<PAGE>
[GRAPHIC]
SMITH BARNEY PREMIER SELECTIONS
Fund
[GRAPHIC]
CLASSIC INVESTOR SERIES
SEMI-ANNUAL REPORT
OCTOBER 31,1999
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney Premier Selections Fund
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The Smith Barney Premier Selections Fund ("Fund") seeks long-term capital growth
by investing in companies with market capitalizations of $5 billion or more at
the time of investment. The Fund's holdings will be comprised of stocks of
approximately 40 companies. Please note that there can be no assurance that the
Fund will achieve its investment objective.
Smith Barney Premier Selections Fund Average Annual Total Returns
October 31, 1999
Without Sales Charges(1)
--------------------------------
Class A Class B Class L
Since Inception+++ (0.79)% (0.96)% (0.96)%
With Sales Charges(2)
--------------------------------
Class A Class B Class L
Since Inception+++ (5.75)% (5.92)% (2.98)%
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception date for Class A, B and L shares is August 31, 1999.
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FUND HIGHLIGHT
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The Fund invests in established, large-capitalized companies, many of which are
dominant globally as well as domestically. More specifically, the Fund's
managers look for:
. Quality companies positioned for the long term: our goal is to identify
large-capitalized companies that we believe offer potential for substantial
long-term opportunities for investors seeking capital appreciation.
. Leadership in both growth and value disciplines: shareholders will
participate in some of the leading companies across the
large-capitalization spectrum.
. Powerful and thoughtful management: We believe that success is often a
function of extraordinary leadership. The companies we choose to own are
those with powerful, thoughtful and forward-looking management.
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NASDAQ SYMBOL
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Class A SPSAX
Class B SPSBX
Class L SPSLX
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WHAT'S INSIDE
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Shareholder Letter .......................................................... 1
Historical Performance....................................................... 4
Schedule of Investments...................................................... 5
Statement of Assets and Liabilities.......................................... 7
Statement of Operations...................................................... 8
Statement of Changes in Net Assets........................................... 9
Notes to Financial Statements................................................10
Financial Highlights.........................................................14
<PAGE>
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SHAREHOLDER LETTER
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[PHOTO] [PHOTO]
HEATH B. MCLENDON ALAN BLAKE
Chairman Vice President and
Investment Officer
[PHOTO]
FRANCES A. ROOT
Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the first semi-annual report for the Smith Barney
Premier Selections Fund ("Fund") for the period ended October 31, 1999. We hope
you find this report useful and informative. In this report we have summarized
the period's prevailing economic and market conditions and outlined our
portfolio strategy. A detailed summary of the Fund's performance can be found in
the appropriate sections that follow.
Performance Update and Investment Strategy
For the period since August 31, 1999 through October 31, 1999, the Class A, B
and L shares of the Fund generated negative total returns of 0.79%, 0.96% and
0.96%, respectively without sales charges. By comparison, the Russell 1000 Index
had a total return of 3.79% for the same period. (The Russell 1000 Index
measures the performance of the 1,000 largest companies in the Russell 3000
Index, which represents approximately 98% of the investable U.S. equity market.)
The Fund's investment strategy is to combine the efforts of two portfolio
managers with complementary but different investment styles (value and growth)
and to invest in what is believed to be the most attractive securities in the
opinion of each portfolio manager. The value discipline seeks to identify
companies whose stock prices do not currently reflect the underlying value of
corporate assets or earnings potential. Factors such as price-to-earnings and
price-to-sales ratios are used to target stocks selling at a discount to their
underlying intrinsic value. The growth discipline seeks to identify companies
that have an anticipated above-average rate of earnings growth.
As previously noted, the Fund invests in established, large-capitalized
companies, many of which are dominant globally as well as domestically. The Fund
seeks to build a portfolio based on our best stock-picking ideas, companies that
we believe offer superior total return potential over time. Within the large-cap
universe, we look for world-class companies that possess industry dominance,
drive innovation, and offer top products and services. Our investment process
enables shareholders to participate in a concentrated portfolio of quality,
larger-capitalization growth and value companies.
In the growth-style portion of the portfolio, we emphasize individual security
selection. We specifically consider large-capitalization companies that have
above-average growth prospects, technological innovation, industry dominance,
competitive products and services, high return on capital and an overall strong
financial condition.
