<PAGE>
SEMI-ANNUAL REPORT
[GRAPHIC APPEARS HERE]
Smith Barney
Appreciation
Fund Inc.
---------------------
June 30, 1996
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney Appreciation Fund Inc.
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Smith Barney
Appreciation Fund for the period ended June 30, 1996. For your convenience, we
have summarized the Fund's investment strategy and discussed some of the Fund's
holdings in greater detail.
We believe that the sentiments expressed in our year-end letter our still
appropriate. We suggested then that a variety of factors -- overspeculation,
valuation and dividend yield considerations and an unsustainably giddy bond
market -- had left the U.S. stock market more vulnerable to negative rather than
positive surprises.
Indeed, the bond market had a miserable first half of 1996, as yields rose from
6% to 7%, with a corresponding drop in bond prices. The stock market was a very
different story. Speculation, aided by "bulletin boards" on the Internet and
huge inflows of money into so-called "aggressive" mutual funds become so intense
that the Federal Reserve Board hinted it might raise interest rates to help
dampen speculation. Instead of reacting negatively to the rise in interest rates
and slower earnings growth, the U.S. stock market continued its relentless
climb.
For the six month period ended June 30, 1996, the Smith Barney Appreciation Fund
had a total return of 8.07% for Class A shares. Because of a deliberate build-up
of cash reserves, the Fund trailed the Standard and Poor's 500 Index return of
10.09% for the same time period. (The Standard and Poor's 500 Index is a
capitalization weighted-index of 500 widely held common stocks.) This was an
attempt, albeit premature, to provide a cushion and buying reserve in a market
that, we believe, had taken on speculative overtones. Rather than declining as a
whole, however, the stock market experienced a series of intensely rapid
rotations from sector to sector. In our opinion, the proliferation of mutual
funds engaged in a short-term performance derby has led to a level of volatility
more akin to commodities than equity investments. Over the past seventeen years,
our investment style has been to buy and hold superior companies. In short, we
prefer to think of ourselves as marathoners in a stock market which, during the
first half of 1996, was more conducive to sprinters.
Fund's Investment Strategy
In a period where values are hard to find, we believe it is important to stick
with a core of the best companies in the world. Our strategy is to select
companies with dominant market positions, global franchises, seasoned and
respected management teams and excellent balance sheets. Because of their
1
<PAGE>
steadiness, these types of companies can be comforting during periods of market
excesses and their long-term, consistent growth in earnings has ultimately
translated into higher dividend and stock prices. Around this core of holdings,
we continued to look for special situations such as restructuring candidates or
undervalued cyclicals.
Since our last letter, the Smith Barney Appreciation Fund's top-ten holdings
have changed slightly. Because the Fund owned both Chase Manhattan Bank and
Chemical Bank prior to their merger, the new Chase Manhattan Bank is now one of
the Fund's key holdings. We anticipate that this merger of two large banks will
create considerable cost savings, synergies and leadership positions in their
key businesses. Moreover, we expect the return of excess capital to investors
through share repurchase plans and dividend increases. Another new addition to
the Fund's top-ten holdings is Allstate, a leading provider of auto and home
insurance. The company is moving aggressively to reduce exposure to "single
event" catastrophes and has announced plans to sell non-core assets and return
excess capital to shareholders. Lastly, during the period covered by the report,
pharmaceutical giants Merck and Johnson & Johnson have become two of the Fund's
top-ten holdings either through appreciation or minor additions to existing
positions.
Other solid performers for the Fund over the last six months include Eastman
Kodak and Xerox, as well as American Home Products, which continues to benefit
from merger savings. Many energy company stocks remain on our buy list as any
surprises in oil prices are likely, in our opinion, to be on the upside. On the
disappointing front, our substantial investment in AT&T has hurt the Fund's
performance recently, as competitive pressures in the long distance market have
worried many investors. However, we continue to believe AT&T's ongoing
restructuring, as well as its solid brand identification and financial clout,
make it as good a value as can be found in today's environment.
Market Outlook
In our view, the risks in the stock market have increased during the last six
months. In fact, stock market volatility has risen markedly in the last several
weeks. The generous gains enjoyed by many investors over the last eighteen
months has caused speculation to rise. Based on almost all traditional market
measurements, the valuation of stocks are at historical highs. Interest rates,
which provided a floor under equities throughout 1995 as they were falling, now
threaten to keep a ceiling on the appreciation potential of many stocks.
Fortunately, the U.S. economy continues to have positive momentum and should
stay strong enough to fulfill most corporate profit expectations.
