDSC Shares are: (a)
Class B shares;
(b) Class C shares; and (c) Class A shares which, when
combined with Class A
shares offered with a sales charge currently held by an
investor, equal or
exceed $500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount equal to
the lesser of the
cost of the shares being redeemed or their net asset value
at the time of
redemption. CDSC Shares that are redeemed will not be
subject to a CDSC to the
extent that the value of such shares represents: (a) capital
appreciation of
Fund assets; (b) reinvestment of dividends or capital gain
distributions; (c)
with respect to Class B shares, shares redeemed more than
five years after
their purchase; or (d) with respect to Class C shares and
Class A shares that
are CDSC Shares, shares redeemed more than 12 months after
their purchase.
Class C shares and Class A shares that are CDSC Shares are
subject to a
1.00% CDSC if redeemed within 12 months of purchase. In
circumstances in which
the CDSC is imposed on Class B shares, the amount of the
charge will depend on
the number of years since the shareholder made the purchase
payment from which
the amount is being redeemed. Solely for purposes of
determining the number of
years since a purchase payment, all purchase payments made
during a month will
be aggregated and deemed to have been made on the last day
of the preceding
Smith Barney statement month. The following table sets forth
the rates of the
charge for redemptions of Class B shares by shareholders,
except in the case
of purchases by Participating Plans, as described below. See
"Purchase of
Shares -- Smith Barney 401(k) Program."
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- ---------------------------------
<S> <C>
First 5.00%
Second 4.00
Third 3.00
Fourth 2.00
Fifth 1.00
Sixth and thereafter 0.00
- ---------------------------------
</TABLE>
Class B shares will convert automatically to Class A
shares eight years
after the date on which they were purchased and thereafter
will no longer be
subject
24
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
to any distribution fees. There also will be converted at
that time such pro-
portion of Class B Dividend Shares owned by the shareholder
as the total number
of his or her Class B shares converting at the time bears to
the total number
of outstanding Class B shares (other than Class B Dividend
Shares) owned by the
shareholder. Shareholders who held Class B shares of Smith
Barney Shearson
Short-Term World Income Fund (the "Short-Term World Income
Fund") on July 15,
1994 and who subsequently exchange those shares for Class B
shares of the Fund
will be offered the opportunity to exchange all such Class B
shares for Class A
shares of the Fund four years after the date on which those
shares were deemed
to have been purchased. Holders of such Class B shares will
be notified of the
pending exchange in writing approximately 30 days before the
fourth anniversary
of the purchase date and, unless the exchange has been
rejected in writing, the
exchange will occur on or about the fourth anniversary date.
See "Prospectus
Summary -- Alternative Purchase Arrangements -- Class B
Shares Conversion Fea-
ture." The length of time that CDSC Shares acquired through
an exchange have
been held will be calculated from the date that the shares
exchanged were ini-
tially acquired in one of the other applicable Smith Barney
Mutual Funds, and
Fund shares being redeemed will be considered to represent,
as applicable, cap-
ital appreciation or dividend and capital gain distribution
reinvestments in
such other funds. For Federal income tax purposes, the
amount of the CDSC will
reduce the gain or increase the loss, as the case may be, on
the amount real-
ized on redemption. The amount of any CDSC will be paid to
Smith Barney.
To provide an example, assume an investor purchased 100
Class B shares at $10
per share for a cost of $1,000. Subsequently, the investor
acquired 5 addi-
tional shares through dividend reinvestment. During the
fifteenth month after
the purchase, the investor decided to redeem $500 of his or
her investment.
Assuming at the time of the redemption the net asset value
had appreciated to
$12 per share, the value of the investor's shares would be
$1,260 (105 shares
at $12 per share). The CDSC would not be applied to the
amount which represents
appreciation ($200) and the value of the reinvested dividend
shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus
$260) would be
charged at a rate of 4.00% (the applicable rate for Class B
shares) for a total
deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) au-
tomatic cash withdrawals in amounts equal to or less than
1.00% per
25
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
month of the value of the shareholder's shares at the time
the withdrawal plan
commences (see "Automatic Cash Withdrawal Plan") (provided,
however, that auto-
matic cash withdrawals in amounts equal to or less than
2.00% per month of the
value of the shareholder's shares will be permitted for
withdrawal plans that
were established prior to November 7, 1994); (c) redemptions
of shares within
12 months following the death or disability of the
shareholder; (d) redemptions
of shares made in connection with qualified distributions
from retirement plans
or IRAs upon the attainment of age 59 1/2; (e) involuntary
redemptions; and (f)
redemptions of shares in connection with a combination of
the Fund with any
investment company by merger, acquisition of assets or
otherwise. In addition,
a shareholder who has redeemed shares from other Smith
Barney Mutual Funds may,
under certain circumstances, reinvest all or part of the
redemption proceeds
within 60 days and receive pro rata credit for any CDSC
imposed on the prior
redemption.
CDSC waivers will be granted subject to confirmation (by
Smith Barney in the
case of shareholders who are also Smith Barney clients or by
the Transfer Agent
in the case of all other shareholders) of the shareholder's
status or holdings,
as the case may be.
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in the Smith
Barney 401(k) Program,
which is generally designed to assist plan sponsors in the
creation and opera-
tion of retirement plans under Section 401(a) of the Code.
To the extent appli-
cable, the same terms and conditions are offered to all
Participating Plans in
the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class B,
Class C and Class Y
shares as investment alternatives under the Smith Barney
401(k) Program.
Class A, Class B and Class C shares acquired through the
Smith Barney 401(k)
Program are subject to the same service and/or distribution
fees as, but dif-
ferent sales charge and CDSC schedules than, the Class A,
Class B and Class C
shares acquired by other investors. Similar to those
available to other invest-
ors, Class Y shares acquired through the Smith Barney 401(k)
Program are not
subject to any initial sales charge, CDSC or service or
distribution fee. Once
a Participating Plan has made an initial investment in the
Fund, all of its
subsequent investments in the Fund must be in the same Class
of shares, except
as otherwise described below.
26
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
Class A Shares. Class A shares of the Fund are offered
without any initial
sales charge to any Participating Plan that purchases from
$500,000 to
$4,999,999 of Class A shares of one or more of the Smith
Barney Mutual Funds.
Class A shares acquired through the Smith Barney 401(k)
Program after November
7, 1994 are subject to a CDSC of 1.00% of redemption
proceeds if the Partici-
pating Plan terminates within four years of the date the
Participating Plan
first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are offered to
any Participating
Plan that purchases less than $250,000 of one or more of the
Smith Barney
Mutual Funds. Class B shares acquired through the Smith
Barney 401(k) Program
are subject to a CDSC of 3.00% of redemption proceeds if the
Participating Plan
terminates within eight years of the date the Participating
Plan first enrolled
in the Smith Barney 401(k) Program. Eight years after the
date the Participat-
ing Plan enrolled in the Smith Barney 401(k) Program, it
will be offered the
opportunity to exchange all of its Class B shares for Class
A shares of the
Fund. Such Plans will be notified of the pending exchange in
writing approxi-
mately 60 days before the eighth anniversary of the
enrollment date and, unless
the exchange has been rejected in writing, the exchange will
occur on or about
the eighth anniversary date. Once the exchange has occurred,
a Participating
Plan will not be eligible to acquire additional Class B
shares of the Fund but
instead may acquire Class A shares of the Fund. If the
Participating Plan
elects not to exchange all of its Class B shares at that
time, each Class B
share held by the Participating Plan will have the same
conversion feature as
Class B shares held by other investors. See "Purchase of
Shares -- Deferred
Sales Charge Alternatives."
Class C Shares. Class C shares of the Fund are offered to
any Participating
Plan that invests from $250,000 to $499,999 in one or more
Smith Barney Mutual
Funds. Class C shares acquired through the Smith Barney
401(k) Program after
November 7, 1994 are subject to a CDSC of 1.00% of
redemption proceeds if the
Participating Plan terminates within four years of the date
the Participating
Plan first enrolled in the Smith Barney 401(k) Program. In
any year after the
date a Participating Plan enrolled in the Smith Barney
401(k) Program, if its
total Class C holdings equal at least $500,000 as of the
calendar year-end, the
Participating Plan will be offered the opportunity to
exchange all of its Class
C shares for Class A shares of the Fund. Such Plans will be
notified in writing
within 30 days after the last business day of the calendar
year, and unless the
exchange offer has been rejected in writing, the exchange
will occur on or
about the last business day of the following March. Once the
exchange has
occurred, a Participating Plan will not be eligible to
acquire Class C shares
27
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PURCHASE OF SHARES (CONTINUED)
of the Fund but instead may acquire Class A shares of the
Fund. Class C shares
not converted will continue to be subject to the
distribution fee.
Class Y Shares. Class Y shares of the Fund are offered
without any service
or distribution fees, sales charge or CDSC to any
Participating Plan that pur-
chases $5,000,000 or more of Class Y shares of one or more
of the Smith Bar-
ney Mutual Funds.
Whether or not the CDSC applies to a Participating Plan
depends on the num-
ber of years since the Participating Plan first became
enrolled in the Smith
Barney 401(k) Program, unlike the applicability of the CDSC
to other share-
holders, which depends on the number of years since those
shareholders made
the purchase payment for the shares which are being
redeemed. Where applica-
ble, the CDSC will be assessed on shares held through the
Smith Barney 401(k)
Program on an amount equal to the lesser of the original
cost of the shares
being redeemed or their net asset value at the time of
redemption; provided,
however, that shares will not be subject to a CDSC to the
extent that the
value of such shares represents capital appreciation of Fund
assets and/or
reinvestments of dividends or capital gain distributions. In
addition, the
CDSC will be waived on redemptions of CDSC Shares in
connection with lump-sum
or other distributions made by a Participating Plan as a
result of: (a) the
retirement of an employee in the Participating Plan; (b) the
termination of
employment of an employee in the Participating Plan; (c) the
death or disabil-
ity of an employee in the Participating Plan; (d) the
attainment of age 59 1/2
by an employee in the Participating Plan; (e) hardship of an
employee in the
Participating Plan to the extent permitted under Section
401(k) of the Code;
or (f) redemptions of shares in connection with a loan made
by the Participat-
ing Plan to an employee.
Participating Plans wishing to acquire shares of the Fund
through the
Smith Barney 401(k) Program must purchase such shares
directly from the Trans-
fer Agent. For further information regarding the Smith
Barney 401(k) Program,
investors should contact a Smith Barney Financial
Consultant.
28
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may
be exchanged at the
net asset value next determined for shares of the same Class
in the following
Smith Barney Mutual Funds, to the extent shares are offered
for sale in the
shareholder's state of residence. Exchanges of Class A,
Class B and Class C
shares are subject to minimum investment requirements and
all shares are sub-
ject to the other requirements of the fund into which
exchanges are made and a
sales charge differential may apply.
FUND NAME
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Equity Income Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Taxable Fixed-Income Funds
**Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
*Smith Barney Funds, Inc. -- Income Return Account
Portfolio
+++Smith Barney Funds, Inc. -- Short-Term U.S. Treasury
Securities Portfolio
Smith Barney Funds, Inc. -- U.S. Government Securities
Portfolio
Smith Barney Government Securities Fund
29
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
*Smith Barney Intermediate Maturity California Municipals
Fund
*Smith Barney Intermediate Maturity New York Municipals
Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
*Smith Barney Muni Funds -- Florida Limited Term Portfolio
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
*Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Ohio Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc. -- Emerging Markets
Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond
Portfolio
Smith Barney World Funds, Inc. -- International Balanced
Portfolio
Smith Barney World Funds, Inc. -- International Equity
Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
Smith Barney Concert Series Inc.
Smith Barney Concert Series Inc. -- High Growth Portfolio
30
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney Concert Series Inc. -- Growth Portfolio
Smith Barney Concert Series Inc. -- Balanced Portfolio
Smith Barney Concert Series Inc. -- Conservative
Portfolio
Smith Barney Concert Series Inc. -- Income Portfolio
Money Market Funds
+Smith Barney Exchange Reserve Fund
++Smith Barney Money Funds, Inc. -- Cash Portfolio
++Smith Barney Money Funds, Inc. -- Government Portfolio
***Smith Barney Money Funds, Inc. -- Retirement Portfolio
+++Smith Barney Muni Funds -- California Money Market
Portfolio
+++Smith Barney Muni Funds -- New York Money Market
Portfolio
+++Smith Barney Municipal Money Market Fund, Inc.
- ------------------------------------------------------------
- -------------------
* Available for exchange with Class A, Class C and Class Y
shares of the
Fund.
** Available for exchange with Class A, Class B and Class Y
shares of the
Fund. In addition, shareholders who own Class C shares
of the Fund through
the Smith Barney 401(k) Program may exchange those
shares for Class C
shares of this Fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares
of the Fund.
++ Available for exchange with Class A and Class Y shares
of the Fund. In
addition, shareholders who own Class C shares of the
Fund through the
Smith Barney 401(k) Program may exchange those shares
for Class C shares
of this fund.
+++ Available for exchange with Class A and Class Y shares
of the Fund.
Class A Exchanges. Class A shares of the Smith Barney
Mutual Funds sold
without a sales charge or with a maximum sales charge of
less than the maximum
charged by other Smith Barney Mutual Funds will be subject
to the appropriate
"sales charge differential" upon the exchange of such shares
for Class A
shares of a fund sold with a higher sales charge. The "sales
charge differen-
tial" is limited to a percentage rate no greater than the
excess of the sales
charge rate applicable to purchases of shares of the mutual
fund being
acquired in the exchange over the sales charge rate(s)
actually paid on the
mutual fund shares relinquished in the exchange and on any
predecessor of
those shares. For purposes of the exchange privilege, shares
obtained through
automatic reinvestment of dividends and capital gain
distributions are treated
as having paid the same sales charges applicable to the
shares on which the
dividends or distributions were paid; however, except in the
case of the Smith
Barney 401(k) Program, if no sales charge was imposed upon
the initial pur-
chase of the shares,
31
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
any shares obtained through automatic reinvestment will be
subject to a sales
charge differential upon exchange.
Class B Exchanges. In the event a Class B shareholder
(unless such share-
holder was a Class B shareholder of the Short-Term World
Income Fund on July
15, 1994) wishes to exchange all or a portion of his or her
shares in any of
the funds imposing a higher CDSC than that imposed by the
Fund, the exchanged
Class B shares will be subject to the higher applicable
CDSC. Upon an exchange,
the new Class B shares will be deemed to have been purchased
on the same date
as the Class B shares of the fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C
shares will be deemed to
have been purchased on the same date as the Class C shares
of the fund that
have been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund who
wish to exchange all
or a portion of their Class Y shares for Class Y shares in
any of the funds
identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege.
Although the
exchange privilege is an important benefit, excessive
exchange transactions can
be detrimental to the Fund's performance and its
shareholders. SBMFM may deter-
mine that a pattern of frequent exchanges is excessive and
contrary to the best
interests of the Fund's other shareholders. In this event,
the Fund may, at its
discretion, decide to limit additional purchases and/or
exchanges by a share-
holder. Upon such a determination, the Fund will provide
notice in writing or
by telephone to the shareholder at least 15 days prior to
suspending the
exchange privilege and during the 15 day period the
shareholder will be
required to (a) redeem his or her shares in the Fund or (b)
remain invested in
the Fund or exchange into any of the funds of the Smith
Barney Mutual Funds
ordinarily available, which position the shareholder would
be expected to main-
tain for a significant period of time. All relevant factors
will be considered
in determining what constitutes an abusive pattern of
exchanges.
Certain shareholders may be able to exchange shares by
telephone.
See""Redemption of Shares--Telephone Redemption and Exchange
Program."
Exchanges will be processed at the net asset value next
determined, plus any
applicable sales charge differential. Redemption procedures
discussed below are
also applicable for exchanging shares, and exchanges will be
made upon receipt
of all supporting documents in proper form. If the account
registration of the
shares of the fund being acquired is identical to the
registration of the
shares of
32
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
EXCHANGE PRIVILEGE (CONTINUED)
the fund exchanged, no signature guarantee is required. A
capital gain or loss
for tax purposes will be realized upon the exchange,
depending upon the cost or
other basis of shares redeemed. Before exchanging shares,
investors should read
the current prospectus describing the shares to be acquired.
The Fund reserves
the right to modify or discontinue exchange privileges upon
60 days' prior
notice to shareholders.
REDEMPTION OF SHARES
The Fund is required to redeem shares tendered to it, as
described below, at
a redemption price equal to their net asset value per share
next determined
after receipt of a written request in proper form at no
charge other than any
applicable CDSC. Redemption requests received after the
close of regular trad-
ing on the NYSE are priced at the net asset value next
determined.
