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Smith Barney Hansberger
Global Value Fund
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Smith Barney Hansberger
Global Small Cap
Value Fund
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SEMI-ANNUAL REPORT
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October 31, 1998
[LOGO] [LOGO]
Hansberger Smith Barney
Global Mutual Funds
Investors, Inc. Investing for your future
Every day(R)
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Smith Barney
Hansberger Funds
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"Globalization of the world economy has continued at an unprecedented pace since
the fall of the Berlin wall. However, globalization does not always proceed
smoothly. The long-term commercialization and growing interdependence of the
world's economies can often create major social and political problems in
specific countries over the short term."
Thomas Hansberger, CFA, CIC
Chairman and Chief Executive Officer
Hansberger Global Investors, Inc.
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The Smith Barney Hansberger Global Value Fund's primary investment objective is
long-term capital growth. The Fund seeks to achieve its objective by investing
primarily in the stocks of U.S. and foreign issuers, which, in the opinion of
Mutual Management Corp., the Fund's investment manager, and Hansberger Global
Investors, Inc., the Fund's sub-adviser, are undervalued.
NASDAQ Symbol
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Class A SGLAX
Class B SGLBX
Class L SGLCX
The Smith Barney Hansberger Global Small Cap Value Fund's primary investment
objective is long-term capital growth. The Fund seeks to achieve this objective
by investing primarily in equity securities of U.S. and foreign issuers with
relatively small market capitalizations (i.e., share price times the number of
equity securities outstanding). These are equity securities which, in the
opinion of Mutual Management Corp., the Fund's investment manager, and
Hansberger Global Investors, Inc., the Fund's sub-investment adviser, are
undervalued.
NASDAQ Symbol
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Class B SCVBX
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WHAT'S INSIDE
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Shareholder Letter ........................................................ 1
Smith Barney Hansberger Global Value Fund
Portfolio Manager Commentary ............................................ 3
Historical Performance .................................................. 7
Smith Barney Hansberger Global Small Cap
Value Fund
Portfolio Manager Commentary ............................................ 10
Historical Performance .................................................. 13
Schedules of Investments .................................................. 16
Statements of Assets and Liabilities ...................................... 26
Statements of Operations .................................................. 27
Statements of Changes in Net Assets ....................................... 28
Notes to Financial Statements ............................................. 30
Financial Highlights ...................................................... 36
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Shareholder Letter
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[PHOTO] [PHOTO]
HEATH B. MCLENDON THOMAS L. HANSBERGER, CFA, CIC
Chairman Chairman and Chief Executive
Officer Hansberger Global
Investors, Inc.
Dear Shareholder:
We are pleased to present the semi-annual shareholder report for the Smith
Barney Hansberger Global Value Fund and the Smith Barney Hansberger Global Small
Cap Value Fund ("Funds") for the period ended October 31, 1998. Individual
commentaries for each Fund follow.
Classic Series Funds
The Smith Barney Hansberger Global Value Fund and the Global Small Cap Value
Fund are part of the Classic Series of Smith Barney Mutual Funds. The Classic
Series Funds are mutual funds whose investment decisions are determined by
experienced portfolio managers based on each fund's investment objectives and
guidelines. Funds in the Smith Barney Classic Series invest across asset classes
and sectors, utilizing a range of strategies in order to achieve their
objectives.
Global Markets Update
Globalization of the world economy has continued at an unprecedented pace since
the fall of the Berlin wall. However, globalization does not always proceed
smoothly. The long-term commercialization and growing interdependence of the
world's economies can often create major social and political problems in
specific countries over the short term. For example, U.S. autoworkers become
concerned when they see more automobiles being produced in Japan and rice
farmers in Japan also become more alarmed when rice imports from California
increase.
Social problems in Detroit and in Japan can quickly translate into serious
political problems and result in rising protectionism and economic contraction.
Ideally the commercialization of the global economy should occur gradually over
time to help minimize any unforeseen economic, social and political disruptions.
Moreover, the role of finance with respect to globalization can also be
disruptive. Because of the speed of technology and communications today, the
movement of capital around the world is virtually instantaneous, which is good
for the capital markets, but can create short-term aberrations.
In many countries, financial market inefficiencies was the catalyst for recent
stock price volatility. Too much capital went into developing countries too
quickly and despite the huge social costs, unregulated hedge funds attacked
currencies in concerted actions in order to increase short-term profits. These
conditions resulted in the widely publicized problems experienced in Asia, and,
later, in Eastern Europe and Latin America. It is important to note, however,
that these market inefficiencies also create some of the best opportunities for
global value investors.
We are now beginning to see a concerted global effort to correct the current
imbalances in the global economy. And while this workout may take some time and
individuals may suffer in the short term, we nonetheless remain convinced that
the long-term, higher standards of living and greater freedoms that come from
free-market global capitalism are worth the price.
The first half of 1998 saw good returns from some developed markets while
emerging market performance for the most part lagged. The global
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Smith Barney Hansberger Funds 1
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financial crisis spread in late summer and negatively impacted all the world's
stock markets. Russia's problems, a major hedge fund rescue in the United
States, the Japanese recession, currency controls in Malaysia and global
deflation dominated the headlines. The markets bottomed out in mid-October when
the Federal Reserve Board cut short rates in the U.S. Since that time, the
world's stock markets have rebounded strongly, underscoring the market's higher
volatility during the reporting period.
Is the worst over? We are concerned about some Latin American and Eastern
European markets that face unique challenges. However, we are beginning to see
the changes throughout Asia that could lead the global economy out of its
current problems. Because of the turbulent and uncertain market conditions
during the period under review, valuations in many companies around the world
have become very compelling. We believe that these undervalued, world-class
companies will provide investors with tremendous opportunities in the years
ahead.
We encourage you to visit our improved Web site at www.smithbarney.com. In
closing, your support of our investment management approach is genuinely
appreciated. We at Hansberger Global Investors ("HGI") and Smith Barney Mutual
Funds will continue to work hard to deliver competitive total returns for our
shareholders over the long term using our value investing approach.
Sincerely,
/s/ Heath B. McLendon /s/ Thomas L. Hansberger, CFA, CIC
Heath B. McLendon Thomas L. Hansberger, CFA, CIC
Chairman Chairman and Chief Executive Officer
Hansberger Global Investors, Inc.
November 20, 1998
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2 1998 Semi-Annual Report to Shareholders
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Smith Barney Hansberger Global Value Fund
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Current Team Members
Thomas L. Hansberger, CFA, CIC, Chairman and Chief Executive Officer of
Hansberger Global Investors, Inc. ("HGI").
Mr. Hansberger is responsible for the management of various separate accounts
and mutual funds. Before forming HGI, Mr. Hansberger served as Chairman,
President and Chief Executive Officer of Templeton Worldwide, Inc., the parent
holding company of the Templeton group of companies. Mr. Hansberger graduated
from Miami University (Oxford, OH) in 1955 and served in the U.S. Air Force.
James E. Chaney, Chief Investment Officer of HGI
Mr. Chaney serves as Portfolio Manager for the Hansberger Institutional Fund and
separate institutional accounts. Prior to joining HGI, Mr. Chaney was Executive
Vice President for the Templeton organization and a senior member of the
Portfolio Management/Strategy Committee. Mr. Chaney holds a Bachelors of Science
in Civil Engineering from the University of Massachusetts - Amherst, a Masters
of Science degree from Northeastern University and an MBA from Columbia
University and is a member of the Beta Gamma Sigma Honor Society.
John Hock, CFA, Senior Vice President of Research of HGI
Mr. Hock is a research analyst and assistant portfolio manager. His research
responsibilities include the coverage of several global industries and
geographic responsibility for Southern Europe. Prior to joining HGI, Mr. Hock
was a Vice President and Senior Analyst in the Global Securities Research and
Economic Group at Merrill Lynch. Mr. Hock received his Bachelors of Science in
Applied Economics from Cornell University and his MBA in Finance from New York
University. He is a Chartered Financial Analyst and a member of the Association
for Investment Management and Research.
Francisco Alzuru, Managing Director of HGI, Latin America
Mr. Alzuru is a portfolio manager and research analyst. His research
responsibilities include several global industries and geographic responsibility
for Mexico and most South American countries. Prior to joining HGI, Mr. Alzuru
was a Vice President and Senior Research Analyst at Vestcorp Partners, a Latin
American-based investment bank, covering Latin America. Mr. Alzuru received a
Bachelors of Science in Urban Planning from the Universidad Simon de Bolivar in
Caracas, Venezuela and a Masters in Finance from Oklahoma City University in
Oklahoma. He is a member of the Association for Investment Management and
Research and the Financial Analysts Society of South Florida.
Performance Update
For the six months ended October 31, 1998, the Hansberger Global Value Fund's
("Global Value Fund") Class A, Class B and Class L shares (excluding sales
charges) had negative total returns of 20.79%, 21.14% and 21.14%, respectively.
A comparative benchmark's return was a negative 4.38% for the Morgan Stanley
Capital International ("MSCI") All-Country World Free Index over the same
period. (The MSCI All-Country World Free Index represents market performance in
both the developed and the emerging markets in Africa, Asia, Australia, Europe,
North America and South America.)
As of October 31, 1998, the Global Value Fund owned securities of 149 issuers in
39 countries. In our opinion, the difference between the performance of the Fund
and the MSCI All-Country Index is largely attributable to the Fund's relatively
low exposure to U.S. stocks and its relatively high exposure to the stocks of
companies domiciled in Australia/New Zealand, Asia, and other developing
countries. In addition, the difference in performance between the Global Value
Fund and the MSCI All-Country Index can also be explained by our holdings in
commodity-
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Smith Barney Hansberger Funds 3
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sensitive industries where we are finding outstanding opportunities in many
world-class companies.
Portfolio Review
Since the Fund began, our investment management team continues to focus on
undervalued companies with favorable long-term earnings prospects. Our
experience suggests that fundamentals and valuations are the primary
determinants of stock price performance over the long term.
