<PAGE>
---------------------------
SMITH BARNEY
APPRECIATION FUND
---------------------------
CLASSIC SERIES | SEMI-ANNUAL REPORT | JUNE 30, 2000
[LOGO]Smith Barney
Mutual Funds
Your Serious Money. Professional Managed.(SM)
---------------------------------------------------------
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
---------------------------------------------------------
<PAGE>
HERSH COHEN [LOGO] Classic Series
PORTFOLIO MANAGER
Semi-Annuial Report . June 30, 2000
[PHOTO]
SMITH BARNEY
HERSH COHEN APPRECIATION FUND
Hersh Cohen has more than 31 years of securities business experience.
Education: BA from Case Western Reserve University; Ph.D. in Psychology from
Tufts University
--------------------------------------------------------------------------------
FUND OBJECTIVE
--------------------------------------------------------------------------------
The Fund seeks long-term capital appreciation of shareholders' capital by
investing primarily in equity securities of U.S. companies. The Fund typically
invests in medium and large capitalization companies but may also invest in
small capitalization companies.
--------------------------------------------------------------------------------
FUND FACTS
--------------------------------------------------------------------------------
FUND INCEPTION
------------------------------------------------------------------------------
March 10, 1970
MANAGER'S INVESTMENT
INDUSTRY EXPERIENCE
------------------------------------------------------------------------------
31 Years
MANAGER TENURE
------------------------------------------------------------------------------
21 Years
SYMBOLS CLASS A CLASS B CLASS L
------------------------------------------------------------------------------
NASDAQ SHAPX SAPBX SAPCX
------------------------------------------------------------------------------
Inception 3/10/70 11/6/92 2/4/93
------------------------------------------------------------------------------
Average Annual Total Returns as of June 30, 2000
Without Sales Charges/(1)/
Class A Class B Class L
Six Months+ 0.43% 0.05% 0.05%
---------------------------------------------------------
One-Year 4.19 3.38 3.32
---------------------------------------------------------
Five-Year 18.24 17.35 17.33
---------------------------------------------------------
Ten-Year 14.11 N/A N/A
---------------------------------------------------------
Since Inception++ 12.69 14.59 14.15
With Sales Charges/(2)/
Class A Class B Class L
Six Months+ (4.60)% (4.77)% (1.92)%
---------------------------------------------------------
One-Year (1.03) (1.22) 1.35
---------------------------------------------------------
Five-Year 17.03 17.25 17.09
---------------------------------------------------------
Ten-Year 13.52 N/A N/A
---------------------------------------------------------
Since Inception++ 12.50 14.59 13.99
---------------------------------------------------------
/(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 L shares reflect the
deduction of the maximum initial 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 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.
-------------------------------------------------------------------------------
What's Inside
Your Investment in the Smith Barney
Appreciation Fund.................................................. 1
A Message from the Chairman........................................ 2
Fund at a Glance................................................... 3
Letter from the Portfolio Manager.................................. 4
Historical Performance............................................. 8
Growth of $10,000.................................................. 11
Schedule of Investments............................................ 12
Statement of Assets and Liabilities................................ 16
Statement of Operations............................................ 17
Statements of Changes in Net Assets................................ 18
Notes to Financial Statements...................................... 19
Financial Highlights............................................... 23
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed./(SM)/
----------------------------------------------------------------------------
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
----------------------------------------------------------------------------
<PAGE>
----------------------------------------------------------------------------
YOUR INVESTMENT IN THE SMITH BARNEY APPRECIATION FUND
----------------------------------------------------------------------------
A Proven and Prudent Approach to Growth Investing
Ably guided for more than 30 years by Wall Street veteran Harry "Hersh" Cohen,
the Appreciation Fund is a core growth portfolio designed to capture the upside
potential of stocks with potentially less downside risk.
[LOGO]_ Timely Investment Opportunities
The expansion of telecommunications has impacted the world. For Hersh
Cohen, this expansion represents a unique opportunity. His classic
approach to growth potentially allows him to identify industry leaders,
while maintaining a relatively conservative portfolio with the potential
for competitive returns.
[LOGO]_ A Prudent Strategy
Hersh Cohen carefully looks at companies with relatively low price-to-
earnings ("P/E") ratios/1/ and strong earnings growth forecasts. He
knows that to make money, you have to invest it, not chase it.
[LOGO]_ A Distinguished History of Managing Your Serious Money
Founded in 1873 and 1892, respectively, the firms of Charles D. Barney
and Edward B. Smith were among the earliest providers of securities
information, research and transactions. Merged in 1937, Smith Barney &
Co. offered its clients a powerful, blue-chip investment capability able
to provide timely information, advice and insightful asset management.
Today, SSB Citi Fund Management LLC unites the distinguished history of
Smith Barney with the unparalleled global reach of its parent,
Citigroup.
At SSB Citi Fund Management LLC, you have access to blue-chip management
delivered professionally. We are proud to offer you, the serious
investor, a variety of managed solutions.
[LOGO] Experience, insight, judgement
Search for undervalued assets,
committed management, strong
. balance sheets, industry leaders
. Stock-by-stock evaluation
Theme-based investigation
. of opportunities
/1/ The P/E ratio is the price of a stock divided by its earnings per
share.
1 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
----------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN
----------------------------------------------------------------------------
Originally offered in 1970, the Smith Barney Appreciation Fund follows one of
the founding principles of our rich tradition of serious money management,
namely, a goal of preserving your capital, while attempting to earn reasonable
returns believing that the compounding effect of such an approach may provide
competitive returns over time. Portfolio Manager Hersh Cohen has not only
achieved that objective, but he continues to diligently seek long-term capital
appreciation. In our view, the Fund's historical returns serve as clear
evidence that an investment in the Appreciation Fund continues to offer long-
term opportunities. (Of course, past performance is not indicative of future
results.)
Hersh Cohen's focus on identifying companies with assets or earning power that
are either unrecognized or undervalued is, in my opinion, a sound approach to
building your assets. In times of market volatility, investing in a fund which
looks to invest in those companies with strong or improving balance sheets,
recognized industry leadership and effective management teams at a reasonable
price may be prudent and advisable.
[PHOTO OF HEATH B. MCLENDON]
CHAIRMAN
For years, individuals and their families and businesses have looked to the
investment professionals of SSB Citi Fund Management LLC for thoughtful
insights and advice. For some, the solution has been a long-term investment
strategy, incorporating multiple stock and bond mutual funds. Others have
invested with specific portfolio managers who are recognized and respected for
their insights and record.
In our opinion, the lessons of the past can and should be used to better
understand the challenges and opportunities of the future. We believe SSBCiti
Fund Management LLC represents extensive asset management expertise. We also
believe that expertise is achieved through the intelligent application of
knowledge and experience. Our portfolio managers have managed portfolios across
markets and cycles.