If a shareholder holds shares in more than one Class, any
request for redemp-
tion must specify the Class being redeemed. In the event of
a failure to spec-
ify which Class, or if the investor owns fewer shares of the
Class than speci-
fied, the redemption request will be delayed until the
Transfer Agent receives
further instructions from Smith Barney, or if the
shareholder's account is not
with Smith Barney, from the shareholder directly. The
redemption proceeds will
be remitted on or before the third business day following
receipt of proper
tender, except on any days on which the NYSE is closed or as
permitted under
the Investment Company Act of 1940, as amended (the "1940
Act"), in extraordi-
nary circumstances. Generally, if the redemption proceeds
are remitted to a
Smith Barney brokerage account, these funds will not be
invested for the share-
holder's benefit without specific instruction, and Smith
Barney will benefit
from the use of temporarily uninvested funds. Redemption
proceeds for shares
purchased by check, other than a certified or official bank
check, will be
remitted upon clearance of the check, which may take up to
ten days or more.
Shares held by Smith Barney as custodian must be redeemed
by submitting
a written request to a Smith Barney Financial Consultant.
Shares other than
those held by Smith Barney as custodian may be redeemed
through an invest-
33
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
REDEMPTION OF SHARES (CONTINUED)
or's Financial Consultant, Introducing Broker or dealer in
the selling group or
by submitting a written request for redemption to:
Smith Barney Appreciation Fund Inc.
Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and
number or dollar
amount of shares to be redeemed, (b) identify the
shareholder's account number
and (c) be signed by each registered owner exactly as the
shares are regis-
tered. If the shares to be redeemed were issued in
certificate form, the cer-
tificates must be endorsed for transfer (or be accompanied
by an endorsed stock
power) and must be submitted to the Transfer Agent together
with the redemption
request. Any signature appearing on a redemption request,
share certificate or
stock power must be guaranteed by an eligible guarantor
institution such as a
domestic bank, savings and loan institution, domestic credit
union, member bank
of the Federal Reserve System or member firm of a national
securities exchange.
The Transfer Agent may require additional supporting
documents for redemptions
made by corporations, executors, administrators, trustees or
guardians. A
redemption request will not be deemed properly received
until the Transfer
Agent receives all required documents in proper form.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM FOR SHAREHOLDERS
WHO DO NOT HAVE A
SMITH BARNEY BROKERAGE ACCOUNT
Certain shareholders may be eligible to redeem and
exchange Fund shares by
telephone. To determine if a shareholder is entitled to
participate in this
program, he or she should contact the Transfer Agent at
(800) 451-2010. Once
eligibility is confirmed, the shareholder must complete and
return a Telephone/
Wire Authorization Form, including a signature guarantee,
that will be provided
by the Transfer Agent upon request. (Alternatively, an
investor may authorize
telephone redemptions on the new account application with a
signature guarantee
when making his/her initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of any
class or classes of
the Fund's shares may be made by eligible shareholders by
calling the Transfer
Agent at (800) 451-2010. Such request may be made between
9:00 a.m. and 4:00
p.m. (New York City time) on any day the NYSE is open.
Redemptions of
34
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
REDEMPTION OF SHARES (CONTINUED)
shares (i) by retirement plans or (ii) for which
certificates have been issued
are not permitted under this program.
A shareholder will have the option of having the
redemption proceeds mailed
to his/her address of record or wired to a bank account
predesignated by the
shareholder. Generally, redemption proceeds will be mailed
or wired, as the
case may be, on the next business day following the
redemption request. In
order to use the wire procedures, the bank receiving the
proceeds must be a
member of the Federal Reserve System or have a correspondent
relationship with
a member bank. The Fund reserves the right to charge
shareholders a nominal fee
for each wire redemption. Such charges, if any, will be
assessed against the
shareholder's account from which shares were redeemed. In
order to change the
bank account designated to receive redemption proceeds, a
shareholder must com-
plete a new Telephone/Wire Authorization Form and, for the
protection of the
shareholder's assets, will be required to provide a
signature guarantee and
certain other documentation.
Exchanges. Eligible shareholders may make exchanges by
telephone if the
account registration of the fund being acquired is identical
to the registra-
tion of the shares of the fund exchanged. Such exchange
requests may be made by
calling the Transfer Agent at (800) 451-2010 between 9:00
a.m. and 4:00 p.m.
(New York City time) on any day the NYSE is open.
Additional Information regarding Telephone Redemption and
Exchange
Program. Neither the Fund nor its agents will be liable for
following instruc-
tions communicated by telephone that are reasonably believed
to be genuine. The
Fund and its agents will employ procedures designed to
verify the identity of
the caller and legitimacy of instructions (for example, a
shareholder's name
and account number will be required and phone calls may be
recorded). The Fund
reserves the right to suspend, modify or discontinue the
telephone redemption
and exchange program or to impose a charge for this service
at any time follow-
ing at least seven (7) days' prior notice to shareholders.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal
plan, under which
shareholders who own shares with a value of at least $10,000
may elect to
receive cash payments of at least $50 monthly or quarterly.
Retirement plan
accounts are eligible for automatic cash withdrawal plans
only where the share-
holder is eligible to receive qualified distributions and
has an account value
of at least $5,000. The withdrawal plan will be carried over
on exchanges
between
35
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
REDEMPTION OF SHARES (CONTINUED)
funds or Classes of the Fund. Any applicable CDSC will not
be waived on amounts
withdrawn by a shareholder that exceed 1.00% per month of
the value of the
shareholder's shares subject to the CDSC at the time the
withdrawal plan com-
mences. (With respect to withdrawal plans in effect prior to
November 7, 1994,
any applicable CDSC will be waived on amounts withdrawn that
do not exceed
2.00% per month of the shareholder's shares subject to the
CDSC.) For further
information regarding the automatic cash withdrawal plan,
shareholders should
contact a Smith Barney Financial Consultant.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any
shareholder's
account in the Fund if the aggregate net asset value of the
shares held in the
Fund account is less than $500. (If a shareholder has more
than one account in
the Fund, each account must satisfy the minimum account
size.) The Fund, howev-
er, will not redeem shares based solely on market reductions
in net asset val-
ue. Before the Fund exercises such right, shareholders will
receive written
notice and will be permitted 60 days to bring accounts up to
the minimum to
avoid automatic redemption.
PERFORMANCE
From time to time, the Fund may include its total return,
average annual
total return and current dividend return in advertisements
and/or other types
of sales literature. These figures are computed separately
for Class A, Class
B, Class C and Class Y shares of the Fund. These figures are
based on histori-
cal earnings and are not intended to indicate future
performance. Total return
is computed for a specified period of time assuming
deduction of the maximum
sales charge, if any, from the initial amount invested and
reinvestment of all
income dividends and capital gain distributions on the
reinvestment dates at
prices calculated as stated in this Prospectus, then
dividing the value of the
investment at the end of the period so calculated by the
initial amount
invested and subtracting 100%. The standard average annual
total return, as
prescribed by the SEC, is derived from this total return,
which provides the
ending redeemable value. Such standard total return
information may also be
accompanied with nonstandard total return information for
differing periods
computed in the same manner but without annualizing the
total return or taking
sales charges into account. The Fund calculates current
dividend return for
each Class by annualizing the most recent monthly
distribution and dividing by
the net asset value or the maximum public
36
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
PERFORMANCE (CONTINUED)
offering price (including sales charge) on the last day of
the period for
which current dividend return is presented. The current
dividend return for
each Class may vary from time to time depending on market
conditions, the com-
position of its investment portfolio and operating expenses.
These factors and
possible differences in the methods used in calculating
current dividend
return should be considered when comparing a Class' current
return to yields
published for other investment companies and other
investment vehicles. The
Fund may also include comparative performance information in
advertising or
marketing its shares. Such performance information may
include data from
Lipper Analytical Services, Inc. and other financial
publications.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for the management and supervision
of the Fund rests
with the Fund's Board of Directors. The Directors approve
all significant
agreements between the Fund and the companies that furnish
services to the
Fund, including agreements with the Fund's distributor,
investment adviser and
administrator, custodian and transfer agent. The day-to-day
operations of the
Fund are delegated to the Fund's investment adviser and
administrator. The
Statement of Additional Information contains background
information regarding
each Director and executive officer of the Fund.
INVESTMENT ADVISER AND ADMINISTRATOR -- SBMFM
The Fund's investment adviser, SBMFM, is a registered
investment adviser
whose principal executive offices are located at 388
Greenwich Street,
New York, New York 10013. SBMFM (through its predecessor
entities) has been in
the investment counseling business since 1940 and renders
investment advice to
a wide variety of individual, institutional and investment
company clients
that had aggregate assets under management as of January 31,
1996 in excess of
$74 billion.
Subject to the supervision and direction of the Fund's
Board of Directors,
SBMFM manages the Fund's portfolio in accordance with the
Fund's stated
investment objective and policies, makes investment
decisions for the Fund,
places orders to purchase and sell securities, and employs
professional port-
folio managers and securities analysts who provide research
services to the
Fund.
37
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
MANAGEMENT OF THE FUND (CONTINUED)
Investment advisory fees are computed daily and paid
monthly at the follow-
ing annual rates of the Fund's average daily net assets:
0.55% up to $250 mil-
lion; 0.513% of the next $250 million; 0.476% of the next
$500 million; 0.439%
of the next $1 billion; 0.402% of the next $1 billion; and
0.365% of net
assets in excess of $3 billion. For the fiscal year ended
December 31, 1995,
the Fund paid investment advisory fees equal to 0.453% of
the value of the
average daily net assets of the Fund.
Administration fees are computed daily and paid monthly at
the following
annual rates of the Fund's average daily net assets: 0.20%
up to $250 million;
0.187% of the next $250 million; 0.174% of the next $500
million; 0.161% of
the next $1 billion; 0.148% of the next $1 billion; and
0.135% of net assets
in excess of $3 billion. For the fiscal year ended December
31, 1995, the Fund
paid administration fees equal to 0.166% of the value of the
average daily net
assets of the Fund. For the Fund's most recent fiscal year,
total operating
expenses were 1.02%, 1.77% and 1.77% for Class A, B and C
shares, respective-
ly.
PORTFOLIO MANAGEMENT
Harry D. Cohen, Vice President and Investment Officer of
the Fund, is pri-
marily responsible for management of the Fund's assets. Mr.
Cohen has served
in this capacity since January 1979, and manages the day-to-
day operations of
the Fund, including making all investment decisions.
Management's discussion and analysis and additional
performance information
regarding the Fund during the fiscal year ended December 31,
1995 is included
in the Annual Report dated December 31, 1995. A copy of the
Annual Report may
be obtained upon request and without charge from a Smith
Barney Financial Con-
sultant or by writing or calling the Fund at the address or
phone number
listed on page one of this Prospectus.
DISTRIBUTOR
Smith Barney is located at 388 Greenwich Street, New York,
New York 10013.
Smith Barney distributes shares of the Fund as principal
underwriter and as
such conducts a continuous offering pursuant to a "best
efforts" arrangement
requiring Smith Barney to take and pay for only such
securities as may be sold
to the public. Pursuant to a plan of distribution adopted by
the Fund under
Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is
paid an annual
service fee with respect to Class A, Class B and Class C
shares of the Fund at
the annual rate of 0.25% of the average daily net assets of
the respec-
38
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
DISTRIBUTOR (CONTINUED)
tive Class. Smith Barney is also paid an annual distribution
fee with respect
to Class B and Class C shares at the annual rate of 0.75% of
the average daily
net assets attributable to those Classes. Class B shares
which automatically
convert to Class A shares eight years after the date of
original purchase will
no longer be subject to distribution fees. The fees are used
by Smith Barney
to pay its Financial Consultants for servicing shareholder
accounts and, in
the case of Class B and Class C shares, to cover expenses
primarily intended
to result in the sale of those shares. These expenses
include: advertising;
the cost of printing and mailing prospectuses to potential
investors; payments
to and expenses of Smith Barney Financial Consultants and
other persons who
provide support services in connection with the distribution
of shares; inter-
est and/or carrying charges; and indirect and overhead costs
of Smith Barney
associated with the sale of Fund shares, including lease,
utility, communica-
tions and sales promotion expenses.
The payments to Smith Barney Financial Consultants for
selling shares of a
Class include a commission or fee paid by the investor or
Smith Barney at the
time of sale and, with respect to Class A, Class B and Class
C shares, a con-
tinuing fee for servicing shareholder accounts for as long
as a shareholder
remains a holder of that Class. Smith Barney Financial
Consultants may receive
different levels of compensation for selling different
Classes of shares.
Payments under the Plan with respect to Class B and Class
C shares are not
tied exclusively to the distribution and shareholder service
expenses actually
incurred by Smith Barney and the payments may exceed
distribution expenses
actually incurred. The Fund's Board of Directors will
evaluate the appropri-
ateness of the Plan and its payment terms on a continuing
basis and in so
doing will consider all relevant factors, including expenses
borne by Smith
Barney, amounts received under the Plan and proceeds of the
CDSC.
ADDITIONAL INFORMATION
The Fund was incorporated under the laws of the State of
Maryland on
September 2, 1969, and is registered with the SEC as a
diversified, open-end
management investment company.
The Fund offers shares of common stock currently
classified into
fiveClasses -- A, B, C, Y and Z. Each Class represents an
identical interest
in the Fund's investment portfolio. As a result, the Classes
have the same
rights, privileges and preferences, except with respect to:
(a) the designa-
tion of each Class;
39
<PAGE>
SMITH BARNEY
Appreciation Fund Inc.
ADDITIONAL INFORMATION (CONTINUED)
(b) the effect of the respective sales charges for each
Class; (c) the distri-
bution and/or service fees, if any, borne by each Class; (d)
the expenses allo-
cable exclusively to each Class; (e) voting rights on
matters exclusively
affecting a single Class; (f) the exchange privilege of each
Class; and (g) the
conversion feature of Class B shares. The Fund's Board of
Directors does not
anticipate that there will be any conflicts among the
interests of the holders
of the different Classes. The Directors, on an ongoing
basis, will consider
whether any such conflict exists and, if so, take
appropriate action.
The Fund does not hold annual shareholder meetings. There
normally will be no
meeting of shareholders for the purpose of electing
Directors unless and until
such time as less than a majority of the Directors holding
office have been
elected by shareholders. The Directors will call a meeting
for any purpose upon
written request of shareholders holding at least 10% of the
Fund's outstanding
shares and the Fund will assist shareholders in calling such
a meeting as
required by the 1940 Act. When matters are submitted for
shareholder vote,
shareholders of each Class will have one vote for each full
share owned and a
proportionate fractional vote for any fractional share held
of that Class. Gen-
erally, shares of the Fund will be voted on a Fund-wide
basis on all matters
except matters affecting only the interests of one or more
of the Classes.
PNC Bank, National Association, located at 17th and
Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as custodian of the
Fund's invest-
ments.
First Data Investor Services Group, Inc., located at
Exchange Place, Boston,
Massachusetts 02109, serves as the Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and
an audited annual
report, which include listings of the investment securities
held by the Fund at
the end of the period covered. In an effort to reduce the
Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of
its semi-annual and
annual reports by household. This consolidation means that a
household having
multiple accounts with the identical address of record will
receive a single
copy of each report. Shareholders who do not want this
consolidation to apply
to their accounts should contact their Smith Barney
Financial Consultant or the
Transfer Agent.
40
<PAGE>
SMITH BARNEY
- ------------
A Member of
TravelersGroup[ART]
SMITH BARNEY
APPRECIATION
FUND INC.
388 Greenwich Street
New
York, New York 10013
<PAGE>
SMITH BARNEY
Appreciation
Fund Inc.
Class Z Shares Only
MARCH 1, 1996
PROSPECTUS BEGINS ON PAGE ONE
P R O S P E C T U S
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
PROSPECTUS
MARCH 1, 1996
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Appreciation Fund Inc. (the "Fund") is a
mutual fund which
seeks long-term appreciation of shareholders' capital
through investments pri-
marily in equity securities.
This Prospectus sets forth concisely certain information
about the Fund,
including expenses, that prospective investors will find
helpful in making an
investment decision. Investors are encouraged to read this
Prospectus care-
fully and retain it for future reference.
The Class Z shares described in this Prospectus
(previously designated as
"Class C" shares) are currently offered exclusively for sale
to tax-exempt
employee benefit and retirement plans of Smith Barney Inc.
("Smith Barney") or
any of its affiliates ("Qualified Plans") and to certain
unit investment
trusts sponsored by Smith Barney or any of its affiliates ("Smith
Barney
UITs").
