<PAGE>
[GRAPHIC]
Congratulations
Hersh Cohen on Your
20th Anniversary
of Managing the Appreciation Fund!
Smith Barney
[GRAPHIC] Appreciation
Fund Inc.
------------------
SEMI-ANNUAL REPORT
------------------
June 30, 1999
[SB] Smith Barney
[MF] Mutual Funds
<PAGE>
Smith Barney
Appreciation Fund Inc.
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- --------------------------------------------------------------------------------
The Smith Barney Appreciation Fund seeks long-term capital appreciation
primarily through investment in equity securities.
Smith Barney Appreciation Fund Inc.
Average Annual Total Returns
June 30, 1999
Without Sales Charges(1)
---------------------------------------
Class A Class B Class L
================================================================================
Six Months+ 10.93% 10.50% 10.50%
- --------------------------------------------------------------------------------
One-Year 18.41 17.50 17.50
- --------------------------------------------------------------------------------
Five-Year 21.37 20.43 20.47
- --------------------------------------------------------------------------------
Ten-Year 15.51 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 12.99 16.38 15.94
================================================================================
With Sales Charges(2)
---------------------------------------
Class A Class B Class L
================================================================================
Six Months+ 5.35% 5.50% 8.43%
- --------------------------------------------------------------------------------
One-Year 12.51 12.50 15.29
- --------------------------------------------------------------------------------
Five-Year 20.13 20.33 20.22
- --------------------------------------------------------------------------------
Ten-Year 14.91 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 12.80 16.38 15.76
================================================================================
(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 and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 5.00% and 1.00%, respectively;
and Class B shares reflect the deduction of a 5.00% CDSC, which applies if
shares are redeemed within one year from initial purchase. Thereafter,
this CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
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.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are March 10, 1970, November
6, 1992 and February 4, 1993, respectively.
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MARKET HIGHLIGHT
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The events of the last six months have presented many portfolio managers with a
significant dilemma: to continue to buy a select group of expensive growth
stocks at record valuations hoping that their prices will go even higher, or buy
attractively valued, solid but unexciting businesses, whose stock prices
continue to lag, hoping that the market will eventually realize their value. The
Appreciation Fund has walked a fine line in trying to attain our oft-stated goal
of allowing investors to participate in potential upside appreciation while also
trying to protect assets in times of market declines.
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NASDAQ SYMBOL
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Class A SHAPX
Class B SAPBX
Class L SAPCX
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WHAT'S INSIDE
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Shareholder Letter........................................................... 1
Historical Performance....................................................... 5
Schedule of Investments...................................................... 10
Statement of Assets and Liabilities.......................................... 15
Statement of Operations...................................................... 16
Statements of Changes in Net Assets.......................................... 17
Notes to Financial Statements................................................ 18
Financial Highlights......................................................... 23
<PAGE>
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Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
HEATH B. HARRY "HERSH"
MCLENDON D. COHEN
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to present the semi-annual report for the Smith Barney
Appreciation Fund for the period ended June 30, 1999. We hope you find this
report to be useful and informative. For your convenience, we have summarized
the Fund's investment strategy during this time and discussed some of the Fund's
holdings in greater detail. A more comprehensive summary of performance and
current holdings can be found in the appropriate sections that follow.
Celebrating 20 Years of the Fund's Strong Track Record in Volatile Markets!
In January 1999, Portfolio Manager Hersh Cohen celebrated his 20th anniversary
managing the Appreciation Fund. In fact, the Fund has only been down twice in
the last ten years -- in 1990 by 0.27% and in 1994 by 0.77%. Over the years, the
Appreciation Fund has grown to serve more than 293,714 shareholders and has over
$5.4 billion in net assets under management as of June 30, 1999.
Please note that investing in equities may also involve additional risks.
Investors could lose money in the Fund, or the Fund may not perform as well as
other investments if: the U.S. stock market declines; large and medium
capitalization stocks or growth stocks are temporarily out of favor; an adverse
event depresses the value of a company's stocks; or the manager's judgment about
the attractiveness, value or potential appreciation of a particular stock or
about the amount to hold in cash reserves proves to be incorrect.
A Classic Investor Series Fund
The Appreciation Fund is part of the Classic Investor Series of Smith Barney
Mutual Funds. The Classic Investor Series funds are mutual funds whose
investment decisions are determined by experienced portfolio managers, based on
each fund's investment objectives and guidelines. Funds in the Smith Barney
Classic Investor Series invest across asset classes and sectors, utilizing a
range of strategies in order to help achieve their objectives.
Performance Update
For the six-months ended June 30, 1999, the Fund's Class A shares returned
10.93% without sales charges and 5.35% with sales charges versus the S&P 500's
total return of 12.38% over the same period. (Past performance is not indicative
of future results. The S&P 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. The index is unmanaged and is not subject to the same
management and trading expenses as a mutual fund. Investors may not invest
directly in an index.) Additional performance information about the Fund's other
share classes can be found on pages five through seven.
Market Commentary
Entering April, the stock market was in a precarious position. Despite a pretty
good move in the popular averages through March, the vast majority of stocks
were actually declining. In the past, markets that had been led higher by
increasingly narrow leadership tended to have serious declines. With most stocks
languishing because of a lack of buying interest, it
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 1
<PAGE>
seemed only a matter of time until the pressure from rising interest rates took
its toll on the handful of stocks that had been enjoying speculative bulges.
But in the first week of April, the market began a month of unprecedented
behavior. Instead of the whole market declining, it turned topsy-turvy. The
former leaders did indeed begin a declining phase, but the hundreds of stocks
that had been out of favor for years, particularly cyclical companies (i.e.,
companies whose fortunes are tied closely to the overall economy) almost
miraculously began to rise. For most of April, the former laggards had their own
bull market.
Finally, in May and June, as interest rates continued to rise, the overall
market began to retreat. The big growth stocks that had been leaders for so
long, but faltered in April, have had some sporadic rallies, but generally
remain well below highs made earlier in the year. The cyclical stocks, having
gotten pricey during their April surge, have also retreated.