Whatever your investment objective may be, we believe that following a
disciplined investment plan is of paramount importance in these uncertain
times. We encourage you to work closely with your financial professional to map
out an investment plan that fits in with your objectives -- be it retirement,
estate planning or educational needs.
When you invest with SSB Citi Fund Management LLC, you can do so with the
confidence that your interests come first, your investment success is paramount
and that the ultimate in resources is being committed to your financial future.
Thank you for investing with us.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
July 12, 2000
2 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
------------------------------------------------------------------------------
Smith Barney Appreciation Fund at a Glance (unaudited)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Top Ten Holdings*+
------------------------------------------------------------------------------
1. Berkshire Hathaway Inc., Class A Shares.................... 4.7%
2. Pfizer Inc................................................. 3.6
3. Microsoft Corp............................................. 3.3
4. General Electric Co........................................ 3.1
5. Intel Corp................................................. 2.9
6. Exxon Mobil Corp........................................... 2.7
7. American International Group, Inc.......................... 2.2
8. Minnesota Mining & Manufacturing Co........................ 2.2
9. Viacom Inc., Class B Shares................................ 2.2
10. Cisco Systems, Inc........................................ 2.1
-----------------------------
Industry Diversification *+
-----------------------------
-----------------------------------------------------
4.2% Beverage, Food & Tobacco
7.5% Broadcasting, Entertainment & Leisure
3.4% Chemicals
13.1% Diversified/Conglomerate
3.8% Financial Services
12.3% Health Care/Drugs/Hospital Supplies
3.6% Insurance
4.5% Oil - International
19.7% Technology
4.3% Telephone/Communications
23.6% Other
-----------------------------------------------------
-----------------------------
Investment Breakdown*++
-----------------------------
--------------------------------
13.2% Repurchase Agreements
86.8% Common Stock
--------------------------------
* These holdings are as of June 30, 2000 and are subject to change.
+ As a percentage of total common stock.
++ As a percentage of total investments.
3 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
Dear Shareholder,
We are pleased to present the semi-annual report for the Smith Barney
Appreciation Fund Inc. ("Fund") for the period ended June 30, 2000. 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./1/ A more
comprehensive summary of performance and current holdings can be found in the
appropriate sections that follow. Please note that any discussion of the Fund's
holdings is as of June 30, 2000. Please refer to pages 12 through 15 for the
Fund's holdings. We hope you find this report to be useful and informative.
Performance Update
For the six months ended June 30, 2000, the Fund's Class A, B and L shares,
without sales charges, returned 0.43%, 0.05% and 0.05%, respectively. The Fund's
Class A, B and L shares, with sales charges, generated negative returns of
4.60%, 4.77% and 1.92%, respectively, for the same period. In comparison, the
Standard & Poor's 500 Index ("S&P 500")/2/ returned a negative 0.43% for the
same period./3/
The Fund seeks long-term appreciation of shareholders' capital by investing
primarily in equity securities of U.S. companies. The Fund typically invests in
medium and large capitalization companies but may also invest in small
capitalization companies.
------------------------------------------------------------------------------
HERSH BELIEVES THAT TO MAKE MONEY,
YOU HAVE TO INVEST IT, NOT CHASE IT.
------------------------------------------------------------------------------
In selecting individual companies for the Fund's portfolio, the manager looks
for companies with strong or rapidly improving balance sheets, recognized
industry leadership and effective management teams that exhibit a desire to earn
consistent returns for shareholders.
Market Overview and Portfolio Update
For the first six months of 2000, the Fund had a very modest gain, but was ahead
of all of the major stock market indicators (i.e., the S&P 500 and the Dow Jones
Industrial Average ("DJIA")/4/). If one looks just on the surface, not much
happened in the stock market in the first half of 2000. The popular averages
finished with only minor changes to the downside. But scratch the surface, or
better yet, ask any former day trader to describe the period, and a far more
fascinating and complex story becomes evident. During the first two months of
the year, speculative activity in the stock market rivaled the greatest manias
in history. After a blazing end to the last century, many technology stocks
continued to tear ahead, accompanied by, we believe, a sense of entitlement by
people who were convinced that their time had come to get rich merely by
speculating in "New Economy" stocks regardless of valuation or risk.
-------------
1 The information provided represents the opinion of the manager and is not
intended to be a forecast of future events, a guarantee of future results
nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Fund.
2 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note that the Index is unmanaged and not subject to
the same charges of a mutual fund. An investor cannot invest directly in an
index.
3 Past performance is not indicative of future results.
4 The DJIA is a price-weighted average of 30 actively traded blue-chip
stocks. Figures for the DJIA include reinvestment of dividends.
4 Smith BarneyAppreciation Fund | 2000 Semi-Annual Report toShareholders
<PAGE>
Meanwhile, the vast majority of sound companies not perceived to be part of that
technology wave suffered from neglect, if not outright liquidation. With
business conditions good, executives were at a loss to explain the poor
performance of their stocks. In fact, it was a flow-of-funds matter, as
investors switched money out of conservative investments into more "aggressive"
vehicles, Simply put, the rapid flow of money into the tech-laden NASDAQ/5/ in
search of fast, and ultimately unrealistic gains, sucked the life out of the
rest of the stock market.
But by mid-March 2000, the Federal Reserve Board ("Fed") had raised interest
rates enough to bite, and with prices of many speculative stocks in the
stratosphere, and market capitalizations (i.e., the number of shares multiplied
by the stock price) at levels never seen before, there was not enough money to
send them higher. Prices weakened a bit, and recovered to within the heights
seen in mid-March, and started slipping again. Like the aftermath of a wild
party, people who had known nothing but good times, woke up feeling a bit
queasy. Selling began slowly, but picked up steam as panic began to replace
greed, and by mid-April, only a month after setting new highs, the Nasdaq
Composite Index/6/ declined approximately 35%. By any historic standard that
should be considered a crash. In comparison, the bear market of 1973-1974 took
two years to decline 40%.
------------------------------------------------------------------------------
IT IS OUR GOAL TO TRY AND MAKE SURE OUR
SHAREHOLDERS PARTICIPATE IN THIS TIME OF
PROSPERITY IN A MANNER CALCULATED TO
BALANCE RISK AGAINST POTENTIAL RETURNS.
------------------------------------------------------------------------------
In our last report, we wrote that it was a matter of if, and not when, the
technology stocks would break. The consequences for the overall market, we
wrote, were dependent on whether money would then flow into the previously
neglected industrial and financial stocks. For a brief moment in April, the
picture appeared bright, as so-called "Old Economy" stocks rallied. But in June,
NASDAQ began to recover, and most other stocks started slipping. On balance,
then, the overall market lost a bit of ground in the first six months but the
internal rotation was intense and rapid, making it very difficult to achieve
much progress. In fact, the rapid rotation made it relatively easy to lose
money, as many stocks simply evaporated after momentum broke. There were some
big declines in stocks with household names and widespread ownership.