Additional information about the Fund is contained in a
Statement of Addi-
tional Information dated March 1, 1996, as amended or
supplemented from time
to time, that is available upon request and without charge
by calling or writ-
ing the Fund at the telephone number or address set forth
above or by contact-
ing a Smith Barney Financial Consultant. The Statement of
Additional Informa-
tion has been filed with the Securities and Exchange
Commission (the "SEC")
and is incorporated by reference into this Prospectus in its
entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUND'S EXPENSES 3
- -------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- -------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 5
- -------------------------------------------------
VALUATION OF SHARES 8
- -------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 8
- -------------------------------------------------
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES 9
- -------------------------------------------------
PERFORMANCE 10
- -------------------------------------------------
MANAGEMENT OF THE FUND 12
- -------------------------------------------------
ADDITIONAL INFORMATION 13
- -------------------------------------------------
</TABLE>
- ------------------------------------------------------------
- -------------------
No person has been authorized to give any information or
to make any
representations in connection with this offering other than
those contained in
this Prospectus and, if given or made, such other
information or
representations must not be relied upon as having been
authorized by the Fund
or the distributor. This Prospectus does not constitute an
offer by the Fund
or the distributor to sell or a solicitation of an offer to
buy any of the
securities offered hereby in any jurisdiction to any person
to whom it is
unlawful to make such an offer or solicitation in such
jurisdiction.
- ------------------------------------------------------------
- -------------------
2
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
THE FUND'S EXPENSES
The following expense table lists the costs and expenses
an investor will
incur either directly or indirectly as a shareholder of
Class Z shares of the
Fund, based on the Fund's operating expenses for its most
recent fiscal year:
<TABLE>
<CAPTION>
AS A % OF
AVERAGE NET ASSETS
- ----------------------------------------------------
<S> <C>
ANNUAL FUND OPERATING EXPENSES
Management fees 0.62%
Other expenses 0.15%
- ----------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.77%
- ----------------------------------------------------
</TABLE>
The nature of the services for which the Fund pays
management fees is
described under "Management of the Fund." Other expenses in
the above table
include fees for shareholder services, custodial fees, legal
and accounting
fees, printing costs and registration fees.
EXAMPLE
The following example is intended to assist an investor in
understanding the
various costs that an investor in the Fund will bear
directly or indirectly.
The example assumes payment by the Fund of operating
expenses at the levels set
forth in the table above. See "Purchase and Redemption of
Shares" and "Manage-
ment of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3
YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------
- -------------------
<S> <C> <C>
<C> <C>
An investor would pay the following expenses
on a $1,000 investment in Class Z shares of
the Fund, assuming (1) 5.00% annual return
and (2) redemption at the end of each time
period: $ 8 $25
$43 $95
</TABLE>
The example also provides a means for the investor to
compare expense levels
of funds with different fee structures over varying
investment periods. To
facilitate such comparison, all funds are required to
utilize a 5.00% annual
return assumption. However, the Fund's actual return will
vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTA-
TION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN
THOSE SHOWN.
3
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
FINANCIAL HIGHLIGHTS
The following information for the fiscal year ended December
31, 1995 has been
audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon
appears in the Fund's Annual Report dated December 31, 1995.
The information
for the fiscal period ended December 31, 1992 through the
fiscal year ended
December 31, 1994 has been audited by Coopers & Lybrand
L.L.P. The information
set out below should be read in conjunction with the
financial statements and
related notes that also appear in the Fund's Annual Report,
which is incorpo-
rated by reference into the Statement of Additional
Information.
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
CLASS Z SHARES 1995(1) 1994
1993(1) 1992(2)
- ------------------------------------------------------------
- -------------------
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.16 $11.02
$10.66 $10.55
- ------------------------------------------------------------
- -------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.23 0.20
0.19 0.03
Net realized and unrealized gain
(loss) 2.75 (0.24)
0.71 0.33
- ------------------------------------------------------------
- -------------------
Total Income (Loss) From Operations 2.98 (0.04)
0.90 0.36
- ------------------------------------------------------------
- -------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.23) (0.22)
(0.18) (0.16)
Net realized gains (1.00) (0.60)
(0.36) (0.09)
- ------------------------------------------------------------
- -------------------
Total distributions (1.23) (0.82)
(0.54) (0.25)
- ------------------------------------------------------------
- -------------------
NET ASSET VALUE, END OF YEAR $11.91 $10.16
$11.02 $10.66
- ------------------------------------------------------------
- -------------------
TOTAL RETURN 29.52% (0.41)%
8.47% 3.38%++
- ------------------------------------------------------------
- -------------------
NET ASSETS, END OF YEAR (000S) $131,357 $101,532
$157,876 $151,427
- ------------------------------------------------------------
- -------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.77% 0.64%
0.66% 0.80%+
Net investment income 1.96 1.99
1.73 1.66+
- ------------------------------------------------------------
- -------------------
PORTFOLIO TURNOVER RATE 57% 52%
52% 21%
- ------------------------------------------------------------
- -------------------
AVERAGE COMMISSIONS PAID ON
EQUITY SECURITY TRANSACTIONS (3) $0.06 --
- -- --
- ------------------------------------------------------------
- -------------------
</TABLE>
(1) Per share amounts have been calculated using the monthly
average shares
method, which more appropriately presents per share data
for this year
since the use of the undistributed income method did not
accord with
results of operations.
(2) For the period from November 6, 1992 (inception date) to
December 31,
1992.
(3) New SEC disclosure guidelines require that the average
commission per
share be calculated for the current year only.
++Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
4
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Fund's sole investment objective is long-term
appreciation of sharehold-
ers' capital through investments primarily in equity
securities. This invest-
ment objective may not be changed without the approval of
the holders of a
majority of the Fund's outstanding shares. There can be no
assurance that the
Fund's investment objective will be achieved.
The Fund attempts to achieve its investment objective by
investing primarily
in equity securities (consisting of common stocks, preferred
stocks, warrants,
rights and securities convertible into common stocks) which
are believed to
afford attractive opportunities for investment appreciation.
The core holdings
of the Fund are blue chip companies that are dominant in
their industries. At
the same time, the Fund may hold securities of companies
with prospects of
sustained earnings growth and/or companies with a cyclical
earnings record if
it is felt these offer attractive investment opportunities.
For example, the
Fund may invest in the securities of companies whose
earnings are expected to
increase, companies whose securities prices are lower than
are believed justi-
fied in relation to their underlying assets or earning
power, or companies in
which changes are anticipated that would result in improved
operations or
profitability. Typically, the Fund invests in middle- and
larger-sized compa-
nies, though it does invest in smaller companies whose
securities may reasona-
bly be expected to appreciate. The Fund's investments are
spread broadly among
different industries. The Fund may hold issues traded over-
the-counter as well
as those listed on one or more national exchanges, and the
Fund may make
investments in foreign securities though management intends
to limit such
investments to 10% of the Fund's assets. In analyzing
securities for invest-
ment, Smith Barney Mutual Funds Management Inc. ("SBMFM")
considers many dif-
ferent factors, including past growth records, management
capability, future
earnings prospects and technological innovation, as well as
general market and
economic factors which can influence the price of
securities. While SBMFM con-
siders dividend potential in selecting investments, current
income for distri-
bution to shareholders is secondary to the Fund's principal
objective of long-
term capital appreciation. The value of the Fund's
investments, and thus the
net asset value of the Fund's shares, will fluctuate in
response to changes in
market and economic conditions, as well as the financial
condition and pros-
pects of issuers in which the Fund invests.
Under normal market conditions, the majority of the Fund's
portfolio con-
sists of common stocks, but it also may contain other equity
securities as
described above, as well as short-term money market
instruments for cash
5
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
management purposes. When SBMFM believes that market
conditions warrant, the
Fund may adopt a temporary defensive investment posture, and
invest in debt
obligations, increase its investment in short-term money
market instruments, or
engage in repurchase agreement transactions with respect to
the securities it
is authorized to hold (as described below).
Further information about the Fund's investment policies,
including a list of
those restrictions on its investment activities that cannot
be changed without
shareholder approval, appears in the Statement of Additional
Information.
INVESTMENT POLICIES AND STRATEGIES
Lending of Portfolio Securities -- From time to time, the
Fund may lend its
portfolio securities to brokers, dealers and other financial
organizations.
These loans may not exceed 33 1/3% of the Fund's total
assets taken at value.
Loans of portfolio securities by the Fund will be
collateralized by cash, let-
ters of credit or obligations of the United States
government and its agencies
or instrumentalities ("U.S. government securities") which
are maintained at all
times in an amount equal to at least 100% of the current
market value of the
loaned securities. By lending its portfolio securities, the
Fund will seek to
generate income by continuing to receive interest on the
loaned securities, by
investing the cash collateral in short-term instruments or
by obtaining yield
in the form of interest paid by the borrower when U.S.
government securities
are used as collateral. The risks in lending portfolio
securities, as with
other extensions of secured credit, consist of possible
delays in receiving
additional collateral or in the recovery of the securities
or possible loss of
rights in the collateral should the borrower fail
financially. Loans will be
made to firms deemed by SBMFM to be of good standing and
will not be made
unless, in the judgment of SBMFM, the consideration to be
earned from such
loans would justify the risk.
Short-Term Investments -- As noted above, the Fund may
invest in short-term
money market instruments, such as: U.S. government
securities; certificates of
deposit, time deposits and bankers' acceptances issued by
domestic banks (in-
cluding their branches located outside the United States and
subsidiaries
located in Canada), domestic branches of foreign banks,
savings and loan asso-
ciations and similar institutions; high grade commercial
paper; and repurchase
agreements with respect to such instruments.
Repurchase Agreements -- The Fund will enter into
repurchase agreements with
banks which are issuers of instruments acceptable for
purchase by the
6
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Fund and with certain dealers on the Federal Reserve Bank of
New York's list of
reporting dealers. Under the terms of a typical repurchase
agreement, the Fund
would acquire an underlying debt obligation for a relatively
short period (usu-
ally not more than one week) subject to an obligation of the
seller to repur-
chase, 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 arrange-
ment results in a fixed rate of return that is not subject
to market fluctua-
tions during the Fund's holding period.
Portfolio Transactions and Turnover -- Portfolio
securities transactions on
behalf of the Fund are placed by SBMFM with a number of
brokers and dealers,
including Smith Barney. Smith Barney has advised the Fund
that in transactions
with the Fund, Smith Barney charges a commission rate at
least as favorable as
the rate that Smith Barney charges its comparable
unaffiliated customers in
similar transactions.
The Fund generally does not engage in short-term trading
but intends to pur-
chase securities for long-term capital appreciation. While
the Fund's portfolio
turnover rate has in the past exceeded 100%, the Fund's
annual portfolio turn-
over rate is not expected to exceed 100%.
Foreign Securities -- The Fund may invest in securities of
non-U.S. issuers
in the form of American Depositary Receipts ("ADRs"),
European Depositary
Receipts ("EDRs") or similar securities representing
interests in the common
stock of foreign issuers. Management intends to limit the
Fund's investment in
these types of securities, together with other types of
foreign securities, to
10% of the Fund's net assets. ADRs are receipts, typically
issued by a U.S.
bank or trust company, which evidence ownership of
underlying securities issued
by a foreign corporation. EDRs are receipts issued in Europe
which evidence a
similar ownership arrangement. Generally, ADRs, in
registered form, are
designed for use in the U.S. securities markets and EDRs are
designed for use
in European securities markets. The underlying securities
are not always denom-
inated in the same currency as the ADRs or EDRs. Although
investment in the
form of ADRs or EDRs facilitates trading in foreign
securities, it does not
mitigate the risks associated with investing in foreign
securities.
Investments in foreign securities incur higher costs than
investments in U.S.
securities, including higher costs in making securities
transactions as well as
foreign government taxes which may reduce the investment
return of the Fund. In
addition, foreign investments may include additional risks
associated with
7
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
currency exchange rates, less complete financial information
about individual
companies, less market liquidity and political instability.
VALUATION OF SHARES
The net asset value per share of Class Z shares is
determined as of the
close of regular trading on the New York Stock Exchange,
Inc. (the "NYSE"), on
each day that the NYSE is open by dividing the value of the
Fund's net assets
attributable to Class Z by the number of shares of the Class
outstanding. The
per share net asset value of the Class Z shares may be
higher than those of
other Classes because of the lower expenses attributable to
Class Z shares.
Generally, the Fund's investments are valued at market
value or, in the
absence of a market value with respect to any securities, at
fair value as
determined by or under the direction of the Fund's Board of
Directors. Short-
term investments that mature in 60 days or less are valued
at amortized cost
whenever the Fund's Board of Directors determines that
amortized cost reflects
fair value of those instruments. Further information
regarding the Fund's val-
uation policies is contained in the Statement of Additional
Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all its
net investment
income (that is, its income other than its net realized
capital gains) and net
realized capital gains, if any, once a year, normally at the
end of the year
in which earned or at the beginning of the next year.
Unless a shareholder is eligible for qualified
distributions and instructs
that dividends and capital gains distributions on shares be
paid in cash and
credited to the shareholder's account, dividends and capital
gains distribu-
tions will be reinvested automatically in additional shares
of the Class at
net asset value, subject to no sales charge or CDSC. In
addition, in order to
avoid the application of a 4% nondeductible excise tax on
certain undistrib-
uted amounts of ordinary income and capital gains, the Fund
may make an addi-
tional distribution, shortly before December 31 in each
year, of any undis-
tributed ordinary income
8
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
or capital gains and expects to pay any other dividends and
distributions nec-
essary to avoid the application of this tax.
TAXES
The Fund has qualified and intends to continue to qualify
each year as a reg-
ulated investment company under Subchapter M of the Internal
Revenue Code of
1986, as amended.
Dividends paid from net investment income and
distributions of net realized
short-term capital gains are taxable to shareholders as
ordinary income,
regardless of how long shareholders have held their Fund
shares and whether
such dividends and distributions are received in cash or
reinvested in addi-
tional Fund shares. Distributions of net realized long-term
capital gains are
taxable to shareholders as long-term capital gains,
regardless of how long
shareholders have held Fund shares and whether such
distributions are received
in cash or are reinvested in additional Fund shares.
Furthermore, as a general
rule, a shareholder's gain or loss on a sale or redemption
of Fund shares will
be a long-term capital gain or loss if the shareholder has
held the shares for
more than one year and will be a short-term capital gain or
loss if the share-
holder has held the shares for one year or less. Some of the
Fund's dividends
declared from net investment income may qualify for the
Federal dividends-
received deduction for corporations.
Statements as to the tax status of each shareholder's
dividends and distribu-
tions are mailed annually. Each shareholder also will
receive, if appropriate,
various written notices after the close of the Fund's prior
taxable year as to
the Federal income tax status of his or her dividends and
distributions which
were received from the Fund during the Fund's prior taxable
year. Shareholders
should consult their plan document or tax advisors about the
tax consequences
associated with participating in a Qualified Plan or Smith
Barney UIT.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Purchases of the Fund's Class Z shares must be made in
accordance with the
terms of a Qualified Plan or Smith Barney UIT. Purchases are
effected at the
net asset value next determined after a purchase order is
received by Smith
Barney (the "trade date"). For shares purchased through
Smith Barney or Intro-
ducing
9
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES (CONTINUED)
Brokers purchasing through Smith Barney, payment is due to
Smith Barney on the
third business day (the "settlement date") after the trade
date. In all other
cases, payment must be made with the purchase order.
Investors who make pay-
ment prior to the settlement date may designate a temporary
investment (such
as a money market fund of the Smith Barney Mutual Funds) for
such payment
until settlement date. The Fund reserves the right to reject
any purchase
order and to suspend the offering of shares for a period of
time. There are no
minimum investment requirements for Class Z shares; however,
the Fund reserves
the right to vary this policy at any time.
Purchase orders received by the Fund or Smith Barney prior
to the close of
regular trading on the NYSE, currently 4:00 p.m., New York
time, on any day
that the Fund calculates its net asset value, are priced
according to the net
asset value determined on that day. See "Valuation of
Shares." Certificates
for Fund shares are issued upon request to the Fund's
transfer agent.
Shareholders may redeem their shares on any day on which
the Fund calculates
its net asset value. See "Valuation of Shares." Redemption
requests received
in proper form prior to the close of regular trading on the
NYSE are priced at
the net asset value per share determined on that day.
Redemption requests
received after the close of regular trading on the NYSE are
priced at the net
asset value as next determined. Shareholders acquiring Class
Z shares through
a Qualified Plan or a Smith Barney UIT should consult the
terms of their
respective plans for redemption provisions.
