SMITH BARNEY APPRECIATION FUND INC.
Supplement Dated June 19, 1998 to
Prospectus Dated April 30, 1998
The following information supplements the information in the Prospectus
under "Investment Objectives and Management Policies"
Options on Securities. The Fund may write (sell) covered put and call
options on securities ("Options") and purchase put and call Options
that are traded on foreign or U.S. securities exchanges and over the
counter. The Fund will write such Options for the purpose of increasing
its return and/or protecting the value of its portfolio. In particular,
where the Fund writes an Option that expires unexercised or is closed
out by the Fund at a profit, it will retain the premium paid for the
Option, which will increase its gross income and will offset in part the
reduced value of a portfolio security in connection with which the
Option may have been written or the increased cost of portfolio
securities to be acquired. However, the writing of Options constitutes
only a partial hedge, up to the amount of the premium, less any
transaction costs. In contrast, if the price of the security underlying
the Option moves adversely to the Fund's position, the Option may be
exercised and the Fund will be required to purchase or sell the security
at a disadvantageous price, resulting in losses that may only be
partially offset by the amount of the premium. The Fund may also write
combinations of put and call Options on the same security, known as
"straddles." Such transactions generate additional premium income but
also present increased risk.
The Fund may purchase put and call Options in anticipation of
declines in the value of portfolio securities or increases in the value
of securities to be acquired. In the event that the expected changes
occur, the Fund may be able to offset the resulting adverse effect on
its portfolio, in whole or in part, through the Options purchased. The
risk assumed by the Fund in connection with such transactions is limited
to the amount of the premium and related transaction costs associated
with the Option, although the Fund may be required to forfeit such
amounts in the event that the prices of securities underlying the
Options do not move in the direction or to the extent anticipated. The
Fund can invest up to 5% of its total assets in put and call options on
securities.
FD