We believe it is important to view the stock market with some historical
perspective. After several years of significantly above-average gains, a flat or
even declining market should not be viewed as a disaster. Earnings did not keep
pace with gains in stock prices over the past few years. Therefore, a period
during which earnings and dividends play catch-up would be a reasonable scenario
to expect. That would be preferable to a general teeth-rattling decline that
took the market to less excessive valuations.
Interestingly, for the first time in recent memory, the strong U.S. economy,
coupled with investor neglect of so many stocks, has created what we think are
many outstanding values, particularly in the industrial sector. The series of
interest rate rises by the Fed has caused people to wonder if we will have to
suffer a "hard landing," otherwise known as a steep recession.
-----------
5 The NASDAQ is a computerized system that provides brokers and dealers with
price quotations for securities traded over the counter as well as for many
New York Stock Exchange listed securities.
6 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market.
5 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
In our opinion,it is more likely that the Fed has engineered a "soft landing" or
slowdown, rather than sending the U.S. economy into a slump. It seems possible
that if that outcome becomes more widely accepted, money could flow into some of
the very inexpensive stocks that have become available. At any rate, those areas
of neglect now seem to have a much more favorable risk-reward ratio than many
overvalued stocks, which even having come down, still sell at price-to-earnings
("P/E") or price-to-revenue ratios/7/ that are way too high for comfort.
Throughout the first six months, we attempted to increase the Fund's holdings in
what we viewed as good companies when their stocks were down, and trim positions
when they got particularly expensive. We did use the extreme weakness in
Microsoft after the antitrust ruling to add to the Fund's position.
------------------------------------------------------------------------------
WE REMAIN DISCIPLINED IN OUR INVESTMENT
APPROACH IN TIMES OF MARKET VOLATILITY.
------------------------------------------------------------------------------
We also added to Berkshire Hathaway,in which we feel extremely comfortable given
the company's management, assets and liquidity, and to Bell Atlantic, which has
now merged with GTE to form a powerhouse telecommunications company, selling at
an attractive discount. We also added materially to Minnesota Mining &
Manufacturing, a chemical, electric and telecommunications conglomerate whose
stock has fallen since year-end, but where fundamentals (such as P/E and price-
to-revenue) are favorable. Their technology business is booming, yet investors
have yet to notice. A significant new position was taken in Delphi Automotive, a
spin-off from General Motors. Their in-car communications systems give some
impetus to a company selling at about one-third the P/E ratio of the overall
market. At the same time, we took profits in all of General Motors, as its
restructuring moves led to an increase in the stock's value.
There has been a wonderful spread of prosperity in this country, and with more
and more people putting money into stocks, profit can no longer be viewed as a
dirty word. But as stock markets have risen, many investors have gotten careless
and taken on more and more risk. It is our goal to try and make sure our
shareholders participate in this prosperity in a manner calculated to balance
risk against potential returns.
In closing, thank you for your investment in the Smith Barney Appreciation Fund
Inc. We look forward to helping you pursue your financial goals in the new
century.
Sincerely,
/s/ Harry "Hersh" D. Cohen
Harry "Hersh" D. Cohen
Vice President and Investment Officer
July 12, 2000
-------------
7 The P/E ratio is the price of a stock divided by its earnings per share.
The price-to-revenue ratio is the price of a stock divided by its revenues.
6 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
Manager Hersh Cohen as featured in our new national advertising campaign
appearing in The Wall Street Journal, Barron's and The New York Times.
[PHOTO APPEARS HERE]
----------------------------------------------------------------
EVERY LARGE CAP INVESTOR SHOULD CONSIDER HAVING TWO THINGS.
DISCIPLINE IN THE
MARKET
AND HERSH COHEN'S PHONE NUMBER
----------------------------------------------------------------
31 years in the market should tell you one thing about Hersh Cohen: the man
has made money. There are many explanations how, but discipline tops the
list. Decades before words like "IPO" and "day trading" became popular,
Hersh knew to make money you had to invest it, not chase it. Even today as
"hot stocks" abound, Hersh looks for value. His advice: know the company's
management and product, or prepare to get burned. Words of wisdom dispensed
daily.
To learn more about the Smith Barney Appreciation Fund and Hersh Cohen's
investment philosophy, call us at 1-888-SERIOUS, ext. 1733 or visit
www.smithbarney.com/mutualfunds for a free prospectus. The prospectus
contains more complete information, including fees and expenses. Please
read it carefully before you invest or send money.
[LOGO] Smith Barney
Your Serious Money. Professionally Managed.(SM) Mutual Funds
CALL 1-888-SERIOUS, EXT. 1733 OR VISIT WWW.SMITHBARNEY.COM/MUTUALFUNDS
(C) 2000 Salomon Smith Barney Inc. Member NASD, SIPC.
Your Serious Money. Professionally Managed.(SM) is a service mark of Salomon
Smith Barney Inc.