Holders of Class Z shares should consult their Qualified
Plans for informa-
tion about exchange options.
PERFORMANCE
TOTAL RETURN
From time to time, the Fund may include its total return,
average annual
total return and current dividend return for Class Z shares
in advertisements.
These figures are based on historical earnings and are not
intended to indi-
cate future performance. Total return is computed for a
specified period of
time assuming deduction of the maximum sales charge, if any,
from the initial
amount invested and reinvestment of all income dividends and
capital gain dis-
tributions on the reinvestment dates at prices calculated as
stated in this
Prospec-
10
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
PERFORMANCE (CONTINUED)
tus, then dividing the value of the investment at the end of
the period so
calculated by the initial amount invested and subtracting
100%. The standard
average annual total return, as prescribed by the SEC, is
derived from this
total return, which provides the ending redeemable value.
Such standard total
return information may also be accompanied with nonstandard
total return
information for differing periods computed in the same
manner but without
annualizing the total return or taking sales charges into
account. The Fund
calculates current dividend return for Class Z shares by
annualizing the most
recent monthly distribution and dividing by the net asset
value on the last
day of the period for which the current dividend return is
presented. The cur-
rent dividend return may vary from time to time depending on
market condi-
tions, the composition of its investment portfolio and
operating expenses.
These factors and possible differences in the methods used
in calculating cur-
rent dividend return should be considered when comparing the
Fund's current
return to yields published for other investment companies
and other investment
vehicles. The Fund may also include comparative performance
information in
advertising or marketing the Class Z shares. Such
performance information may
include data from Lipper Analytical Services, Inc. and other
financial publi-
cations.
Class Z's average annual total return was as follows for
the periods indi-
cated:
29.52% for the one-year period beginning January 1, 1995
through
December 31, 1995.
12.43% for the period from commencement of operations
(November 6, 1992)
through December 31, 1995.
Class Z's aggregate total return was as follows for the
periods indicated:
29.52% for the one-year period beginning on January 1,
1995 through
December 31, 1995.
44.65% for the period from commencement of operations
(November 6, 1992)
through December 31, 1995.
11
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of
the Fund rests with
the Fund's Board of Directors. The Directors approve all
significant agreements
between the Fund and the persons or companies that furnish
services to the
Fund, including agreements with the Fund's distributor,
investment adviser and
administrator, custodian and transfer agent. The day-to-day
operations of the
Fund are delegated to the Fund's investment adviser and
administrator. The
Statement of Additional Information contains background
information regarding
each Director and executive officer of the Fund.
INVESTMENT ADVISER AND ADMINISTRATOR -- SBMFM
SBMFM (formerly known as Smith, Barney Advisers, Inc.) is
a registered
investment adviser whose principal executive offices are
located at 388 Green-
wich Street, New York, New York 10013, and serves as the
Fund's investment
adviser. SBMFM is a wholly owned subsidiary of Smith Barney
Holdings Inc.
("Holdings"). Holdings is a wholly owned subsidiary of
Travelers Group Inc.
("Travelers"), a diversified financial services holding
company engaged,
through its subsidiaries, principally in four business
segments: Investment
Services, Consumer Financial Services, Life Insurance
Services and Property &
Casualty Insurance Services. SBMFM has been in the
investment counseling busi-
ness (through its predecessors) since 1940 and renders
investment advice to a
wide variety of individual, institutional and investment
company clients that
had aggregate assets under management as of January 31, 1996
in excess of $74
billion.
Subject to the supervision and direction of the Fund's
Board of Directors,
SBMFM manages the Fund's portfolio in accordance with the
Fund's stated invest-
ment objective and policies, makes investment decisions for
the Fund, places
orders to purchase and sell securities, and employs
professional portfolio man-
agers and securities analysts who provide research services
to the Fund.
Investment advisory fees are computed daily and paid
monthly at the following
annual rates of the value of the Fund's average daily net
assets: 0.55% up to
$250 million; 0.513% of the next $250 million; 0.476% of the
next $500 million;
0.439% of the next $1 billion; 0.402% of the next $1
billion; and 0.365% of the
net assets in excess of $3 billion. For the fiscal year
ended December 31,
1995, the Fund paid investment advisory fees equal to 0.453%
of the value of
the average daily net assets of the Fund.
12
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
MANAGEMENT OF THE FUND (CONTINUED)
Administration fees are computed daily and paid monthly at
the following
annual rates of the value of the Fund's average daily net
assets: 0.20% up to
$250 million; 0.187% of the next $250 million; 0.174% of the
next $500 million;
0.161% of the next $1 billion; 0.148% of the next $1
billion; and 0.135% of the
net assets in excess of $3 billion. For the fiscal year
ended December 31,
1995, the Fund paid administration fees equal to 0.166% of
the value of the
average daily net assets of the Fund. For the Fund's last
fiscal year, total
operating expenses were 0.77%.
PORTFOLIO MANAGEMENT
Harry D. Cohen, Vice President and Investment Officer of
the Fund, is primar-
ily responsible for management of the Fund's assets. Mr.
Cohen has served in
this capacity since January of 1979, and manages the day-to-
day operations of
the Fund, including making all investment decisions.
Management's discussion and analysis and additional
performance information
regarding the Fund during the fiscal year ended December 31,
1995 is included
in the Annual Report dated December 31, 1995. A copy of the
Annual Report may
be obtained upon request and without charge from a Smith
Barney Financial Con-
sultant or by writing or calling the Fund at the address or
phone number listed
on page one of this Prospectus.
DISTRIBUTOR -- SMITH BARNEY
Smith Barney is located at 388 Greenwich Street, New York,
New York 10013,
and serves as the Fund's distributor. Smith Barney is a
wholly owned subsidiary
of Travelers.
ADDITIONAL INFORMATION
The Fund was incorporated in the state of Maryland on
September 2, 1969 and
is registered with the SEC as a diversified, open-end
management investment
company.
The Fund offers shares of common stock currently
classified into five Clas-
ses-- A, B, C , Y and Z. Each Class represents an identical
pro rata interest
in the Fund's investment portfolio. As a result, the Classes
have the same
rights, privileges and preferences, except with respect to:
(a) the designation
of each Class; (b) the effect of the respective sales
charges, if any, for each
Class; (c) the distri-
13
<PAGE>
Smith Barney
Appreciation Fund Inc. -- Class Z Shares
ADDITIONAL INFORMATION (CONTINUED)
bution and/or service fees, if any, borne by each Class
pursuant to a plan
adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of
1940, as amended (the "1940 Act"); (d) the expenses
allocable to each Class;
(e) voting rights on matters exclusively affecting a single
Class; (f) the
exchange privilege of each Class; and (g) the conversion
feature of Class B
shares. The Fund's Board of Directors does not anticipate
that there will be
any conflicts among the interests of the holders of the
different Classes. The
Directors, on an ongoing basis, will consider whether any
such conflict exists
and, if so, take appropriate action.
The Fund does not hold annual shareholder meetings. There
normally will be no
meeting of shareholders for the purpose of electing
Directors unless and until
such time as less than a majority of the Directors holding
office have been
elected by shareholders. The Directors will call a meeting
for any purpose upon
the written request of shareholders holding at least 10% of
the Fund's out-
standing shares and the Fund will assist shareholders in
calling such a meeting
as required by the 1940 Act. When matters are submitted for
shareholder vote,
shareholders of each Class will have one vote for each full
share owned and a
proportionate fractional vote for any fractional share held
of that Class. Gen-
erally, shares of the Fund will be voted on a Fund-wide
basis on all matters
except matters affecting only the interests of one or more
of the Classes.
The Fund sends its shareholders a semi-annual report and
an audited annual
report, which include a listing of the investment securities
held by the Fund
at the end of the period covered.
PNC Bank, National Association, located at 17th and
Chestnut Streets, Phila-
delphia, Pennsylvania 19103, serves as custodian of the
Fund's investments.
First Data Investor Services Group, Inc,, located at
Exchange Place, Boston,
Massachusetts 02109, serves as the Fund's transfer agent.
Shareholders may seek information regarding the Fund from
their Smith Barney
Financial Consultant.
14
<PAGE>
SMITH BARNEY
- ------------
A Member of
Travelers Group [LOGO]
SMITH BARNEY
APPRECIATION
FUND INC.
388 Greenwich Street
New
York, New York 10013
SMITH BARNEY APPRECIATION FUND INC.
PART B
Smith Barney
Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Statement of Additional Information March 1, 1996
This Statement of Additional Information expands upon and
supplements the information contained in the current
Prospectus of Smith Barney Appreciation Fund Inc. (the
"Fund") dated March 1, 1996, as amended or
supplemented from time to time, and should be read in
conjunction with the Fund's Prospectus. The Fund's
Prospectus may be obtained from any Smith Barney Financial
Consultant, or by writing or calling the Fund at the address
or telephone number set forth above. This Statement of
Additional Information, although not in itself a prospectus,
is incorporated by reference into the Prospectus in its
entirety.
CONTENTS
For ease of reference, the same section headings are used in
both the Prospectus and this Statement of Additional
Information, except where shown below:
<TABLE>
<S>
<C>
Management of the Fund 1
Investment Objective and Management Policies 5
Purchase of Shares 12
Redemption of Shares 12
Distributor 13
Valuation of Shares 15
Exchange Privilege 15
Performance Data (See in the Prospectus "Performance")
16
Taxes (See in the Prospectus "Dividends, Distributions and
Taxes") 18
Additional Information 20
Financial Statements 20
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain
of the organizations that provide services to the Fund.
These organizations are the following:
<TABLE>
<S>
<C>
Name Service
Smith Barney Inc.
("Smith Barney") Distributor
Smith Barney Mutual Funds Management Inc.
("SBMFM") Investment Adviser and Administrator
PNC Bank, National Association
("PNC") Custodian
First Data Investor Services Group, Inc.,
formerly The Shareholder Services Group, Inc.
(the "Transfer Agent") Transfer Agent
</TABLE>
These organizations and the functions they perform for the
Fund are discussed in the Prospectus and in this Statement
of Additional Information.
Directors and Executive Officers of the Fund
The names of the Directors and executive officers of the
Fund, together with information as to their principal
business occupations during the past five years, are shown
below. Each Director who is an "interested person'' of the
Fund, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), is indicated by an asterisk.
Herbert Barg, Director (Age 72). Private Investor. His
address is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania
19004.
*Alfred J. Bianchetti, Director (Age 73). Retired; formerly
Senior Consultant to Dean Witter Reynolds Inc. His address
is 19 Circle End Drive, Ramsey, New Jersey 07466.
Martin Brody, Director (Age 74). Vice Chairman of the Board
of Restaurant Associates Corp. His address is HMK
Associates, Three ADP Boulevard, Roseland, New Jersey 07068.
Dwight B. Crane, Director (Age 58). Professor, Graduate
School of Business Administration, Harvard University;
Business Consultant. His address is Graduate School of
Business Administration, Harvard University, Boston,
Massachusetts 02163.
Burt N. Dorsett, Director (Age 65). Managing Partner of
Dorsett McCabe Management, Inc., an investment counseling
firm; Director of Research Corporation Technologies, Inc., a
non-profit patent-clearing and licensing firm. His address
is 201 East 62nd Street, New York, New York 10021.
Elliot S. Jaffe, Director (Age 69). Chairman of the Board
and Chief Executive Officer of The Dress Barn, Inc.
His address is 30 Dunnigan Drive, Suffern, New York 10901.
Stephen E. Kaufman, Director (Age 63). Attorney. His
address is 277 Park Avenue, New York, New York 10172.
Joseph J. McCann, Director (Age 65). Financial Consultant.
His address is 200 Oak Park Place, Pittsburgh, Pennsylvania
15243.
*Heath B. McLendon, Chairman of the Board and Investment
Officer (Age 62). Managing Director of Smith Barney and
Chairman of Smith Barney Strategy Advisers Inc.; prior to
July 1993, Senior Executive Vice President of Shearson
Lehman Brothers Inc. ("Shearson Lehman Brothers"), Vice
Chairman of Shearson Asset Management, a Director of
PanAgora Asset Management, Inc. and PanAgora Asset
Management Limited. Mr. McLendon is Chairman of the
Board and Investment Officer of 41 Smith Barney Mutual
Funds. His address is 388 Greenwich Street, New York, New
York 10013.
Cornelius C. Rose, Jr., Director (Age 62). President,
Cornelius C. Rose Associates, Inc., Financial Consultants,
and Chairman and Director of Performance Learning Systems,
an educational consultant. His address is P.O. Box 355,
Fair Oaks, Enfield, New Hampshire 03748.
Jessica M. Bibliowicz, President (Age 36). Executive
Vice President of Smith Barney; prior to 1994, Director of
Sales and Marketing for Prudential Mutual Funds; prior to
1990, First Vice President, Asset Management Division of
Shearson Lehman Brothers. Ms. Bibliowicz serves as
President of 39 Smith Barney Mutual Funds. Her address is
388 Greenwich Street, New York, New York 10013.
Lewis E. Daidone, Senior Vice President and Treasurer (Age
38). Managing Director of Smith Barney; Director and Senior
Vice President of SBMFM. Mr. Daidone serves as Senior Vice
President and Treasurer of 41 Smith Barney Mutual Funds.
His address is 388 Greenwich Street, New York, New York
10013.
Harry D. Cohen, Vice President and Investment Officer (Age
54). President and Director of Smith Barney Investment
Advisors, a division of SBMFM; Executive Vice President of
Smith Barney; prior to July 1993, President of Asset
Management Division of Shearson Lehman Brothers and
Executive Vice President of Shearson Lehman Brothers. Mr.
Cohen also serves as Vice President and Investment Officer
of 1 other of the Smith Barney Mutual Funds. His address is
388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 44). Managing
Director of Smith Barney; General Counsel and Secretary of
SBMFM. Ms. Sydor serves as Secretary of 41 Smith Barney
Mutual Funds. Her address is 388 Greenwich Street, New
York, New York 10013.
Each Director also serves as a director, trustee and/or
general partner of certain other mutual funds for which
Smith Barney serves as distributor. As of February 1,
1996, the Directors and officers of the Fund, as a group,
owned less than 1.00% of the outstanding common stock of the
Fund. As of February 1, 1996, to the knowledge of the Fund
and the Board of Directors, no single shareholder or "group"
(as that term is used in Section 13(d) of the Securities Act
of 1934) beneficially owned more than 5% of the outstanding
shares of the Fund with the exception of the following:
<TABLE>
<S> <C> <C>
Shareholder Class Percent Ownership
Citibank NA Cust. Smith BarneyShearson 401K Savings
PlanSmith Barney Account 111 Wall Street New York, New York
10043 Class C 99.92%
</TABLE>
No officer, director or employee of Smith Barney or any
parent or subsidiary receives any compensation from the Fund
for serving as an officer or Director of the Fund. The
Fund pays each Director who is not an officer, director or
employee of Smith Barney or any of its affiliates a fee of
$3,000 per annum plus $500 per in-person meeting and $100
per telephonic meeting. Each Director emeritus receives
$l,500 per annum plus $250 per in-person meeting and $50 per
telephonic meeting. All Directors are reimbursed for travel
and out-of-pocket expenses incurred in attending such
meetings.
For the calendar year ended December 31, 1995, the Directors
of the Fund were paid the following compensation.
<TABLE>
<S> <C> <C>
Aggregate Compensation
Aggregate Compensation from the Smith Barney
Director (*) from the Fund Mutual Funds
Herbert Barg (18) $3,850 $81,850
Alfred Bianchetti (13) 3,850 37,000
Martin Brody (21) 3,750 93,300
Dwight B. Crane (24) 3,850 119,250
Burt N. Dorsett (13) 5,100 51,400
Elliot S. Jaffe (13) 5,100 50,900
Stephen E. Kaufman (15) 3,850 57,000
Joseph J. McCann (13) 3,850 37,400
Heath B. McLendon (41) ------- --------
Cornelius C. Rose (13) 5,100 51,500
</TABLE>
* Indicates number of funds within the Smith Barney Mutual
Fund complex for which each Director serves as
Director/Trustee.
Investment Adviser and Administrator-SBMFM
SBMFM serves as investment adviser to the Fund pursuant to a
written agreement (the "Advisory Agreement"), which was
first approved by the Fund's Board of Directors, including a
majority of the Directors who are not interested persons of
the Fund or Smith Barney (the "Independent Directors"),
on April 1, 1993 and by shareholders on June 1, 1993. The
services provided by SBMFM under the Advisory Agreement are
described in the Prospectus under "Management of the Fund."