The events of the last six months have presented many portfolio managers with a
significant dilemma: to continue to buy a select group of expensive growth
stocks at record valuations hoping that their prices will go even higher, or to
buy attractively valued, solid but unexciting businesses, whose stock prices
continue to lag, hoping that the market will eventually realize their value. The
Appreciation Fund has walked a fine line in trying to attain our oft-stated goal
of allowing investors to participate in potential upside appreciation while also
trying to protect assets in times of market declines.
We have a good mixture of great growth companies bought at much lower levels,
and stocks with solid values that we hope will be recognized as they began to be
in April. There were several changes to the Fund's portfolio during the six
months under review. After they had a strong run early in the year we trimmed
pharmaceutical stocks such as Johnson & Johnson and Pfizer as valuations and
expectations reached frenzied levels. After a significant sell-off this sector
has come back down to more realistic levels, and we have repurchased some shares
sold at higher prices.
In addition, financial holdings such as Chase Manhattan Bank and Associates
First Capital were eliminated due to concerns over revenue growth and rising
interest rates. Proceeds were used to increase our weighting in the
telecommunications sector where companies such as GTE, Bell Atlantic and
Ameritech offer solid growth prospects at a significant discount to market
valuation levels. In addition, we also materially increased our position in AT&T
where new management is aggressively restructuring to accelerate growth.
Earlier this year holdings were increased in the energy sector, particularly
Royal Dutch and Texaco, where depressed oil prices offered an opportunity to buy
rapidly improving companies with good dividend yields at modest prices. In the
volatile technology sector, Texas Instruments, IBM and Lucent Technologies were
significant contributors to overall performance. Other stocks that posted strong
results over the last six months include CBS, Tyco International and Viacom.
Allstate continued to drag on performance, yet we believe the company's
fundamentals are excellent, and it remains a good opportunity. America Online, a
company we purchased in small quantities last summer during the market's
turmoil, grew through price appreciation to where it had become the second
largest position in the Fund. Despite the great promise of Internet stocks,
earnings are still elusive, so we cut the position in half during the mania of
late winter. We will hold a modest position in AOL for its prospects, but
earnings and the valuations that investors put on those earnings still carry a
lot of weight in our decisions to buy, hold or sell stocks.
- --------------------------------------------------------------------------------
2 1999 Semi-Annual Report to Shareholders
<PAGE>
As the third quarter of 1999 begins, it is worth reviewing the current status of
the three factors that determine stock prices: earnings, interest rates and
psychology. The continued strength in the domestic economy probably has had a
positive effect on corporate earnings for the second quarter. Additionally, the
Asian economies, which are potential sources of demand for U.S. products, have
begun to slowly improve. U.S. consumers continue to take on additional debt to
make purchases, a sign of tremendous confidence, but also a trend that probably
is dependent on a continued bull market. Virtually all of the earnings increases
will be coming from either higher volume, or cost-cutting, because pricing power
for corporations remains practically non-existent. In addition to competition
from abroad, as well as worldwide overcapacity in many industries, the soaring
impact of the Internet on commerce is being felt by many companies.
One of the most striking effects of the Internet is its powerful deflationary
force. Price-cutting is rampant. Direct sales are eliminating a whole layer of
intermediaries with the attendant cuts in prices. Current earnings are coming in
well for many companies, but because of the unintended consequences of Internet
commerce, the future is likely to hold as many unpleasant effects on some
corporations as it will opportunities for others.
The depressing effect on prices of the Internet, combined with excess capacity
for many industries, leads into a discussion of interest rates. The rise in
long-term interest rates from 4.75% in October to 6.15% in June is somewhat
mystifying. We expected a rebound from distress levels after the Russian default
and accompanying hedge fund fiasco, but the rise from 5 1/2% and up seems
excessive. Simply put, deflationary forces in the world are still stronger than
inflationary ones. Despite a rise in short-term rates designed to take some
excess steam out of the economy, long-term interest rates should recede.
Normally that would be a plus for stocks but, with price-earnings ratios already
at record high levels, it would take a massive rate decline to have a positive
impact on stock prices.
Psychology, the third factor behind stock prices, remains a problem. Complacency
is rampant. There never has been such widespread belief in the stock market's
ability to keep rising at unrealistic rates. The bull market psychology has
taken stocks to valuation levels that seem dangerous, unless one accepts a new
paradigm. Obviously, many investors have bought into that concept. Margin debt
has soared, as speculators, flush with success over the past few years, add to
holdings with cheap borrowed money. Additionally, mutual fund managers have a
fear that has not been seen before -- not a fear of stocks going down, but
rather a fear of selling stocks, lest they go higher.
In summary, little has changed. Stocks are expensive, and interest rates are
high. Good earnings could keep things afloat, but the closest things to bargains
are companies that nobody seems to want, except for the brief flurry in April.
We remain cautious unless we can make a better case for the valuations people
are willing to pay. Now that the Federal Reserve Board has conformed to
widespread expectations and raised short-term interest rates by a quarter point,
further complacency is likely, and it would not be surprising to see stocks
become even more speculative in the months ahead.
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Smith Barney Appreciation Fund Inc. 3
<PAGE>
Thank you for investing in the Smith Barney Appreciation Fund. We look forward
to continuing to help you pursue your financial goals in the new century ahead.
Sincerely,
/s/ Heath B. McLendon /s/ Harry Cohen
Heath B. McLendon Harry "Hersh" D. Cohen
Chairman Vice President and
Investment Officer
July 6, 1999
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Top Ten Holdings* As of June 30, 1999
- --------------------------------------------------------------------------------
1. Berkshire Hathaway Inc. Class A shares 4.4%
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2. General Electric Co. 2.9
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3. American Telephone & Telegraph Corp. 2.1
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4. Microsoft Corp. 2.1
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5. Tyco International Ltd. 2.0
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6. International Business Machines Corp. 1.8
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7. Allstate Corp. 1.8
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8. Bristol-Myers & Squibb Co. 1.7
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9. Bank of New York Co., Inc. 1.7
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10. Mobil Corp. 1.6
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* As a percentage of common stocks.