7 Smith Barney Appreciation Fund 2000 Semi-Annual Report to Shareholders
<PAGE>
================================================================================
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>
6/30/00 $ 15.73 $ 15.22 $ 0.00 $ 0.58 0.43%+
----------------------------------------------------------------------------------------------------
12/31/99 15.31 15.73 0.14 1.67 15.08
----------------------------------------------------------------------------------------------------
12/31/98 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)
====================================================================================================
Total $ 1.85 $ 8.91
====================================================================================================
</TABLE>
================================================================================
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>
6/30/00 $ 15.66 $ 15.09 $ 0.00 $ 0.58 0.05%+
----------------------------------------------------------------------------------------------------
12/31/99 15.26 15.66 0.02 1.67 14.19
----------------------------------------------------------------------------------------------------
12/31/98 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 $ 0.68 $ 8.76
====================================================================================================
</TABLE>
8 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<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>
6/30/00 $ 15.65 $ 15.08 $ 0.00 $ 0.58 0.05%+
---------------------------------------------------------------------------------------------------
12/31/99 15.26 15.65 0.02 1.67 14.12
---------------------------------------------------------------------------------------------------
12/31/98 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 $ 0.54 $ 8.67
===================================================================================================
</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>
6/30/00 $ 15.69 $ 15.21 $ 0.00 $ 0.58 0.62%+
---------------------------------------------------------------------------------------------------
12/31/99 15.28 15.69 0.20 1.67 15.40
---------------------------------------------------------------------------------------------------
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 $ 0.96 $ 6.71
===================================================================================================
</TABLE>
================================================================================
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>
6/30/00 $ 15.71 $ 15.23 $ 0.00 $ 0.58 0.62%+
---------------------------------------------------------------------------------------------------
12/31/99 15.29 15.71 0.20 1.67 15.46
---------------------------------------------------------------------------------------------------
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 $ 1.77 $ 8.76
===================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
9 Smith Barney Appreciation Fund | 2000 semi-annual Report to Shareholders
<PAGE>
================================================================================
Average Annual Total Returns
================================================================================
Without Sales Charges/(1)/
-----------------------------------------------
Class A Class B Class L Class Y Class Z
================================================================================
Six Months Ended 6/30/00+ 0.43% 0.05% 0.05% 0.62% 0.62%
--------------------------------------------------------------------------------
Year Ended 6/30/00 4.19 3.38 3.32 4.54 4.54
--------------------------------------------------------------------------------
Five Years Ended 6/30/00 18.24 17.35 17.33 N/A 18.65
--------------------------------------------------------------------------------
Ten Years Ended 6/30/00 14.11 N/A N/A N/A N/A
--------------------------------------------------------------------------------
Inception* through 6/30/00 12.69 14.59 14.15 18.19 15.84
================================================================================
With Sales Charges/(2)/
-----------------------------------------------
Class A Class B Class L Class Y Class Z
================================================================================
Six Months Ended 6/30/00+ (4.60)% (4.77)% (1.92)% 0.62% 0.62%
--------------------------------------------------------------------------------
Year Ended 6/30/00 (1.03) (1.22) 1.35 4.54 4.54
--------------------------------------------------------------------------------
Five Years Ended 6/30/00 17.03 17.25 17.09 N/A 18.65
--------------------------------------------------------------------------------
Ten Years Ended 6/30/00 13.52 N/A N/A N/A N/A
--------------------------------------------------------------------------------
Inception* through 6/30/00 12.50 14.59 13.99 18.19 15.84
================================================================================
================================================================================
Cumulative total Returns
================================================================================
Without Sales Charges/(1)/
================================================================================
Class A (6/30/90 through 6/30/00) 274.39%
--------------------------------------------------------------------------------
Class A (Inception* through 6/30/00) 3,648.28
--------------------------------------------------------------------------------
Class B (Inception* through 6/30/00) 183.54
--------------------------------------------------------------------------------
Class L (Inception* through 6/30/00) 166.40
--------------------------------------------------------------------------------
Class Y (Inception* through 6/30/00) 109.31
--------------------------------------------------------------------------------
Class Z (Inception* through 6/30/00) 208.11
================================================================================
(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 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.
10 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the
Smith Barney Appreciation Fund vs. the Standard & Poor's 500 Index+
--------------------------------------------------------------------------------
June 1990 -- June 2000
. Smith Barney Appreciation Fund . Standard & Poor's 500 Index
Jun\1990 9,496 10,000
Dec\1990 9,063 9,400
Dec\1991 11,504 12,258
Dec\1992 12,228 12,391
Dec\1993 13,222 13,636
Dec\1994 13,120 13,815
Dec\1995 16,959 19,001
Dec\1996 20,224 23,361
Dec\1997 25,541 31,154
Dec\1998 30,763 40,108
Dec\1999 35,402 48,543
Jun\2000 35,554 48,335
+ Hypothetical illustration of $10,000 invested in Class A shares on June
30, 1990, assuming deduction of the maximum 5.00% sales charge and
reinvestment of dividends and capital gains, if any, at net asset value
through June 30, 2000. The Standard & Poor's 500 Index is composed of 500
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. An investor may not
invest directly in an index. The performance of the Fund's other classes
may be greater or less than the Class A shares' performance indicated on
this chart, depending on whether greater or lesser sales charges and fees
were incurred by shareholders investing in the 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 shareholders tax liability on dividends or capital gains.
11 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
----------------------------------------------------------------------------------------
COMMON STOCK -- 86.8%
<S> <C> <C>
Auto:Parts & Accessories -- 0.8%
2,791,000 Delphi Automotive Systems Corp. $ 40,643,938
91,653 Visteon Corp.* 1,111,294
---------------------------------------------------------------------------------------
41,755,232
---------------------------------------------------------------------------------------
Automobile -- 0.6%
700,000 Ford Motor Co. 30,100,000
---------------------------------------------------------------------------------------
Banking -- 2.0%
1,200,000 Bank One Corp. 31,875,000
200,000 First Virginia Banks, Inc.+ 6,962,500
1,000,000 Washington Mutual, Inc.+ 28,875,000
1,000,000 Wells Fargo & Co. 38,750,000
---------------------------------------------------------------------------------------
106,462,500
---------------------------------------------------------------------------------------
Basic Materials -- 1.6%
1,000,000 Alcoa Inc. 29,000,000
1,200,000 Barrick Gold Corp. 21,825,000
800,000 International Paper Co.+ 23,850,000
1,000,000 Placer Dome Inc. 9,562,500
---------------------------------------------------------------------------------------
84,237,500
---------------------------------------------------------------------------------------
Beverage, Food & Tobacco -- 3.7%
200,000 H.J. Heinz Co. 8,750,000
2,000,000 McDonald's Corp. 65,875,000
1,400,000 PepsiCo, Inc. 62,212,500
500,000 Ralston-Ralston Purina Group 9,968,750
600,000 Wm. Wrigley Jr. Co.+ 48,112,500
---------------------------------------------------------------------------------------
194,918,750
---------------------------------------------------------------------------------------
Broadcasting, Entertainment & Leisure -- 6.5%
700,000 Cablevision Systems Corp.* 47,512,500
121,275 dick clark productions, inc.* 1,424,981
840,000 Scandinavian Broadcasting Systems SA*+ 45,780,000
600,000 Time Warner, Inc.+ 45,600,000
1,750,000 USA Networks, Inc.* 37,843,750