SBMFM pays the salary of any officer and employee who is
employed by both it and the Fund. SBMFM bears all expenses
in connection with the performance of its services. SBMFM
is a wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings"), which in turn is a wholly owned subsidiary of
Travelers Group Inc. ("Travelers").
As compensation for SBMFM's investment advisory services
rendered to the Fund, the Fund pays a fee computed daily and
paid monthly at the following annual rates of the Fund's
average daily net assets: 0.55%, up to $250 million; 0.513%
of the next $250 million; 0.476% of the next $500 million;
0.439% of the next $1 billion, 0.402% of the next $l
billion; and 0.365% of the net assets in excess of $3
billion. For the fiscal years ended December 31, 1995,
1994 and 1993, the Fund paid $12,764,132, $l2,564,785 and
$l3,580,825, respectively, in investment advisory fees.
SBMFM also serves as administrator to the Fund pursuant to a
written agreement dated April 10, 1994 (the
"Administration Agreement"), which was most recently
approved by the Fund's Board of Directors, including a
majority of the Independent Directors of the Fund or Smith
Barney, on July 19, 1995. The services provided by SBMFM
under the Administration Agreement are described in the
Prospectus under "Management of the Fund." SBMFM pays the
salary of any officer and employee who is employed by both
it and the Fund and bears all expenses in connection with
the performance of its services.
As compensation for administrative services rendered to the
Fund, SBMFM receives a fee computed daily and paid monthly
at the following annual rates: 0.20%, of the value of the
Fund's average daily net assets up to $250 million; 0.187%
of the next $250 million; 0.174% of the next $500 million;
0.161% of the next $1 billion; 0.148% of the next $1 billion
and 0.135% of the net assets in excess of $3 billion.
For the fiscal year ended December 31, 1995, the Fund
paid $4,675,818 in administration fees. For the fiscal
period from April 20, 1994 through December 31, 1994, the
Fund paid $3,228,079 in administration fees. Prior to April
20, 1994, The Boston Company Advisors, Inc. ("The Boston
Company") served as the Fund's administrator and prior to
May 21, 1993, also served as the Fund's sub-investment
adviser. For the fiscal period from January 1, l994 through
April 19, 1994, the Fund paid $1,374,456 to The Boston
Company in administration fees. For the fiscal years
ended December 31, 1993 and 1992, the Fund paid sub-
investment advisory and/or administration fees of $4,977,511
and $3,295,537, respectively.
The Fund bears expenses incurred in its operation including:
taxes, interest, brokerage fees and commissions, if any;
fees of Directors who are not officers, directors,
shareholders or employees of Smith Barney or SBMFM; SEC fees
and state Blue Sky qualification fees; charges of
custodians; transfer and dividend disbursing agent's fees;
certain insurance premiums; outside auditing and legal
expenses; costs of maintaining corporate existence; investor
services (including allocated telephone and personnel
expenses); costs of preparation and printing of prospectuses
and statements of additional information for regulatory
purposes and for distribution to existing shareholders;
costs of shareholders' reports and shareholder meetings; and
meetings of the officers or Board of Directors of the Fund.
SBMFM and the Fund have agreed that it in any fiscal year
the aggregate expenses of the Fund (including fees paid
pursuant to the Advisory and Administration Agreements, but
excluding interest, taxes, brokerage, fees paid pursuant to
the Fund's services and distribution plan, and, with the
prior written consent of the necessary state securities
commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund,
SBMFM will, to the extent required by state law, reduce its
management fees by such excess expense. Such a fee
reduction, if any, will be reconciled on a monthly basis.
The most restrictive state expense limitation applicable to
the Fund would require SBMFM to reduce its fees in any year
that such excess expenses exceed 2.50% of the first $30
million of average net assets, 2.00% of the next $70 million
of average net assets and 1.50% of the remaining average
assets. No fee reduction was necessary for the 1995,
1994 or 1993 fiscal years.
Counsel and Auditors
Willkie Farr & Gallagher serves as counsel to the Fund. The
Independent Directors of the Fund have selected Stroock &
Stroock & Lavan to serve as their legal counsel.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York
10154, has been selected as the Fund's independent auditor
to examine and report on the Fund's financial statements and
highlights for the fiscal year ending December 31, 1996.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and
the policies it employs to achieve its objective. This
section contains supplemental information concerning the
types of securities and other instruments in which the Fund
may invest, the investment policies and portfolio strategies
that the Fund may utilize and certain risks attendant to
such investments, policies and strategies.
Money Market Instruments. As stated in the Prospectus, the
Fund may invest for temporary defensive purposes in
corporate and government bonds and notes and money market
instruments. Money market instruments in which the Fund may
invest include: obligations issued or guaranteed by the
United States government, its agencies or instrumentalities
("U.S. government securities"); certificates of deposit,
time deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of
instruments. The following is a more detailed description
of such money market instruments.
Certificates of deposit ("CDs") are short-term, negotiable
obligations of commercial banks. Time deposits ("TDs") are
non-negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates.
Bankers' acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with international
transactions.
Domestic commercial banks organized under Federal law are
supervised and examined by the Comptroller of the Currency
and are required to be members of the Federal Reserve System
and to be insured by the Federal Deposit Insurance
Corporation the ("FDIC"). Domestic banks organized under
state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System
only it they elect to join. Most state banks are insured by
the FDIC (although such insurance may not be of material
benefit to the Fund, depending upon the principal amount of
CDs of each bank held by the Fund) and are subject to
Federal examination and to a substantial body of Federal law
and regulation. As a result of governmental regulations,
domestic branches of domestic banks are, among other things,
generally required to maintain specialized levels of
reserves, and are subject to other supervision and
regulation designed to promote financial soundness.
Obligations of foreign branches of domestic banks, such as
CDs and TDs, may be general obligations of the parent bank
in addition to the issuing branch, or may be limited by the
terms of a specific obligation and governmental regulation.
Such obligations are subject to different risks than are
those of domestic banks or domestic branches of foreign
banks. These risks include foreign economic and political
developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign
branches of domestic banks are not necessarily subject to
the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and financial
recordkeeping requirements. In addition, less information
may be publicly available about a foreign branch of a
domestic bank than about a domestic bank. CDs issued by
wholly owned Canadian subsidiaries of domestic banks are
guaranteed as to repayment of principal and interest (but
not as to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be
general obligations of the parent bank in addition to the
issuing branch, or may be limited by the terms of a specific
obligation and by Federal and state regulation as well as
governmental action in the country in which the foreign bank
has its head office. A domestic branch of a foreign bank
with assets in excess of $1 billion may or may not be
subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is
located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State
Branches") may or may not be required: (a) to pledge to the
regulator by depositing assets with a designated bank within
the state, an amount of its assets equal to 5% of its total
liabilities; and (b) to maintain assets within the state in
an amount equal to a specified percentage of the aggregate
amount of liabilities of the foreign bank payable at or
through all of its agencies or branches within the state.
The deposits of State Branches may not necessarily be
insured by the FDIC. In addition, there may be less
publicly available information about a domestic branch of a
foreign bank than about a domestic bank.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of
domestic banks or by domestic branches of foreign banks,
SBMFM will carefully evaluate such investments on a case-by-
case basis. Savings and loans associations whose CDs may be
purchased by the Fund are supervised by the Office of Thrift
Supervision and are insured by the Savings Association
Insurance Fund. As a result, such savings and loan
associations are subject to regulation and examination.
American, European and Continental Depositary Receipts. The
Fund may invest in the securities of foreign and domestic
issuers in the form of American Depositary Receipts ("ADRs")
and European Depositary Receipts ("EDRs"). These securities
may not necessarily be denominated in the same currency as
the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company
that evidence ownership of underlying securities issued by a
foreign corporation. EDRs, which sometimes are referred to
as Continental Depositary Receipts ("CDRs"), are receipts
issued in Europe typically by foreign banks and trust
companies that evidence ownership of either foreign or
domestic securities. Generally, ADRs, in registered form,
are designed for use in U.S. securities markets and EDRs and
CDRs, in bearer form, are designed for use in European
securities markets.
Lending of Portfolio Securities. As stated in the
Prospectus, the Fund has the ability to lend securities from
its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, may not exceed
33 1/3% of the Fund's total assets taken at value. The Fund
may not lend its portfolio securities to Smith Barney or its
affiliates unless it has applied for and received specific
authority from the SEC. Loans of portfolio securities by
the Fund will be collateralized by cash, letters of credit
or U S. government securities that are maintained at all
times in an amount equal to at least 100% of the current
market value of the loaned securities.
In lending its portfolio securities, the Fund can increase
its income by continuing to receive interest on the loaned
securities as well as by either investing the cash
collateral in short-term instruments or obtaining yield in
the form of interest paid by the borrower when U S.
government securities are used as collateral. Requirements
of the SEC, which may be subject to future modifications,
currently provide that the following conditions must be met
whenever the Fund's portfolio securities are loaned: (a) the
Fund must receive at least 100% cash collateral or
equivalent securities from the borrower; (b) the borrower
must increase such collateral whenever the market value of
the securities rises above the value of such collateral; (c)
the Fund must be able to terminate the loan at any time; (d)
the Fund must receive reasonable interest on the loan, as
well as an amount equal to any dividends, interest or other
distributions on the loaned securities, and any increase in
market value; (e) the Fund may pay only reasonable custodian
fees in .connection with the loan; and ( f) voting rights on
the loaned securities may pass to the borrower; however, if
a material event adversely affecting the investment occurs,
the Fund's Board of Directors must terminate the loan and
regain the right to vote the securities. The risks in
lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms
deemed by SBMFM to be of good standing and will not be made
unless, in the judgment of SBMFM, the consideration to be
earned from such loans would justify the risk. From time to
time, the Fund may return a part of the interest earned from
the investment of collateral received for securities loaned
to: (a) the borrower; and/or (b) a third party, which is
unaffiliated with the Fund or with Smith Barney and, which
is acting as a "finder."
Convertible Securities. Convertible securities are fixed-
income securities that may be converted at either a stated
price or stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar
to both fixed-income and equity securities. Although to a
lesser extent than with fixed-income securities generally,
the market value of convertible securities tends to decline
as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market
value of the underlying common stocks and, therefore, also
will react to variations in the general market for equity
securities. A unique feature of convertible securities is
that as the market price of the underlying common stock
declines, convertible securities tend to trade increasingly
on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock.
When the market price of the underlying common stock
increases, the prices of the convertible securities tend to
rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk,
investments in convertible securities generally entail less
risk than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are
investments that provide for a stable stream of income with
generally higher yields than common stocks. Of course, like
all fixed-income securities, there can be no assurance of
current income because the issuers of the convertible
securities may default on their obligations. Convertible
securities, however, generally offer lower interest or
dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation.
A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation
through the conversion feature, which enables the holder to
benefit from increases in the market price of the underlying
common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations,
enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to
common stock, of the same issuer. Because of the
subordination feature, however, convertible securities
typically have lower ratings than similar non-convertible
securities.
Warrants. Because a warrant does not carry with it the
right to dividends or voting rights with respect to the
securities that the warrant holder is entitled to purchase,
and because it does not represent any rights to the assets
of the issuer, a warrant may be considered more speculative
than certain other types of investments. In addition, the
value of a warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to its expiration
date. The investment in warrants, valued at the lower of
cost or market, may not exceed 5% of the value of the Fund's
net assets. Included within that amount, but not to exceed
2% of the value of the Fund's net assets, may be warrants
that are not listed on the New York Stock Exchange, Inc.
(the "NYSE") or the American Stock Exchange. Warrants
acquired by the Fund in units or attached to securities may
be deemed to be without value.
Preferred Stock. Preferred stocks, like debt obligations,
are generally fixed-income securities. Shareholders of
preferred stocks normally have the right to receive
dividends at a fixed rate when and as declared by the
issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing
corporation. Dividends on the preferred stock may be
cumulative, and all cumulative dividends usually must be
paid prior to common shareholders receiving any dividends.
Preferred stock dividends must be paid before common stock
dividends and, for that reason, preferred stocks generally
entail less risk than common stocks. Upon liquidation,
preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or stated
value, and are senior in right of payment to common stock.
Preferred stocks are, however, equity securities in the
sense that they do not represent a liability of the issuer
and, therefore, do not offer as great a degree of protection
of capital or assurance of continued income as investments
in corporate debt securities. In addition, preferred stocks
are subordinated in right of payment to all debt obligations
and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the
same issuer.
Investment Restrictions
The Fund has adopted the following investment restrictions
for the protection of shareholders. Restrictions l through 8
below cannot be changed without approval by the holders of a
majority of the outstanding shares of the Fund, defined as
the lesser of (a) 67% or more of the Fund's shares present
at a meeting, if the holders of more than 50% of the
outstanding shares are present in person or by proxy or (b)
more than 50% of the Fund's outstanding shares. The
remaining restrictions may be changed by the Fund's Board of
Directors at any time. In accordance with these
restrictions, the Fund will not:
1. With respect to 75% of the value of its total assets,
invest more than 5% of its total assets in securities of any
one issuer, except securities issued or guaranteed by the
United States government, or purchase more than 100% of the
outstanding voting securities of such issuer.
2. Issue senior securities as defined in the 1940 Act and
any rules and orders thereunder, except insofar as the Fund
may be deemed to have issued senior securities by reason of:
(a) borrowing money or purchasing securities on a when-
issued or delayed-delivery basis; (b) purchasing or selling
futures contracts and options on futures contracts and other
similar instruments; and (c) issuing separate classes of
shares.
3. Invest more than 25% of its total assets in securities,
the issuers of which are in the same industry. For purposes
of this limitation, U.S. government securities and
securities of state or municipal governments and their
political subdivisions are not considered to be issued by
members of any industry.
4. Borrow in excess of 33 1/3% of the total value of its
assets (including the amount borrowed) less its liabilities
(not including such borrowings). See the discussion of
"Certain Investment Activities" later in this Statement of
Additional Information.
5. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the Fund may
invest consistent with its investment objective and
policies; (b) repurchase agreements; and (c) loans of its
portfolio securities.
6. Engage in the business of underwriting securities
issued by other persons, except to the extent that the Fund
may technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in disposing of
portfolio securities.
7. Purchase or sell real estate, real estate mortgages,
real estate investment trust securities, commodities or
commodity contracts, but this shall not prevent the Fund
from: (a) investing in securities of issuers engaged in the
real estate business and securities which are secured by
real estate or interests therein; (b) holding or selling
real estate received in connection with securities it holds;
or (c) trading in futures contracts and options on futures
contracts.
8. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any
securities short (except against the box). For purposes of
this restriction, the deposit or payment by the Fund of
initial or maintenance margin in connection with futures
contracts and related options and options on securities is
not considered to be the purchase of a security on margin.
9. Pledge, hypothecate, mortgage or otherwise encumber its
assets in an amount in excess of 5% of its assets to secure
borrowings for investment purposes or otherwise.
10. Invest more than 2% of the value of its assets in
warrants, provided that warrants acquired in connection with
other securities shall not be subject to this restriction.
11. Invest in mineral-type programs or leases.
12. Purchase or otherwise acquire any security if, as a
result, more than l5% of its net assets would be invested in
securities that are illiquid.
13. Purchase or retain the securities of any issuer if
those officers and Directors of the Fund or SBMFM owning
individually more than 1/2 of l% of the securities of such
issuer, together own more than 5% of the securities of such
issuer.
14. Purchase the securities of any other open-end
investment company, except through a purchase on the open
market involving no commission or profit to a sponsor or
dealer (other than the customary stock exchange or over-the-
counter brokerage commission) and except as part of a
merger, consolidation or acquisition of assets.
15. Invest for the purpose of exercising control of
management.
16. Purchase securities of any company with a record of
less than three years' continuous operation if such purchase
would cause its investments in such companies to exceed 5%
of the value of its total assets. (For purposes of this
limitation, issuers include predecessors, sponsors,
controlling persons, general partners, guarantors and
originators of underlying assets.)
17. Purchase or write put or call options.
If any percentage restriction described above is complied
with at the time of an investment, a later increase or
decrease in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
Certain of these restrictions were adopted as the result of
undertakings to state securities commissions and must be
complied with only as long as the Fund's shares are
registered in the particular state. In order to permit the
sale of the Fund's shares in certain states, the Fund may
make commitments more restrictive than the investment
restrictions described above such as those regarding oil and
mineral leases and real estate limited partnerships.