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
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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>
6/30/99 $15.31 $16.51 $0.00 $0.46 10.93%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/98 13.92 15.31 0.18 1.23 20.45
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.85 13.92 0.20 2.09 26.29
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/96 11.90 12.85 0.19 1.14 19.25
- ------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
Total $1.95 $7.34
====================================================================================================================================
</TABLE>
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Historical Performance -- Class B 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>
6/30/99 $15.26 $16.39 $0.00 $0.46 10.50%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/98 13.88 15.26 0.06 1.23 19.52
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.81 13.88 0.06 2.09 25.31
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/96 11.88 12.81 0.09 1.14 18.29
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.66 $6.97
====================================================================================================================================
</TABLE>
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Smith Barney Appreciation Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L 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>
6/30/99 $15.26 $16.39 $0.00 $0.46 10.50%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/30/98 13.88 15.26 0.06 1.23 19.52
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.81 13.88 0.06 2.09 25.31
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/96 11.88 12.81 0.10 1.14 18.34
- ------------------------------------------------------------------------------------------------------------------------------------
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 $0.52 $6.88
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
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>
6/30/99 $15.28 $16.50 $0.00 $0.46 11.08%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/98 13.93 15.28 0.29 1.23 20.93
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.86 13.93 0.25 2.09 26.70
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/96 12.10 12.86 0.22 1.14 17.65+
====================================================================================================================================
Total $0.76 $4.92
====================================================================================================================================
</TABLE>
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Historical Performance -- Class Z 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>
6/30/99 $15.29 $16.52 $0.00 $0.46 11.14%+
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/98 13.94 15.29 0.29 1.23 20.91
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/97 12.87 13.94 0.26 2.09 26.72
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/96 11.91 12.87 0.23 1.14 19.66
- ------------------------------------------------------------------------------------------------------------------------------------
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 $1.57 $6.97
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
6 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
-----------------------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 6/30/99+ 10.93% 10.50% 10.50% 11.08% 11.14%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 6/30/99 18.41 17.50 17.50 18.83 18.81
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 6/30/99 21.37 20.43 20.47 N/A 21.79
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 6/30/99 15.51 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 6/30/99 12.99 16.38 15.94 22.53 17.65
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges(2)
-----------------------------------------------------------------------------------
Class A Class B Class L Class Y Class Z
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 6/30/99+ 5.35% 5.50% 8.43% 11.08% 11.14%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 6/30/99 12.51 12.50 15.29 18.83 18.81
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 6/30/99 20.13 20.33 20.22 N/A 21.79
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 6/30/99 14.91 N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 6/30/99 12.80 16.38 15.76 22.53 17.65
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (6/30/89 through 6/30/99) 322.84%
- --------------------------------------------------------------------------------
Class A (Inception* through 6/30/99) 3,497.62
- --------------------------------------------------------------------------------
Class B (Inception* through 6/30/99) 174.26
- --------------------------------------------------------------------------------
Class L (Inception* through 6/30/99) 157.84
- --------------------------------------------------------------------------------
Class Y (Inception* through 6/30/99) 100.23
- --------------------------------------------------------------------------------
Class Z (Inception* through 6/30/99) 194.74
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and Class L shares reflect
the deduction of the maximum initial sales charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class L shares
also reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* The inception dates for Class A, B, L, Y and Z shares are March 10, 1970,
November 6, 1992, February 4, 1993, January 30, 1996 and November 6, 1992,
respectively.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 7
<PAGE>
Smith Barney
Appreciation Fund Inc.
Growth of $10,000 invested in Class A Shares of the Smith Barney Appreciation
Fund Inc. vs. the Standard & Poor's 500 Stock Index*
March 10, 1970 - June 30, 1999
Smith Barney Appreciation Fund Inc.
S&P 500 Index
January 1979: Hersh Cohen becomes the Portfolio Manager [PHOTO]
of the Smith Barney Appreciation Fund Inc.
[GRAPH]
Smith Barney
Appreciation S&P 500
Date Fund Inc. Index
3/10/70 9,503 10,000
1970 War in Cambodia escalates 10,995 10,629
1971 Freeze on wages and prices 12,840 12,148
NASDAQ introduced
1972 Watergate break-in 12,722 14,457
Nixon visits China
1973 OPEC oil embargo 9,164 12,333
1974 Nixon resigns as President 6,902 9,069
1975 U.S. involvement in Vietnam ends 8,196 12,445
1976 Bicentennial celebration 9,875 15,423
1977 U.S. energy crisis 9,519 14,320
1978 Genocide in Cambodia 11,577 15,261
Camp David accords
1979 Three Mile Island disaster 16,786 18,098
Iran hostage crisis begins
1980 Reagan elected President in landslide 22,781 23,980
1981 Assassination attempts on Reagan 23,207 22,800
and Pope. First space shuttle launch
1982 Worst U.S. recession in 40 years 28,710 27,712
1983 Beirut bombing 35,309 33,964
* Hypothetical illustration of $10,000 invested in Class A shares on March
10, 1970, 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, 1999. The Standard & Poor's 500 Stock
Index ("S&P 500") 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 is not subject to the same
management and trading expenses as a mutual fund. The performance of the
Portfolio's other classes may be greater or less than the Class A shares'
performance
- --------------------------------------------------------------------------------
8 1999 Semi-Annual Report to Shareholders
<PAGE>
For more than twenty-five years and through all market cycles, the Smith Barney
Appreciation Fund has delivered consistent long-term growth.