2
<PAGE>
We believe the Smith Barney Appreciation Fund's portfolio is well-positioned for
current market conditions. In our view, the best protection for investors
against market volatility is to invest in great growth companies (as described
in the "Investment Strategy" section on page 1) and hold them for the long term.
We believe the best scenario for the market would be a prolonged sideways
movement that would cool speculative excesses without hurting new investors.
Obviously, the market will do its best to make it interesting.
Thank you for investing in the Smith Barney Appreciation Fund. We look forward
to continuing to help you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Harry D. Cohen
Heath B. McLendon Harry D. Cohen
Chairman and Vice President and
Chief Executive Officer Investment Officer
July 12, 1996
3
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
6/30/96 $11.90 $12.86 $0.00 $0.00 8.07%+
12/31/95 10.15 11.90 0.20 1.00 29.26
12/31/94 11.01 10.15 0.18 0.60 (0.77)
12/31/93 10.66 11.01 0.16 0.36 8.13
12/31/92 10.26 10.66 0.15 0.09 6.29
12/31/91 8.30 10.26 0.20 0.07 26.94
12/31/90 8.66 8.30 0.25 0.08 (0.27)
12/31/89 7.04 8.66 0.24 0.22 29.55
12/31/88 6.49 7.04 0.19 0.13 13.45
12/31/87 6.54 6.49 0.26 0.25 6.95
12/31/86 5.82 6.54 0.00 0.41 19.93
Total $1.83 $3.21
<CAPTION>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
6/30/96 $11.88 $12.79 $0.00 $0.00 7.66%+
12/31/95 10.14 11.88 0.11 1.00 28.29
12/31/94 11.00 10.14 0.10 0.60 (1.53)
12/31/93 10.65 11.00 0.08 0.36 7.38
Inception*-12/31/92 10.55 10.65 0.16 0.09 3.28+
Total $0.45 $2.05
<CAPTION>
- --------------------------------------------------------------------------------
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
6/30/96 $11.88 $12.79 $0.00 $0.00 7.66%+
12/31/95 10.14 11.88 0.11 1.00 28.29
12/31/94 11.00 10.14 0.11 0.60 (1.41)
Inception*-12/31/93 10.99 11.00 0.08 0.36 4.09+
Total $0.30 $1.96
</TABLE>
4
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Historical Performance--Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Inception*-6/30/96 $12.10 $12.88 $0.00 $0.00 6.45%+
<CAPTION>
- --------------------------------------------------------------------------------
Historical Performance--Class Z Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
- ------------ --------- --------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
6/30/96 $11.91 $12.89 $0.00 $0.00 8.23%+
12/31/95 10.16 11.91 0.23 1.00 29.52
12/31/94 11.02 10.16 0.22 0.60 (0.41)
12/31/93 10.66 11.02 0.18 0.36 8.47
Inception*-12/31/92 10.55 10.66 0.16 0.09 3.38+
----- -----
Total $0.79 $2.05
===== =====
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------------------
Class A Class B Class C Class Y Class Z
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Six Months Ended 6/30/96+ 8.07% 7.66% 7.66% N/A 8.23%
Year Ended 6/30/96 19.14 18.39 18.29 N/A 19.48
Five Years Ended 6/30/96 12.61 N/A N/A N/A N/A
Ten Years Ended 6/30/96 11.88 N/A N/A N/A N/A
Inception* through 6/30/96 11.91 11.92 10.79 6.45%+ 13.07
<CAPTION>
With Sales Charge(2)
-----------------------------------------------
Class A Class B Class C Class Y Class Z
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Six Months Ended 6/30/96+ 2.63% 2.66% 6.66% N/A 8.23%
Year Ended 6/30/96 13.15 13.39 17.29 N/A 19.48
Five Years Ended 6/30/96 11.45 N/A N/A N/A N/A
Ten Years Ended 6/30/96 11.30 N/A N/A N/A N/A
Inception* through 6/30/96 11.69 11.51 10.79 6.45%+ 13.07
</TABLE>
5
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-----------------------
Class A (6/30/86 through 6/30/96) 207.17%
Class B (Inception* through 6/30/96) 50.84
Class C (Inception* through 6/30/96) 41.74
Class Y (Inception* through 6/30/96) 6.45+
Class Z (Inception* through 6/30/96) 56.66
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class A shares or the applicable contingent
deferred sales charges ("CDSC") with respect to Class B and C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 5.00% and Class B shares reflect the
deduction of a 5.00% CDSC, which applies if shares are redeemed within one
year from initial purchase and declines thereafter by 1.00% per year until
no CDSC is incurred. Class C shares reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within the first year of purchase.