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Smith Barney Premier Selections Fund 1
<PAGE>
In the value portion of the portfolio we search for undervalued stocks of
established, well-recognized but temporarily out-of-favor companies. We
specifically consider companies that have low market valuations measured by our
valuation models, above-market dividend yields and established dividend records,
positive changes in earnings prospects, improving returns on invested capital,
cash flow and liquidity.
Please note that investing in a non-diversified fund such as the Fund that may
only invest in the securities of approximately 40 companies may entail greater
risk than is normally associated with more widely diversified funds.
Market Update and Outlook
Large Cap Value
We think that the outlook for international economies has improved substantially
during the period. The Federal Reserve Board ("Fed") shifted its focus from
containing last year's global crisis toward curbing inflationary pressures. The
Fed recently reversed last fall's three reductions in short-term interest rates,
based on factors such as a strong recovery in manufacturing industries,
unrestrained consumer spending, and rising commodity prices. The Fed's actions
removed the extra liquidity it supplied last year when economic conditions
seemed bleak and panic swept global financial markets. We believe that these
rate increases should effectively lessen the risk of inflation going forward.
In our opinion, individual stock performance has recently shown a bias toward
stocks that can generate sustainable growth in non-interest rate sensitive
industries, and which have met earnings expectations.
During the period, we continued to see the market react negatively to companies
that announced earnings shortfalls. In most of these cases, the shares of such
stumbling companies saw quick, striking declines in value, reflecting what we
believe to be a considerably lower tolerance for risk among many investors.
Recent economic data has shown signs of a return to the "global Goldilocks
economy," namely, a global economy that is not too hot, nor too cold, but just
right. We expect that data about inflation and economic strength should remain
the dominant influence of market activity going forward. Although our outlook
for the stock market for the remainder of 1999 is positive, we believe stock
market returns will be more moderate compared to the performance of recent
years.
Our investment strategy remains focused on identifying high-quality,
attractively valued companies with adequate earnings visibility and clearly
identifiable fundamental catalysts. We continue to find value in the energy,
basic materials, transportation, and capital goods sectors, while reducing
exposure to the health care sector due to legislative risks associated with
managed care.
We think one of the best large-cap value stock ideas is International Paper,
which recently completed its acquisition of Union Camp. Though the largest
company in the U.S. paper and forest products industry, we do not think that
International Paper is a stagnant giant. Instead, management is aggressively
cutting costs, eliminating less efficient production, and capitalizing on
economies of scale. In our view, this has enabled International Paper to improve
margins even before the benefits of improved pricing begins to work through to
its earnings.
Large Cap Growth
With the Asian crisis now a distant memory, we believe the recovery of Asia,
along with Latin America, means we may finally be seeing the proverbial "light
at the end of the tunnel." In our view, the number of acquisitions made by
consumer companies over the past two years has placed them in a position to
benefit to an even greater degree from worldwide economic recovery.
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
Ultimately, we think that it is the corporate earnings outlook that is the most
important factor in determining the behavior of large-capitalization growth
stocks. As such, we tend to view much of the political and economic headlines as
background noise and continue our focus on individual company balance sheets,
products and managements. When questions exist about the political and economic
situation worldwide, it always seems to lead many investors back to the highest-
quality companies.
We remain focused on companies that can, in a low inflation environment, deliver
above-average unit growth. We also want our companies to have the ability,
through balance sheet strength, to raise dividends, buy back their shares and
make strategic acquisitions.
We plan to add to our positions in Coca-Cola, Wrigley and Disney as we believe
the world economic recovery that is underway should benefit global brand name
companies such as these.
In closing, thank you for investing in the Smith Barney Premier Selections Fund.
We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ HEATH B. MCLENDON /s/ ALAN BLAKE
Heath B. McLendon Alan Blake
Chairman Vice President and
Investment Officer
/s/ FRANCES A. ROOT
Frances A. Root
Vice President and
Investment Officer
November 15, 1999
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Top Ten Holdings+ As of October 31, 1999
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1. Chase Manhattan Corp. 3.9%
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2. America Online, Inc. 3.5
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3. Enron Corp. 3.5
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4. Exxon Corp. 3.3
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5. Bristol-Myers Squibb Co. 3.2
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6. Marsh & McLennan Co., Inc. 3.2
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7. Warner-Lambert Co. 3.0
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8. General Electric Co. 3.0
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9. Coca-Cola Co. 2.9
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10. Merck & Co., Inc. 2.9
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+ As a percentage of total common stock.