1,500,000 Viacom Inc., Class B Shares*+ 102,281,250
1,700,000 Walt Disney Co. 65,981,250
---------------------------------------------------------------------------------------
346,423,731
---------------------------------------------------------------------------------------
Chemicals -- 3.0%
1,800,000 Dow Chemical Co.+ 54,337,500
500,000 E.I. du Pont de Nemours & Co. 21,875,000
700,000 Great Lakes Chemical Corp.+ 22,050,000
975,000 PPG Industries, Inc. 43,204,687
1,200,000 Solutia Inc. 16,500,000
---------------------------------------------------------------------------------------
157,967,187
---------------------------------------------------------------------------------------
Consumer Products -- 2.7%
1,500,000 Gillette Co. 52,406,250
1,400,000 Kimberly-Clark Corp. 80,325,000
200,000 Procter & Gamble Co. 11,450,000
---------------------------------------------------------------------------------------
144,181,250
---------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
12 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investment (unaudited) (continued) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
----------------------------------------------------------------------------------
<S> <C> <C>
Diversified/Conglomerate -- 11.3%
4,050 Berkshire Hathaway Inc., Class A Shares* $217,890,000
15 Berkshire Hathaway Inc., Class B Shares* 26,400
1,500,000 Canadian Pacific Ltd. 39,281,250
2,700,000 General Electric Co. 143,100,000
500,000 Honeywell International Inc. 16,843,750
350,000 Johnson Controls, Inc. 17,959,375
1,200,000 Minnesota Mining & Manufacturing Co. 99,000,000
1,400,000 Tyco International Ltd. 66,325,000
----------------------------------------------------------------------------------
600,425,775
----------------------------------------------------------------------------------
Electrical Equipment -- 1.3%
1,100,000 Emerson Electric Co. 66,412,500
----------------------------------------------------------------------------------
Financial Services -- 3.3%
700,000 Fannie Mae 36,531,250
1,400,000 Household International Inc. 58,187,500
700,000 Merrill Lynch & Co., Inc. 80,500,000
----------------------------------------------------------------------------------
175,218,750
----------------------------------------------------------------------------------
Health Care/Drugs/Hospital Supplies -- 10.6%
450,000 ALZA Corp.* 26,606,250
675,000 American Home Products Corp. 39,656,250
600,000 Amgen Inc.* 42,150,000
950,000 Bristol-Myers Squibb Co. 55,337,500
50,000 Celera Genomics Group* 4,675,000
700,000 Chiron Corp.* 33,250,000
550,000 Eli Lilly & Co. 54,931,250
600,000 Johnson & Johnson 61,125,000
118,000 Medical Manager Corp.* 4,019,375
700,000 Merck & Co., Inc. 53,637,500
3,487,500 Pfizer Inc. 167,400,000
400,000 Pharmacia Corp. 20,675,000
----------------------------------------------------------------------------------
563,463,125
----------------------------------------------------------------------------------
Insurance -- 3.1%
900,000 Allstate Corp. 20,025,000
850,000 American International Group, Inc. 99,875,000
600,000 Chubb Corp. 36,900,000
650,000 Horace Mann Educators Corp. 9,750,000
----------------------------------------------------------------------------------
166,550,000
----------------------------------------------------------------------------------
Manufacturing/Building Materials -- 0.8%
1,500,000 Dal-Tile International Inc.* 12,375,000
1,000,000 Masco Corp. 18,062,500
700,000 Pall Corp. 12,950,000
----------------------------------------------------------------------------------
43,387,500
----------------------------------------------------------------------------------
Oil & Gas/Service/Drilling -- 2.0%
1,550,000 Conoco Inc. 34,100,000
550,000 Schlumberger Ltd. 41,043,750
700,000 The Williams Cos., Inc. 29,181,250
----------------------------------------------------------------------------------
104,325,000
----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
13 Smith Barney Appreciation Fund | 2000 Semi-Annual Report Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
------------------------------------------------------------------------------------------------------
<S> <C>
Oil - International -- 3.9%
600,000 BP Amoco PLC $ 33,937,500
1,600,000 Exxon Mobil Corp. 125,600,000
800,000 Royal Dutch Petroleum Co. ADR 49,250,000
------------------------------------------------------------------------------------------------------
208,787,500
------------------------------------------------------------------------------------------------------
Publishing -- 2.4%
600,000 Dow Jones & Co., Inc. 43,950,000
675,000 Gannett Co., Inc. 40,373,438
1,200,000 Meredith Corp. 40,500,000
------------------------------------------------------------------------------------------------------
124,823,438
------------------------------------------------------------------------------------------------------
Real Estate -- 0.9%
596,200 Forest City Enterprises, Inc. 19,898,175
1,000,000 The St. Joe Co. 30,000,000
------------------------------------------------------------------------------------------------------
49,898,175
------------------------------------------------------------------------------------------------------
Retail -- 2.8%
200,000 Amazon.com, Inc.*+ 7,262,500
350,000 Costco Wholesale Corp.* 11,550,000
300,000 CVS Corp.+ 12,000,000
1,200,000 The Home Depot, Inc. 59,925,000
950,000 Wal-Mart Stores, Inc. 54,743,750
------------------------------------------------------------------------------------------------------
145,481,250
------------------------------------------------------------------------------------------------------
Technology -- 17.1%
200,000 Agilent Technologies, Inc.* 14,750,000
1,300,000 America Online, Inc.* 68,575,000
500,000 American Power Conversion Corp.* 20,406,250
1,500,000 Cisco Systems, Inc.* 95,343,750
326,295 EChapman.com, Inc.* 2,324,852
6,635 Exfo Electro-Optical Engineering Inc.* 291,111
1,450,000 First Data Corp.+ 71,956,250
100,000 Gemstar International Group Ltd.* 6,145,312
100,000 Hewlett-Packard Co. 12,487,500
1,000,000 Intel Corp. 133,687,500
450,000 International Business Machines Corp. 49,303,125
1,400,000 Lucent Technologies Inc. 82,950,000
750,000 Mettler-Toledo International Inc.* 30,000,000
1,900,000 Microsoft Corp.* 152,000,000
1,700,000 Motorola, Inc.+ 49,406,250
400,000 Safeguard Scientifics, Inc.*+ 12,825,000
350,000 Solectron Corp.*+ 14,656,250
125,000 Tanning Technology Corp.* 2,406,250
1,000,000 Texas Instruments Inc. 68,687,500
200,000 Xilinix, Inc.* 16,512,500
------------------------------------------------------------------------------------------------------
904,714,400
------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
14 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Schedule of Investments (unaudited)(continued) June 30, 2000
------------------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
------------------------------------------------------------------------------------------------------------------------
<S> <C>
Telephone/Communications -- 3.7%
700,000 AT&T Corp. $ 22,137,500
700,000 Bell Atlantic Corp.+++ 35,568,750
1,000,000 GTE Corp.++ 62,250,000
300,000 Metromedia Fiber Network, Inc.*+ 11,906,250
50,000 QUALCOMM Inc.* 3,000,000
1,400,000 SBC Communications Inc. 60,550,000
------------------------------------------------------------------------------------------------------------------------
195,412,500
------------------------------------------------------------------------------------------------------------------------
Transportation -- 0.9%
500,000 Florida East Coast Industries, Inc. 20,000,000
425,000 United Parcel Service, Inc. 25,075,000
------------------------------------------------------------------------------------------------------------------------
45,075,000
------------------------------------------------------------------------------------------------------------------------
Utilities -- 1.8%
600,000 Allegheny Energy, Inc. 16,425,000
225,000 CH Energy Group, Inc. 7,635,937
400,000 Duke Energy Corp. 22,550,000
400,000 NRG Energy, Inc.* 7,300,000
600,000 TXU Corp. 17,700,000
1,200,000 Waste Management, Inc.+ 22,800,000
------------------------------------------------------------------------------------------------------------------------
94,410,937
------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $3,062,333,200) 4,594,432,000
========================================================================================================================
FACE
AMOUNT SECURITY VALUE
========================================================================================================================
REPURCHASE AGREEMENTS -- 13.2%
$432,825,000 J.P. Morgan Securities Inc., 6.500% due 7/3/00; Proceeds at maturity -- $433,059,447;
(Fully collateralized by U.S. Treasury Notes & Bonds, 3.375% to 7.875% due 7/15/02
to 2/15/21; Market value -- $441,481,711) 432,825,000
267,317,000 UBS Warburg LLC, 6.550% due 7/3/00; Proceeds at maturity -- $267,462,797;
(Fully collateralized by U.S. Treasury Notes, 5.500% to 7.500% due 3/31/03
to 2/15/05; Market value -- $272,665,908) 267,317,000
------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $700,142,000) 700,142,000
========================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $3,762,475,200**) $5,294,574,000
========================================================================================================================
</TABLE>
* Non-income producing security.
