SEMI-
ANNUAL
REPORT
SMITH BARNEY SHEARSON
TELECOMMUNICATIONS
GROWTH
FUND
JUNE 30, 1994
TELECOMMUNICATIONS GROWTH FUND
DEAR SHAREHOLDER:
We are pleased to provide you with the Semi-Annual Report, which includes
the portfolio of investments for Smith Barney Shearson Telecommunications
Growth Fund, for the six-month period ended June 30, 1994. As you know,
the Fund's primary objective is to provide capital appreciation through
common stock investment; income is a secondary objective. The Fund's hold-
ings are concentrated in communications, telecommunications and technol-
ogy.
The Fund's Class A total return (income plus change in share price) was
(10.58)% for the first six months of 1994. By comparison, Standard &
Poor's Daily Price Index of 500 Common Stocks (the "S&P 500"), an unman-
aged index used to portray common stock price movement of large U.S. com-
panies, was (3.38)%. The Fund underperformed this index because after fif-
teen months of significant outperformance, the stocks in the Fund under-
went a market correction. We believe the fundamentals underlying the
Fund's portfolio did not deteriorate and remain very strong.
Although the results for the first six months of 1994 were disappointing,
we are very optimistic about the future of the Fund, particularly in the
area of wireless communication. We expect wireless communications to revo-
lutionize the way we do business and become part of everyday life for many
Americans by the year 2000. The elements leading the revolution are con-
tinuously improving coverage and functionality, lower prices, and new ap-
plications. We subdivide the wireless technologies into three categories:
cellular phones, specialized mobile radio, and wireless cable. Our enthu-
siasm for the industry is based on the following assumptions:
* SUBSTANTIAL INDUSTRY GROWTH. We believe that the number of cellular
subscribers could quadruple over the next seven years, from 13 million
today to more than 49 million. This growth should drive local cellular
revenues up 19% a year, from $8.2 billion to more than $32 billion by
the year 2000.
* NEW PLAYERS JOIN THE GAME. With Motorola's backing, some specialized
mobile radio operators are developing enhanced networks ("ESMR") that
will offer mobile telephone services similar to cellular. We believe
that the market for wireless telephones is so young that a third compet-
itive offering will help to expand the market, not cannibalize the ex-
isting business.
* LOW-COST PROVIDER TO GRAB CABLE MARKET SHARE. While it provides the
same programming as traditional cable, wireless cable's subscriber rates
are 25%-40% lower. We look for wireless cable systems to reach penetra-
tion rates of 12% over the next five years, up from almost nothing
today.
We believe we are well positioned to participate in the growth opportuni-
ties in the wireless communication area. Also, we see opportunities in
foreign communications companies. Many formerly state-run companies are
becoming private enterprises and are modernizing their operations, and we
believe that their long-term growth prospects are excellent.
Thank you again for your continued confidence in the Fund.
Sincerely,
Heath B. McLendon Guy R. Scott
Chairman of the Board Investment Administrator
and Investment Officer
August 22, 1994
PORTFOLIO HIGHLIGHTS (UNAUDITED) JUNE 30, 1994
INDUSTRY BREAKDOWN
DESCRIPTION OF PIE CHART IN SHAREHOLDER REPORT
Pie chart depicting the allocation of the Telecommunications Growth Fund's
investment securities held at June 30, 1994 by industry classification.
The pie is broken in pieces representing industries in the following per-
centages:
<TABLE>
<CAPTION>
INDUSTRY
PERCENTAGE
<S> <C>
COMMUNICATIONS
36.5%
TELECOMMUNICATIONS
28.7%
CONSUMER SERVICES
10.3%
TECHNOLOGY
8.6%
ENERGY
4.3%
CAPITAL GOODS
2.2%
UTILITIES
1.0%
OTHER COMMON STOCK, COMMERCIAL PAPER, AND NET OTHER ASSETS
AND LIABILITIES
8.4%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Company Net
Assets
<S> <C>
GENERAL INSTRUMENT CORPORATION 3.1%
GRUPO TELEVISA SA, ADR 2.7
ERICSSON TELEPHONE COMPANY, CLASS B, ADR 2.7
TELLABS INC. 2.4
TELEFONOS DE MEXICO SA, ADR 2.4
LIN BROADCASTING CORPORATION 2.3
MCI COMMUNICATIONS CORPORATION 2.3
CAPITAL CITIES/ABC INC. 2.2
CELLULAR COMMUNICATIONS INC., SERIES A 2.2
SCIENTIFIC-ATLANTA, INC. 2.2
</TABLE>
PORTFOLIO OF INVESTMENTS (UNAUDITED) JUNE 30, 1994
<TABLE>
<CAPTION>
MARKET
VALUE
SHARES (NOTE
1)
<C> <S> <C>
COMMON STOCK -- 91.7%
COMMUNICATIONS -- 36.5%
66,000 Advanced Information Services, ADR $
2,491,500
131,000 Associated Communications Corporation, Class B+
3,373,250
13,500 BHC Communications, Inc., Class A
1,032,750
82,000 Capital Cities/ABC Inc.