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Smith Barney Premier Selections Fund 3
<PAGE>
<TABLE>
<CAPTION>
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Historical Performance -- Class A Shares
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Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Return(1)
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<S> <C> <C> <C> <C> <C>
Inception* -- 10/31/99 $11.40 $11.31 $0.00 $0.00 (0.79)%+
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Historical Performance -- Class B Shares
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Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Return(1)
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Inception* -- 10/31/99 $11.40 $11.29 $0.00 $0.00 (0.96)%+
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Historical Performance -- Class L Shares
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Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Return(1)
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Inception* -- 10/31/99 $11.40 $11.29 $0.00 $0.00 (0.96)%+
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</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
<TABLE>
<CAPTION>
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Average Annual Total Returns+
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Without Sales Charges(1)
---------------------------------------------
<S> <C> <C> <C>
Class A Class B Class L
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Inception* to 10/31/99 (0.79)% (0.96)% (0.96)%
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With Sales Charges(2)
---------------------------------------------
Class A Class B Class L
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Inception* to 10/31/99 (5.75)% (5.92)% (2.98)%
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</TABLE>
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%;
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the 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.
* Inception date for Class A, B and L shares is August 31, 1999.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
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Schedule of Investments (unaudited) October 31, 1999
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SHARES SECURITY VALUE
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COMMON STOCK -- 99.1%
Aerospace -- 0.6%
145,000 Raytheon Co., Class B Shares $ 4,223,125
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Aluminum -- 2.4%
290,000 Alcoa Inc. 17,617,500
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Automotive -- 1.9%
200,000 General Motors Corp. 14,050,000
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Beverage -- 2.9%
359,700 The Coca-Cola Co. 21,222,300
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Computer Software -- 4.7%
197,800 Microsoft Corp.* 18,308,862
811,100 Novell, Inc.* 16,272,694
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34,581,556
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Consumer Products -- 7.7%
467,800 The Gillette Co. 16,928,513
320,000 Kimberly-Clark Corp. 20,200,000
239,000 Wm. Wrigley Jr. Co. 19,105,062
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56,233,575
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Diversified/Conglomerate -- 3.0%
159,700 General Electric Co. 21,649,331
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Entertainment & Leisure -- 2.8%
768,400 The Walt Disney Co. 20,266,550
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Financial Services -- 12.0%
325,000 The Chase Manhattan Corp. 28,396,875
230,400 Fannie Mae 16,300,800
295,000 Marsh & McLennan Cos., Inc. 23,323,438
243,700 Merrill Lynch & Co., Inc. 19,130,450
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87,151,563
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Health Care/Drugs/Hospital Supplies -- 13.4%
305,000 Bristol-Myers Squibb Co. 23,427,812
191,200 Eli Lilly & Co. 13,168,900
259,300 Merck & Co., Inc. 20,630,556
469,400 Pfizer Inc. 18,541,300
271,900 Warner-Lambert Co. 21,701,019
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97,469,587
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Insurance -- 7.7%
196,800 American International Group, Inc. 20,258,100
230 Berkshire Hathaway Inc., Class A Shares* 14,697,000
180,000 The Chubb Corp. 9,877,500
150,000 CIGNA Corp. 11,212,500
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56,045,100
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Machinery/Industrial -- 1.6%
215,000 Caterpillar Inc. 11,878,750
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Manufacturing -- 1.8%
230,000 AlliedSignal Inc. 13,095,625
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See Notes to Financial Statements.