However, we have been in an environment that has rewarded "growth and momentum"
investors at the expense of "value" investors during the past few years. In our
opinion, many stocks that have generated high levels of earnings growth have
appreciated to levels that we believe already discount their long-term earnings
prospects. We do not believe this is sustainable and we believe that
fundamentals may reemerge as the primary determinant of stock price performance.
More recently, very expensive stock markets that have been considered overvalued
on fundamental valuation measures (i.e., P/E, P/CF, P/BV and dividend yield)
began going down in July and August while many attractive stock markets based on
normalized earnings and long-term prospects began to do better than these
previously overvalued markets on a relative basis.
We believe the Global Value Fund is well-positioned to capitalize on this trend
due to its holdings in 140 undervalued companies worldwide. Moreover, the
geographic exposure of the Fund is well-diversified among 39 countries.
United States
The Global Value Fund's portfolio is constructed on a stock-by-stock basis, with
geographic and industry representation largely resulting from where we are
finding the most fundamentally attractive and undervalued companies. Typically,
under normal market conditions, stocks are held for three to seven years on
average and portfolio turnover is generally low.
The combination of our long-term, value-oriented investment strategy and the
conditions of global stocks at the Fund's inception date has led us to avoid
many high-priced U.S. stocks in favor of what we believe are better-value
opportunities in other areas of the world. Given the high P/E ratios of many
U.S. stocks at the end of last year, our domestic stock exposure was limited
with no dominant industry representation. (A P/E ratio is the price of a
company's stock divided by its earnings per share.)
Our largest U.S. holding was GTE, representing about 1.5% of the Fund's
portfolio. During the course of the year, we maintained our exposure and took
advantage of the market correction that began in the third quarter of 1998 to
add to new positions in Schlumberger, a depressed oil services company, and
Republic Services Inc., a consolidator in the domestic waste management
industry.
Europe
European stocks contributed favorably to the Fund's performance this year, but
we are finding it increasingly difficult to identify compelling values in
Europe. Our interest in the region has gradually shifted from Southern Europe to
Northern Europe with an emphasis on specific opportunities in the Nordic
countries and the U.K. The nations of Southern Europe, including Italy, Greece,
Spain and Portugal, have received great attention since it is considered to be
the primary beneficiary of the upcoming European Monetary Union ("EMU"). During
our European research visits, we discovered that the managements of many
companies share our belief that investor expectations may be too high in Europe.
Accordingly, we have taken profits in many of our Southern European holdings and
we have redeployed proceeds to what we perceive are better opportunities,
further north.
Value opportunities exist in the Nordic countries, where depressed oil, paper
and forest product prices have hampered overall market conditions. Within this
area, the Fund's exposure has been in these depressed sectors as well as banks
where stocks are selling at significant discounts to their pan-European peers.
The
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4 1998 Semi-Annual Report to Shareholders
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largest individual European country exposure in the Fund is in the U.K.
where high interest rates, a strong currency and a domestic economic slowdown
have led to depressed valuations. A reversal of these trends, particularly when
compared with continental European neighbors, may be a potential catalyst for
these stocks to perform better. Our largest holdings in the U.K. include Cable
and Wireless, a holding company with significant telecommunications assets
worldwide, and Nycomed Amersham, a leading pharmaceutical company that is
selling at depressed valuations.
Japan
There is tremendous skepticism surrounding the outlook for economic and stock
market prospects in Japan. The economy is in recession, consumer confidence is
low and pricing power has diminished; yet Japan's stock market has already
responded to many of these concerns by falling from its peak of 38,900 in 1989
to 13,500 at the end of October. We are becoming cautiously optimistic about
some Japanese stocks that have typically been overlooked, and which have the
ability to be restructured and are domestically oriented.
Developing Markets
Following the roughly 57% correction in Asian emerging markets during 1997, we
gradually built positions in quality companies that appear to have been
oversold. We took advantage of the volatility that spilled over into other
emerging markets to establish modest positions in Eastern Europe and to a lesser
degree in Latin America as well. Contributing to our interest in the stocks
domiciled in emerging markets is the fact that these low P/E ratios exist at a
time when corporate earnings are at depressed levels.
We believe the true earnings power of these companies is far from being
recognized in their low valuations. Aside from many of these companies being
undervalued, many emerging market currencies have become undervalued as well.
The types of companies that we have concentrated on in the emerging markets are
leaders in their respective industries or regions.
One of our core holdings has been Korea's Pohang Iron and Steel ("POSCO"), the
second largest steel manufacturer in the world. POSCO had been recognized as the
world's lowest cost producer when the Korean Won was at 800 Won/$U.S. The
subsequent devaluation of the Korean Won to 1320 has added even further to its
competitiveness. POSCO's stock price has gained 50% from its all-time low in
July, yet its valuation remains below its peer group and we remain steadfast
holders. Although the full-fledged economic recoveries in many emerging
countries might be a few years away, we believe that stock prices will begin to
recognize the accelerating sales volumes and long-term earnings prospects long
before economies come into full swing.
October 1998 illustrates the velocity at which these stocks can recover, as
evidenced by gains of 55%, 43%, 41% and 39% in Indonesia, the Philippines,
Thailand and Korea, respectively. Within the emerging markets, we have
identified the most attractive opportunities in Asia followed by Eastern Europe
and Latin America. Although no guarantees can be given, we believe that the
recovery from extremely depressed valuations in many stocks in these countries
should contribute meaningfully to the Global Value Fund's longer-term
performance.
The Impact of Depressed Commodity Prices
Depressed commodity prices have had adverse effects on markets far beyond the
Nordic region, particularly in the developing countries, Australia and New
Zealand. In many of these stock markets, we find an attractive combination of
overly depressed economies, attractive stock valuations and undervalued
currencies. We have seen strong recoveries in certain areas during the last
month, but price levels remain at a fraction of normal and potential levels. The
timing of the recovery is difficult to identify, but it is clear that extreme
undervaluations exist.
The Commodity Research Bureau's ("CRB") Commodity Index reached a 21-year low
and the value of the Australian dollar is near its lowest levels seen in
decades. In neighboring Canada, the Canadian dollar
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Smith Barney Hansberger Funds 5
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fell to its lowest level in many years. In light of this volatility and
increasingly attractive valuations, we have increased our exposure in Australia
and New Zealand, and we remain committed to our holdings in several emerging
markets.
Conclusion
We think that the Global Value Fund is well-positioned for the future. As
previously noted, the Fund's portfolio has been constructed based upon company
fundamentals and valuations with a three-to seven-year investment horizon. Our
research team has performed extensive due diligence and visited 143 companies
and various government officials during recent months in Austria, Belgium,
Chile, Czech Republic, Denmark, Finland, Hong Kong, Indonesia, Japan, Malaysia,
Mexico, Norway, the Philippines, Peru, Russia, Slovakia, South Korea, Singapore,
Sweden, Switzerland, Thailand and the U.K. as well as the U.S.
Our strong enthusiasm about the prospects for many of our holdings resemble what
we experienced when investing in Hong Kong in the aftermath of Tianamen Square,
U.S. banking stocks in the early 1990s and European banks in the aftermath of
the European Monetary System debacle in 1992. After experiencing several
difficult quarters, our patience was generously rewarded then. We expect
long-term investors who can tolerate the higher volatility associated with
global investing may ultimately be rewarded for their patience as well.
Please see pages seven through nine for additional Global Value Fund performance
information.
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6 1998 Semi-Annual Report to Shareholders
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Historical Performance -- Class A Shares
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Net Asset Value
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Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
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10/31/98 $12.99 $10.29 $0.00 (20.79)%
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Inception* -- 4/30/98 11.40 12.99 0.02 14.13
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Total $0.02
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Historical Performance -- Class B Shares
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Net Asset Value
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Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
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10/31/98 $12.96 $10.22 $0.00 (21.14)%
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Inception* -- 4/30/98 11.40 12.96 0.02 13.87
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Total $0.02
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Historical Performance -- Class L Shares(2)
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Net Asset Value
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Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
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10/31/98 $12.96 $10.22 $0.00 (21.14)%
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Inception* -- 4/30/98 11.40 12.96 0.02 13.87
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Total $0.02
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Historical Performance -- Class Y Shares
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Net Asset Value
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Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
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10/31/98 $13.00 $10.31 $0.00 (20.69)%
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Inception* -- 4/30/98 12.44 13.00 0.00 4.50
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Total $0.00
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It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
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Smith Barney Hansberger Funds 7
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Average Annual Total Returns+
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Without Sales Charges(1)
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Class A Class B Class L(2) Class Y
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Period Ended 10/31/98 (20.79)% (21.14)% (21.14)% (20.69)%
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Inception* through 10/31/98 (9.59) (10.21) (10.21) (17.72)
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With Sales Charges(3)
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Class A Class B Class L(2) Class Y
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Period Ended 10/31/98 (24.73)% (25.08)% (22.71)% (20.69)%
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Inception* through 10/31/98 (14.11) (14.69) (12.03) (17.72)
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(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 charge ("CDSC") with respect to Class
B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) 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 initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the first year of purchase.
+ Total returns are not annualized, as it may not be representative of the
total return for the year.
* The inception date for Class A, B and L shares is December 19, 1997 and
the inception date for Class Y shares is March 10, 1998.
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8 1998 Semi-Annual Report to Shareholders
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Global Value Fund at a Glance (unaudited)
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Growth of $10,000 Invested in Class A, B and L Shares of the
Global Value Fund vs. MSCI All Country World Free Index+
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December 1997--October 1998
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Global Value Fund - Global Value Fund - Global Value Fund - MSCI All Country
Class A Class B Class L World Free Index
<S> <C> <C> <C> <C>
Dec 19 1997 9,500 9,500 9,900 10,000
Dec 1997 9,649 9,657 10,057 10,131
Jan 1998 9,582 9,578 9,978 10,354
Feb 1998 10,292 10,316 10,716 11,062
Mar 1998 10,734 10,773 11,173 11,534
Apr 1998 10,842 10,887 11,287 11,643
May 1998 10,208 10,210 10,610 11,422
Jun 1998 9,524 9,483 9,881 11,627
Jul 1998 9,390 9,349 9,742 11,631
Aug 1998 7,829 7,788 8,116 10,001
Sep 1998 7,612 7,571 7,889 10,200
Oct 31 1998 8,589 8,531 8,890 11,132
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A, B and L shares
at inception on December 19, 1997, assuming deduction of the maximum
initial sales charge of 5.00% for Class A. It also assumes the deduction
of the maximum 5.00% and 1.00% CDSCs for Class B and L shares,
respectively, and the reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 1998. The Morgan Stanley Capital
International ("MSCI") All Country World Free Market Index includes 46
markets, of which emerging markets represent approximately 9.5% and
excludes shares which are not readily purchased by non-local investors.