- --------------------------------------------------------------------------------
Average Annual Total Return of
the Smith Barney Appreciation Fund vs.
the S&P 500 Since Cohen Became Manager
(Since January 31, 1979)
SB Appreciation Fund
(Class A Shares) S&P 500
17.82%** 17.78%
- --------------------------------------------------------------------------------
[GRAPH]
Smith Barney
Appreciation S&P 500
Date Fund Inc. Index
1984 Iran/Iraq conflict 35,957 36,095
1985 U.S. becomes debtor nation 48,332 47,544
Gramm-Rudman Act
1986 Tax reform 57,915 56,420
Bombing of Libya
1987 Market correction 61,986 59,383
1988 RJR Nabisco buyout 70,270 69,220
1989 Collapse of high-yield bond market 91,035 91,117
Berlin Wall falls
1990 Iraq invasion of Kuwait 90,792 88,288
1991 U.S. recession 115,250 115,131
1992 Riots in Los Angeles 122,499 116,376
1993 World Trade Center terrorist bombing 132,462 128,073
Passage of NAFTA
1994 Orange County bankruptcy 131,442 129,758
1995 Dow rises above 4000, then 5000 169,895 178,460
1996 Dow rises above 6500 202,602 219,414
1997 Dow rises above 7000 255,872 292,610
1998 Hersh Cohen celebrates 20 years as 308,191 376,702
the Portfolio Manager of the
Appreciation Fund
1999 341,864 423,338
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.
** Please note that this figure assumes reinvestment of all dividends and
capital gains distributions at net asset value and does not reflect
deduction of the applicable sales charge with respect to Class A shares,
which would have reduced the Fund's performance.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 83.4%
Aerospace -- 0.3%
200,000 Lockheed Martin Corp.+ $ 7,450,000
100,000 Raytheon Co., Class A Shares 6,887,500
- --------------------------------------------------------------------------------
14,337,500
- --------------------------------------------------------------------------------
Airlines -- 0.6%
400,000 Alaska Air Group, Inc.* 16,700,000
300,000 AMR Corp.*+ 20,475,000
- --------------------------------------------------------------------------------
37,175,000
- --------------------------------------------------------------------------------
Auto Parts & Accessories -- 0.6%
489,251 Delphi Automotive Systems Corp. 9,081,722
400,000 Goodyear Tire & Rubber Co.+ 23,525,000
- --------------------------------------------------------------------------------
32,606,722
- --------------------------------------------------------------------------------
Automobile -- 1.7%
187,050 DaimlerChrysler A.G.*+ 16,624,069
500,000 Ford Motor Co. 28,218,750
700,000 General Motors Corp. 46,200,000
- --------------------------------------------------------------------------------
91,042,819
- --------------------------------------------------------------------------------
Banking -- 2.6%
2,100,000 Bank of New York Co., Inc. 77,043,750
200,000 First Virginia Banks, Inc.+ 9,825,000
300,000 National City Corp. 19,650,000
900,000 Wells Fargo & Co. 38,475,000
- --------------------------------------------------------------------------------
144,993,750
- --------------------------------------------------------------------------------
Beverage, Food & Tobacco -- 4.1%
300,000 BestFoods 14,850,000
200,000 Hershey Foods Corp.+ 11,875,000
700,000 H.J. Heinz Co. 35,087,500
1,400,000 McDonald's Corp. 57,837,500
900,000 PepsiCo Inc. 34,818,750
1,300,000 Ralston-Purina Group 39,568,750
325,000 Wm. Wrigley Jr., Co.+ 29,250,000
- --------------------------------------------------------------------------------
223,287,500
- --------------------------------------------------------------------------------
Broadcasting -- 2.6%
1,400,000 CBS Corp.* 60,812,500
600,000 Infinity Broadcasting Corp., Class A Shares*+ 17,850,000
895,000 Scandinavian Broadcasting Systems SA*+ 28,863,750
900,000 USA Networks Inc.* 36,112,500
- --------------------------------------------------------------------------------
143,638,750
- --------------------------------------------------------------------------------
Chemicals -- 2.0%
550,000 Air Products and Chemicals, Inc. 22,137,500
100,000 Chemfab Corp.* 1,818,750
150,000 Dow Chemical Corp.+ 19,031,250
500,000 E.I. du Pont de Nemours & Co. 34,156,250
550,000 Hercules Inc. 21,621,875
800,000 RPM Inc.+ 11,350,000
- --------------------------------------------------------------------------------
110,115,625
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Products -- 3.8%
900,000 Eastman Kodak Co. $ 60,975,000
600,000 Gillette Co. 24,600,000
1,200,000 Kimberly-Clark Corp. 68,400,000
300,000 Mattel Inc. 7,931,250
400,000 Newell Co. 18,600,000
300,000 Procter & Gamble Co.+ 26,775,000
- --------------------------------------------------------------------------------
207,281,250
- --------------------------------------------------------------------------------
Consumer Services -- 0.4%
1,000,000 Cendant Corp.* 20,500,000
- --------------------------------------------------------------------------------
Diversified/Conglomerate -- 10.8%
800,000 AlliedSignal Inc.+ 50,400,000
2,925 Berkshire Hathaway Inc., Class A Shares* 201,532,500
15 Berkshire Hathaway Inc., Class B Shares* 33,600
1,000,000 Canadian Pacific Ltd. 23,812,500
1,200,000 General Electric Co. 133,350,000
640,000 Host Marriott Services Corp.* 5,200,000
500,000 Minnesota Mining & Manufacturing Co. 43,468,750
750,000 PPG Industries, Inc. 44,296,875
950,000 Tyco International Ltd. 90,012,500
- --------------------------------------------------------------------------------
592,106,725
- --------------------------------------------------------------------------------
Electrical Equipment -- 1.5%
600,000 Emerson Electric Co. 37,725,000
400,000 Johnson Controls, Inc. 27,725,000
700,000 SLI, Inc.* 18,900,000
- --------------------------------------------------------------------------------
84,350,000
- --------------------------------------------------------------------------------
Entertainment & Leisure -- 2.0%
110,250 Dick Clark Productions, Inc.* 1,591,734
200,000 MediaOne Group Inc.* 14,875,000
450,000 Time-Warner, Inc. 33,075,000
400,000 Viacom Inc., Class B Shares* 17,600,000
1,300,000 Walt Disney Co. 40,056,250
- --------------------------------------------------------------------------------
107,197,984
- --------------------------------------------------------------------------------
Financial Services -- 4.4%
200,000 American Express Co. 26,025,000
100,000 Chapman Holdings Inc.*+ 625,000
1,000,000 Fannie Mae 68,375,000
30,500 Goldman Sachs Group, Inc.+ 2,203,625
450,000 H & R Block Inc. 22,500,000