* The inception dates for Class A, B, C, Y and Z shares are March 10, 1970,
November 6, 1992, February 4, 1993, January 30, 1996 and November 6, 1992,
respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
6
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of
the Smith Barney Appreciation Fund Inc.
vs. Standard & Poor's 500 Index+
- --------------------------------------------------------------------------------
June 1986 -- June 1996
Smith Barney S&P 500
Appreciation Fund Inc. Index
6/86 $9,500.00 $10,000.00
12/86 $9,205.00 $ 9,821.00
12/87 $9,852.00 $10,337.00
12/88 $11,169.00 $12,049.00
12/89 $14,470.00 $15,861.00
12/90 $14,431.00 $15,368.00
12/91 $18,318.00 $20,041.00
12/92 $19,471.00 $21,567.00
12/93 $21,054.00 $23,735.00
12/94 $20,892.00 $24,047.00
12/95 $27,004.00 $33,072.00
6/96 $29,182.00 $36,409.00
+ Hypothetical illustration of $10,000 invested in Class A shares on June 30,
1986, assuming deduction of the maximum 5.00% sales charge at the time of
investment and reinvestment of dividends and capital gains, if any, at net
asset value through June 30, 1996. The Standard & Poor's 500 Index is an
index composed of widely held common stocks listed on the New York Stock
Exchange, American Stock Exchange and over-the-counter market. Figures for
the index include reinvestment of dividends. The index is unmanaged and it
is not subject to the same management and trading expenses as a mutual
fund. The performance of the Fund's other classes may be greater or less
than the Class A shares' performance indicated on this chart, depending on
whether greater or lesser sales charges and fees were incurred by
shareholders investing in other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
7
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Portfolio Highlights (unaudited) June 30, 1996
- --------------------------------------------------------------------------------
Portfolio Breakdown
Healthcare/Drugs/Hospital Supplies 9.2%
Diversified/Conglomerates 7.0%
Oil 9.6%
Insurance 5.1%
Publishing 4.2%
Consumer Products 5.0%
Banking 4.7%
Office Equipment & Supplies 3.5%
Chemicals 3.9%
Telephone/Communications 4.6%
Other Common Stocks 19.2%
Repurchase Agreements 13.0%
Electric Equipment 4.1%
Financial Services 3.8%
Beverages, Food, and Tobacco 3.1%
Top Ten Holdings
Percentage of
Total Investments
================================================================================
Eastman Kodak Co. 3.6%
American Telephone & Telegraph Corp. 2.7
Mobil Corp. 2.4
Allstate Corp. 2.4
Xerox Corp. 2.3
Minnesota Mining & Manufacturing Co. 2.0
Amoco Corp. 1.9
Merck and Company, Inc. 1.8
General Electric Co. 1.7
Johnson & Johnson 1.7
8
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 1996
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCKS -- 87.0%
Aerospace -- 2.7%
775,000 Allied Signal, Inc. $44,271,875
200,000 Boeing Co. 17,425,000
300,000 Lockheed Martin Corp. 25,200,000
86,896,875
Airlines -- 1.1%
400,000 AMR Corp.+ 36,400,000
Auto-Parts & Accessories -- 1.3%
650,000 Echlin, Inc. 24,618,750
350,000 Goodyear Tire & Rubber Co. 16,887,500
41,506,250
Automobiles -- 1.6%
300,000 Chrysler Corp. 18,600,000
650,000 General Motors Corp. 34,043,750
52,643,750
Banking -- 4.7%
750,000 Chase Manhattan Bank Corp. 52,968,750
200,000 Crestar Financial Corp. 10,675,000
250,000 First of America Bank Corp. 11,187,500
400,000 First Virginia Banks, Inc. 16,000,000
250,000 National City Corp. 8,781,250
350,000 Union Planters Corp. 10,631,250
175,000 Wells Fargo & Co. 41,803,125
152,046,875
Beverages, Food, and Tobacco -- 3.1%
100,000 Anheuser-Busch Companies, Inc. 7,500,000
300,000 Coca-Cola Co. 14,662,500
250,000 CPC International, Inc. 18,000,000
900,000 McDonalds Corp. 42,075,000
300,000 Nabisco Holdings Corp. 10,612,500
134,400 W.M. Wrigley Jr. Corp. 6,787,200
99,637,200
Broadcasting -- 0.8%
375,000 Scandinavian Broadcasting Systems+ 9,187,500
400,000 Viacom Inc., Non Voting Shares+ 15,550,000
24,737,500
See Notes to Financial Statements.