The performance of the Fund's other classes may be greater or less than
the 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 values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Top Ten Holdings* As of October 31, 1998
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1. Petroleum Geo-Services ASA 1.8%
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2. Yamanouchi Pharmaceutical Co. Ltd. 1.8
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3. Koninklijke KPN NY 1.8
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4. Hutchison Whampoa Ltd. 1.7
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5. GTE Corp. 1.5
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6. City Developments Ltd. 1.5
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7. United Overseas Bank Ltd. 1.4
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8. Marubeni Corp. 1.4
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9. Cable & Wireless PLC 1.4
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10. Philippines Long Distance Telephone Co. 1.3
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* As a percentage of total stocks.
Investment Allocation as of October 31, 1998**
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[PIE GRAPH APPEARS HERE]
Africa 1.3%
Repurchase Agreement 2.9%
Europe 43.1%
Asia/Pacific 32.9%
North America 15.7%
South America 4.1%
** As a percentage of total investments.
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Smith Barney Hansberger Funds 9
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Smith Barney Hansberger Global Small Cap Value Fund
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Current Team Members
Lauretta Reeves, CFA, Managing Director of Research of HGI
Ms. Reeves' research responsibilities include several global industries and
coverage of the United Kingdom and Central European markets. Prior to joining
HGI, Ms. Reeves was Senior Vice President at Templeton in the research and
portfolio management group. Ms. Reeves received her MBA from Nova-Southeastern
University and her undergraduate degree in business management from Florida
International University. Ms. Reeves is a Chartered Financial Analyst and a
member of the Association for Investment Management and Research.
Vladimir Tyurenkov, Managing Director of HGI, Eastern Europe & Russia
Prior to joining HGI, Mr. Tyurenkov spent several years working for the Russian
Government and on the Pepperdine University Russian Conversion and Privatization
Program. Mr. Tyurenkov has an MBA specializing in Finance from Pepperdine
University in California. Additionally, he holds a Master's in Computer Science
from Moscow State Technical University.
Robert Mazuelos, Senior Vice President of Research of HGI
Mr. Mazuelos is a research analyst and assistant portfolio manager. His research
responsibilities include several global industries and geographic responsibility
for Central America, Peru and Chile. Prior to joining HGI, Mr. Mazuelos was a
performance analyst at Templeton Investment Counsel, Inc. where he was
responsible for return analysis on separate accounts and mutual funds. Mr.
Mazuelos received a Bachelors of Science in Business Administration from the
University of Florida. He is a member of the Association for Investment
Management and Research and the Financial Analysts Society of South Florida.
Victoria Gretsky, Vice President of Research of HGI
Ms. Gretsky is a research analyst. Her responsibilities include the analysis of
key markets in Eastern Europe and Russia, as well as global industries. Prior to
joining HGI, she was a research analyst for Optimum Consulting, a Russia-based
firm that specialized in restructuring Russian companies during privatization.
Ms. Gretsky holds a Masters in Computer Science from Moscow State Technical
University.
Performance Update
For the period ended October 31, 1998, the Hansberger Global Small Cap Value
Fund's ("Global Small Cap Value") Class A, Class B and Class L shares (excluding
sales charges) had negative returns of 25.06%, 25.36% and 25.36%, respectively.
A comparative benchmark's return was a negative 14.80% Salomon Smith Barney
World EMI Index (Small-Cap) during the same time period. As of October 31, 1998,
the Fund owned securities of 88 issuers in 29 countries.
The difference between the performance of the Global Small Cap Value Fund and
the Salomon Smith Barney World EMI Index ("Small-Cap") is largely attributable
to the Fund's relatively low exposure to stocks in the U.S. and the relatively
high exposure in stocks of companies domiciled in Australia/New Zealand, Asia
and developing countries in general.
Portfolio Review
The Global Small Cap Value Fund commenced operations on December 19, 1997.
Adhering to the HGI style of value investing, the Fund's portfolio was
constructed from the bottom up, utilizing our entire team of investment
professionals to select stocks trading at low prospective normalized P/E ratios.
(Bottom-up investing focuses on the potential outstanding performance of
individual companies rather than considering the impact of major economic
trends. A P/E ratio is the price of a company's stock divided by its earnings
per share.)
Our country and industry weightings are the result of where we found the best
values at the time of new cash inflows into the Global Small Cap Value Fund or
where we redeployed our cash after we sold stocks.
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10 1998 Semi-Annual Report to Shareholders
<PAGE>
United States
Consistent with our investment philosophy, turnover in the Fund's portfolio
since inception was relatively minimal. The largest Fund weighting remains in
the U.S. Contrary to larger-sized company stocks in the U.S., smaller-sized
companies were still trading at reasonable valuations at the beginning of 1998.
As the year progressed and market volatility increased, investors switched into
better known index names, further depressing smaller-sized company stock prices.
As a result, we were able to further diversify our U.S. holdings, which may
prove prudent in light of a potential slowdown in the U.S. economy.
The Fund's current U.S. exposure is primarily in the business and public
services, apparel, metals, retailing and food industries. Since many of the U.S.
stocks currently under consideration are trading at one-half the valuation of
their index counterparts, we believe that North America should remain an
opportunistic market for small-cap value investing in the near future.
Europe
Europe is the largest region in which the Global Small Cap Value Fund is
invested, with the U.K. and Germany being two of the larger markets represented.
The economy of the U.K. has lagged that of the continent in part due to
England's decision not to participate in the upcoming Euro, its strong currency
and high interest rates. As Great Britain's interest rates begin to converge
with those of the European continent, we anticipate that the U.K. market will
eventually perform well. Within Germany, we have invested in several
construction and building material companies. These industries are currently
depressed due to a lack of domestic demand and ties to emerging market projects.
In our view, improvement in Eastern European and Asian economies and a long
awaited tax cut in Germany should facilitate a rebound in construction stock
prices.
We have underweighted the Southern European stock markets, such as France and
Italy, because these stock markets have risen ahead of the implementation of the
Euro, and it is difficult to find stocks with compelling valuations within those
countries. We have overweighted the Scandinavian markets which, excluding
Finland, will not be adopting the Euro next year. The stocks we believe
represent the best values in this region are in the forest products, metals and
industries related to natural resources. Most commodity prices have been
depressed due to excess supply and dropping demand in Asia. These stocks should
do well when supply and demand return to balance for basic materials.
Asia
We also took advantage of the severe drop in the Asian markets to add to
resource-related companies in the region, particularly in New Zealand. Our
biggest exposure in this region, however, is Hong Kong, where we have purchased
retailing, leisure, and business and public service companies. In Japan, we hold
positions in construction and engineering stocks. Although interest-rate cuts
and bank restructurings have caused these markets to rebound, our recent
analysis indicates that many Asian stocks are still trading at too severe of a
discount to their peers in other parts of the world. We anticipate that positive
fiscal action in Japan should help stabilize Asia's financial markets and lead
to competitive performance.
Developing Markets
Asian, Eastern European and Latin American emerging market investments stood at
less than 10% of the Global Small Cap Value Fund's portfolio at fiscal year-end.
Although in the short run investments in these regions have had a negative
impact on the Global Small Cap Value Fund's portfolio, we believe a prudent
allocation to these markets will enhance return and increase diversification
over the long run. Smaller-sized companies normally have a higher risk profile
in developing markets and we will remain selective whenever we add to the Global
Small Cap Value Fund's emerging market exposure.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 11
<PAGE>
Conclusion
Although this has been a difficult year for global small-cap value investing, it
has been an excellent year for assembling a portfolio of stocks whose underlying
companies have great prospects and are trading at a significant discount to
their potential value. We believe that as the markets eventually stabilize and
investors become more selective, smaller-sized company stock valuations should
begin to approach that of larger-sized companies.
Please see pages 13 through 15 for additional Global Small Cap Value Fund
performance information.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
================================================================================
10/31/98 $12.37 $ 9.27 $0.00 (25.06)%
- --------------------------------------------------------------------------------
Inception* -- 4/30/98 11.40 12.37 0.01 8.64
================================================================================
Total $0.01
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
================================================================================
10/31/98 $12.34 $ 9.21 $0.00 (25.36)%
- --------------------------------------------------------------------------------
Inception* -- 4/30/98 11.40 12.34 0.01 8.38
================================================================================
Total $0.01
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares(2)
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
================================================================================
10/31/98 $12.34 $ 9.21 $0.00 (25.36)%
- --------------------------------------------------------------------------------
Inception* -- 4/30/98 11.40 12.34 0.01 8.38
================================================================================
Total $0.01
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
Net Asset Value
--------------------
Beginning End Income Total
Period Ended of Period of Period Dividends Returns+(1)
================================================================================
10/31/98 $12.37 $ 9.28 $0.00 (24.98)%
- --------------------------------------------------------------------------------
Inception* -- 4/30/98 11.74 12.37 0.00 5.37
================================================================================
Total $0.00
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 13
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
Without Sales Charges(1)
--------------------------------------------
Class A Class B Class L(2) Class Y
================================================================================
Period Ended 10/31/98 (25.06)% (25.36)% (25.36)% (24.98)%
- --------------------------------------------------------------------------------
Inception* through 10/31/98 (18.59) (19.11) (19.11) (21.36)
================================================================================
With Sales Charges(3)
--------------------------------------------
Class A Class B Class L(2) Class Y
================================================================================
Period Ended 10/31/98 (28.80)% (29.10)% (26.82)% (24.98)%
- --------------------------------------------------------------------------------
Inception* through 10/31/98 (22.66) (23.15) (20.76) (21.36)
================================================================================
(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) On June 12, 1998, Class C shares were renamed Class L shares.