1,200,000 Household International Inc. 56,850,000
450,000 Merrill Lynch & Co. 35,971,875
800,000 Washington Mutual, Inc.+ 28,300,000
- --------------------------------------------------------------------------------
240,850,500
- --------------------------------------------------------------------------------
Health Care/Drugs/Hospital Supplies -- 9.8%
1,600,000 Abbott Labs., Inc.+ 72,800,000
750,000 American Home Products Corp. 43,125,000
500,000 Amgen Inc.* 30,437,500
300,000 Becton, Dickinson and Co. 9,000,000
1,100,000 Bristol-Myers & Squibb Co. 77,481,250
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Health Care/Drugs/Hospital Supplies -- 9.8% (continued)
1,000,000 Chiron Corp* $ 20,750,000
600,000 Eli Lilly & Co. 42,975,000
500,000 Johnson & Johnson 49,000,000
900,000 Merck and Co., Inc.+ 66,600,000
750,000 Mettler-Toledo International Inc.* 18,609,375
650,000 Pfizer, Inc. 71,337,500
500,000 Warner-Lambert Co. 34,687,500
- --------------------------------------------------------------------------------
536,803,125
- --------------------------------------------------------------------------------
Home Building -- 0.2%
350,000 Del Webb Corp. 8,356,250
- --------------------------------------------------------------------------------
Insurance -- 4.1%
2,300,000 Allstate Corp. 82,512,500
625,000 American International Group, Inc.+ 73,164,063
50,000 Chubb Corp.+ 52,125,000
395,000 CNA Financial Corp.* 15,923,437
- --------------------------------------------------------------------------------
223,725,000
- --------------------------------------------------------------------------------
Manufacturing/Building Materials -- 1.2%
100,000 Barnes Group Inc. 2,175,000
979,000 Dal-Tile International Inc.* 11,136,125
200,000 Leggett & Platt, Inc. 5,562,500
825,000 Masco Corp. 23,821,875
500,000 Parker-Hannifin Corp. 22,875,000
- --------------------------------------------------------------------------------
65,570,500
- --------------------------------------------------------------------------------
Office Equipment & Supplies -- 1.1%
1,050,000 Xerox Corp.+ 62,015,625
- --------------------------------------------------------------------------------
Oil & Gas/Service/Drilling -- 1.5%
200,000 Halliburton Co. 9,050,000
500,000 Nabors Industries, Inc.* 12,218,750
700,000 Schlumberger Ltd.+ 44,581,250
500,000 Tidewater Inc. 15,250,000
- --------------------------------------------------------------------------------
81,100,000
- --------------------------------------------------------------------------------
Oil - International -- 4.2%
150,000 British Petroleum Amoco PLC+ 16,275,000
600,000 Exxon Corp. 46,275,000
750,000 Mobil Corp. 74,250,000
1,100,000 Royal Dutch Petroleum Co., ADR 66,275,000
450,000 Texaco Inc.+ 28,125,000
- --------------------------------------------------------------------------------
231,200,000
- --------------------------------------------------------------------------------
Publishing -- 1.7%
700,000 Gannett Co. 49,962,500
1,200,000 Meredith Corp. 41,550,000
- --------------------------------------------------------------------------------
91,512,500
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Real Estate -- 0.5%
131,300 Forest City Enterprises, Inc. $ 3,676,400
930,000 The St. Joe Corp.+ 25,110,000
- --------------------------------------------------------------------------------
28,786,400
- --------------------------------------------------------------------------------
Retail -- 3.5%
275,000 Hannaford Bros. Co. 14,712,500
300,000 The Gap, Inc. 15,112,500
900,000 The Home Depot, Inc.+ 57,993,750
700,000 The Kroger Co. 19,556,250
450,000 Safeway Inc.* 22,275,000
1,300,000 Wal-Mart Stores, Inc. 62,725,000
- --------------------------------------------------------------------------------
192,375,000
- --------------------------------------------------------------------------------
Technology -- 11.6%
500,000 America Online, Inc.* 55,250,000
1,000,000 CISCO Systems Inc.* 64,500,000
1,200,000 First Data, Corp. 58,725,000
300,000 Hewlett-Packard Co. 30,150,000
1,300,000 Intel Corp. 77,350,000
650,000 International Business Machines Corp. 84,012,500
1,100,000 Lucent Technologies Inc.+ 74,181,250
1,050,000 Microsoft Corp.* 94,696,875
1,200,000 Novell, Inc.*+ 31,800,000
450,000 Texas Instruments, Inc. 65,250,000
- --------------------------------------------------------------------------------
635,915,625
- --------------------------------------------------------------------------------
Telephone/Communications -- 5.8%
1,700,000 American Telephone & Telegraph Corp.+ 94,881,250
700,000 Ameritech Corp. 51,450,000
900,000 Bell Atlantic Corp. 58,837,500
1,125,000 GTE Corp. 85,218,750
350,000 MCI WorldCom, Inc.* 30,187,500
- --------------------------------------------------------------------------------
320,575,000
- --------------------------------------------------------------------------------
Transportation -- 0.6%
300,000 FDX Corp.* 16,275,000
387,000 Florida East Coast Industries, Inc. 17,124,750
- --------------------------------------------------------------------------------
33,399,750
- --------------------------------------------------------------------------------
Utilities -- 0.2%
200,000 The AES Corp.+ 11,625,000
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $2,792,394,342) 4,572,443,900
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
==============================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS -- 16.6%
$300,000,000 Chase Manhattan Inc., 4.800% due 7/1/99; $ 300,000,000
Proceeds at maturity -- $300,040,000 (Fully
collateralized by U.S. Treasury Notes, 4.750% due 2/15/04;
Market Value -- $306,001,050)
410,703,000 Warburg Dillon Read LLC, 4.844% due 7/1/99 410,703,000
Proceeds at maturity -- $410,758,261 (Fully
collateralized by U.S. Treasury Notes, 4.500% due 1/31/01;
Market Value -- $418,925,003)
197,880,000 Goldman Sachs & Co., 4.800% due 7/1/99; 197,880,000
Proceeds at maturity -- $197,906,384 (Fully collateralized
by U.S. Treasury Notes and Strips, 0.000% to 8.750% due 3/2/00
to 5/15/17; Market Value -- $201,837,738)
- ----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $908,583,000) 908,583,000
==============================================================================================
TOTAL INVESTMENTS AT VALUE -- 100%
(Cost -- $3,700,977,342**) $5,481,026,900
==============================================================================================
</TABLE>
* Non-income producing security
+ A portion of the security is on loan (see Note 7).