9
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Chemicals -- 3.9%
600,000 E.I. du Pont de Nemours & Co. $ 47,475,000
500,000 Hercules, Inc. 27,625,000
450,000 Olin Corp. 40,162,500
450,000 Wellman, Inc. 10,518,750
125,781,250
Computer Software & Services -- 0.5%
150,000 Microsoft Corp.+ 18,018,750
Consumer Products -- 5.0%
450,000 Corning, Inc. 17,268,750
475,000 Gillette Co. 29,628,125
200,000 International Flavors & Fragrances, Inc. 9,525,000
300,000 Mattel, Inc. 8,587,500
800,000 Newell Co. 24,500,000
550,000 Procter & Gamble Co. 49,843,750
550,000 Tyco International Ltd. 22,412,500
161,765,625
Diversified/Conglomerates -- 7.0%
1,500,000 Eastman Kodak Co. 116,625,000
650,000 Honeywell, Inc. 35,425,000
600,000 Horsham Corp. 8,325,000
300,000 Host Marriott Services Corp.+ 2,175,000
950,000 Minnesota Mining & Manufacturing Co. 65,550,000
228,100,000
Electrical Equipment -- 4.1%
1,075,000 AMP, Inc. 43,134,375
200,000 Emerson Electric Co. 18,075,000
650,000 General Electric Co. 56,225,000
900,000 Teradyne, Inc.+ 15,525,000
132,959,375
Entertainment & Leisure -- 1.6%
100,000 Dick Clark Productions, Inc.+ 1,425,000
550,000 Walt Disney Co. 34,581,250
180,000 Savoy Pictures Entertainment, Inc.+ 967,500
350,000 Time-Warner, Inc. 13,737,500
50,711,250
Environmental Control -- 1.5%
300,000 Browning Ferris Industries 8,700,000
See Notes to Financial Statements.
10
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Environmental Control -- 1.5% (continued)
1,200,000 WMX Technologies, Inc. $ 39,300,000
48,000,000
Financial Services -- 3.8%
1,000,000 American Express Co. 44,625,000
175,000 Enron Corp. 7,153,125
700,000 Federal National Mortgage Association 23,450,000
400,000 Great Western Financial, Inc. 9,550,000
500,000 Household International 38,000,000
122,778,125
Healthcare/Drugs/Hospital Supplies -- 9.2%
800,000 Abbott Laboratories, Inc. 34,800,000
800,000 American Home Products Corp. 48,100,000
125,000 Amgen, Inc.+ 6,750,000
500,000 Bristol-Myers-Squibb Co. 45,000,000
1,100,000 Johnson & Johnson 54,450,000
900,000 Merck and Company, Inc. 58,162,500
225,000 Unilever NV 32,653,125
350,000 Warner Lambert Co. 19,250,000
299,165,625
Insurance -- 5.1%
1,700,000 Allstate Corp. 77,562,500
250,000 American International Group, Inc. 24,656,250
600,000 Chubb Corp. 29,925,000
150,000 CNA Financial Corp.+ 15,450,000
800,000 Leucadia National Corp. 19,600,000
167,193,750
Machinery -- 1.4%
500,000 Kennametal, Inc. 17,000,000
1,000,000 Stanley Works 29,750,000
46,750,000
Metals -- 0.6%
300,000 Aluminum Co. of America 17,212,500
200,000 Santa Fe Pacific Gold Corp. 2,825,000
20,037,500
Office Equipment & Supplies -- 3.5%
400,000 International Business Machines Corp. 39,600,000
See Notes to Financial Statements.
11
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Office Equipment & Supplies -- 3.5% (continued)
1,425,000 Xerox Corp. $76,237,500
115,837,500
Oil-Domestic -- 3.1%
150,000 Atlantic Richfield Co. 17,775,000
700,000 Tenneco, Inc. 35,787,500
750,000 Union Pacific Resources Group, Inc. 20,062,500
800,000 Unocal Corp. 27,000,000
100,625,000
Oil-International -- 6.5%
250,000 Amerada Hess Corp. 13,406,250
875,000 Amoco Corp. 63,328,125
446,500 Chevron Corp. 26,343,500
700,000 Mobil Corp. 78,487,500
190,000 Royal Dutch Petroleum Co. ADR 29,212,500
210,777,875
Paper & Paper Products -- 0.7%
310,000 St. Joe Paper Co. 19,995,000
47,500 Temple-Inland, Inc. 2,220,625
22,215,625
Publishing -- 4.2%
500,000 Gannett Co. 35,375,000
400,000 Meredith Corp. 16,700,000
950,000 New York Times Company Class A Shares 30,993,750
500,000 R. R. Donnelley & Sons Co. 17,437,500
250,000 Scholastic Corp.+ 15,500,000
275,000 Tribune Co. 19,971,875
135,978,125
Real Estate -- 0.1%
150,000 Spieker Properties, Inc. 4,087,500
Retail -- 2.2%
550,000 J.C. Penney, Inc. 28,875,000
1,700,000 Wal-Mart Stores, Inc. 43,137,500
72,012,500
Technology -- 3.1%
425,000 Hewlett-Packard Co. 42,340,625
425,000 Intel Corp. 31,210,939
See Notes to Financial Statements.