(3) 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 initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC, which
applies if shares are redeemed within the first year of purchase.
+ Total returns are not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B and L shares is December 19, 1997 and the
inception date for Class Y shares is March 10, 1998.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Global Small Cap Value Fund at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A, B and L Shares of the
Global Small Cap Value Fund vs. Salomon Smith Barney World Extended Market
Index+
- --------------------------------------------------------------------------------
December 1997--October 1998
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Global Value Fund - Global Value Fund - Global Value Fund - SSB World Extended
Class A Class B Class L Market Index
<S> <C> <C> <C> <C>
Dec 19 1997 9,500 9,500 9,900 10,000
Dec 1997 9,528 9,530 9,930 10,243
Jan 1998 9,069 9,061 9,443 10,313
Feb 1998 9,653 9,653 10,053 11,084
Mar 1998 10,112 10,118 10,518 11,578
Apr 1998 10,321 10,338 10,738 11,659
May 1998 10,095 10,092 10,492 11,446
Jun 1998 9,461 9,429 9,825 11,309
Jul 1998 9,044 9,003 9,382 10,850
Aug 1998 7,592 7,551 7,869 9,123
Sep 1998 7,392 7,351 7,660 9,361
Oct 31 1998 7,734 7,685 8,008 9,933
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A, B and L shares
at inception on December 19, 1997, assuming deduction of the maximum
initial sales charges of 5.00% for Class A. It also assumes the deduction
of the maximum 5.00% and 1.00% CDSCs for Class B and L shares,
respectively, and the reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 1998. The Salomon Smith Barney
World Extended Market Index is a component of the Broad Market Index
("BMI") which defines the small-capitalization stock universe or remaining
20% of the capital of each country within the index. The BMI universe
spans 22 countries and includes listed shares of countries with a total
available market capitalization of at least the local equivalent of $100
million on the last business day on May each year. The performance of the
Fund's other classes may be greater or less than the 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 values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
Top Ten Holdings* As of October 31, 1998
- --------------------------------------------------------------------------------
1. Owens & Minor, Inc. 2.9%
- --------------------------------------------------------------------------------
2. Cafe De Coral Holdings 2.4
- --------------------------------------------------------------------------------
3. Tecumseh Products Co. 2.2
- --------------------------------------------------------------------------------
4. Somerfield PLC 2.2
- --------------------------------------------------------------------------------
5. The Geon Co. 2.1
- --------------------------------------------------------------------------------
6. Sparebanken NOR 2.1
- --------------------------------------------------------------------------------
7. Sherwood Group PLC 2.0
- --------------------------------------------------------------------------------
8. Learning Company, Inc. 1.9
- --------------------------------------------------------------------------------
9. Financiere Marc de Lacharriere 1.9
- --------------------------------------------------------------------------------
10. Daito Trust Construction Co. Ltd. 1.9
- --------------------------------------------------------------------------------
* As a percentage of total stocks.
Investment Allocation as of October 31, 1998**
- --------------------------------------------------------------------------------
[PIE GRAPH APPEARS HERE]
Asia/Pacific 19.0%
South America 1.4%
Repurchase Agreement 8.4%
Europe 46.7%
North America 24.5%
** As a percentage of total investments.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 15
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
STOCK -- 97.1%
Argentina -- 1.6%
50,000 Telecom Argentina SA ADR $ 1,612,500
50,000 YPF Sociedad Anonima ADR 1,446,875
- --------------------------------------------------------------------------------
3,059,375
- --------------------------------------------------------------------------------
Australia -- 2.6%
252,807 Broken Hill Proprietary Co. Ltd. 2,139,579
108,425 National Australia Bank Ltd. 1,430,426
257,162 Orica Ltd. 1,411,803
- --------------------------------------------------------------------------------
4,981,808
- --------------------------------------------------------------------------------
Austria -- 2.3%
11,000 Bank Austria AG 598,498
34,200 Boehler - Uddeholm AG 1,611,310
23,800 VA Technologie AG 2,205,878
- --------------------------------------------------------------------------------
4,415,686
- --------------------------------------------------------------------------------
Brazil -- 1.1%
55,000 Companhia Vale do Rio Doce ADR 829,928
15,700 Telecomunicacoes Brasileiras SA Telebras ADR 1,192,218
- --------------------------------------------------------------------------------
2,022,146
- --------------------------------------------------------------------------------
Canada -- 3.0%
77,000 Alcan Aluminium Ltd. 1,949,062
165,000 Methanex Corp.(a) 959,922
127,000 Moore Corp. Ltd. 1,436,687
296,137 Noranda Forest Inc. 1,263,414
- --------------------------------------------------------------------------------
5,609,085
- --------------------------------------------------------------------------------
Chile -- 0.4%
35,000 Cia de Telecomunicaciones de Chile SA-ADR 767,812
- --------------------------------------------------------------------------------
China -- 1.6%
130,000 Huaneng Power International, Inc.(a) 1,787,500
236,500 Shandong Huaneng Power Co. Ltd. ADR 1,212,062
- --------------------------------------------------------------------------------
2,999,562
- --------------------------------------------------------------------------------
Colombia -- 0.2%
61,000 Bancolombia SA ADR 301,187
- --------------------------------------------------------------------------------
Croatia -- 0.7%
88,800 Pliva DD GDR 1,305,360
- --------------------------------------------------------------------------------
Czech Republic -- 0.6%
20,000 CEZ AS--Class A Shares 455,178
165,000 Komercni Banka AS GDR(a) 705,375
- --------------------------------------------------------------------------------
1,160,553
- --------------------------------------------------------------------------------
Denmark -- 1.1%
16,000 Forsikringsselskabet Codan (The Codan Group) 2,033,004
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
Finland -- 2.3%
182,000 Kemira Oyj $ 1,499,057
195,000 Metsa-Serla Oyj, Class B Shares 1,474,546
114,100 The Rauma Group Oyj 1,347,414
- --------------------------------------------------------------------------------
4,321,017
- --------------------------------------------------------------------------------
France -- 3.8%
4,000 Bail Investissement 593,125
9,500 Compagnie de Saint Gobain 1,405,254
3,200 Eridania Beghin-Say SA(a) 575,850
17,916 Lafarge SA 1,831,255
29,100 Scor SA 1,668,393
2,100 Societe Eurafrance SA 1,066,060
- --------------------------------------------------------------------------------
7,139,937
- --------------------------------------------------------------------------------
Germany -- 4.1%
40,400 BASF AG 1,705,083
51,000 Bilfinger & Berger Bau AG 1,040,816
5,385 Fuchs Petrolub AG Oel & Chemie, Preferred Shares 531,606
32,000 Hoechst AG 1,335,104
97,500 Pfleiderer AG 1,995,682
65,000 Tarkett Sommer AG 1,069,466
- --------------------------------------------------------------------------------
7,677,757
- --------------------------------------------------------------------------------
Hong Kong -- 5.1%
350,000 Dairy Farm International Holdings Ltd. 430,500
1,200,000 Giordano International Ltd. 144,074
42,800 HSBC Holdings PLC 980,764
426,000 Hutchison Whampoa Ltd. 3,052,285
588,911 Jardine Matheson Holdings Ltd. 1,648,950
400,000 Smartone Telecommunications Holdings Ltd. 1,136,070
2,800,000 Swire Pacific Ltd., Class B Shares 2,313,452
- --------------------------------------------------------------------------------
9,706,095
- --------------------------------------------------------------------------------
India -- 1.2%
240,000 Gujarat Ambuja Cements Ltd.+ 1,104,000
86,000 State Bank of India GDR+ 694,450
251,000 Tata Engineering and Locomotive Co. Ltd. GDR+ 635,030
- --------------------------------------------------------------------------------
2,433,480
- --------------------------------------------------------------------------------
Italy -- 0.7%
750,000 Azienda Mediterranea Gas e Acqua S.p.A. 589,653
850,000 Montedison S.p.A. di Risp NC 669,830
33,400 Sogefi S.p.A. 80,938
- --------------------------------------------------------------------------------
1,340,421
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 17
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
Japan -- 8.3%
244,000 Daito Trust Construction Co. Ltd. $ 2,083,412
200,000 Daiwa Securities Co. Ltd. 566,377
650,000 Dowa Fire & Marina Insurance Ltd. 1,935,553
317,000 Kyudenko Corp. 1,765,493
1,395,000 Marubeni Corp. 2,561,829
560,000 Nippon Fire & Marine Insurance Co. Ltd. 1,955,891
2,051,000 Showa Denko K.K. 1,513,653
115,000 Yamanouchi Pharmaceutical Co. Ltd. 3,296,146
- --------------------------------------------------------------------------------
15,678,354
- --------------------------------------------------------------------------------
Malaysia -- 0.6%
650,000 O.Y.L. Industries Berhad 1,170,279
- --------------------------------------------------------------------------------
Mexico -- 1.1%
263,900 Cemex SA de CV 619,146
20,000 Grupo Industrial Durango, SA ADR(a) 100,000
11,000 Telefonos de Mexico SA ADR 580,937
191,000 Transportacion Maritima Mexicana SA de CV ADR(a) 740,125
- --------------------------------------------------------------------------------
2,040,208
- --------------------------------------------------------------------------------
Netherlands -- 4.3%
6,288 DSM NV 595,570
108,701 Koninklijke Ahrend NV 2,205,797
82,800 Koninklijke Emballage Industrie Van Leer NV 1,551,641
83,500 Koninklijke KPN NV 3,245,756
21,200 Koninklijke Pakhoed NV 522,139
- --------------------------------------------------------------------------------
8,120,903
- --------------------------------------------------------------------------------
New Zealand -- 3.9%
3,700,000 Brierley Investments Ltd. 842,275
1,000,000 Carter Holt Harvey Ltd. 815,276
525,000 Fernz Corp. Ltd. 1,528,643
310,000 Fisher & Paykel Industries Ltd. 919,038
500,000 Fletcher Challenge Building 661,750
900,000 Fletcher Challenge Energy 1,658,081
535,000 Tranz Rail Holdings Ltd. 979,972
- --------------------------------------------------------------------------------
7,405,035
- --------------------------------------------------------------------------------
Norway -- 6.8%
116,000 Aker RGI ASA, Class B Shares 1,069,965
67,000 Elekem ASA 758,864
35,000 Kvaerner PLC 754,862
37,800 Norsk Hydro ASA 1,640,758
100,600 Odfjell ASA 968,855
160,000 Petroleum Geo-Services ASA(a) 3,385,692
172,000 Saga Petroleum ASA 2,169,772
116,100 Sparebanken NOR 2,204,769
- --------------------------------------------------------------------------------
12,953,537
- --------------------------------------------------------------------------------
Peru -- 0.2%
238,000 Banco Wiese ADR 431,375
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
Philippines -- 2.1%
290,600 Metropolitan Bank & Trust Co. $ 1,505,214
101,000 Philippines Long Distance Telephone Co. 2,415,489
- --------------------------------------------------------------------------------
3,920,703
- --------------------------------------------------------------------------------
Portugal -- 0.5%
34,100 EDP-Electricidade de Portugal SA 857,898
- --------------------------------------------------------------------------------
Russia -- 0.8%
48,000 Gazprom ADR+ 447,600
24,200 Lukoil Holding ADR 391,072
50,000 Rostelecom ADR 190,625