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Smith Barney Premier Selections Fund 5
<PAGE>
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Schedule of Investments (unaudited) (continued) October 31,1999
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SHARES SECURITY VALUE
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Office Equipment & Supplies -- 3.9%
380,000 Pitney Bowes Inc. $ 17,313,750
408,000 Xerox Corp. 11,424,000
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28,737,750
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Oil & Gas -- 11.4%
320,000 BP Amoco PLC ADR 18,480,000
635,000 Enron Corp. 25,360,313
320,000 Exxon Corp. 23,700,000
420,000 The Williams Cos., Inc. 15,750,000
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83,290,313
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Paper -- 2.2%
300,000 International Paper Co. 15,787,500
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Technology -- 11.0%
273,400 Cisco Systems, Inc.* 20,231,600
266,300 Intel Corp. 20,621,606
197,300 Motorola, Inc. 19,224,419
227,100 Texas Instruments Inc. 20,382,225
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80,459,850
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Telecommunications -- 8.1%
195,700 America Online, Inc.* 25,379,844
385,000 AT&T Corp. 17,998,750
312,680 SBC Communications Inc. 15,927,137
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59,305,731
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TOTAL COMMON STOCK
(Cost -- $725,746,386) 723,065,706
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 0.9%
$6,762,000 Morgan Stanley Dean Witter & Co., 5.190% due 11/1/99;
Proceeds at maturity -- $6,764,925; (Fully
collateralized by U.S. Treasury Notes & Bonds,
6.375% to 8.875% due 3/31/01 to 8/15/17;
Market value -- $6,914,276) (Cost --
$6,762,000) 6,762,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $732,508,386**) $ 729,827,706
================================================================================
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
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Statement of Assets and Liabilities (unaudited) October 31, 1999
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ASSETS:
Investments, at value (Cost -- $732,508,386) $729,827,706
Cash 69
Receivable for securities sold 1,884,837
Receivable for Fund shares sold 988,535
Dividends and interest receivable 775,615
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Total Assets 733,476,762
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LIABILITIES:
Management fees payable 425,298
Distribution fees payable 408,988
Accrued expenses 63,576
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Total Liabilities 897,862
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Total Net Assets $732,578,900
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NET ASSETS:
Par value of capital shares $ 64,841
Capital paid in excess of par value 738,727,890
Accumulated net investment loss (329,166)
Accumulated net realized loss from security transactions (3,203,985)
Net unrealized depreciation of investments (2,680,680)
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Total Net Assets $732,578,900
================================================================================
Shares Outstanding:
Class A 14,665,811
Class B 28,653,566
Class L 21,521,641
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Net Asset Value:
Class A (and redemption price) $ 11.31
Class B * $ 11.29
Class L ** $ 11.29
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Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $ 11.91
Class L (net asset value plus 1.01% of net asset value per share) $ 11.40
================================================================================
* 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 one year from initial purchase.
See Notes to Financial Statements.
Smith Barney Premier Selections Fund 7
<PAGE>
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Statement of Operations (unaudited) For the Period Ended October 31, 1999(a)
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INVESTMENT INCOME:
Dividends $ 1,246,150
Interest 482,747
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Total Investment Income 1,728,897
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EXPENSES:
Distribution fees (Note 2) 960,031
Management fees (Note 2) 866,868
Registration fees 131,031
Shareholder and system servicing fees 56,131
Shareholder communications 28,743
Audit and legal 5,755
Custody 4,826
Trustees' fees 4,208
Other 470
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Total Expenses 2,058,063
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Net Investment Loss (329,166)
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REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 3):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 6,435,129
Cost of securities sold 9,639,114
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Net Realized Loss (3,203,985)
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Change in Net Unrealized Depreciation of Investments:
Beginning of period --
End of period (2,680,680)
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Increase in Net Unrealized Depreciation (2,680,680)
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Net Loss on Investments (5,884,665)
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Decrease in Net Assets From Operations $ (6,213,831)
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(a) For the period from August 31, 1999 (commencement of operations) to
October 31, 1999.
See Notes to Financial Statements.
8 1999 Semi-Annual Report to Shareholders
<PAGE>
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Statement of Changes in Net Assets For the Period Ended October 31, 1999(a)
(unaudited)
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OPERATIONS:
Net investment loss $ (329,166)
Net realized loss (3,203,985)
Increase in net unrealized depreciation (2,680,680)
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Decrease in Net Assets From Operations (6,213,831)
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains --
- --------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders --
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 745,392,415
Net asset value of shares issued for reinvestment of dividends --
Cost of shares reacquired (6,599,684)
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Increase in Net Assets From Fund Share Transactions 738,792,731
- --------------------------------------------------------------------------------
Increase in Net Assets 732,578,900
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------------
End of period* $ 732,578,900
================================================================================
* Includes accumulated net investment loss of: $ (329,166)
================================================================================
(a) For the period from August 31, 1999 (commencement of operations) to October
31, 1999.