12
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1996
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Technology -- 3.1% (continued)
400,000 Silicon Graphics Co.+ $ 9,600,000
150,000 Seagate Technology+ 6,750,000
250,000 Texas Instruments, Inc. 12,468,750
102,370,314
Telephone/Communications -- 4.6%
1,400,000 American Telephone & Telegraph Corp. 86,800,000
300,000 GTE Corp. 13,425,000
616,000 NYNEX Corp. 29,260,000
1,200,000 Tele-Communications Inc., Class A Shares+ 21,750,000
151,235,000
TOTAL COMMON STOCKS
(Cost -- $2,005,324,145) 2,830,269,139
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENTS -- 13.0%
$261,829,000 Goldman Sachs & Co., 5.375% due 7/01/96;
Proceeds at maturity -- $261,946,223; (Fully
collateralized by U.S. Treasury Notes, 6.875%
due 3/31/00; Market value -- $267,183,057) $ 261,829,000
161,040,000 Morgan Stanley Group, Inc., 5.320% due 7/01/96;
Proceeds at maturity -- $161,111,338; (Fully
collateralized by U.S. Treasury Notes, 9.250%
due 8/15/98; Market value -- $164,280,000) 161,040,000
TOTAL REPURCHASE AGREEMENTS
(Cost -- $422,869,000) 422,869,000
TOTAL INVESTMENTS -- 100%
(Cost -- $2,428,193,145*) $3,253,138,139
+ Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
13
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $2,005,324,145) $2,830,269,139
Repurchase agreements (Cost -- $422,869,000) 422,869,000
Cash 237
Receivable for securities sold 15,926,491
Receivable for Fund shares sold 2,182,009
Dividends and interest receivable 3,843,625
- --------------------------------------------------------------------------------
Total Assets 3,275,090,501
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 24,785,393
Investment advisory fees 1,180,356
Administration fees payable 428,368
Distribution fees payable 725,446
Accrued expenses 920,334
- --------------------------------------------------------------------------------
Total Liabilities 28,039,897
- --------------------------------------------------------------------------------
Total Net Assets $3,247,050,604
================================================================================
NET ASSETS:
Par value of capital shares 252,917
Capital paid in excess of par value 2,155,903,676
Undistributed net investment income 20,435,563
Accumulated net realized gain on security transactions 245,513,454
Net unrealized appreciation of investments 824,944,994
- --------------------------------------------------------------------------------
Total Net Assets $3,247,050,604
================================================================================
Shares Outstanding:
Class A 155,627,829
- --------------------------------------------------------------------------------
Class B 82,049,820
- --------------------------------------------------------------------------------
Class C 1,606,607
- --------------------------------------------------------------------------------
Class Y 2,541,640
- --------------------------------------------------------------------------------
Class Z 11,091,264
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $12.86
- --------------------------------------------------------------------------------
Class B* $12.79
- --------------------------------------------------------------------------------
Class C** $12.79
- --------------------------------------------------------------------------------
Class Y (and redemption price) $12.88
- --------------------------------------------------------------------------------
Class Z (and redemption price) $12.89
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 5.26% of net asset value per share) $13.54
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
14
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996
INVESTMENT INCOME:
Dividends $ 29,405,855
Interest 10,681,029
Less: Foreign withholding tax (230,789)
Total Investment Income 39,856,095
EXPENSES:
Distribution fees (Note 2) 7,672,678
Investment advisory fees (Note 2) 7,022,694
Administration fees (Note 2) 2,574,443
Shareholder and system servicing fees 1,556,712
Shareholder communications 261,000
Custody 75,603
Registration fees 52,356
Audit and legal 36,500
Directors' fees 25,000
Other 610,835
Total Expenses 19,887,821
Net Investment Income 19,968,274
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 959,867,581
Cost of securities sold 808,128,142
Net Realized Gain 151,739,439
Change in Net Unrealized Appreciation of Investments:
Beginning of period 754,211,115
End of period 824,944,994
Increase in Net Unrealized Appreciation 70,733,879
Net Gain on Investments 222,473,318
Increase in Net Assets From Operations $ 242,441,592
See Notes to Financial Statements.