4 Rostelecom RDC(a) 24,400
201,000 Surgutneftegaz ADR 432,150
- --------------------------------------------------------------------------------
1,485,847
- --------------------------------------------------------------------------------
Singapore -- 2.8%
750,000 City Developments Ltd. 2,717,558
550,000 United Overseas Bank Ltd. 2,583,983
- --------------------------------------------------------------------------------
5,301,541
- --------------------------------------------------------------------------------
Slovakia -- 0.7%
122,200 Slovakofarma AS GDR+ 381,875
143,000 Vychodoslvenske Zeleziarne AS 856,092
- --------------------------------------------------------------------------------
1,237,967
- --------------------------------------------------------------------------------
Slovenia -- 0.4%
97,000 SKB Banka GDR+ 700,825
- --------------------------------------------------------------------------------
South Africa -- 0.2%
140,000 Standard Bank Investment Corp. Ltd. ADR 421,746
- --------------------------------------------------------------------------------
South Korea -- 2.8%
132,500 Pohang Iron & Steel Co. Ltd. ADR 2,385,000
65,420 Samsung Electronics GDR+(a) 1,486,739
55,000 SK Telecom Co. Ltd. ADR 567,187
1,400 SK Telecom Co. Ltd. 971,681
- --------------------------------------------------------------------------------
5,410,607
- --------------------------------------------------------------------------------
Spain -- 1.8%
23,000 Construcciones y Auxiliar de Ferrocarriles SA 766,014
98,000 Iberdrola SA 1,579,861
22,100 Repsol SA 1,107,192
- --------------------------------------------------------------------------------
3,453,067
- --------------------------------------------------------------------------------
Sweden -- 2.8%
61,000 AssiDoman AB 1,154,903
73,500 BT Industries AB 1,165,905
69,500 Kalmar Industries AB 617,908
95,400 SKF AB, Class B Shares 1,092,259
136,000 Trelleborg AB, Class B Shares 1,243,939
- --------------------------------------------------------------------------------
5,274,914
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 19
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
Switzerland -- 1.2%
1,020 ABB AG, Bearer Shares $ 1,221,710
1,000 Holderbank Financiere Glarus AG Bearer Shares 1,114,311
- --------------------------------------------------------------------------------
2,336,021
- --------------------------------------------------------------------------------
Thailand -- 1.1%
580,000 Bangkok Bank Public Co. Ltd. 883,929
910,000 Thai Farmers Bank Public Co. Ltd. 1,151,585
- --------------------------------------------------------------------------------
2,035,514
- --------------------------------------------------------------------------------
United Kingdom -- 7.3%
3,172,564 Albert Fisher Group PLC 371,917
1,115,244 The BICC Group 933,852
115,000 British Telecommunications PLC 1,504,136
290,000 BTR PLC - Class B Shares 162,697
425,625 BTR PLC 743,090
226,846 Cable & Wireless PLC 2,558,627
480,000 Caradon PLC 996,784
102,500 Fairview Holdings PLC(a) 140,758
205,000 Hillsdown Holdings PLC 288,384
327,922 Lucas Varity PLC 1,131,295
40,000 National Westminster Bank PLC 668,207
156,000 Orange PLC 1,449,959
285,436 Rolls-Royce PLC 1,061,206
148,000 Standard Chartered PLC 1,578,225
102,500 Terranova Foods PLC(a) 203,413
- --------------------------------------------------------------------------------
13,792,550
- --------------------------------------------------------------------------------
United States -- 14.4%
62,300 American Standard Cos., Inc.(a) 1,989,706
109,800 Archer-Daniels-Midland Co.(a) 1,832,287
35,000 Flour Corp. 1,358,437
73,000 The Geon Co. 1,583,187
76,000 Georgia Pacific Timber Company 1,686,250
47,000 GTE Corp. 2,758,312
76,000 IBP Inc. 2,056,750
100,000 Nabors Industries, Inc.(a) 1,850,000
14,000 Owens Corning 508,375
151,000 Paxar Corp.(a) 1,368,437
20,500 Pharmacia & Upjohn, Inc. 1,085,218
45,500 Raychem Corp. 1,390,593
61,000 Roper Industries Inc. 1,086,562
40,000 Schlumberger Ltd. 2,100,000
31,000 Tecumseh Products Co., Class A Shares 1,612,000
87,500 Titanium Metals Corp. 918,750
18,850 Waste Management Inc. 850,606
40,000 Willamette Industries Inc. 1,240,000
- --------------------------------------------------------------------------------
27,275,470
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND
SHARES SECURITY VALUE
================================================================================
Venezuela -- 0.6%
90,000 Mavesa SA ADR $ 360,000
148,866 Siderurgica Venezolana SA CA ADR 779,210
- --------------------------------------------------------------------------------
1,139,210
- --------------------------------------------------------------------------------
TOTAL STOCK
(Cost -- $215,083,685) 183,717,856
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 2.9%
$5,465,000 CIBC Wood Gundy Securities, Inc., 5.250% due 11/2/98;
Proceeds at maturity -- $5,467,391; (Fully
collateralized by U.S. Treasury Notes, 6.375%
due 5/15/99; Market value -- $5,575,186)
(Cost -- $5,465,000) 5,465,000
================================================================================
Total Investments -- 100%
(Cost -- $220,548,685*) $189,182,856
================================================================================
(a) Non-income producing security.
+ Security is exempt under Rule 144A of the Securities Act of 1933. This
security may be sold in transactions that are exempt from registration,
normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 21
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND
SHARES SECURITY VALUE
================================================================================
STOCK -- 91.6%
Australia -- 1.5%
258,000 Henry Walker Group Ltd. $ 287,391
- --------------------------------------------------------------------------------
Austria -- 1.1%
4,400 Boehler - Uddeholm AG 207,304
- --------------------------------------------------------------------------------
Canada -- 2.1%
22,800 Moore Corp. Ltd. 257,925
32,851 Noranda Forest Inc. 140,156
- --------------------------------------------------------------------------------
398,081
- --------------------------------------------------------------------------------
China -- 1.3%
24,000 Shangdon Huaneng Power Co. Ltd. ADR 123,000
1,300,000 Shanghai Petrochemical Co. Ltd.(a) 130,906
- --------------------------------------------------------------------------------
253,906
- --------------------------------------------------------------------------------
Czech Republic -- 0.7%
14,000 Komercni Banka AS GDR(a) 59,850
9,700 Skoda Plzen AS(a) 64,880
- --------------------------------------------------------------------------------
124,730
- --------------------------------------------------------------------------------
Denmark -- 0.9%
1,300 Forsikringsselskabet Codan (The Codan Group) 165,182
- --------------------------------------------------------------------------------
Finland -- 4.4%
27,000 Kemira Oyj 222,387
23,000 Metsa-Serla Oyj, Class B Shares 173,921
16,500 The Rauma Group 194,849
47,200 Tamro Oyj 252,932
- --------------------------------------------------------------------------------
844,089
- --------------------------------------------------------------------------------
France -- 3.3%
2,000 Bail Investissement 296,562
3,200 Financiere Marc de Lacharriere SA 333,994
- --------------------------------------------------------------------------------
630,556
- --------------------------------------------------------------------------------
Germany -- 6.2%
960 Fuchs Petrolub AG Oel & Chemie, Preferred Shares 94,771
18,250 Hans Einhell AG 211,568
13,300 Lindner Holding KGaA 248,944
6,800 Moebel Walther AG 221,712
3,700 Strabag AG(a) 221,169
10,700 Tarkett Sommer AG 176,051
- --------------------------------------------------------------------------------
1,174,215
- --------------------------------------------------------------------------------
Hong Kong -- 5.3%
1,200,000 Cafe De Coral Holdings 410,534
800,000 CDL Hotels International Ltd. 204,493
800,000 Giordano International Ltd. 96,049
1,230,000 Pacific Ports Co. Ltd.(a) 112,743
320,000 South China Morning Post Holdings Ltd. 171,443
- --------------------------------------------------------------------------------
995,262
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND
SHARES SECURITY VALUE
================================================================================
Hungary -- 0.5%
4,000 BorsodChem RT $ 98,659
- --------------------------------------------------------------------------------
Indonesia -- 0.2%
905,000 PT Kalbe Farma(a) 44,655
- --------------------------------------------------------------------------------
Italy -- 2.1%
375,000 Azienda Mediterranea Gas e Acqua S.p.A. 294,827
44,900 Sogefi S.p.A. 108,806
- --------------------------------------------------------------------------------
403,633
- --------------------------------------------------------------------------------
Japan -- 4.0%
56,000 Ataka Construction & Engineering Co. 153,781
38,000 Daito Trust Construction Co. Ltd. 324,466
52,000 Kyudenko Corp. 289,608
- --------------------------------------------------------------------------------
767,855
- --------------------------------------------------------------------------------
Mexico -- 0.3%
12,600 Grupo Industrial Durango, SA ADR(a) 63,000
- --------------------------------------------------------------------------------
Netherlands -- 5.0%
3,700 Eriks Holdings NV 248,622
15,100 European Vinyls Corp. International NV 140,675
12,343 Koninklijke Ahrend Groep NV 250,469
17,000 Koninklijke Emballage Industrie Van Leer NV 318,573
- --------------------------------------------------------------------------------
958,339
- --------------------------------------------------------------------------------
New Zealand -- 5.7%
230,300 Air New Zealand Ltd. 304,803
99,000 Fernz Corp. Ltd. 288,259
83,000 Fisher & Paykel Industries Ltd. 246,065
348,248 Fletcher Challenge Forests 117,993
68,800 Tranz Rail Holdings Ltd. 126,022
- --------------------------------------------------------------------------------
1,083,142
- --------------------------------------------------------------------------------
Norway -- 4.7%
22,900 Aker RGI ASA, Class B Shares 211,226
28,300 Elkem ASA 320,536
19,080 Sparebanken NOR 362,334
- --------------------------------------------------------------------------------
894,096
- --------------------------------------------------------------------------------
Peru -- 1.1%
33,400 Banco Wiese ADR 60,538
12,600 Southern Peru Copper Corp., Ltd. 150,412
- --------------------------------------------------------------------------------
210,950
- --------------------------------------------------------------------------------
Poland -- 0.3%
63,000 Mostostal-Export SA ADR 58,508
- --------------------------------------------------------------------------------
Russia -- 0.3%
17,000 Irkutskenergo ADR 29,750
24,000 Nizhegorodsvyazinform ADR 15,360
- --------------------------------------------------------------------------------
45,110
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 23
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND
SHARES SECURITY VALUE
================================================================================
Slovakia -- 0.6%
1,400 Slovakofarma AS $ 63,858
7,800 Vychodoslovenske Zeleziarne AS 46,695
- --------------------------------------------------------------------------------
110,553
- --------------------------------------------------------------------------------
Slovenia -- 0.4%
9,800 SKB Banka GDR+ 70,805
- --------------------------------------------------------------------------------
Spain -- 3.1%
3,200 Banco Pastor SA 170,748
7,000 Catalana Occidente SA 185,516
7,000 Construcciones y Auxiliar de Ferrocarriles SA 233,135
- --------------------------------------------------------------------------------
589,399
- --------------------------------------------------------------------------------
Sweden -- 5.7%
16,600 BT Industries AB 263,320
12,600 Esselte AB, Class B Shares 183,752