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $2,792,394,342) $4,572,443,900
Repurchase agreements (Cost -- $908,583,000) 908,583,000
Cash 4,952,572
Collateral for secutities on loan (Note 7) 306,792,573
Receivable for Fund shares sold 3,899,327
Receivable for securities sold 2,006,153
Dividends and interest receivable 4,551,892
- --------------------------------------------------------------------------------------------------
Total Assets 5,803,229,417
- --------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 306,792,573
Payable for securities purchased 28,133,570
Investment advisory fee payable 1,984,920
Administration fees payable 730,056
Distribution fees payable 549,898
Payable for Fund shares purchased 167,813
Accrued expenses 1,139,984
- --------------------------------------------------------------------------------------------------
Total Liabilities 339,498,814
- --------------------------------------------------------------------------------------------------
Total Net Assets $5,463,730,603
- --------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 331,767
Capital paid in excess of par value 3,269,303,715
Undistributed net investment income 17,879,163
Accumulated net realized gain on security transactions and futures contracts 396,166,400
Net unrealized appreciation of investments 1,780,049,558
- --------------------------------------------------------------------------------------------------
Total Net Assets $5,463,730,603
==================================================================================================
Shares Outstanding:
Class A 193,761,214
---------------------------------------------------------------------------------------------
Class B 107,912,324
---------------------------------------------------------------------------------------------
Class L 7,890,559
---------------------------------------------------------------------------------------------
Class Y 5,998,702
---------------------------------------------------------------------------------------------
Class Z 16,204,234
---------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $16.51
---------------------------------------------------------------------------------------------
Class B* $16.39
---------------------------------------------------------------------------------------------
Class L** $16.39
---------------------------------------------------------------------------------------------
Class Y (and redemption price) $16.50
---------------------------------------------------------------------------------------------
Class Z (and redemption price) $16.52
---------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $17.38
---------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $16.56
==================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended June 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 26,506,502
Interest 22,027,277
Less: Foreign withholding tax (616,621)
- --------------------------------------------------------------------------------
Total Investment Income 47,917,158
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 12,460,015
Investment advisory fees (Note 2) 10,571,611
Administration fees (Note 2) 3,887,119
Shareholder and system servicing fees 2,597,090
Shareholder communications 245,783
Registration fees 98,138
Custody 79,097
Directors' fees 32,764
Audit and legal fees 26,733
Other 29,991
- --------------------------------------------------------------------------------
Total Expenses 30,028,341
- --------------------------------------------------------------------------------
Net Investment Income 17,888,817
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTE 3 AND 6):
Realized Gain From:
Security transactions (excluding short-term securities) 400,964,925
Futures contracts 1,305,463
- --------------------------------------------------------------------------------
Net Realized Gain 402,270,388
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 1,670,560,703
End of period 1,780,049,558
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 109,488,855
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 511,759,243
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 529,648,060
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (unaudited)
and the Year Ended December 31, 1998
<TABLE>
<CAPTION>
1999 1998
=======================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,888,817 $ 44,614,086
Net realized gain 402,270,388 437,867,108
Increase in net unrealized appreciation 109,488,855 354,145,227
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 529,648,060 836,626,421
- -------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income -- (46,469,945)
Net realized gains (147,586,116) (370,466,221)
- -------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (147,586,116) (416,936,166)
- -------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sales 466,603,784 817,670,978
Net asset value of shares issued for reinvestment of dividends 139,197,916 390,809,346
Cost of shares reacquired (450,097,804) (936,984,556)
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 155,703,896 271,495,768
- -------------------------------------------------------------------------------------------------------
Increase in Net Assets 537,765,840 691,186,023
NET ASSETS:
Beginning of period 4,925,964,763 4,234,778,740
- -------------------------------------------------------------------------------------------------------
End of period* $5,463,730,603 $4,925,964,763
=======================================================================================================
* Includes undistributed (overdistributed) net investment income of: $17,879,163 $(9,654)
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 17
<PAGE>
- --------------------------------------------------------------------------------
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 for which no sales price was reported 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 for which market quotations are not available will be
valued in good faith at fair value by or under the direction of the Board of
Trustees; (d) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (e)
dividend income is recorded on the ex-dividend date; foreign dividends are
recorded on the earlier of the ex-dividend date or as soon as practical after
the Fund determines the existence of a dividend declaration after exercising
reasonable due diligence; (f) interest income is recorded on the accrual basis;
(g) dividends and distributions to shareholders are recorded on the ex-dividend
date; (h) gains or losses on the sale of securities are calculated by using the
specific identification method; (i) direct expenses are charged to each class;
management fees and general fund expenses are allocated on the basis of relative
net assets; (j) 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; (k) 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; (l) the
character of income and gains distributed are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. At December 31, 1998, reclassifications were 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 realized gains and net assets were not affected by this change; and (m)
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 Other Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
adviser of the Fund. The Fund pays SSBC 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.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
SSBC 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.