15
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (unaudited)
and the Year Ended December 31, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 19,968,274 $ 41,762,727
Net realized gain 151,739,439 276,898,722
Increase in net unrealized appreciation 70,733,879 388,853,268
- --------------------------------------------------------------------------------
Increase In Net Assets From Operations 242,441,592 707,514,717
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (43,641,495)
Net realized gains -- (235,509,609)
- --------------------------------------------------------------------------------
Decrease In Net Assets From
Distributions To Shareholders -- (279,151,104)
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 207,344,907 306,829,899
Net asset value of shares issued
for reinvestment of dividends -- 269,686,363
Cost of shares reacquired (269,387,662) (495,067,915)
- --------------------------------------------------------------------------------
Increase (Decrease) In Net Assets From
Fund Share Transactions (62,042,755) 81,448,347
Increase In Net Assets 180,398,837 509,811,960
NET ASSETS:
Beginning of period 3,066,651,767 2,556,839,807
- --------------------------------------------------------------------------------
End of period* $3,247,050,604 $3,066,651,767
* Includes undistributed
net investment income of: $20,435,563 $467,289
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Appreciation Fund Inc. ("Fund"), a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets;
securities traded in the over-the-counter market and listed securities for which
no sales price are valued at bid price, or in the absence of a recent bid price,
at the bid equivalent obtained from one or more of the major market makers in
the securities; U.S. government and agency obligations are valued at the mean
between the closing bid and asked prices on each day; (c) securities maturing
within 60 days or less are valued at cost plus accreted discount, or minus
amortized premium, which approximates market value; (d) dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis; (e) dividends and distributions to shareholders are recorded on the
ex-dividend date; (f) gains or losses on the sale of securities are calculated
by using the specific identification method; (g) direct expenses are charged to
each class; management fees and general fund expenses are allocated on the basis
of relative net assets; (h) the accounting records are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (i) the Fund intends to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (j) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At December 31, 1995,
reclassifications are made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net
17
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
realized gains and net assets were not affected by this change; and (k)
estimates and assumptions are required to be made regarding assets, liabilities
and changes in net assets resulting from operations when financial statements
are prepared. Changes in the economic environment, financial markets and any
other parameters used in determining these estimates could cause actual results
to differ.
2. Management Agreement and Transactions with Affiliated Persons
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), acts as investment adviser of the Fund. The Fund
pays SBMFM an investment advisory fee calculated at the annual rate of 0.55% on
the Fund's average daily net assets up to $250 million; 0.513% on the next $250
million; 0.476% on the next $500 million; 0.439% on the next $1 billion; 0.402%
on the next $1 billion; and 0.365% on average daily net assets in excess of $3
billion. This fee is calculated daily and paid monthly.
SBMFM also serves as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% on the Fund's average daily net assets up
to $250 million; 0.187% on the next $250 million; 0.174% on the next $500
million; 0.161% on the next $1 billion; 0.148% on the next $1 billion and 0.135%
on the average daily net assets in excess of $3 billion. This fee is calculated
daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SBH, acts as distributor of
Fund shares and primary broker for its portfolio agency transactions. For the
six months ended June 30, 1996, SB received brokerage commissions of $386,742
and sales charges of approximately $1.0 million on sales of the Fund's Class A
shares.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B
shares, which applies if redemption occurs less than one year from initial
purchase and declines thereafter by 1.00% until no CDSC is incurred. Class C
shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. In addition, Class A shares, in certain instances, also have a
1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which
when combined with current holdings of Class A shares, equal or exceed $500,000
in the
18
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
aggregate. These purchases do not incur an initial sales charge. For the six
months ended June 30, 1996, CDSCs paid to SB were approximately:
Class A Class B Class C
- --------------------------------------------------------------------------------
CDSCs $2,000 $851,000 $3,000
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to its Class A, B and C shares calculated at the annual rate of 0.25% of the
average daily net assets of each respective class. In addition, the Fund also
pays a distribution fee with respect to Class B and C shares calculated at the
annual rate of 0.75% of the average daily net assets for each class. For the six
months ended June 30, 1996, total Distribution Plan fees were as follows:
Class A Class B Class C
- ------------------------------------------------------------------------------
Distribution Plan Fees $2,470,077 $5,112,332 $90,269
All officers and one Director of the Fund are employees of SB.