Certain Investment Activities
While the Fund is authorized to borrow money from banks for
purposes of investment (leveraging) and to invest in
securities of foreign issuers, it has no current intention
of engaging in these investment activities and will do so
only when the Fund's Board of Directors determines that
either or both of these activities are in the best interests
of shareholders.
Portfolio Turnover
The Fund generally does not engage in short-term trading but
intends to purchase securities for long-term capital
appreciation. While the Fund's portfolio turnover rate has
in the past exceeded 100%, the Fund's annual portfolio
turnover rate is not expected to exceed 100%. A portfolio
turnover rate of 100% would occur if all of the securities
in the Fund's portfolio were replaced once during a period
of one year. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio
securities for the year by the monthly average value of
portfolio securities. Securities with remaining maturities
of one year or less at the date of acquisition are excluded
from the calculation. For the fiscal years ended
December 31, 1994 and 1995, the Fund's portfolio turnover
rate was 52% and 57%, respectively.
Future portfolio turnover rates may vary greatly from year
to year as well as within a particular year and may be
affected by cash requirements for redemptions of the Fund's
shares as well as by requirements that enable the Fund to
receive favorable tax treatment. Portfolio turnover rates
will largely depend on the level of purchases and
redemptions of Fund shares. Higher portfolio turnover rates
can result in corresponding increases in brokerage
commissions. In addition, to the extent that the Fund
realizes short-term gains as the result of more portfolio
transactions, such gains would be taxable to shareholders at
ordinary income tax rates.
Portfolio Transactions
Decisions to buy and sell securities for the Fund are made
by SBMFM, subject to the overall supervision and review of
the Fund's Board of Directors. Portfolio securities
transactions for the Fund are effected by or under the
supervision of SBMFM.
Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the
over-the-counter market, but the price of those securities
includes an undisclosed commission or mark-up. Over-the-
counter purchases and sales are transacted directly with
principal market makers except in those cases in which
better prices and executions may be obtained elsewhere. The
cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at
which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down. For the fiscal
years ended December 31, 1995, 1994 and 1993, the Fund paid
total brokerage commissions of $3,736,847, $3,433,551 and
$3,034,151, respectively.
In executing portfolio transactions and selecting brokers or
dealers, it is the Fund's policy to seek the best overall
terms available. SBMFM, in seeking the most favorable price
and execution, considers all factors it deems relevant,
including, for example, the price, the size of the
transaction, the reputation, experience and financial
stability of the broker-dealer involved and the quality of
service rendered by the broker-dealer in other transactions.
SBMFM receives research, statistical and quotation services
from several broker-dealers with which it places the Fund's
portfolio transactions. It is possible that certain of the
services received primarily will benefit one or more other
accounts for which SBMFM exercises investment discretion.
Conversely, the Fund may be the primary beneficiary of
services received as a result of portfolio transactions
effected for other accounts. SBMFM's fee under the Advisory
Agreement is not reduced by reason of its receiving such
brokerage and research services. The Fund's Board of
Directors, in its discretion, may authorize SBMFM to cause
the Fund to pay a broker that provides brokerage and
research services to SBMFM a commission in excess of that
which another qualified broker would have charged for
effecting the same transaction. Smith Barney will not
participate in commissions from brokerage given by the Fund
to other brokers or dealers and will not receive any
reciprocal brokerage business resulting therefrom.
In accordance with Section 17(e) of the 1940 Act and Rule
17(e) thereunder, the Fund's Board of Directors has
determined that any portfolio transaction for the Fund may
be executed through Smith Barney or an affiliate of Smith
Barney if, in SBMFM's judgment, the use of Smith Barney or
an affiliate is likely to result in price and execution at
least as favorable as those of other qualified brokers and
if, in the transaction, Smith Barney or the affiliate
charges the Fund a commission rate consistent with those
charged by Smith Barney or an affiliate to comparable
unaffiliated customers in similar transactions. In
addition, under rules recently adopted by the SEC, Smith
Barney may directly execute such transactions for the Fund
on the floor of any national securities exchange, provided:
(a) the Board of Directors has expressly authorized Smith
Barney to effect such transactions; and (b) Smith Barney
annually advises the Fund of the aggregate compensation it
earned on such transactions. For the fiscal year ended
December 31, 1995, the Fund paid $637,506 in brokerage
commissions to Smith Barney, or 17% of the total brokerage
commissions paid. Smith Barney secured 14% of the aggregate
dollar amount of transactions involving commissions during
the 1995 fiscal year. For the 1995, 1994 and 1993 fiscal
years, the Fund paid $637,506, $487,203 and $579,597,
respectively, in brokerage commissions to Smith Barney
and/or Shearson Lehman Brothers, the Fund's distributor
prior to Smith Barney.
Even though investment decisions for the Fund are made
independently from those of the other accounts managed by
SBMFM, investments of the kind made by the Fund also may be
made by those other accounts. When the Fund and one or more
accounts managed by SBMFM are prepared to invest in, or
desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in
a manner believed by SBMFM to be equitable. In some cases,
this procedure may adversely affect the price paid or
received by the Fund or the size of the position obtained
for or disposed of by the Fund.
PURCHASE OF SHARES
Volume Discounts
The schedule of sales charges on Class A shares described in
the Prospectus applies to purchases made by any "purchaser,"
which is defined to include the following: (a) an
individual; (b) an individual's spouse and his or her
children purchasing shares for their account; (c) a trustee
or other fiduciary purchasing shares for a single trust
estate or single fiduciary account; (d) a pension, profit-
sharing or other employee benefit plan qualified under
Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and qualified employee benefit plans
of employers who are "affiliated persons" of each other
within the meaning of the 1940 Act; (e) tax-exempt
organizations enumerated in Section 501 (c)(3) or (13) of
the Code; and (f) a trustee or other professional fiduciary
(including a bank, or an investment adviser registered with
the SEC under the Investment Advisers Act of 1940, as
amended) purchasing shares of the Fund for one or more trust
estates or fiduciary accounts. Purchasers who wish to
combine purchase orders to take advantage of volume
discounts should contact a Smith Barney Financial
Consultant.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedule in
the Prospectus, apply to any purchase of Class A shares if
the aggregate investment in Class A shares of the Fund and
in Class A shares of other Smith Barney Mutual Funds that
are offered with a sales charge, including the purchase
being made, of any purchaser is $25,000 or more. The
reduced sales charge is subject to confirmation of the
shareholder's holdings through a check of appropriate
records. The Fund reserves the right to terminate or amend
the combined right of accumulation at any time after written
notice to shareholders. For further information regarding
the combined right of accumulation, shareholders should
contact a Smith Barney Financial Consultant.
Determination of Public Offering Price
The Fund offers its shares to the public on a continuous
basis. The public offering price for a Class A, Class Y and
Class Z share of the Fund is equal to the net asset value
per share at the time of purchase, plus for Class A shares,
an initial sales charge based on the aggregate amount of the
investment. The public offering price for a Class B and
Class C share (and Class A share purchases, including
applicable rights of accumulation, equaling or exceeding
$500,000) is equal to the net asset value per share at the
time of purchase and no sales charge is imposed at the time
of purchase. A contingent deferred sales charge ("CDSC"),
however, is imposed on certain redemptions of Class B and
Class C shares, and of Class A shares when purchased in
amounts equaling or exceeding $500,000. The method of
computation of the public offering price is shown in the
Fund's financial statements incorporated by reference in
their entirety into this Statement of Additional
Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of
payment postponed (a) for any period during which the NYSE
is closed (other than for customary weekend or holiday
closings), (b) when trading in markets the Fund normally
utilizes is restricted, or an emergency, as determined by
the SEC, exists so that disposal of the Fund's investments
or determination of net asset value is not reasonably
practicable or (c) for such other periods as the SEC by
order may permit for the protection of the Fund's
shareholders.
Distributions in Kind
If the Board of Directors of the Fund determines that it
would be detrimental to the best interests of the remaining
shareholders to make a redemption payment wholly in cash,
the Fund may pay, in accordance with SEC rules, any portion
of a redemption in excess of the lesser of $250,000 or 1% of
the Fund's net assets by distribution in kind of portfolio
securities in lieu of cash. Securities issued as a
distribution in kind may incur brokerage commissions when
shareholders subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders who own shares with a value of at
least $10,000 ($5,000 for retirement plan accounts) and who
wish to receive specific amounts of cash monthly or
quarterly. Withdrawals of at least $50 may be made under
the Withdrawal Plan by redeeming as many shares of the Fund
as may be necessary to cover the stipulated withdrawal
payment. Any applicable CDSC will not be waived on amounts
withdrawn by shareholders that exceed 1.00% per month of the
value of a shareholder's shares at the time the Withdrawal
Plan commences. (With respect to Withdrawal Plans in effect
prior to November 7, 1994, any applicable CDSC will be
waived on amounts withdrawn that do not exceed 2.00% per
month of the value of a shareholder's shares at the time the
Withdrawal Plan commenced.) To the extent withdrawals exceed
dividends, distributions and appreciation of a shareholder's
investment in the Fund, there will be a reduction in the
value of the shareholder's investment and continued
withdrawal payments will reduce the shareholder's investment
and ultimately may exhaust it. Withdrawal payments should
not be considered as income from investment in the Fund.
Furthermore, as it generally would not be advantageous to a
shareholder to make additional investments in the Fund at
the same time he or she is participating in the Withdrawal
Plan, purchases by such shareholders in amounts of less than
$5,000 ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan
and who hold their shares in certificate form must deposit
their share certificates with the Transfer Agent as agent
for Withdrawal Plan members. All dividends and
distributions on shares in the Withdrawal Plan are
reinvested automatically at net asset value in additional
shares of the Fund. Withdrawal Plans should be set up with
a Smith Barney Financial Consultant. A shareholder who
purchases shares directly through the Transfer Agent may
continue to do so and applications for participation in the
Withdrawal Plan must be received by the Transfer Agent no
later than the eighth day of the month to be eligible for
participation beginning with that month's withdrawal. For
additional information, shareholders should contact a Smith
Barney Financial Consultant.
DISTRIBUTOR
Smith Barney serves as the Fund's distributor on a best
efforts basis pursuant to a written agreement (the
"Distribution Agreement") which was most recently approved
by the Fund's Board of Directors on July 19, 1995. For the
fiscal years ended December 31, 1995, 1994 and 1993, Smith
Barney and/or its predecessor, Shearson Lehman Brothers,
received approximately $1.7 million $1.4 million and $3.1
million respectively, in sales charges for the sale of
Class A shares and did not reallow any portion thereof to
dealers. For the fiscal years ended December 31, 1995, 1994
and 1993, Smith Barney or Shearson Lehman Brothers received
approximately $1,912,000, $2,313,000 and $1,794,000,
respectively, representing CDSC on redemptions of the Fund's
Class B shares. For the fiscal years ended December 31,
1995, and 1994, Smith Barney received approximately $4000
and $1, respectively, representing CDSC on redemptions of
the Fund's Class C shares.
When payment is made by the investor, unless otherwise noted
by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Smith Barney
may benefit from the temporary use of the funds. The
investor may designate another use for the funds prior to
settlement date, such as an investment in a money market
fund (other than Smith Barney Exchange Reserve Fund) of the
Smith Barney Mutual Funds. If the investor instructs Smith
Barney to invest the funds in a Smith Barney money market
fund, the amount of the investment will be included as part
of the average daily net assets of both the Fund and the
Smith Barney money market fund, and affiliates of Smith
Barney that serve the funds in an investment advisory or
administrative capacity will benefit from the fact they are
receiving fees from both such investment companies for
managing these assets computed on the basis of their average
daily net assets. The Fund's Board of Directors has been
advised of the benefits to Smith Barney resulting from these
settlement procedures and will take such benefits into
consideration when reviewing the Advisory, Administration
and Distribution Agreements for continuance.
For the fiscal year ended December 31, 1995, Smith Barney
incurred distribution expenses totaling approximately
$14,769,000, consisting of approximately $807,000 for
advertising, $112,000 for printing and mailing of
Prospectuses, $6,213,000 for support services, $7,487,000 to
Smith Barney Financial Consultants, and $150,000 in accruals
for interest on the excess of Smith Barney expenses incurred
in distribution of the Fund's shares over the sum of the
distribution fees and CDSC received by Smith Barney from the
Fund.
Distributions Arrangements
To compensate Smith Barney for the services it provides and
for the expense it bears under the Distribution Agreement,
the Fund has adopted a services and distribution plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. Under
the Plan, the Fund pays Smith Barney a service fee, accrued
daily and paid monthly, calculated at the annual rate of
0.25% of the value of the Fund's average daily net assets
attributable to the Class A, Class B and Class C shares. In
addition, the Fund pays Smith Barney a distribution fee with
respect to the Class B and Class C shares primarily intended
to compensate Smith Barney for its initial expense of paying
Financial Consultants a commission upon sales of those
shares. The Class B and Class C distribution fee is
calculated at the annual rate of 0.75% of the value of the
Fund's average daily net assets attributable to the shares
of the respective Class.
The following service and distribution fees were incurred
during the periods indicated:
<TABLE>
<S> <C> <C> <C> <C>
SERVICE FEES
Fiscal YearEnded 12/31/95 Fiscal YearEnded 12/31/94
Fiscal YearEnded 12/31/93 For PeriodFrom 2/4/93Through
12/31/93*
Class A $4,551,117 $3,818,714
$4,143,053 -
Class B 2,192,717 2,832,127 3,054,126
- -
Class C 21,953 9,200 -
$1,600
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
DISTRIBUTION FEES
Fiscal YearEnded 12/31/95 Fiscal YearEnded 12/31/94
Fiscal YearEnded 12/31/93 For PeriodFrom 2/4/93Through
12/31/93*
Class B $6,578,149 $8,496,382
$9,162,378 -
Class C 65,858 27,602 -
$4,800
* The Fund commenced selling Class C shares on February 4,
1993.
</TABLE>
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote of
the Fund's Board of Directors, including a majority of the
Independent Directors. The Plan may not be amended to
increase the amount of the service and distribution fees
without shareholder approval, and all amendments of the Plan
also must be approved by the Directors and Independent
Directors in the manner described above. The Plan may be
terminated with respect to a Class of the Fund at any time,
without penalty, by vote of a majority of the Independent
Directors or by vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Class.
Pursuant to the Plan, Smith Barney will provide the Fund's
Board of Directors with periodic reports of amounts expended
under the Plan and the purpose for which such expenditures
were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each
day, Monday through Friday, except days on which the NYSE is
closed. The NYSE currently is scheduled to be closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and
on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively.
Because of the differences in distribution fees and Class-
specific expenses, the per share net asset value of each
Class may differ. The following is a description of the
procedures used by the Fund in valuing its assets.
Securities listed on a national securities exchange will be
valued on the basis of the last sale on the date on which
the valuation is made or, in the absence of sales, at the
mean between the closing bid and asked prices. Over-the-
counter securities will be valued at the mean between the
closing bid and asked prices on each day, or, if market
quotations for those securities are not readily available,
at fair value, as determined in good faith by the Fund's
Board of Directors. Short-term obligations with maturities
of 60 days or less are valued at amortized cost, which
constitutes fair value as determined by the Fund's Board of
Directors. Amortized cost involves valuing an instrument at
its original cost to the Fund and thereafter assuming a
constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest
rates on the market value of the instrument. All other
securities and other assets of the Fund will be valued at
fair value as determined in good faith by the Fund's Board
of Directors.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any Smith Barney
Mutual Fund may exchange all or part of their shares for
shares of the same Class of other Smith Barney Mutual Funds,
to the extent such shares are offered for sale in the
shareholder's state of residence, on the basis of relative
net asset value per share at the time of exchange as
follows:
A. Class A shares of any fund purchased with a sales
charge may be exchanged for Class A shares of any of the
other funds, and the sales charge differential, if any, will
be applied. Class A shares of any fund may be exchanged
without a sales charge for shares of the funds that are
offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares
sold with a sales charge, and the appropriate sales charge
differential will be applied.
B. Class A shares of any fund acquired by a previous
exchange of shares purchased with a sales charge may be
exchanged for Class A shares of any of the other funds, and
the sales charge differential, if any, will be applied.
C. Class B shares of any fund may be exchanged
without a sales charge. Class B shares of the Fund
exchanged for Class B shares of another fund will be subject
to the higher applicable CDSC of the two funds and, for
purposes of calculating CDSC rates and conversion periods,
will be deemed to have been held since the date the shares
being exchanged were deemed to be purchased.