CFBDS, Inc., acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, as well as certain other broker-dealers, continues
to sell Fund shares to the public as a member of the selling group. For the six
months ended June 30, 1999, SSB and its affiliates received brokerage
commissions of $145,290.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from purchase. This CDSC
declines by 1.00% the first year after purchase and thereafter by 1.00% per year
until no CDSC is incurred. Class L shares are being sold at net asset value plus
a maximum sales charge of 1.00%. Class L shares also have a 1.00% CDSC, which
applies if redemption occurs within the first year of purchase. In certain
cases, Class A shares 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 aggregate. These purchases do not incur an
initial sales charge.
For the six months ended June 30, 1999, SSB received sales charges of
approximately $1,325,000, $11,000 and $328,000 on sales of the Portfolio's Class
A, Class B and Class L shares, respectively. In addition, CDSCs paid to SSB were
approximately:
Class A Class B Class L
================================================================================
CDSCs $2,000 $554,000 $21,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L 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 L 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, 1999, total Distribution Plan fees were as follows:
Class A Class B Class L
================================================================================
Distribution Plan Fees $3,789,405 $8,156,901 $513,709
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended June 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $1,596,376,509
- --------------------------------------------------------------------------------
Sales 1,549,543,342
================================================================================
At June 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $1,786,562,283
Gross unrealized depreciation (6,512,725)
- --------------------------------------------------------------------------------
Net unrealized appreciation $1,780,049,558
================================================================================
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, 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.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
5. Option Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the amount of the premium
originally paid. When the Fund exercises a call option, the cost of the security
that the Fund purchases upon exercise will be increased by the premium
originally paid.
At June 30, 1999, the Fund had no open purchased call or put options.
When a Fund writes a call or put option, an amount equal to the premium received
by the Fund is recorded as a liability, the value of which is marked-to-market
daily. When a written option expires, the Fund realizes a gain equal to the
amount of the premium received. When the Fund enters into a closing purchase
transaction, the Fund realizes a gain or loss depending upon whether the cost of
the closing transaction is greater or less than the premium originally received
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When a written call option
is exercised, the cost of the security sold will be decreased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security that the Fund
purchased upon exercise. When written index options are exercised, settlement is
made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
call option is that the Fund gives up the opportunity to participate in any
increase in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Fund is exposed to the risk of a loss
if the market price of the underlying security declines.
During the six months ended June 30, 1999, the Fund did not write any call or
put options.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contract. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract. The Fund enters into such
contracts to hedge a portion of its portfolio. The Fund bears the market risk
that arises from changes in the value of the financial instruments and
securities indices (futures contracts).
At June 30, 1999, the Fund had no open futures contracts.
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
7. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded in
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Fund maintains exposure for the risk of any losses in
the investment of amounts received as collateral.
At June 30, 1999, the Fund loaned common stocks having a value of approximately
$299,365,873 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Banco Bilbao Vizcaya, 5.875% due 7/1/99 $ 35,339,390
Bank of Montreal, 5.937% due 7/1/99 10,173,315
Bank of Montreal, 5.250% due 7/1/99 24,583,924
Banque Paribas, 5.875% due 7/1/99 37,287,189
Barclays Bank PLC, 5.875% due 7/1/99 19,667,139
Commercial Paper:
Dakota Certificates Program, 4.993% due 9/2/99 1,167,724
Moriarty LLC, 5.123% due 8/16/99 36,741,931
Moriarty LLC, 5.102% due 8/2/99 18,902,726
Moriarty LLC, 5.177% due 9/20/99 40,412,751
Corporate Receivables, 4.906% due 8/2/99 7,936,167
Certificate of Deposit:
Svenska Handelsbanken, 4.940% due 10/25/99 74,580,317
- --------------------------------------------------------------------------------
Total $306,792,573
================================================================================
For the six months ended June 30, 1999, income earned by the Portfolio from
securities lending was $281,725.
8. Capital Shares
At June 30, 1999, the Fund had one 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. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At June 30, 1999, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y Class Z
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Total Paid-in Capital $1,755,695,612 $1,137,678,370 $113,158,136 $72,286,632 $190,816,732
==========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
---------------------------- ----------------------------
Shares Amount Shares Amount
================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 12,529,508 $ 201,165,044 31,944,426 $ 478,164,660
Shares issued on reinvestment 5,171,969 82,648,065 16,242,300 246,245,285
Shares reacquired (17,193,007) (275,102,249) (36,385,814) (541,889,271)
- ------------------------------------------------------------------------------------------------
Net Increase 508,470 $ 8,710,860 11,800,912 $ 182,520,674
================================================================================================
Class B
Shares sold 12,500,654 $ 200,737,749 14,958,279 $ 221,404,435
Shares issued on reinvestment 2,898,311 45,967,224 7,850,793 117,753,029
Shares reacquired (9,262,801) (147,472,355) (22,640,705) (335,884,537)
- ------------------------------------------------------------------------------------------------
Net Increase 6,136,164 $ 99,232,618 168,367 $ 3,272,927
================================================================================================
Class L+
Shares sold 2,785,712 $ 44,725,784 2,887,128 $ 42,349,991
Shares issued on reinvestment 212,591 3,371,693 393,767 5,900,714
Shares reacquired (561,647) (8,929,590) (1,276,184) (18,734,090)
- ------------------------------------------------------------------------------------------------
Net Increase 2,436,656 $ 39,167,887 2,004,711 $ 29,516,615
================================================================================================
Class Y
Shares sold 468,372 $ 7,320,820 2,956,701 $ 44,326,404
Shares issued on reinvestment -- -- -- --
Shares reacquired (167,677) (2,832,464) (1,299,545) (19,155,296)
- ------------------------------------------------------------------------------------------------
Net Increase 300,695 $ 4,488,356 1,657,156 $ 25,171,108
================================================================================================