See Notes to Financial Statements.
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Smith Barney Premier Selections Fund 9
<PAGE>
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Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Premier Selections Fund ("Portfolio"), a separate investment
fund of the Smith Barney Investment Funds, Inc. ("Fund"), a Maryland
corporation, is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, open-end management investment company. The Fund consists
of this Portfolio and eight other separate investment portfolios: Smith Barney
Investment Grade Bond Fund, Smith Barney Government Securities Fund, Smith
Barney Small Cap Growth Fund, Smith Barney Contrarian Fund, Concert Peachtree
Growth Fund, Smith Barney Hansberger Global Value Fund, Smith Barney Hansberger
Global Small Cap Value Fund and Smith Barney Small Cap Value Fund. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Portfolio are:
(a) security transactions are accounted for on trade date; (b) securities traded
on national securities markets are valued at the closing prices on such markets
or, in the absence of sales, at the mean between the closing bid and asked
prices; over-the-counter securities are valued at the mean between the bid and
asked prices. Investments in securities for which market quotations are not
available are valued at fair value as determined in good faith by the Board of
Directors; (c) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (d)
dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis; (e) gains or losses on the sale of securities are
calculated by using the specific identification method; (f) direct expenses are
charged to each class; investment advisory fees and general Portfolio expenses
are allocated on the basis of relative net assets by class; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the
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 it from
substantially all Federal income and excise taxes; (i) 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; and
(j) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), acts as investment adviser to the Portfolio. The
Portfolio pays SSBC an advisory fee calculated at an annual rate of 0.75% of the
average daily net assets. This fee is calculated daily and paid monthly.
CFBDS, Inc. ("CFBDS") acts as the Portfolio's distributor. Salomon Smith Barney
Inc. ("SSB"), another subsidiary of SSBH, as well as certain other broker-
dealers, continues to sell Portfolio shares to the public as a member of the
selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
period ended October 31, 1999 SSB did not receive any brokerage commissions.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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 and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L shares
also have a 1.00% CDSC, which applies if redemption occurs within the first year
of purchase.
For the period ended October 31, 1999, CFBDS and SSB received sales charges of
$84,000 and $23,000 on sales of the Fund's Class A and L shares, respectively.
In addition, CDSCs paid to SSB were approximately:
Class B Class L
- --------------------------------------------------------------------------------
CDSCs $38,000 $9,000
- --------------------------------------------------------------------------------
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B and L shares calculated at the annual rate of 0.75% of
the average daily net assets of each class, respectively. For the year ended
August 31, 1999, total Distribution Plan fees were as follows:
Class A Class B Class L
- --------------------------------------------------------------------------------
Distribution Plan Fees $65,264 $510,052 $384,715
- --------------------------------------------------------------------------------
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the period ended October 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
- --------------------------------------------------------------------------------
Purchases $735,385,501
- --------------------------------------------------------------------------------
Sales 6,435,129
- --------------------------------------------------------------------------------
At October 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 37,500,015
Gross unrealized depreciation (40,180,695)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (2,680,680)
- --------------------------------------------------------------------------------
4. Repurchase Agreements
The Portfolio purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Portfolio requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
5. Reverse Repurchase Agreement
The Portfolio may enter into reverse repurchase agreement transactions for
leveraging purposes. A reverse repurchase agreement involves a sale by the
Portfolio of securities that it holds with an agreement by the Portfolio to
repurchase the same securities at an agreed upon price and date. A reverse
repurchase agreement involves the risk that the market value of the securities
sold by the Portfolio may decline below the repurchase price of the securities.
The Portfolio will establish a segregated account with its custodian, in which
the Portfolio will maintain cash, U.S. government securities or other liquid
high grade debt obligations equal in value to its obligations with respect to
reverse repurchase agreements.
During the period ended October 31, 1999, the Portfolio did not have any reverse
repurchase agreements.
- --------------------------------------------------------------------------------
Smith Barney Premier Selections Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the 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) and the credit risk should a
counterparty fail to perform under such contracts.