3. Investments
During the six months ended June 30, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Purchases $918,502,063
Sales 959,867,581
At June 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were approximately
as follows:
Gross unrealized appreciation $841,123,426
Gross unrealized depreciation (16,178,432)
- --------------------------------------------------------------------------------
Net unrealized appreciation $824,944,994
4. Repurchase Agreements
The Fund purchases (and its custodian take possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally,
19
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
the next business day) at an agreed-upon higher repurchase price. The Fund
requires continual maintenance of the market value of the collateral in amounts
at least equal to the repurchase price.
5. Capital Shares
At June 30, 1996, the Fund had two billion shares of capital stock
authorized with a par value of $0.001 per share. The Fund has the ability to
issue multiple classes of shares. Each share of a class represents an identical
interest and has the same rights except that each class bears expenses
specifically related to the distribution of its shares.
At June 30, 1996, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class C Class Y Class Z
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Paid-in
Capital $1,215,968,134 $772,123,501 $18,709,478 $32,065,415 $117,290,065
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
----------------------- -------------------------
Shares Amount Shares Amount
----------------------- -------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 5,230,627 $ 64,723,215 7,620,507 $ 89,452,092
Shares issued on
reinvestment -- -- 14,668,264 174,069,009
Shares redeemed (11,983,188) (149,320,417) (26,276,992) (300,583,374)
- ----------------------------------------------------------------------------------------
Net Decrease (6,752,561) $ (84,597,202) $ (3,988,221) $ (37,062,273)
Class B
Shares sold 7,660,237 $ 94,583,399 14,923,988 $ 177,804,234
Shares issued on
reinvestment -- -- 6,941,401 81,718,744
Shares redeemed (8,808,795) (109,255,426) (13,719,120) (161,328,324)
- ----------------------------------------------------------------------------------------
Net Increase (Decrease) (1,148,558) $ (14,672,027) 8,146,269 $ 98,194,654
Class C
Shares sold 524,199 $ 6,469,417 1,074,749 $ 12,534,789
Shares issued on
reinvestment -- -- 94,795 1,116,130
Shares redeemed (151,268) (1,879,803) (432,791) (4,957,997)
- ----------------------------------------------------------------------------------------
Net Increase 372,931 $ 4,589,614 736,753 $ 8,692,922
</TABLE>
20
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996* December 31, 1995**
------------------- --------------------
Shares Amount Shares Amount
------------------- --------------------
<S> <C> <C> <C> <C>
Class Y
Shares sold 2,541,640 $32,065,415 973,805 $ 12,162,013
Shares issued on
reinvestment -- -- 13,581 161,209
Shares redeemed -- -- (987,386) (12,189,962)
Net Increase 2,541,640 $32,065,415 -- $ 133,260
Class Z
Shares sold 770,179 $ 9,503,461 1,316,558 $ 14,876,771
Shares issued on
reinvestment -- -- 1,060,434 12,621,271
Shares redeemed (708,218) (8,932,016) (1,345,826) (16,008,258)
Net Increase 61,961 $ 571,445 1,031,166 $ 11,489,784
</TABLE>
* Transactions for Class Y shares are for the period from January 30, 1996 to
June 30, 1996.
** Transactions for Class Y shares are for the period from October 13, 1995 to
November 27, 1995.
21
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Shares 1996(1) 1995(2) 1994 1993(2) 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.90 $10.15 $11.01 $10.66 $10.26 $8.30
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.09 0.20 0.16 0.15 0.18 0.18
Net realized and unrealized gain (loss) 0.87 2.75 (0.24) 0.72 0.46 2.05
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.96 2.95 (0.08) 0.87 0.64 2.23
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions 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 Period $12.86 $11.90 $10.15 $11.01 $10.66 $10.26
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 8.07%++ 29.26% (0.77)% 8.13% 6.29% 26.94%
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $2,001,736 $1,932,573 $1,689,268 $1,579,248 $1,712,411 $1,752,884
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.03%+ 1.02% 1.02% 1.03% 0.88% 0.80%
Net investment income 1.49+ 1.71 1.61 1.35 1.58 2.20
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 57% 52% 52% 21% 19%
=============================================================================================================================
Average commissions per share
paid on equity transactions(3) $0.06 $0.06 -- -- -- --
=============================================================================================================================
Class B Shares 1996(1) 1995(2) 1994 1993(2) 1992(2)(4)
=============================================================================================================================
Net Asset Value, Beginning of Period $11.88 $10.14 $11.00 $10.65 $10.55
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.04 0.11 0.13 0.06 0.01
Net realized and unrealized gain (loss) 0.87 2.74 (0.29) 0.73 0.34
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.91 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 Period $12.79 $11.88 $10.14 $11.00 $10.65
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 7.66%++ 28.29% (1.53)% 7.38% 3.28%++
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,049,029 $988,069 $761,000 $1,285,966 $1,122,249
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.80%+ 1.77% 1.80% 1.83% 1.82%+
Net investment income 0.72+ 0.96 0.83 0.56 0.64+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 33% 57% 52% 52% 21%
- -----------------------------------------------------------------------------------------------------------------------------
Average commissions per share
paid on equity transactions(3) $0.06 $0.06 -- -- --
=============================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1996 (unaudited).