Class Z
Shares sold 804,280 $ 12,654,387 2,085,157 $ 31,425,488
Shares issued on reinvestment 451,248 7,210,934 1,376,363 20,910,318
Shares reacquired (983,086) (15,761,146) (1,447,123) (21,321,362
- ------------------------------------------------------------------------------------------------
Net Increase 272,442 $ 4,104,175 2,014,397 $ 31,014,444
================================================================================================
</TABLE>
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1)(2) 1998(2) 1997 1996 1995(2) 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.31 $13.92 $12.85 $11.90 $10.15 $11.01
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.18 0.19 0.19 0.20 0.16
Net realized and unrealized gain (loss) 1.59 2.62 3.17 2.09 2.75 (0.24)
- ------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.66 2.80 3.36 2.28 2.95 (0.08)
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.18) (0.20) (0.19) (0.20) (0.18)
Net realized gains (0.46) (1.23) (2.09) (1.14) (1.00) (0.60)
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (1.41) (2.29) (1.33) (1.20) (0.78)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.51 $15.31 $13.92 $12.85 $11.90 $10.15
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 10.93%++ 20.45% 26.29% 19.25% 29.26% (0.77)%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $3,199 $2,959 $2,526 $2,100 $1,933 $1,690
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.93%+ 0.95% 0.95% 1.00% 1.02% 1.02%
Net investment income 0.94+ 1.23 1.47 1.52 1.71 1.61
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 63% 57% 62% 57% 52%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares 1999(1)(2) 1998(2) 1997 1996 1995(2) 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.26 $13.88 $12.81 $11.88 $10.14 $11.00
- ------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.06 0.07 0.08 0.11 0.13
Net realized and unrealized gain (loss) 1.58 2.61 3.15 2.08 2.74 (0.29)
- ------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.59 2.67 3.22 2.16 2.85 (0.16)
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.06) (0.06) (0.09) (0.11) (0.10)
Net realized gains (0.46) (1.23) (2.09) (1.14) (1.00) (0.60)
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (1.29) (2.15) (1.23) (1.11) (0.70)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.39 $15.26 $13.88 $12.81 $11.88 $10.14
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 10.50%++ 19.52% 25.31% 18.29% 28.29% (1.53)%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $1,768 $1,553 $1,410 $1,134 $988 $761
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.72%+ 1.73% 1.73% 1.78% 1.77% 1.80%
Net investment income 0.16+ 0.44 0.68 0.74 0.96 0.83
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 63% 57% 62% 57% 52%
==============================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares 1999(1)(2) 1998(2)(3) 1997 1996 1995(2) 1994
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.26 $13.88 $12.81 $11.88 $10.14 $11.00
- --------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.01 0.06 0.09 0.09 0.11 0.10
Net realized and unrealized gain (loss) 1.58 2.61 3.13 2.08 2.74 (0.25)
- --------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.59 2.67 3.22 2.17 2.85 (0.15)
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.06) (0.06) (0.10) (0.11) (0.11)
Net realized gains (0.46) (1.23) (2.09) (1.14) (1.00) (0.60)
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (1.29) (2.15) (1.24) (1.11) (0.71)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.39 $15.26 $13.88 $12.81 $11.88 $10.14
- --------------------------------------------------------------------------------------------------------------------------
Total Return 10.50%++ 19.52% 25.31% 18.34% 28.29% (1.41)%
- --------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $129,300 $83,215 $47,872 $25,505 $14,653 $5,040
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.72%+ 1.73% 1.73% 1.77% 1.77% 1.66%
Net investment income 0.17+ 0.44 0.68 0.75 0.96 0.98
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 63% 57% 62% 57% 52%
==========================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized
- --------------------------------------------------------------------------------
24 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
<TABLE>
<CAPTION>
Class Y Shares 1999(1)(2) 1998(2) 1997(2) 1996(3)
================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.28 $13.93 $12.86 $12.10
- ------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.10 0.24 0.27 0.23
Net realized and unrealized gain 1.58 2.63 3.14 1.89
- ------------------------------------------------------------------------------------------------
Total Income From Operations 1.68 2.87 3.41 2.12
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.29) (0.25) (0.22)
Net realized gains (0.46) (1.23) (2.09) (1.14)
- ------------------------------------------------------------------------------------------------
Total Distributions (0.46) (1.52) (2.34) (1.36)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.50 $15.28 $13.93 $12.86
- ------------------------------------------------------------------------------------------------
Total Return 11.08%++ 20.93% 26.70% 17.65%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $98,986 $87,041 $56,302 $73,196
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.58%+ 0.59% 0.59% 0.66%+
Net investment income 1.29+ 1.59 1.79 2.06+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 63% 57% 24%
================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from January 30, 1996 (inception date) to December 31,
1996.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Appreciation Fund Inc. 25
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
<TABLE>
<CAPTION>
Class Z Shares 1999(1)(2) 1998(2) 1997 1996 1995(2) 1994
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.29 $13.94 $12.87 $11.91 $10.16 $11.02
- ------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.10 0.24 0.24 0.24 0.23 0.20
Net realized and unrealized gain (loss) 1.59 2.63 3.18 2.09 2.75 (0.24)
- ------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.69 2.87 3.42 2.33 2.98 (0.04)
- ------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.29) (0.26) (0.23) (0.23) (0.22)
Net realized gains (0.46) (1.23) (2.09) (1.14) (1.00) (0.60)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.46) (1.52) (2.35) (1.37) (1.23) (0.82)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.52 $15.29 $13.94 $12.87 $11.91 $10.16
- ------------------------------------------------------------------------------------------------------------------------
Total Return 11.14%++ 20.91% 26.72% 19.66% 29.52% (0.41)%
- ------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $267,658 $243,609 $194,070 $153,034 $131,357 $101,532
- ------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.58%+ 0.59% 0.59% 0.64% 0.77% 0.64%
Net investment income 1.30+ 1.59 1.82 1.88 1.96 1.99
- ------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 37% 63% 57% 62% 57% 52%
========================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
26 1999 Semi-Annual Report to Shareholders
<PAGE>
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<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
Appreciation Fund Inc.
Directors
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Harry D. Cohen
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSBC Fund Management Inc.
Distributors
CFBDS, 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., but it may also be used as sales literature
when preceded or accompanied by the current Prospectus, which gives details
about charges, expenses, investment objectives and operating policies of the
Fund. If used as sales material after September 30, 1999, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
SALOMON SMITH BARNEY
- ---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