At October 31, 1999, the Portfolio had no open futures contracts.
7. Lending of Portfolio Securities
The Portfolio has an agreement with its custodian whereby the custodian may lend
securities owned by the Portfolio to brokers, dealers and other financial
organizations. Fees earned by the Portfolio on securities lending are recorded
as interest income. Loans of securities by the Portfolio are collateralized by
cash, U.S. government securities or high quality money market instruments that
are maintained at all times in an amount at least equal to the current market
value of the loaned securities, plus a margin which may vary depending on the
type of securities loaned. The custodian establishes and maintains the
collateral in a segregated account. The Portfolio maintains exposure for the
risk of any losses in the investment of amounts received as collateral.
At October 31, 1999, the Portfolio had no securities on loan.
8. Option Contracts
Premiums paid when call options are purchased by the Portfolio represent
investments which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the
Portfolio enters into a closing sales transaction, the Portfolio will realize a
gain or loss depending on whether the proceeds from the closing sales
transactions are greater or less than the premium paid for the option. When the
Portfolio exercises a call option, the cost of the security which the Portfolio
purchases upon exercise will be increased by the premium originally paid.
When a Portfolio writes a call 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 call option is exercised the proceeds of the security sold will be
increased by the premium originally received.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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 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.
At October 31, 1999, the Portfolio did not have any written options.
9. Capital Shares
At October 31, 1999, the Fund had 10 billion shares of capital stock authorized
with a par value of $0.001 per share. The Fund has the ability to issue multiple
classes of shares. Each share of a class represents an identical interest and
has the same rights, except that each class bears certain expenses, including
those specifically related to the distribution of its shares.
At October 31, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
- --------------------------------------------------------------------------------
Total Paid-in Capital $167,087,805 $326,451,978 $245,252,948
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
Period Ended
October 31, 1999*
------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Class A
Shares sold 14,927,738 $170,027,119
Shares issued on reinvestment -- --
Shares reacquired (261,927) (2,939,314)
- --------------------------------------------------------------------------------
Net Increase 14,665,811 $167,087,805
- --------------------------------------------------------------------------------
Class B
Shares sold 28,809,231 $328,138,599
Shares issued on reinvestment -- --
Shares reacquired (155,665) (1,686,621)
- --------------------------------------------------------------------------------
Net Increase 28,653,566 $326,451,978
- --------------------------------------------------------------------------------
Class L
Shares sold 21,702,519 $247,226,697
Shares issued on reinvestment -- --
Shares reacquired (180,878) (1,973,749)
- --------------------------------------------------------------------------------
Net Increase 21,521,641 $245,252,948
- --------------------------------------------------------------------------------
* For the period from August 31, 1999 (inception date) to October 31, 1999.
- --------------------------------------------------------------------------------
Smith Barney Premier Selections Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Class A(1)(2) Class B(1)(2) Class L(1)(2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 11.40 $ 11.40 $ 11.40
- ---------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.01 (0.01) (0.01)
Net realized and unrealized loss (0.10) (0.10) (0.10)
- ---------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations (0.09) (0.11) (0.11)
- ---------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains -- -- --
- ---------------------------------------------------------------------------------------------------
Total Distributions -- -- --
- ---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.31 $ 11.29 $ 11.29
- ---------------------------------------------------------------------------------------------------
Total Return++ (0.79)% (0.96)% (0.96)%
- ---------------------------------------------------------------------------------------------------
Net Assets, End of Period $165,853 $323,640 $243,086
- ---------------------------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.20% 1.95% 1.95%
Net investment income (loss) 0.29 (0.46) (0.46)
- ---------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 1% 1% 1%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from August 31, 1999 (inception date) to October 31, 1999
(unaudited).
(2) Per share amounts have been calculated using the average shares method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
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<PAGE>
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<PAGE>
Smith Barney Premier Selections Fund
Directors
Paul R. Ades
Herbert Barg
Dwight B. Crane
Frank Hubbard
Heath B. McLendon, Chairman
Jerome Miller
Ken Miller
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Alan Blake
Vice President and Investment Officer
Frances A. Root
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Shareholder Servicing Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Premier Selections Fund. It is not 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.
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Premier Selections Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01760 12/99