+ All or a portion of this security is on loan (See Note 7).
++ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
15 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 2000
---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost -- $3,062,333,200) $4,594,432,000
Repurchase agreements, at value (Cost -- $700,142,000) 700,142,000
Cash 649
Collateral for securities on loan (Note 7) 298,082,656
Dividends and interest receivable 4,543,268
Receivable for Fund shares sold 1,875,532
---------------------------------------------------------------------------------------------------------------------
Total Assets 5,599,076,105
---------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 298,082,656
Payable for securities purchased 9,097,027
Investment advisory fees payable 1,815,189
Distribution fees payable 824,549
Administration fees payable 667,665
Payable for Fund shares purchased 410,395
Accrued expenses 1,280,537
---------------------------------------------------------------------------------------------------------------------
Total Liabilities 312,178,018
---------------------------------------------------------------------------------------------------------------------
Total Net Assets $5,286,898,087
=====================================================================================================================
NET ASSETS:
Par value of capital shares $ 348,337
Capital paid in excess of par value 3,521,716,451
Undistributed net investment income 21,254,835
Accumulated net realized gain from security transactions and futures contracts 211,479,664
Net unrealized appreciation of investments 1,532,098,800
---------------------------------------------------------------------------------------------------------------------
Total Net Assets $5,286,898,087
=====================================================================================================================
Shares Outstanding:
Class A 214,385,946
---------------------------------------------------------------------------------------------------------------------
Class B 99,632,294
---------------------------------------------------------------------------------------------------------------------
Class L 11,643,549
---------------------------------------------------------------------------------------------------------------------
Class Y 5,866,502
---------------------------------------------------------------------------------------------------------------------
Class Z 16,808,333
---------------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 15.22
---------------------------------------------------------------------------------------------------------------------
Class B * $ 15.09
---------------------------------------------------------------------------------------------------------------------
Class L ** $ 15.08
---------------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $ 15.21
---------------------------------------------------------------------------------------------------------------------
Class Z (and redemption price) $ 15.23
---------------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $ 16.02
---------------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $ 15.23
=====================================================================================================================
</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.
16 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended June
30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 28,292,362
Interest 23,001,308
Less: Foreign withholding tax (197,619)
--------------------------------------------------------------------------------
Total Investment Income 51,096,051
--------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 12,716,208
Investment advisory fees (Note 2) 10,938,741
Administration fees (Note 2) 4,022,833
Shareholder and system servicing fees 2,262,240
Shareholder communications 261,526
Registration fees 137,527
Custody 84,419
Directors' fees 35,487
Audit and legal 26,925
Other 30,416
--------------------------------------------------------------------------------
Total Expenses 30,516,322
--------------------------------------------------------------------------------
Net Investment Income 20,579,729
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 6):
Realized Gain From:
Security transactions (excluding short-term securities) 209,353,487
Futures contracts 7,865,196
--------------------------------------------------------------------------------
Net Realized Gain 217,218,683
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 1,760,403,281
End of period 1,532,098,800
--------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (228,304,481)
--------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (11,085,798)
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 9,493,931
================================================================================
See Notes to Financial Statements.
17 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Statement of Changes in Net Assets
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 2000 (unaudited)
and the Year Ended December 31, 1999
2000 1999
========================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 20,579,729 $ 37,698,990
Net realized gain 217,218,683 597,948,936
Increase (decrease) in net unrealized appreciation (228,304,481) 89,842,578
--------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 9,493,931 725,490,504
--------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (37,014,230)
Net realized gains (194,059,134) (551,110,949)
--------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (194,059,134) (588,125,179)
--------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 654,143,807 1,002,205,348
Net asset value of shares issued for reinvestment of dividends 182,614,354 553,845,742
Cost of shares reacquired (974,291,224) (1,010,384,825)
--------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund Share Transactions (137,533,063) 545,666,265
--------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (322,098,266) 683,031,590
NET ASSETS:
Beginning of period 5,608,996,353 4,925,964,763
--------------------------------------------------------------------------------------------------------
End of period* $ 5,286,898,087 $ 5,608,996,353
========================================================================================================
* Includes undistributed net investment income of: $ 21,254,835 $ 675,106
========================================================================================================
</TABLE>
See Notes to Financial Statements.
18 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<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
Directors; (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 dili-gence; (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; 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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH") which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup") 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.
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.
Citi Fiduciary Trust Company ("CFTC"), formerly known as Smith Barney Private
Trust Company, another subsidiary of Citigroup, acts as the Fund's transfer
agent and PFPC Global Fund Services ("PFPC") acts as the Fund's sub-transfer
agent. CFTC receives account fees and asset-based fees that vary according to
account size and type of account. PFPC is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts. During the
six months ended June 30, 2000, the Fund paid transfer agent fees of $1,748,261
to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Fund's distributor replacing CFBDS,Inc. ("CFBDS"). In addition,
SSB acts as the primary broker for the Fund's portfolio agency transactions.
Certain other broker-dealers, continue to sell Fund shares to the public as
members of the selling group. For the six months ended June 30, 2000, SSB and
its affiliates received brokerage commissions of $186,836.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, respectively. There is a contingent deferred sales charge ("CDSC") of
5.00% on Class B shares, which applies if redemption occurs within one year from
19 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Notes to Financial Statements(unaudited)(continued)
-------------------------------------------------------------------------------
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, 2000, CFBDS and SSB received sales charges of
approximately $816,000, $43,000 and $304,000 on sales of the Fund's Class A, B
and L shares, respectively. In addition, CDSCs paid to SSB were approximately:
Class A Class B Class L
--------------------------------------------------------------------------------
CDSCs $9,000 $869,000 $35,000
--------------------------------------------------------------------------------
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 June30, 2000, total Distribution Plan fees were as follows:
Class A Class B Class L
--------------------------------------------------------------------------------
Distribution Plan Fees $4,032,412 $7,855,716 $828,080
--------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended June 30, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
--------------------------------------------------------------------------------
Purchases $ 1,412,278,949
--------------------------------------------------------------------------------
Sales 1,466,626,753
--------------------------------------------------------------------------------
At June 30, 2000, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
--------------------------------------------------------------------------------
Gross unrealized appreciation $ 1,662,884,812
--------------------------------------------------------------------------------
Gross unrealized depreciation (130,786,012)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 1,532,098,800
--------------------------------------------------------------------------------
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.