15,750 Getinge Industrier AB 241,777
11,300 Kalmar Industries 100,465
44,690 Lifco AB Class B Shares(a) 180,085
12,100 PLM AB 120,735
- --------------------------------------------------------------------------------
1,090,134
- --------------------------------------------------------------------------------
Switzerland -- 1.3%
600 Forbo Holding AG 248,116
- --------------------------------------------------------------------------------
Thailand -- 0.3%
247,400 Precious Shipping Public Co. Ltd.(a) 53,863
- --------------------------------------------------------------------------------
United Kingdom -- 6.8%
143,187 BICC Group PLC 119,898
79,000 David S. Smith Holdings PLC 166,701
70,000 Dorling Kindersley Holdings PLC 281,351
480,000 Sherwood Group PLC 345,659
58,333 Somerfield PLC 376,599
3,285 TLG PLC 9,572
- --------------------------------------------------------------------------------
1,299,780
- --------------------------------------------------------------------------------
United States -- 22.4%
27,100 American Residential Services, Inc.(a) 106,707
7,700 Aviation Sales Co.(a) 256,025
22,800 Chiquita Brands International, Inc. 242,250
16,900 The Geon Co. 366,518
30,700 Hoenig Group, Inc.(a) 222,575
8,400 Invacare Corp. 189,000
12,960 The Learning Company, Inc.(a) 334,530
32,000 Owens & Minor, Inc. 508,000
15,700 Paxar Corp.(a) 142,281
12,000 Penn Treaty American Corp.(a) 252,750
16,000 PETCO Animal Supplies, Inc.(a) 142,000
12,300 Roper Industries Inc. 219,094
34,000 Seattle FilmWorks, Inc.(a) 127,500
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedules of Investments (unaudited) (continued) October 31, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND
SHARES SECURITY VALUE
================================================================================
United States -- 22.4% (continued)
16,400 Tarrant Apparel Group $ 309,550
7,400 Tecumseh Products Co., Class A Shares 384,800
15,000 Titanium Metals Corp. 157,500
22,600 Wolverine World Wide, Inc. 295,212
- --------------------------------------------------------------------------------
4,256,292
- --------------------------------------------------------------------------------
TOTAL STOCK
(Cost -- $21,877,984) 17,427,605
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 8.4%
$1,600,000 CIBC Wood Gundy Securities Inc., 5.25% due 11/2/98;
Proceeds at maturity -- $1,600,700; (Fully
collateralized by U.S. Treasury Notes, 6.375%
due 5/15/99; Market value -- $1,632,978)
(Cost -- $1,600,000) 1,600,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $23,477,984*) $19,027,605
================================================================================
(a) Non-income producing security.
+ Security is exempt under Rule 144A of the Security Exchange Act of 1933.
This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 25
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities (unaudited) October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smith Barney
Smith Barney Hansberger
Hansberger Global Small
Global Value Cap Value
Fund Fund
============================================================================================================
<S> <C> <C>
ASSETS:
Investments, at cost $220,548,685 $23,477,984
Foreign currency, at cost 2 --
============================================================================================================
Investments, at value $189,182,856 $19,027,605
Foreign currency, at value 2 --
Cash 6,773 57,618
Dividends and interest receivable 468,265 70,807
Receivable for Fund shares sold 146,495 45,323
Receivable for securities sold -- 46,791
Receivable from manager -- 75,501
- ------------------------------------------------------------------------------------------------------------
Total Assets 189,804,391 19,323,645
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Management fees payable 272,675 --
Distribution fees payable 52,818 2,963
Payable to foreign bank -- 33,375
Accrued expenses 50,455 41,843
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 375,948 78,181
- ------------------------------------------------------------------------------------------------------------
Total Net Assets $189,428,443 $19,245,464
============================================================================================================
NET ASSETS:
Par value of capital shares $ 18,409 $ 208
Capital paid in excess of par value 221,601,011 24,086,342
Undistributed net investment income 2,071,355 254,158
Accumulated net realized loss from security transactions (2,914,173) (646,537)
Net unrealized depreciation of investments and foreign currencies (31,348,159) (4,448,707)
- ------------------------------------------------------------------------------------------------------------
Total Net Assets $189,428,443 $19,245,464
============================================================================================================
Shares Outstanding:
Class A 2,003,077 789,762
--------------------------------------------------------------------------------------------------------
Class B 3,437,448 943,538
--------------------------------------------------------------------------------------------------------
Class L 912,420 201,555
--------------------------------------------------------------------------------------------------------
Class Y 12,055,766 148,695
--------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $10.29 $9.27
--------------------------------------------------------------------------------------------------------
Class B * $10.22 $9.21
--------------------------------------------------------------------------------------------------------
Class L ** $10.22 $9.21
--------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $10.31 $9.28
--------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $10.83 $9.76
--------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $10.32 $9.30
============================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
26 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations (unaudited) For the Six Months Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Smith Barney
Smith Barney Hansberger
Hansberger Global Small
Global Value Cap Value
Fund Fund
============================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 541,765 $ 41,227
Dividend 2,303,636 361,868
Less: Foreign withholding tax (234,524) (47,019)
- ------------------------------------------------------------------------------------------------------------
Total Investment Income 2,610,877 356,076
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 830,043 114,531
Distribution fees 277,889 73,324
Registration fees 107,603 34,015
Custody 30,082 20,309
Shareholder and system servicing fees 26,779 39,255
Shareholder communications 17,552 42,671
Audit and legal 14,138 31,604
Directors' fees 7,020 10,894
Other 73,508 23,594
- ------------------------------------------------------------------------------------------------------------
Total Expenses 1,384,614 390,197
Less: Management fee waiver and expense reimbursement (Note 2) -- (142,300)
- ------------------------------------------------------------------------------------------------------------
Net Expenses 1,384,614 247,897
- ------------------------------------------------------------------------------------------------------------
Net Investment Income 1,226,263 108,179
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (2,763,948) (665,943)
Foreign currency transactions 334,589 2,756
- ------------------------------------------------------------------------------------------------------------
Net Realized Loss (2,429,359) (663,187)
- ------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments and Foreign Currencies:
Beginning of period 8,375,536 1,565,615
End of period (31,348,159) (4,448,707)
- ------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (39,723,695) (6,014,322)
- ------------------------------------------------------------------------------------------------------------
Net Loss on Investments and Foreign Currencies (42,153,054) (6,677,509)
- ------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(40,926,791) $(6,569,330)
============================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended October 31, 1998 (unaudited)
and the Year Ended April 30, 1998
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Value Fund October 31 April 30
============================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,226,263 $ 202,933
Net realized gain (loss) (2,429,359) 200,904
Increase in net unrealized appreciation (depreciation) (39,723,695) 8,375,536
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (40,926,791) 8,779,373
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (85,869)
- ------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders -- (85,869)
- ------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 101,196,736 132,967,684
Net asset value of shares issued for reinvestment of dividends -- 83,205
Cost of shares reacquired (11,319,897) (1,265,998)
- ------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 89,876,839 131,784,891
- ------------------------------------------------------------------------------------------------------------
Increase in Net Assets 48,950,048 140,478,395
NET ASSETS:
Beginning of period 140,478,395 --
- ------------------------------------------------------------------------------------------------------------
End of period* $189,428,443 $140,478,395
============================================================================================================
* Includes undistributed net investment income of: $2,071,355 $510,503
============================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
28 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended October 31, 1998 (unaudited)
and the Year Ended April 30, 1998
<TABLE>
<CAPTION>
Smith Barney Hansberger Small Cap Value Fund October 31 April 30
============================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 108,179 $ 59,952
Net realized gain (loss) (663,187) 110,277
Increase in net unrealized appreciation (depreciation) (6,014,322) 1,565,615
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Operations (6,569,330) 1,735,844
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (20,614)
- ------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders -- (20,614)
- ------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 4,613,330 22,450,956
Net asset value of shares issued for reinvestment of dividends -- 20,354
Cost of shares reacquired (2,616,738) (368,338)
- ------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share Transactions 1,996,592 22,102,972
- ------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (4,572,738) 23,818,202
NET ASSETS:
Beginning of period 23,818,202 --
- ------------------------------------------------------------------------------------------------------------
End of period* $19,245,464 $23,818,202
============================================================================================================
* Includes undistributed net investment income of: $254,158 $143,223
============================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Hansberger Global Value Fund and Smith Barney Hansberger Global
Small Cap Value Fund ("Portfolios") are separate investment portfolios of the
Smith Barney Investment Funds Inc. ("Fund"). The Fund, a Maryland corporation,
is registered under the Investment Company Act of 1940, as amended, as an
open-end, diversified management investment company. The Fund consists of these
Portfolios and five other separate investment portfolios: Concert Peachtree
Growth Fund, Smith Barney Investment Grade Bond Fund, Smith Barney Special
Equities Fund, Smith Barney Contrarian Fund (formerly known as Smith Barney
Managed Growth Fund) and Smith Barney Government Securities Fund. The financial
statements and financial highlights for the other portfolios are presented in
separate annual reports dated December 31, 1997.