Dealers other than Smith Barney must notify the Transfer
Agent of the investor's prior ownership of Class A shares of
Smith Barney High Income Fund and the account number in
order to accomplish an exchange of shares of Smith Barney
High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire
shares of the same Class in a fund with different investment
objectives when they believe that a shift between funds is
an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the
fund shares being acquired may legally be sold. Prior to
any exchange, the shareholder should obtain and review a
copy of the current prospectus of each fund into which an
exchange is being considered. Prospectuses may be obtained
from a Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary
supporting documents, shares submitted for exchange are
redeemed at the then-current net asset value and, subject to
any applicable CDSC, the proceeds are immediately invested,
at a price as described above, in shares of the fund being
acquired. Smith Barney reserves the right to reject any
exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote total return of a
Class in advertisements or in reports and other
communications to shareholders. The Fund may include
comparative performance information in advertising or
marketing the Fund's shares. Such performance information
may include the following industry and financial
publications: Barron's, Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar
Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal. To the extent any advertisement or
sales literature of the Fund describes the expenses or
performance of any Class it will also disclose such
information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed according
to a formula prescribed by the SEC. The formula can be
expressed as follows:
P(1 + T)n = ERV
Where P = a hypothetical initial payment of
$1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a
hypothetical $1,000 investment
made at the beginning of a 1-, 5- or 10-
year period at the end
of the 1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all dividends
and distributions.
Class A's average annual total return was as follows for the
periods indicated:
22.84% for the one-year period beginning on January 1, 1995
through December 31, 1995
12.19% per annum during the five-year period beginning on
January 1, 1991 through December 31, 1995
12.82% per annum during the ten-year period beginning on
January 1, 1986 through December 31, 1995
The average annual total return figures assume that the
maximum 5.00% sales charge has been deducted from the
investment at the time of purchase. If the maximum sales
charge had not been deducted, Class A's average annual total
return for those same periods would have been 29.26%, 13.35%
and 13.40%, respectively.
Class B's average annual total return was as follows for the
periods indicated:
23.29% for the one-year period beginning on January 1, 1995
through December 31, 1995
10.79% for the period from inception (November 6, 1992)
through December 31, 1995
The average annual total return figures assume that the
maximum applicable CDSC has been deducted from the
investment at the time of redemption. If the maximum CDSC
had not been deducted, Class B's average annual total return
for those same periods would have been 28.29% and 11.30%,
respectively.
Class C's (formerly Class D's) average annual total return
was as follows for the periods indicated:
27.29% for the one-year period beginning on January 1, 1995
through December 31,1995
9.93% for the period from inception (February 4, 1993)
through December 31,1995
The average annual total return figures assume that the
maximum applicable CDSC has been deducted from the
investment at the time of redemption. If the maximum CDSC
had not been deducted, Class C's average annual total return
for those same periods would have been 28.29% and 9.93%,
respectively.
Aggregate Total Return
"Aggregate total return" figures represent the cumulative
change in the value of an investment in the Class for the
specified period and are computed by the following formula:
ERV - P
P
Where: P = a hypothetical initial payment of
$10,000
ERV = Ending Redeemable Value of a
hypothetical $10,000 investment
made at the beginning of a 1-, 5- or 10-
year period at the end
of the 1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all dividends
and distributions.
Class A's aggregate total return was as follows for the
periods indicated:
22.84% for the one-year period beginning on January 1, 1995
through December 31, 1995
77.71% for the five-year period beginning on January 1, 1991
through December 31, 1995
233.76% for the ten-year period beginning on January 1, 1986
through December 31, 1995
These aggregate total return figures assume the maximum
5.00% sales charge has been deducted from the investment at
the time of purchase. If the maximum sales charge had not
been deducted, Class A's aggregate total return for those
same periods would have been 29.26%, 87.13% and 251.52%,
respectively.
Class B's aggregate total return was as follows for the
periods indicated:
23.29% for the one-year period beginning on January 19, 1995
through December 31, 1995
38.10% for the period from inception (November 6, 1992)
through December 31, 1995.
These aggregate total return figures assume that the maximum
applicable CDSC has been deducted from the investment at the
time of redemption. If the maximum applicable CDSC had not
been deducted, Class B's aggregate total return for those
same periods would have been 28.29% and 40.10%,
respectively.
Class C's aggregate total return was as follows for the
periods indicated:
27.29% for the one-year period beginning on January 1, 1995
through December 31, 1995
31.65% for the period from inception (February 4, 1993)
through December 31, 1995
These aggregate total return figures assume that the maximum
applicable CDSC has been deducted from the investment at the
time of redemption. If the maximum CDSC had not been
deducted, Class C's aggregate total return for those same
periods would have been 28.29% and 31.65%, respectively.
Performance will vary from time to time depending on market
conditions, the composition of the Fund's portfolio,
operating expenses and the expenses exclusively attributable
to the Class. Consequently, any given performance quotation
should not be considered representative of the Class'
performance for any specified period in the future. Because
performance will vary, it may not provide a basis for
comparing an investment in the Class with certain bank
deposits or other investments that pay a fixed yield for a
stated period of time. Investors comparing the Class'
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.
It is important to note that the total return figures set
forth above are based on historical earnings and are not
intended to indicate future performance.
TAXES
The following is a summary of certain Federal income tax
considerations that may affect the Fund and its
shareholders. The summary is not intended as a substitute
for individual tax advice and investors are urged to consult
their own tax advisors as to the tax consequences of an
investment in the Fund.
The Fund has qualified and intends to continue to qualify
each year as a regulated investment company under the Code.
To so qualify, the Fund must, among other things, derive
less than 30% of its gross income in each taxable year from
the sale or disposition of stocks, securities, and certain
financial instruments held for less than three months. This
requirement may limit the extent to which the Fund is able
to sell stocks, securities or financial instruments held for
less than three months. If the Fund (a) qualifies as a
regulated investment company and (b) distributes to its
shareholders at least 90% of its net investment income
(including, for this purpose, its net realized short-term
capital gains), the Fund will not be liable for Federal
income taxes to the extent that its net investment income
and its net realized long- and short-term capital gains, if
any, are distributed to its shareholders.
Gains or losses on the sales of stock or securities by the
Fund generally will be long-term capital gains or losses if
the Fund has held the stock or securities for more than one
year. Gains or losses on sales of stock or securities held
for not more than one year generally will be short-term
capital gains or losses.
Any net long-term capital gains realized by the Fund will be
distributed annually as described in the Prospectus. Such
distributions ("capital gain dividends") will be taxable to
shareholders as long-term capital gains, regardless of how
long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice
mailed by the Fund to shareholders after the close of the
Fund's prior taxable year. If a shareholder receives a
capital gain dividend with respect to any share and if the
share has been held by the shareholder for six months or
less, then any loss on the sale or exchange of such share
will be treated as a long-term capital loss to the extent of
the capital gain dividend.
The portion of the dividends received from the Fund that
qualifies for the dividends-received deduction for
corporations will be reduced to the extent that the Fund
holds dividend-paying stock for less than 46 days (91 for
certain preferred stocks). The Fund's holding period will
not include any period during which the Fund has reduced its
risk of loss from holding the stock by purchasing an option
to sell or entering into a short sale of substantially
identical stock or securities convertible into the stock.
The holding period for stock may also be reduced if the Fund
diminishes its risk of loss by holding one or more other
positions with respect to substantially similar or related
properties. Dividends-received deductions will be allowed
only with respect to shares that a corporate shareholder has
held for at least 46 days within the meaning of the same
holding period rules applicable to the Fund.
If the Fund is the holder of record of any stock on the
record date for any dividends payable with respect to such
stock, such dividends shall be included in the Fund's gross
income as of the later of (a) the date that such stock
became ex-dividend with respect to such dividends (that is,
the date on which a buyer of the stock would not be entitled
to receive the declared but unpaid, dividends) or (b) the
date that the Fund acquired such stock. Accordingly, in
order to satisfy its income distribution requirements, the
Fund may be required to pay dividends based on anticipated
earnings and shareholders may receive dividends in an
earlier year than would otherwise be the case.
If a shareholder incurs a sales charge in acquiring shares
of the Fund, disposes of those shares within 90 days and
then acquires shares in a mutual fund for which the
otherwise applicable sales charge is reduced by reason of a
reinvestment right (that is exchange privilege), the
original sales charge will not be taken into account in
computing gain/loss on the original shares to the extent the
subsequent sales charge is reduced. Instead, it will he
added to the tax basis in the newly acquired shares.
Furthermore, the same rule also applies to a disposition of
the newly acquired or redeemed shares made within 90 days of
the second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge by
shifting his or her investment in a family of mutual funds.
Investors considering buying shares of the Fund on or just
prior to a record date for a taxable dividend or capital
gain distribution should be aware that, regardless of
whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or
distribution payment, any such payment will be a taxable
dividend or distribution payment.
If a shareholder fails to furnish a correct taxpayer
identification number, fails fully to report dividend and
interest income, or fails to certify that he or she has
provided a correct taxpayer identification number and that
he or she is not subject to "backup withholding," then the
shareholder may be subject to a 31% backup withholding tax
with respect to (a) any taxable dividends and distributions
and (b) the proceeds of any redemptions of Fund shares. An
individual's taxpayer identification number is his or her
social security number. The backup withholding tax is not
an additional tax and may be credited against a
shareholder's regular Federal income tax liability.
The foregoing is only a summary of certain tax
considerations generally affecting the Fund and its
shareholders and is not intended as a substitute for careful
tax planning. Shareholders are urged to consult their tax
advisors with specific reference to their own tax
situations, including their state and local tax liabilities.
ADDITIONAL INFORMATION
The Fund was incorporated on September 2, 1969 under the
name The Shearson Appreciation Fund, Inc. On October 28,
1987, November 5, 1995, July 30, 1993 and October 14, 1994,
the Fund changed its name to Shearson Lehman Appreciation
Fund Inc., Shearson Lehman Brothers Appreciation Fund Inc.,
Smith Barney Shearson Appreciation Fund Inc. and Smith
Barney Appreciation Fund Inc., respectively.
PNC, located at 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, serves as the custodian of the Fund.
Under its agreement with the Fund, PNC holds the Fund's
portfolio securities and keeps all necessary accounts and
records. For its services, PNC receives a monthly fee based
upon the month-end market value of securities held in
custody and also receives securities transaction charges.
The assets of the Fund are held under bank custodianship in
compliance with the 1940 Act.
First Data Investor Services Group, Inc., located at
Exchange Place, Boston, Massachusetts 02109, serves as the
Fund's transfer agent. Under the transfer agency agreement,
the Transfer Agent maintains the shareholder account records
for the Fund, handles certain communications between
shareholders and the Fund and distributes dividends and
distributions payable by the Fund. For these services, the
Transfer Agent receives a monthly fee computed on the basis
of the number of shareholder accounts it maintains for the
Fund during the month and is reimbursed for out-of-pocket
expenses.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended December
31, 1995 is incorporated herein by reference in its
entirety.
Smith Barney
Appreciation
Fund Inc.
Statement of
Additional Information
March 1, 1996
Smith Barney
Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
SMITH BARNEY APPRECIATION FUND INC.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights are incorporated by
reference to Part A filed herewith.
Included in Part B:
The Registrant's Annual Report for the year
ended December 31, 1995 and the Report of
Independent Accountants are incorporated by
reference to the Definitive 30b-1 filed on
March 1, 1996 as Accession # 91155-96-
000098.
Included in Part C:
Consent of Independent Accountants is filed
herein.
(b) Exhibits
Exhibit No. Description of Exhibits
All references are to the Registrant's
Registration Statement on Form N-8B-1 (the
"Registration Statement") as filed with the SEC on
September 9, 1969 and Form N-1A File No. 2-34576
and 811-1940.
(1)(a) Registrant's Articles of Incorporation,
Articles of Amendment and Articles Supplementary
dated August 25, 1969, May 9, 1983, August 26,
1987, July 20, 1989, November 2, 1992, and July
30, 1993, respectively, are incorporated by
reference to Post-Effective Amendment No. 34 filed
on December 29, 1993 ("Post-Effective Amendment
No. 34").
(b) Registrant's Articles of Amendment dated
October 14, 1994, Form of Articles Supplementary
dated November 7, 1994 and Form of Articles of
Amendment dated November 7, 1993 are incorporated
by reference to Post-Effective Amendment No. 37
filed on November 7, 1994 ("Post-Effective
Amendment No. 37").
(2)(a) Registrant's By-Laws are incorporated by
reference to the Registration Statement.
(b) Amendment to Registrant's By-Laws are
incorporated by reference to Post-Effective
Amendment No. 24 filed on February 29, 1988.
(c) Amendment to Registrant's By-Laws dated
January 24, 1987 and October 21, 1987 are
incorporated by reference to Post-Effective
Amendment No. 26.
(d) Amendment to Registrant's By-Laws dated July 20,
1994 are filed herein.
(3) Not Applicable.
(4)(a) Registrant's form of stock certificate is
incorporated by reference to Post-Effective
Amendment No. 31 filed on November 6, 1992 ("Post-
Effective Amendment No. 31").
(5) Investment Advisory Agreement between the
Registrant and Smith Barney Shearson Asset
Management, dated July 30, 1993, is incorporated
by reference to Post-Effective Amendment No. 34.
(6)(a) Distribution Agreement between the Registrant
and Smith Barney Shearson Inc., dated July 30,
1993, is incorporated by reference to Post-
Effective Amendment No. 34.
(b) Form of Distribution Agreement between the
Registrant and PFS Distributors is incorporated by
reference to Post-Effective Amendment No. 39 filed
on July 3, 1995 ("Post-Effective Amendment No.
39").
(7) Not Applicable.
(8) Form of Custodian Agreement between the
Registrant and PNC Bank, National Association is
incorporated by reference to Post-Effective
Amendment No. 39.
(9)(a) Administration Agreement between the
Registrant and Smith, Barney Advisers, Inc. dated
April 20, 1994, is incorporated by reference to
Post-Effective Amendment No. 35 filed on July 1,
1994 ("Post-Effective Amendment No. 35").
(b) Transfer Agency Agreement between the
Registrant and The Shareholder Services Group,
Inc., dated April 20, 1993, is incorporated by
reference to Post-Effective Amendment No. 35.
(d) Form of Sub-Transfer Agency Agreement between
the Registrant and PFS Shareholder Services is
incorporated by reference to Post-Effective
Amendment No. 39.
(10) Opinion of Counsel regarding legality of
shares being registered is incorporated by
reference to Post-Effective Amendment No. 38 filed
on February 28, 1995 ("Post-Effective Amendment
No. 38").
(11) Consent of KPMG Peat Marwick LLP is filed
herein.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Amended Services and Distribution Plan
pursuant to Rule 12b-1 between the Registrant and
Smith Barney Inc., dated November 7, 1994, is
incorporated by reference to Post-Effective
Amendment No. 37.
(16) Performance Data is incorporated by reference
to Post-Effective Amendment No. 26..
(17) A Financial Data Schedule is filed herein.
(18) Form of Rule 18f-3(d) Multiple Class Plan of
the Registrant is incorporated by reference to
Post-Effective Amendment No. 40 filed on December
22, 1995.
Item 25. Persons Controlled by or under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class by Class as of
February 16, 1996
Common stock, par Class A 163,438
value $.001 per share Class B
96,940
Class C 1,503
Class Y 3
Class Z 18
Item 27. Indemnification
Response to this item is incorporated by reference
to Post-Effective Amendment No. 38.
Item 28(a). Business and Other Connections of Investment
Adviser
Investment Adviser - - Smith Barney Mutual Funds Management
Inc., formerly known as Smith, Barney Advisers, Inc.
("SBMFM")
SBMFM, through its predecessors, has been in the investment
counseling business since 1934 and was incorporated in
December 1968 under the laws of the State of Delaware. SBMFM
is a wholly owned subsidiary of Smith Barney Holdings Inc.
(formerly known as Smith Barney Shearson Holdings Inc.),
which in turn is a wholly owned subsidiary of Travelers
Group Inc. (formerly known as Primerica Corporation)
("Travelers"). SBMFM is registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers
Act").
The list required by this Item 28 of the officer and
directors of SBMFM together with information as to any other
business, profession, vocation or employment of a
substantial nature engaged in by such officer and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SBMFM
pursuant to the Advisers Act (SEC File No. 801-8314).
Prior to the close of business on November 7, 1994,
Greenwich Street Advisors served as investment adviser.
Greenwich Street Advisors, through its predecessors, has
been in the investment counseling business since 1934 and
was a division of Mutual Management Corp. ("MMC"). MMC was
incorporated in 1978 and is a wholly owned subsidiary of
Smith Barney Holdings Inc. ("Holdings"), which in turn is a
wholly owned subsidiary of Travelers. The list required by
this Item 28 of officers and directors of MMC and Greenwich
Street Advisors, together with information as to any other
business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of Form ADV filed by MMC on
behalf of Greenwich Street Advisors pursuant to the Advisers
Act (SEC File No. 801-14437).