5.Options 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, 2000, the Fund had no open purchased call or put option contracts.
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 call option is
exercised the proceeds of the security sold will be increased 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
20 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
-------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
--------------------------------------------------------------------------------
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 30,2000, the Fund did not write any call or put
option contracts.
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 30,2000, the Fund had no open futures contracts.
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, deal-ers 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, 2000, the Fund loaned common stocks having a value of approximately
$288,761,058 and holds the following collateral for loaned securities:
Security Description Value
==============================================================================
Time Deposits:
Banco Bilbao Vizcaya S.A.,7.13% due 7/3/00 $ 63,392,330
Bank Brussels Lambert, 7.13% due 7/3/00 3,499,749
Caisse des Depots et Consignations, 6.94% due 7/3/00 63,392,330
Caisse des Depots et Consignations, 7.06% due 7/3/00 31,469,420
Credit Suisse First Boston, 7.13% due 7/3/00 2,497,601
Credit Suisse First Boston, 7.16% due 7/3/00 6,482,006
Norwest Bank Minnesota NA, 6.88% due 7/3/00 1,398,146
San Paolo IMI, S.p.A., 7.00% due 7/3/00 31,696,165
Floating Rate Certificate of Deposit:
Comerica Bank, 5.86% due 2/14/01 70,832
Floating Rate Notes:
AMSouth Bank, 5.73% due 1/25/01 6,203,503
Bank One Corp.,6.68% due 7/2/01 2,140,927
First Union National Bank, 6.51% due 5/21/01 3,476,303
Goldman Sachs, 5.28% due 8/23/00 13,064,621
Key Bank Corp., 5.91% due 2/14/01 7,481,315
Morgan Stanley, 5.75% due 11/2/00 27,798,767
Sigma Finance Corp., 6.48% due 11/6/00 24,018,641
------------------------------------------------------------------------------
Total $298,082,656
==============================================================================
For the six months ended June 30,2000, income earned by the Fund from securities
lending was $274,234.
21 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
------------------------------------------------------------------------------
8. Capital Shares
At June 30, 2000, 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.
At June 30,2000, 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 $2,073,187,673 $1,007,519,825 $171,487,893 $ 70,087,044 $199,782,353
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30,2000 December 31,1999
------------------------------- --------------------------------------------
Shares Amount Shares Amount
==================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 31,412,976 $ 489,711,660 32,259,798 $ 515,792,047
Shares issued on reinvestment 7,514,764 114,074,121 21,772,653 338,497,503
Shares reacquired (35,969,898) (558,845,697) (35,857,091) (573,026,713)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,957,842 $ 44,940,084 18,175,360 $ 281,262,837
==================================================================================================================================
Class B
Shares sold 7,473,244 $ 114,683,423 23,143,005 $ 369,108,213
Shares issued on reinvestment 3,518,992 52,960,825 11,127,812 171,184,647
Shares reacquired (23,483,283) (359,957,482) (23,923,636) (378,905,553)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (12,491,047) $(192,313,234) 10,347,181 $ 161,387,307
==================================================================================================================================
Class L
Shares sold 2,437,954 $ 37,429,082 5,379,277 $ 85,714,397
Shares issued on reinvestment 414,605 6,235,651 936,337 14,384,326
Shares reacquired (1,525,586) (23,283,692) (1,452,941) (22,982,120)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,326,973 $ 20,381,041 4,862,673 $ 77,116,603
==================================================================================================================================
Class Y
Shares sold 137,531 $ 2,081,354 877,462 $ 13,711,023
Shares issued on reinvestment -- -- -- --
Shares reacquired (575,291) (9,005,427) (271,207) (4,498,182)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (437,760) $ (6,924,073) 606,255 $ 9,212,841
==================================================================================================================================
Class Z
Shares sold 663,761 $ 10,238,288 1,127,436 $ 17,879,668
Shares issued on reinvestment 615,126 9,343,757 1,913,573 29,779,266
Shares reacquired (1,508,978) (23,198,926) (1,934,377) (30,972,257)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (230,091) $ (3,616,881) 1,106,632 $ 16,686,677
==================================================================================================================================
</TABLE>
22 Smith Barney Appreciation Fund | 2000 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 2000/(1)(2)/ 1999/(2)/ 1998/(2)/ 1997 1996 1995/(2)/
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.73 $15.31 $13.92 $12.85 $11.90 $10.15
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.08 0.15 0.18 0.19 0.19 0.20
Net realized and unrealized gain (loss) (0.01) 2.08 2.62 3.17 2.09 2.75
-----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.07 2.23 2.80 3.36 2.28 2.95
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.14) (0.18) (0.20) (0.19) (0.20)
Net realized gains (0.58) (1.67) (1.23) (2.09) (1.14) (1.00)
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (1.81) (1.41) (2.29) (1.33) (1.20)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,End of Period $ 15.22 $15.73 $15.31 $13.92 $12.85 $11.90
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.43%++ 15.08% 20.45% 26.29% 19.25% 29.26%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $ 3,263 $3,326 $2,959 $2,526 $2,100 $1,933
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.92%+ 0.92% 0.95% 0.95% 1.00% 1.02%
Net investment income 1.01+ 0.96 1.23 1.47 1.52 1.71
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 71% 63% 57% 62% 57%
===================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (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.
23 Smith Barney Appreciation Fund | 2000 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 B Shares 2000/(1)//(2)/ 1999/(2)/ 1998/(2)/ 1997 1996 1995/(2)/
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.66 $15.26 $13.88 $12.81 $11.88 $10.14
------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.02 0.03 0.06 0.07 0.08 0.11
Net realized and unrealized gain (loss) (0.01) 2.06 2.61 3.15 2.08 2.74
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.01 2.09 2.67 3.22 2.16 2.85
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.02) (0.06) (0.06) (0.09) (0.11)
Net realized gains (0.58) (1.67) (1.23) (2.09) (1.14) (1.00)
Total Distributions (0.58) (1.69) (1.29) (2.15) (1.23) (1.11)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.09 $15.66 $15.26 $13.88 $12.81 $11.88
------------------------------------------------------------------------------------------------------------------------------------
Total Return 0.05%++ 14.19% 19.52% 25.31% 18.29% 28.29%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $ 1,503 $1,755 $1,553 $1,410 $1,134 $ 988
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.69%+ 1.70% 1.73% 1.73% 1.78% 1.77%
Net investment income 0.23+ 0.17 0.44 0.68 0.74 0.96
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 71% 63% 57% 62% 57%
====================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (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.