The significant accounting policies consistently followed by the Portfolios are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on the primary
exchange on which they are traded; securities listed or traded on certain
foreign exchanges or other markets whose operations are similar to the U.S.
over-the-counter market (including securities listed on exchanges where the
primary market is believed to be over-the-counter) and securities for which no
sales price was reported on that date are valued at the mean between the bid and
ask prices. Securities which are listed or traded on more than one exchange or
market are valued at the quotations on the exchange or market determined to be
the primary market for such securities; (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) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
an accrual basis; (g) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Portfolios determine the existence of a dividend declaration
after exercising reasonable due diligence; (h) direct expenses are charged to
each Portfolio and class; management fees and general expenses are allocated on
the basis of relative net assets by class; (i) dividends and distributions to
shareholders are recorded on the ex-dividend date; (j) the accounting records of
each Portfolio are maintained in U.S. dollars. All assets and liabilities
denominated in foreign currencies are translated into 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 or expense amounts
recorded and collected or paid are adjusted when reported by the custodian; (k)
the character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. At April 30, 1998, reclassifications were made to the capital
accounts of the Portfolios to reflect permanent book/tax differences and income
and gains available for distributions under tax regulations. Accordingly, net
investment losses of $42,310 and $13,014 were reclassed to paid-in capital for
the Smith Barney Hansberger Global Value Fund and the Smith Barney Hansberger
Global Small Cap Value Fund, respectively. Net investment income, net realized
gains and net assets were not affected by these adjustments; (l) each Portfolio
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 each Portfolio from
substantially all Federal income and excise taxes; and
- --------------------------------------------------------------------------------
30 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
(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.
In addition, the Portfolios may enter into forward exchange contracts in order
to hedge against foreign currency risk. These contracts are marked-to-market
daily by recognizing the difference between the contract exchange rate and the
current market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment manager of the Fund. The Smith Barney
Hansberger Global Value Fund ("Global Value") and Smith Barney Hansberger Global
Small Cap Value Fund ("Global Small Cap") pay MMC a management fee calculated at
the annual rate of 0.95% and 1.05%, respectively, of the average daily net
assets of each Portfolio. These fees are calculated daily and paid monthly. For
the six months ended October 31, 1998, MMC waived all of its management fee and
reimbursed expenses of $27,769.
MMC has entered into a sub-advisory agreement with Hansberger Global Investors,
Inc. ("Hansberger"). Pursuant to the sub-advisory agreement, Hansberger is
responsible for the day-to-day portfolio operations and investment decisions of
the Portfolios. MMC pays Hansberger a fee of 0.50% and 0.60% of the average
daily net assets of Global Value and Global Small Cap, respectively, for the
services Hansberger provides as sub-investment adviser. These fees are
calculated daily and paid monthly.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), was the Fund's distributor. SSB (as well
as certain other broker-dealers) continues to sell Fund shares to the public as
a member of the selling group. SSB, another subsidiary of SSBH, acts as the
primary broker for its portfolio agency transactions. For the six months ended
October 31, 1998, SSB received brokerage commissions of $14,241.
On June 12, 1998, the Fund's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from initial purchase.
Thereafter this CDSC declines by 1.00% per year until no CDSC is incurred. Class
L shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase.
For the six months ended October 31, 1998, CDSC's paid to SSB were
approximately:
CDSC's
-------------------------------------
Portfolio Class A Class B Class L
================================================================================
Global Value $ 3,000 $57,000 $ 4,000
- --------------------------------------------------------------------------------
Global Small Cap Value 1,000 17,000 3,000
================================================================================
For the six months ended October 31, 1998, sales charges received by SSB were
approximately:
Sales Charges
----------------------
Portfolio Class A Class L
================================================================================
Global Value $42,000 $13,000
- --------------------------------------------------------------------------------
Global Small Cap Value 16,000 2,000
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Portfolios pay a service fee with respect
to Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class' shares. The Portfolios also pay 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 respective Portfolio and
class. For the period ended October 31, 1998, total Distribution Plan fees
incurred by the Portfolios were:
Portfolio Class A Class B Class L
================================================================================
Global Value $ 29,358 $198,203 $ 50,328
- --------------------------------------------------------------------------------
Global Small Cap Value 10,600 50,896 11,828
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the period ended October 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Portfolio Purchases Sales
================================================================================
Global Value $144,644,728 $7,107,820
- --------------------------------------------------------------------------------
Global Small Cap Value 3,066,910 1,331,320
================================================================================
At October 31, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
Net Unrealized
Portfolio Appreciation Depreciation Appreciation
================================================================================
Global Value $11,975,480 $(43,341,309) $(31,365,829)
- --------------------------------------------------------------------------------
Global Small Cap Value 1,145,713 (5,596,092) (4,450,379)
================================================================================
4. Option Contracts
Premiums paid when put or call options are purchased by the Portfolios represent
investments, which are marked-to-market daily. When a purchased option expires,
the Portfolio will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio 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
Portfolio 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 Portfolio exercises a call
option, the cost of the security that the Portfolio purchases upon exercise will
be increased by the premium originally paid.
At October 31, 1998, the Portfolios had no open purchased call or put options.
- --------------------------------------------------------------------------------
32 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
When a Portfolio writes a covered call or put option, an amount equal to the
premium received by the Portfolio is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Portfolio realizes
a gain equal to the amount of the premium received. When the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised the cost of the security
sold will be decreased by the premium originally received. When a written put
option is exercised, the amount of the premium originally received will reduce
the cost of the security that the Portfolio 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 Portfolio enters into options for hedging purposes. The risk in
writing a covered call option is that the Portfolio 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 covered put option is that the Portfolio
is exposed to the risk of loss if the market price of the underlying security
declines.
During the period ended October 31, 1998, the Portfolios did not write any
covered call or put options.
5. 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 made or received 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 Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transactions and the Portfolio's basis in the contract. The Portfolio enters
into such contracts to hedge a portion of its portfolio. The Portfolio bears the
market risk that arises from changes in the value of the financial instruments
and securities indices (futures contracts).
At October 31, 1998, the Portfolios had no open futures contracts.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Concentration of Risk
The Portfolios' investments in foreign securities may involve risks not present
in domestic investments. Since securities may be denominated in a foreign
currency and may require settlement in foreign currencies and pay interest or
dividends in foreign currencies, changes in the relationship of these foreign
currencies to the U.S. dollar can significantly affect the value of the
investments and earnings of each of the Portfolios. Foreign investments may also
subject the Portfolios to foreign government exchange restrictions,
expropriation, taxation or other political, social or economic developments, all
of which could affect the market and/or credit risk of the investments.
In addition to the risks described above, risks may arise from forward foreign
currency contracts with respect to the potential inability of counterparties to
meet the terms of their contracts.
7. Lending of Portfolio Securities
The Portfolios have an agreement with their custodian whereby the custodian may
lend securities owned by the Portfolios to brokers, dealers and other financial
organizations. Fees earned by the Portfolios on securities lending are recorded
as interest income. Loans of securities by the Portfolios 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 depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Portfolios maintain exposure for the risk of any losses
in the investment of amounts received as collateral.
At October 31, 1998, the Portfolios had no securities on loan.
8. Capital Shares
At October 31, 1998, the Fund had ten billion shares of capital stock authorized
with a par value of $0.001 per share. The Portfolios have the ability to issue
multiple classes of shares. Each share of a class represents an identical legal
interest in a Portfolio and has the same rights, except that each class bears
certain expenses specifically related to the distribution of its shares.
Effective June 12, 1998, the Fund adopted the remaining of existing Class C
shares as Class L shares.