Item 29. Principal Underwriters
(a) Smith Barney Inc. ("Smith Barney") currently acts as
distributor for Smith Barney Managed Municipals Fund
Inc., Smith Barney California Municipals Fund Inc.,
Smith Barney Massachusetts Municipals Fund, Smith
Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Principal Return
Fund, Smith Barney Managed Governments Fund Inc., Smith
Barney Income Funds, Smith Barney Equity Funds, Smith
Barney Investment Funds Inc., Smith Barney Natural
Resources Fund Inc., Smith Barney Telecommunications
Trust, Smith Barney Arizona Municipals Fund Inc., Smith
Barney New Jersey Municipals Fund Inc., The USA High
Yield Fund N.V., Garzarelli Sector Analysis Portfolio
N.V., Smith Barney Fundamental Value Fund Inc., Smith
Barney Series Fund, Consulting Group Capital Markets
Funds, Smith Barney Investment Trust, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney
Oregon Municipals Fund, Smith Barney Funds, Inc., Smith
Barney Muni Funds, Smith Barney World Funds, Inc.,
Smith Barney Money Funds, Inc., Smith Barney Tax-Free
Money Fund, Inc., Smith Barney Variable Account Funds,
Smith Barney U.S. Dollar Reserve Fund (Cayman),
Worldwide Special Fund, N.V., Worldwide Securities
Limited, (Bermuda), Smith Barney International Fund
(Luxembourg), Smith Barney Institutional Cash
Management Fund Inc., Smith Barney Concert Series Inc.
and various series of unit investment trusts.
Smith Barney is a wholly owned subsidiary of Smith
Barney Holdings Inc. (formerly known as Smith Barney
Shearson Holdings Inc.), which in turn is a wholly
owned subsidiary of Travelers Group Inc. (formerly
known as Primerica Corporation) ("Travelers"). On
June 1, 1994, Smith Barney changed its name from Smith
Barney Shearson Inc. to its current name. The
information required by this Item 29 with respect to
each director, officer and partner of Smith Barney is
incorporated by reference to Schedule A of FORM BD
filed by Smith Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 812-8510).
(b) PFS Distributors ("PFS") currently acts as distributor
for: Common Sense Growth; Common Sense Growth/Income;
Common Sense Government; Common Sense Money Market;
Common Sense Municipal Bond; CSII Aggressive
Opportunity - A; CSII Aggressive Opportunity - B; CSII
Growth - A; CSII Growth - B; CSII Growth/Income - A;
CSII Growth/Income - B; CSII Government - A; CSII
Government - B; CSII Emerging Growth - A; CSII Emerging
Growth - B; CSII International Equity - A; CSII
International Equity - B; Smith Barney Concert Series
Inc; Smith Barney Money Funds, Inc. - Cash Portfolio;
Smith Barney Exchange Reserve Fund; Smith Barney Growth
Opportunity Fund; and Smith Barney Investment Grade
Bond Fund.
On May 8, 1995, PFS changed its name from Common Sense
Distributors to PFS Distributors, its current name. The
information required by this Item 29 with respect to
each director, officer and partner of PFS is
incorporated by reference to Schedule A of FORM BD,
filed by PFS pursuant to the Securities Exchange Act of
1934 (SEC File No. 8-37352).
Item 30. Location of Accounts and Records
(1) Smith Barney Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th & Chestnut Streets
Philadelphia, PA 19103
(4) First Data Investor Services Group, Inc.
One Boston Place
Boston, Massachusetts 02109
Item 31. Management Services
None
Item 32. Undertakings
None
Rule 485(b) Certification
The Registrant hereby certifies that it meets all
of the requirements for effectiveness pursuant to Rule
485(b) under the Securities Act of 1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant, SMITH BARNEY APPRECIATION FUND
INC., has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York,
State of New York on the
20th day of February, 1996 .
SMITH BARNEY APPRECIATION FUND
INC.
By: /s/ Heath B. McLendon
Heath B. McLendon,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration
Statement and the above Power of Attorney has been signed
below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Heath B. McLendon Director, Chairman of the Board 2/20/96
Heath B. McLendon
/s/ Lewis E. Daidone Senior Vice President and
2/20/96
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/ Alfred J. Bianchetti Director 2/20/96
Alfred J. Bianchetti
/s/ Herbert Barg Director 2/20/96
Herbert Barg
/s/ Martin Brody Director 2/20/96
Martin Brody
Signature Title Date
/s/ Burt N. Dorsett Director 2/20/96
Burt N. Dorsett
/s/ Dwight B. Crane Director 2/20/96
Dwight B. Crane
/s/ Elliott S. Jaffe Director 2/20/96
Elliott S. Jaffe
/s/ Stephen E. Kaufman Director
2/20/96
Stephen E. Kaufman
/s/ Joseph J. McCann Director 2/20/96
Joseph J. McCann
/s/ Cornelius C. Rose, Jr. Director 2/20/96
Cornelius C. Rose
shared/domestic/clients/shearson/funds/camu/amendby.doc
AMENDMENT TO BY-LAWS OF
SMITH BARNEY SHEARSON APPRECIATION FUND INC.
adopted July 20, 1994
RESOLVED: That a new provision pertaining to and describing the
retirement of Directors or the designation of a
Director Emeritus is added to Article II of the By-
Laws effective as of the date this resolution is made;
providing that:
Article II - BOARD OF DIRECTORS
Section 19. Director Emeritus
A Director who has reached the age of seventy two (72)
years may elect the status of Director Emeritus
provided that the Director has served for ten (10)
years as a member of the Board of the Corporation or
of the Board of Directors of another investment
company distributed, advised or administered by an
entity under common control with the Corporation's
distributor, investment adviser or administrator.
Upon reaching eighty (80) years of age, a Director
must elect status as a Director Emeritus. (The
foregoing provisions shall not be deemed to restrict a
Director's ability to resign.)
A Board Member designated as a Director Emeritus may
attend meetings of the Board of Directors, however, he
or she shall have no voting rights and shall not be
under a duty to manage or direct the business and
affairs of the Corporation. A Director Emeritus shall
not be deemed to stand in a fiduciary relation to the
Corporation and shall not be responsible to discharge
the duties of a Director or to exercise that
diligence, care or skill which a Director would
ordinarily be required to exercise under applicable
laws. In addition, a Director Emeritus shall be
indemnified to the full extent that an officer of
Director of the Corporation may be indemnified under
the Corporation's governing documents and applicable
state and federal laws.
As long as a Board Member is a Director Emeritus, but
in no event for more than a period of ten (10) years,
provided the Corporation has net assets in excess of
$100 million, a Director Emeritus will receive 50% of
the annual retainer and annual meeting fees paid to
active Board Members. In any event, a Director
Emeritus shall be entitled to reasonable out-of-pocket
expenses for each meeting attended.
Independent Auditors' Consent
To the Shareholders and Directors of
Smith Barney Appreciation Fund Inc.:
We consent to the use of our report dated February 9, 1996 with
respect to the Smith Barney Appreciation Fund Inc. incorporated
herein by reference and to the references to our Firm under the
headings "Financial Highlights" in the Prospectuses and
"Counsel and Auditors" in the Statement of Additional
Information.
KPMG PEAT MARWICK LLP
New York, New York
February 27, 1996
[ARTICLE] 6
[CIK] 0000089558
[NAME] SMITH BARNEY APPRECIATION FUND INC. - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2,312,285,223
[INVESTMENTS-AT-VALUE] 3,066,496,338
[RECEIVABLES] 10,171,668
[ASSETS-OTHER] 360
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,076,668,366
[PAYABLE-FOR-SECURITIES] 4,134,963
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5,881,636
[TOTAL-LIABILITIES] 10,016,599
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,217,941,506
[SHARES-COMMON-STOCK] 162,380,390
[SHARES-COMMON-PRIOR] 166,368,611
[ACCUMULATED-NII-CURRENT] 467,289
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 93,774,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 754,211,115
[NET-ASSETS] 3,066,651,767
[DIVIDEND-INCOME] 56,466,887
[INTEREST-INCOME] 20,385,339
[OTHER-INCOME] 0
[EXPENSES-NET] 35,089,499
[NET-INVESTMENT-INCOME] 41,762,727
[REALIZED-GAINS-CURRENT] 276,898,722
[APPREC-INCREASE-CURRENT] 388,853,268
[NET-CHANGE-FROM-OPS] 707,514,717
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 31,928,802
[DISTRIBUTIONS-OF-GAINS] 148,609,934
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,620,507
[NUMBER-OF-SHARES-REDEEMED] 26,276,992
[SHARES-REINVESTED] 14,668,264
[NET-CHANGE-IN-ASSETS] 509,811,960
[ACCUMULATED-NII-PRIOR] 1,640,913
[ACCUMULATED-GAINS-PRIOR] 53,090,046
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,764,132
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 35,089,499
[AVERAGE-NET-ASSETS] 1,811,254,257
[PER-SHARE-NAV-BEGIN] 10.15
[PER-SHARE-NII] 0.20
[PER-SHARE-GAIN-APPREC] 1.00
[PER-SHARE-DIVIDEND] 0.20
[PER-SHARE-DISTRIBUTIONS] 1.20
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.90
[EXPENSE-RATIO] 1.02
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000089558
[NAME] SMITH BARNEY APPRECIATION FUND INC. - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2,312,285,223
[INVESTMENTS-AT-VALUE] 3,066,496,338
[RECEIVABLES] 10,171,668
[ASSETS-OTHER] 360
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,076,668,366
[PAYABLE-FOR-SECURITIES] 4,134,963
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5,881,636
[TOTAL-LIABILITIES] 10,016,599
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,217,941,506
[SHARES-COMMON-STOCK] 83,198,578
[SHARES-COMMON-PRIOR] 75,052,109
[ACCUMULATED-NII-CURRENT] 467,289
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 93,774,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 754,211,115
[NET-ASSETS] 3,066,651,767
[DIVIDEND-INCOME] 56,466,887
[INTEREST-INCOME] 20,385,339
[OTHER-INCOME] 0
[EXPENSES-NET] 35,089,499
[NET-INVESTMENT-INCOME] 41,762,727
[REALIZED-GAINS-CURRENT] 276,898,722
[APPREC-INCREASE-CURRENT] 388,853,268
[NET-CHANGE-FROM-OPS] 707,514,717
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 9,069,362
[DISTRIBUTIONS-OF-GAINS] 75,634,724
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 14,923,988
[NUMBER-OF-SHARES-REDEEMED] 13,719,120
[SHARES-REINVESTED] 6,941,401
[NET-CHANGE-IN-ASSETS] 509,811,960
[ACCUMULATED-NII-PRIOR] 1,640,913
[ACCUMULATED-GAINS-PRIOR] 53,090,046
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,764,132
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 35,089,499
[AVERAGE-NET-ASSETS] 873,121,230
[PER-SHARE-NAV-BEGIN] 10.14
[PER-SHARE-NII] 0.11
[PER-SHARE-GAIN-APPREC] 1.00
[PER-SHARE-DIVIDEND] 0.11
[PER-SHARE-DISTRIBUTIONS] 1.11
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.88
[EXPENSE-RATIO] 1.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000089558
[NAME] SMITH BARNEY APPRECIATION FUND INC. - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2,312,285,223
[INVESTMENTS-AT-VALUE] 3,066,496,338
[RECEIVABLES] 10,171,668
[ASSETS-OTHER] 360
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,076,668,366
[PAYABLE-FOR-SECURITIES] 4,134,963
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5,881,636
[TOTAL-LIABILITIES] 10,016,599
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,217,941,506
[SHARES-COMMON-STOCK] 1,233,676
[SHARES-COMMON-PRIOR] 496,923
[ACCUMULATED-NII-CURRENT] 467,289
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 93,774,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 754,211,115
[NET-ASSETS] 3,066,651,767
[DIVIDEND-INCOME] 56,466,887
[INTEREST-INCOME] 20,385,339
[OTHER-INCOME] 0
[EXPENSES-NET] 35,089,499
[NET-INVESTMENT-INCOME] 41,762,727
[REALIZED-GAINS-CURRENT] 276,898,722
[APPREC-INCREASE-CURRENT] 388,853,268
[NET-CHANGE-FROM-OPS] 707,514,717
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 134,193
[DISTRIBUTIONS-OF-GAINS] 991,606
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,074,749
[NUMBER-OF-SHARES-REDEEMED] 432,791
[SHARES-REINVESTED] 94,795
[NET-CHANGE-IN-ASSETS] 509,811,960
[ACCUMULATED-NII-PRIOR] 1,640,913
[ACCUMULATED-GAINS-PRIOR] 53,090,046
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,764,132
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 35,089,499
[AVERAGE-NET-ASSETS] 8,804,141
[PER-SHARE-NAV-BEGIN] 10.14
[PER-SHARE-NII] 0.11
[PER-SHARE-GAIN-APPREC] 1.00
[PER-SHARE-DIVIDEND] 0.11
[PER-SHARE-DISTRIBUTIONS] 1.11
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.88
[EXPENSE-RATIO] 1.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000089558
[NAME] SMITH BARNEY APPRECIATION FUND INC. - CLASS Y
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2,312,285,223
[INVESTMENTS-AT-VALUE] 3,066,496,338
[RECEIVABLES] 10,171,668
[ASSETS-OTHER] 360
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,076,668,366
[PAYABLE-FOR-SECURITIES] 4,134,963
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5,881,636
[TOTAL-LIABILITIES] 10,016,599
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,217,941,506
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 467,289
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 93,774,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 754,211,115
[NET-ASSETS] 3,066,651,767
[DIVIDEND-INCOME] 56,466,887
[INTEREST-INCOME] 20,385,339
[OTHER-INCOME] 0
[EXPENSES-NET] 35,089,499
[NET-INVESTMENT-INCOME] 41,762,727
[REALIZED-GAINS-CURRENT] 276,898,722
[APPREC-INCREASE-CURRENT] 388,853,268
[NET-CHANGE-FROM-OPS] 707,514,717
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 161,210
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 973,805
[NUMBER-OF-SHARES-REDEEMED] 987,386
[SHARES-REINVESTED] 13,581
[NET-CHANGE-IN-ASSETS] 509,811,960
[ACCUMULATED-NII-PRIOR] 1,640,913
[ACCUMULATED-GAINS-PRIOR] 53,090,046
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,764,132
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 35,089,499
[AVERAGE-NET-ASSETS] 666,458
[PER-SHARE-NAV-BEGIN] 10.15
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000089558
[NAME] SMITH BARNEY APPRECIATION FUND INC. - CLASS Z
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 2,312,285,223
[INVESTMENTS-AT-VALUE] 3,066,496,338
[RECEIVABLES] 10,171,668
[ASSETS-OTHER] 360
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,076,668,366
[PAYABLE-FOR-SECURITIES] 4,134,963
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 5,881,636
[TOTAL-LIABILITIES] 10,016,599
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,217,941,506
[SHARES-COMMON-STOCK] 11,029,303
[SHARES-COMMON-PRIOR] 9,998,137
[ACCUMULATED-NII-CURRENT] 467,289
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 93,774,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 754,211,115
[NET-ASSETS] 3,066,651,767
[DIVIDEND-INCOME] 56,466,887
[INTEREST-INCOME] 20,385,339
[OTHER-INCOME] 0
[EXPENSES-NET] 35,089,499
[NET-INVESTMENT-INCOME] 41,762,727
[REALIZED-GAINS-CURRENT] 276,898,722
[APPREC-INCREASE-CURRENT] 388,853,268
[NET-CHANGE-FROM-OPS] 707,514,717
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 13,161,558
[NUMBER-OF-SHARES-REDEEMED] 1,345,826
[SHARES-REINVESTED] 1,060,434
[NET-CHANGE-IN-ASSETS] 509,811,960
[ACCUMULATED-NII-PRIOR] 1,640,913
[ACCUMULATED-GAINS-PRIOR] 53,090,046
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,764,132
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 35,089,499
[AVERAGE-NET-ASSETS] 121,568,862
[PER-SHARE-NAV-BEGIN] 10.16
[PER-SHARE-NII] 0.23
[PER-SHARE-GAIN-APPREC] 1.00
[PER-SHARE-DIVIDEND] 0.23
[PER-SHARE-DISTRIBUTIONS] 1.23
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.91
[EXPENSE-RATIO] 0.77
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