(2) 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.
(3) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(4) For the period from November 6, 1992 (inception date) to December 31, 1992.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
Class Y
Class C Shares Shares
----------------------------------------------------- --------
1996(1) 1995(2) 1994 1993(2)(3) 1996(4)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.88 $10.14 $11.00 $10.99 $12.10
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.05 0.11 0.10 0.07 0.11
Net realized and unrealized gain (loss) 0.86 2.74 (0.25) 0.38 0.67
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.91 2.85 (0.15) 0.45 0.78
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income -- (0.11) (0.11) (0.08) --
Net realized gains -- (1.00) (0.60) (0.36) --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions -- (1.11) (0.71) (0.44) --
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.79 $11.88 $10.14 $11.00 $12.88
- ----------------------------------------------------------------------------------------------------------------------
Total Return 7.66%++ 28.29% (1.41)% 4.09%++ 6.45%++
- ----------------------------------------------------------------------------------------------------------------------
Net Asset, End of Period (000s) $20,555 $14,653 $5,040 $2,214 $32,729
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.69%+ 1.77% 1.66% 1.68%+ 0.74%+
Net investment income 0.84+ 0.96 0.98 0.71+ 1.79+
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 33% 57% 52% 52% 0.33%
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(5) $0.06 $0.06 -- -- $0.06
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1996 (unaudited).
(2) 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.
(3) For the period from November 6, 1992 (inception date) to December
31, 1992.
(4) For the period from January 30, 1996 (inception date) to June 30,
1996 (unaudited).
(5) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
++ Total return is not annualized, as it may not be representative
of the total return for the year.
+ Annualized.
23
<PAGE>
Smith Barney Appreciation Fund Inc.
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
CLASS Z SHARES 1996(1) 1995(2) 1994 1993(2) 1992(3)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.91 $10.16 $11.02 $10.66 $10.55
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income 0.11 0.23 0.20 0.19 0.03
Net realized and unrealized gain (loss) 0.87 2.75 (0.24) 0.71 0.33
- ----------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.98 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 PERIOD $12.89 $11.91 $10.16 $11.02 $10.66
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 8.23%++ 29.52% (0.41)% 8.47% 3.38%++
- ----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $143,002 $131,357 $101,532 $157,876 $151,427
- ----------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.68%+ 0.77% 0.64% 0.66% 0.80%+
Net investment income 1.84+ 1.96 1.99 1.73 1.66+
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 33% 57% 52% 52% 21%
- ----------------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS(4) $0.06 $0.06 -- -- --
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended June 30, 1996 (unaudited).
(2) 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.
(3) For the period from November 6, 1992 (inception date) to December
31, 1992.
(4) As of October 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per shares.
++ Total return is not annualized, as it may not be representative
of the total return for the year.
+ Annualized.
24
<PAGE>
Smith Barney
Appreciation
Fund Inc.
Directors
Herbert Barg
Alfred Bianchetti
Martin Brody
Dwight Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen Kaufman
Joseph McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Harry D. Cohen
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
SmithBarney
-----------
A Member of TravelersGroup[LOGO]
Investment Manager
Smith Barney Mutual Funds
Management Inc.
Distributors
Smith Barney Inc.
PFS Distributors Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the
general information of the
shareholders of Smith Barney
Appreciation Fund Inc. It is not
authorized for distribution to
prospective investors unless
accompanied or preceded by an
effective Prospectus for the
Fund, which contains information
concerning the Fund's investment
policies and expenses as well as
other pertinent information.
Smith Barney
Appreciation Fund Inc.
388 Greenwich Street
New York, New York 10013
FD01154 8/96