24 Smith Barney Appreciation Fund | 2000 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 L Shares 2000/(1)(2)/ 1999/(2)/ 1998/(2)(3)/ 1997 1996 1995/(2)/
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 15.65 $ 15.26 $ 13.88 $ 12.81 $ 11.88 $ 10.14
Income (Loss) From Operations:
Net investment income 0.02 0.03 0.06 0.09 0.09 0.11
Net realized and unrealized gain (loss) (0.01) 2.05 2.61 3.13 2.08 2.74
------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.01 2.08 2.67 3.22 2.17 2.85
------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.02) (0.06) (0.06) (0.10) (0.11)
Net realized gains (0.58) (1.67) (1.23) (2.09) (1.14) (1.00)
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (1.69) (1.29) (2.15) (1.24) (1.11)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.08 $ 15.65 $ 15.26 $ 13.88 $ 12.81 $ 11.88
------------------------------------------------------------------------------------------------------------------------------------
Total Return 0.05%++ 14.12% 19.52% 25.31% 18.34% 28.29%
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $175,610 $161,491 $83,215 $47,872 $25,505 $14,653
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.72%+ 1.71% 1.73% 1.73% 1.77% 1.77%
Net investment income 0.21+ 0.18 0.44 0.68 0.75 0.96
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 71% 63% 57% 62% 57%
====================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (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.
25 Smith Barney Appreciation Fund | 2000 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 2000/(1)(2)/ 1999/(2)/ 1998/(2)/ 1997/(2)/ 1996/(3)/
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.69 $ 15.28 $ 13.93 $ 12.86 $ 12.10
---------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.10 0.21 0.24 0.27 0.23
Net realized and unrealized gain (loss) (0.00)* 2.07 2.63 3.14 1.89
---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.10 2.28 2.87 3.41 2.12
---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.20) (0.29) (0.25) (0.22)
Net realized gains (0.58) (1.67) (1.23) (2.09) (1.14)
---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (1.87) (1.52) (2.34) (1.36)
---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.21 $ 15.69 $ 15.28 $ 13.93 $ 12.86
---------------------------------------------------------------------------------------------------------------------
Total Return 0.62%++ 15.40% 20.93% 26.70% 17.65%++
---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $89,224 $98,920 $87,041 $56,302 $73,196
---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.58%+ 0.57% 0.59% 0.59% 0.66%+
Net investment income 1.35+ 1.30 1.59 1.79 2.06+
---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 71% 63% 57% 24%
=====================================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (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.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
26 Smith Barney Appreciation Fund | 2000 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 Z Shares 2000/(1)(2)/ 1999/(2)/ 1998/(2)/ 1997/(2)/ 1996/(3)/ 1995/(2)/
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.71 $ 15.29 $ 13.94 $ 12.87 $ 11.91 $ 10.16
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.10 0.21 0.24 0.24 0.24 0.23
Net realized and unrealized gain (loss) (0.00)* 2.08 2.63 3.18 2.09 2.75
-----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.10 2.29 2.87 3.42 2.33 2.98
-----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.20) (0.29) (0.26) (0.23) (0.23)
Net realized gains (0.58) (1.67) (1.23) (2.09) (1.14) (1.00)
-----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.58) (1.87) (1.52) (2.35) (1.37) (1.23)
-----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 15.23 $ 15.71 $ 15.29 $ 13.94 $ 12.87 $ 11.91
-----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.62%++ 15.46% 20.91% 26.72% 19.66% 29.52%
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $255,927 $267,640 $243,609 $194,070 $153,034 $131,357
-----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.58%+ 0.58% 0.59% 0.59% 0.64% 0.77%
Net investment income 1.35+ 1.30 1.59 1.82 1.88 1.96
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 31% 71% 63% 57% 62% 57%
==================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27 Smith Barney Appreciation Fund | 2000 Semi-Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY
APPRECIATION FUND
--------------------------------------------------------------------------------
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
SSB Citi Fund Management LLC
DISTRIBUTOR
Salomon Smith Barney Inc.
PFS Distributors, Inc.
CUSTODIAN
PFPC Trust Company
TRANSFER AGENT
Citi Fiduciary Trust Company
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island
02940-9699
<PAGE>
Smith Barney Appreciation Fund
-------------------------------------------------------------------------------
THE SMITH BARNEY FAMILY OF FUNDS
EQUITY FUNDS
Aggressive Growth Fund
------------------
Appreciation Fund
------------------
Balanced Fund
Concert Peachtree Growth Fund
Concert Social Awareness Fund
Convertible Fund
Financial Services Fund
Fundamental Value Fund
Health Sciences Fund
Large Cap Blend Fund
Large Capitalization Growth Fund
Large Cap Value Fund
Mid Cap Blend Fund
Natural Resources Fund
Premier Selections All Cap Fund
Premier Selections Global Growth Fund
Premier Selections Large Cap Fund
Premium Total Return Fund
S&P 500 Index Fund
Small Cap Blend Fund
Small Cap Growth Fund
Small Cap Value Fund
Technology Fund
TAX-EXEMPT FIXED INCOME FUNDS+
Arizona Municipals Fund*
California Municipals Fund*
Florida Portfolio*
Georgia Portfolio*
Intermediate Maturity CA Municipals Fund*
Intermediate Maturity NY Municipals Fund*
Limited Term Portfolio
Managed Municipals Fund
Massachusetts Municipals Fund*
Municipal High Income Fund
National Portfolio
New Jersey Municipals Fund*
New York Portfolio*
Oregon Municipals Fund*
Pennsylvania Portfolio*
MONEY MARKET FUNDS
California Money Market Portfolio*
Institutional Cash Management Fund
Massachusetts Money Market Portfolio*
Municipal Money Market
Money Funds,Inc.
TAXABLE FIXED-INCOME FUNDS
Adjustable Rate Government Income Fund
Diversified Strategic Income Fund
Government Securities Fund
High Income Fund
Investment Grade Bond Fund
Managed Governments Fund
Short-Term High Grade Bond Fund
Total Return Bond Fund
U.S. Government Securities Fund
GLOBAL/INTERNATIONAL FUNDS**
Emerging Markets Portfolio
European Portfolio
Global Government Bond Portfolio
Hansberger Global Small Cap Value Fund
Hansberger Global Value Fund
International Equity Portfolio
Pacific Portfolio
CONCERT ALLOCATION SERIES
Global Portfolio
High Growth Portfolio
Growth Portfolio
Balanced Portfolio
Conservative Portfolio
Income Portfolio
+ A portion of the income from the tax-free funds many be subject to federal,
state and local taxes.
* Not available in all states.
** Investments in non-U.S. securities involve risks relating to political,
social and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. issuers and markets are
subject.
This report is submitted for the general information of the shareholders of
Smith Barney Appreciation Fund Inc., but it also may 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, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
SMITH BARNEY APPRECIATION FUND
Smith Barney Mutual Funds
388 Greenwich Street,MF-2
New York,New York 10013
For complete information on any of the above Smith Barney Mutual Funds,
including management fees and expenses, call or write for a free prospectus.
Read it carefully before you invest or send money.
1-888-GET-SERIOUS
www.smithbarney.com/mutualfunds
[LOGO OF SOLOMON SMITH BARNEY]
A member of citigroup[logo]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