At October 31, 1998, total paid-in capital amounted to the following for each
Portfolio:
<TABLE>
<CAPTION>
Portfolio Class A Class B Class L Class Y
============================================================================================================
<S> <C> <C> <C> <C>
Global Value $23,594,449 $40,852,322 $10,755,311 $146,417,338
- ------------------------------------------------------------------------------------------------------------
Global Small Cap 9,191,486 10,913,551 2,393,831 1,587,682
============================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
34 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Period Ended Period Ended*
October 31, 1998 April 30, 1998
----------------------------- -----------------------------
Shares Amount Shares Amount
============================================================================================================
<S> <C> <C> <C> <C>
Smith Barney Hansberger
Global Value Fund
Class A
Shares sold 298,190 $ 3,281,066 2,136,344 $24,725,211
Shares issued on reinvestment -- -- 2,413 27,893
Shares redeemed (409,866) (4,130,665) (24,004) (295,535)
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (111,676) $ (849,599) 2,114,753 $24,457,569
============================================================================================================
Class B
Shares sold 487,033 $ 5,667,334 3,558,428 $41,419,420
Shares issued on reinvestment -- -- 3,969 45,877
Shares redeemed (562,853) (5,659,212) (49,129) (599,114)
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (75,820) $ 8,122 3,513,268 $40,866,183
============================================================================================================
Class L
Shares sold 204,789 $ 2,359,688 882,791 $10,292,554
Shares issued on reinvestment -- -- 816 9,435
Shares redeemed (145,885) (1,530,020) (30,091) (371,349)
- ------------------------------------------------------------------------------------------------------------
Net Increase 58,904 $ 829,668 853,516 $ 9,930,640
============================================================================================================
Class Y**
Shares sold 7,716,859 $89,888,648 4,338,907 $56,530,499
Shares issued on reinvestment -- -- -- --
Shares redeemed -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Increase 7,716,859 $89,888,648 4,338,907 $56,530,499
============================================================================================================
Smith Barney Hansberger
Global Small Cap Value Fund
Class A
Shares sold 140,649 $ 1,587,062 755,715 $ 8,670,260
Shares issued on reinvestment -- -- 658 7,518
Shares redeemed (102,336) (1,011,369) (4,924) (57,082)
- ------------------------------------------------------------------------------------------------------------
Net Increase 38,313 $ 575,693 751,449 $ 8,620,696
============================================================================================================
Class B
Shares sold 114,609 $ 1,264,145 955,601 $10,919,021
Shares issued on reinvestment -- -- 938 10,711
Shares redeemed (111,788) (1,096,272) (15,822) (177,383)
- ------------------------------------------------------------------------------------------------------------
Net Increase 2,821 $ 167,873 940,717 $10,752,349
============================================================================================================
Class L
Shares sold 35,832 $ 406,415 229,248 $ 2,629,681
Shares issued on reinvestment -- -- 186 2,125
Shares redeemed (51,690) (509,097) (12,021) (133,873)
- ------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (15,858) $ (102,682) 217,413 $ 2,497,933
============================================================================================================
Class Y**
Shares sold 129,814 $ 1,355,708 18,881 $ 231,994
Shares issued on reinvestment -- -- -- --
Shares redeemed -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Net Increase 129,814 $ 1,355,708 18,881 $ 231,994
============================================================================================================
</TABLE>
* For the period from December 19, 1997 (inception date) to April 30, 1998.
** For the period ended April 30, 1998, Class Y had an inception date of
March 10, 1998.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 35
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended April 30, except where noted:
<TABLE>
<CAPTION>
Class A Class B
Smith Barney Hansberger --------------------- ----------------------
Global Value Fund 1998(1) 1998(2) 1998(1) 1998(2)
====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.99 $11.40 $12.96 $11.40
- ----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income(3) 0.10 0.05 0.05 0.02
Net realized and unrealized gain (loss) (2.80) 1.56 (2.79) 1.56
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.70) 1.61 (2.74) 1.58
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.02) -- (0.02)
- ----------------------------------------------------------------------------------------------------
Total Distributions -- (0.02) -- (0.02)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.29 $12.99 $10.22 $12.96
- ----------------------------------------------------------------------------------------------------
Total Return++ (20.79)% 14.13% (21.14)% 13.87%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $20,612 $27,478 $35,143 $45,526
- ----------------------------------------------------------------------------------------------------
Ratio to Average Net Assets+:
Expenses(3) 1.59% 1.71% 2.34% 2.48%
Net investment income 1.63 1.25 0.87 0.52
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 1% 4% 1%
====================================================================================================
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited).
(2) For the period from December 19, 1997 (inception date) to April 30, 1998.
(3) The Manager waived part of its fees for the period ended April 30, 1998.
If such fees were not waived, the per share effect on net investment
income and the expense ratios would have been as follows:
Net Investment Income Expense Ratios
Per Share Decreases Without Fee Waivers+
--------------------- --------------------
Class A $0.01 2.09%
Class B 0.01 2.87
++ Total returns are not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
36 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended April 30, except where noted:
<TABLE>
<CAPTION>
Class L(2) Class Y
Smith Barney Hansberger --------------------- ----------------------
Global Value Fund 1998(1) 1998(3) 1998(1) 1998(4)
====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.96 $11.40 $13.00 $12.44
- ----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.04 0.02 0.07 0.00*
Net realized and unrealized gain (loss) (2.78) 1.56 (2.76) 0.56
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (2.74) 1.58 (2.69) 0.56
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.02) -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions -- (0.02) -- --
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22 $12.96 $10.31 $13.00
- ----------------------------------------------------------------------------------------------------
Total Return++ (21.14)% 13.87% (20.69)% 4.50%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $9,328 $11,060 $124,346 $56,414
- ----------------------------------------------------------------------------------------------------
Ratio to Average Net Assets+:
Expenses(5) 2.42% 2.49% 1.18% 1.47%
Net investment income 0.84 0.42 1.64 1.83
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 1% 4% 1%
====================================================================================================
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited).
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) For the period from December 19, 1997 (inception date) to April 30, 1998.
(4) For the period from March 10, 1998 (inception date) to April 30, 1998.
(5) The Manager waived part of its fees for the periods ended April 30, 1998.
If such fees were not waived, the per share effect on net investment
income and the expense ratios would have been as follows:
Net Investment Income Expense Ratios
Per Share Decreases Without Fee Waivers+
--------------------- --------------------
Class L $0.01 2.88%
Class Y 0.00* 1.85
* Amount represents less than $0.01 per share.
++ Total returns are not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 37
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended April 30, except where noted:
<TABLE>
<CAPTION>
Class A Class B
Smith Barney Hansberger --------------------- ----------------------
Global Small Cap Value Fund 1998(1) 1998(2) 1998(1) 1998(2)
====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.37 $11.40 $12.34 $11.40
- ----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(3) 0.05 0.05 0.02 0.02
Net realized and unrealized gain (loss) (3.15) 0.93 (3.15) 0.93
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (3.10) 0.93 (3.13) 0.95
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.01) -- (0.01)
- ----------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) -- (0.01)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.27 $12.37 $9.21 $12.34
- ----------------------------------------------------------------------------------------------------
Total Return++ (25.06)% 8.64% (25.36)% 8.38%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $7,320 $9,296 $8,689 $11,606
- ----------------------------------------------------------------------------------------------------
Ratio to Average Net Assets+:
Expenses(3) 1.84% 1.95% 2.60% 2.68%
Net investment income 1.40 1.28 0.67 0.58
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 2% 8% 2%
====================================================================================================
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited).
(2) For the period from December 19, 1997 (inception date) to April 30, 1998.
(3) The Manager waived all of its fees for the periods ended April 30, 1998
and October 31, 1998. In addition, the Manager reimbursed the Portfolio
for $17,302 and $27,769 in expenses for the periods ended April 30, 1998
and October 31, 1998, respectively. If such fees were not waived and
expenses not reimbursed, the per share effect on net investment income and
the expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement+
--------------------- -------------------
1998(1) 1998(2) 1998(1) 1998(2)
------- ------- ------- -------
Class A $0.07 $0.05 3.14% 3.25%
Class B 0.07 0.04 3.90 3.96
++ Total returns are not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
38 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended April 30, except where noted:
<TABLE>
<CAPTION>
Class L(2) Class Y
Smith Barney Hansberger --------------------- ----------------------
Global Small Cap Value Fund 1998(1) 1998(3) 1998(1) 1998(4)
====================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.34 $11.40 $12.37 $11.74
- ----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(5) 0.02 0.02 0.02 0.00*
Net realized and unrealized gain (loss) (3.15) 0.93 (3.11) 0.63
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (3.13) 0.95 (3.09) 0.63
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.01) -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) -- --
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.21 $12.34 $9.28 $12.37
- ----------------------------------------------------------------------------------------------------
Total Return++ (25.36)% 8.38% (24.98)% 5.37%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,856 $2,682 $1,380 $234
- ----------------------------------------------------------------------------------------------------
Ratio to Average Net Assets+:
Expenses(5) 2.60% 2.71% 1.50% 1.73%
Net investment income 0.67 0.58 1.56 2.42
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 8% 2% 8% 2%
====================================================================================================
</TABLE>
(1) For the six months ended October 31, 1998 (unaudited).
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) For the period from December 19, 1997 (inception date) to April 30, 1998.
(4) For the period from March 10, 1998 (inception date) to April 30, 1998.
(5) The Manager waived part of its fees for the periods ended October 31, 1998
and April 30, 1998. In addition, the Manager reimbursed the Portfolio for
$17,302 and $27,769 in expenses for the periods ended October 31, 1998 and
April 30, 1998, respectively. If such fees were not waived, and expenses
not reimbursed, the per share effect on net investment income and the
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers
Per Share Decreases and Reimbursement+
--------------------- -------------------
1998(1) 1998 1998(1) 1998
------- ------- ------- -------
Class L $0.08 $0.04(3) 3.90% 4.02%(3)
Class Y 0.03 0.00*(4) 2.72 3.05(4)
* Amount represents less than $0.01 per share.
++ Total returns are not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Hansberger Funds 39
<PAGE>
[This page intentionally left blank]
<PAGE>
Directors
Paul R. Ades
Herbert Barg
Dwight B. Crane
Frank Hubbard
Heath B. McLendon, Chairman
Jerome Miller
Ken Miller
Allan R. Johnson, Emeritus
John F. White, Emeritus
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Sub-Investment Adviser
Hansberger Global Investors, Inc.
Distributor
CFBDS, Inc.
Custodian
The Chase Manhattan Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney Investment
Funds Inc. -- Smith Barney Hansberger Global Value and Smith Barney Hansberger
Global Small Cap Value Funds. It is not authorized for distribution to
prospective investors unless accompanied by a current Prospectus for the Fund,
which contains information concerning the Fund's investment policies and
expenses as well as other pertinent information.
SALOMON SMITH BARNEY
---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Investment Funds Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD01490 11/98