5,832,250
101,333 Cellular Communications Inc.+
2,482,658
117,500 Cellular Communications Inc., Series A+
5,640,000
60,000 Century Telephone Enterprises, Inc.
1,552,500
218,700 Comcast Corporation, Class A
3,936,600
109,350 Comcast Corporation, Class A (Special)
1,968,300
34,000 Compania De Telefonos De Chile, ADR
2,907,000
90,500 Comsat Corporation
2,104,125
90,000 Contel Cellular Inc.+
1,490,625
140,000 Ericsson Telephone Company, Class B, ADR
6,938,750
16,800 Grupo Iusacell, Series D, SA, ADR
443,100
69,200 Grupo Iusacell, Series L, SA, ADR
1,799,200
137,500 Grupo Televisa SA, ADR+ ++
6,978,125
344,425 IDB Communications Group, Inc.
3,185,931
272,000 Intermedia Communications, Florida, Inc.
3,332,000
51,000 Lin Broadcasting Corporation
6,107,250
171,200 MFS Communications Company, Inc.+
4,237,200
186,000 Nextel Communications Inc., Class A+
5,626,500
81,500 Rogers Cantel Mobile Communications, Inc.,
Class B+
1,976,375
164,000 Scientific-Atlanta, Inc.
5,637,500
134,500 Time Warner, Inc.
4,724,313
33,000 Turner Broadcasting Systems Inc., Class B
573,375
109,000 Vanguard Cellular Systems Inc., Class A+
3,597,000
20,000 Viacom Inc., Class A+
675,000
137,400 Viacom Inc., Class B+
4,345,275
94,988,452
TELECOMMUNICATIONS -- 28.7%
160,000 Airtouch Communications+
3,780,000
114,000 C-TEC Corporation, Class B+
3,306,000
291,000 Hong Kong Telecommunications Ltd., ADR
5,456,250
264,700 MCI Communications Corporation
5,856,487
65,000 Newbridge Networks Corporation+
2,234,375
118,000 Octel Communications Corporation+
1,947,000
158,550 Sprint Corporation
5,529,431
100,000 Tele Denmark A/S, ADR
2,462,500
41,500 Telcom Corporation Argentina Stet-France, ADR
2,126,875
82,900 Telecom Corporation New Zealand Ltd., ADR
3,523,250
40,000 Telecomasia Corporation Pub. Ltd.++
1,220,000
101,000 Telecommunication Brasillinas, ADR
3,939,000
36,500 Telefonica De Argentina SA, ADR, Class B++
2,126,125
127,000 Telefonica De Espana SA, ADR
5,111,750
110,200 Telefonos De Mexico SA, ADR
6,157,425
476,000 Telekom Malaysia, ADR
3,546,237
102,000 Telephone & Data Systems Inc.
3,774,000
200,000 Tellabs Inc.
6,200,000
270,000 Thai Tel & Telecommunications, ADR
1,509,585
64,000 Vodafone Group Plc, ADR
4,848,000
74,654,290
CONSUMER SERVICES -- 10.3%
72,500 Cablemaxx Inc.+
580,000
280,000 Home Shopping Network
3,290,000
145,000 International Family Entertainment Inc., Class
B+
2,392,500
184,000 Liberty Media Corporation, Class A
3,634,000
43,000 Multimedia, Inc.+
1,247,000
80,000 Peoples Choice TV Corporation+
1,740,000
145,000 QVC Network Inc.
5,510,000
255,000 Tele-Communications Inc., Class A+
5,195,625
236,200 United International Holdings Inc., Class A+
3,159,175
1,176 U.S. West Inc.
49,245
26,797,545
TECHNOLOGY -- 8.6%
113,300 Antec Corporation+
2,662,550
135,000 Broadband Technologies Inc.
2,565,000
70,000 Chipcom Corp+
2,747,500
142,500 General Instruments Corporation+
8,122,500
124,000 Motorola Inc.
5,518,000
24,000 PeopleSoft Inc.+
840,000
22,455,550
ENERGY -- 4.3%
780,000 Global Marine Inc.+
3,607,500
64,200 Schlumberger, Ltd.
3,795,825
142,000 Varco International, Inc.+
958,500
210,000 Weatherford International, Inc.+
2,835,000
11,196,825
CAPITAL GOODS -- 2.2%
337,000 Rowan Inc.+
2,948,750
119,300 Tidewater, Inc.
2,773,725
5,722,475
UTILITIES -- 1.0%
121,300 Alcatel Alsthom, ADR
2,638,276
OTHER -- 0.1%
18,000 Jasmine International, ADR
258,786
TOTAL COMMON STOCK (Cost $241,917,120)
238,712,199
FACE VALUE
COMMERCIAL PAPER -- 8.2%
$13,088,000 Ford Motor Credit Corporation, 4.300% due
7/1/1994
13,088,000
8,215,000 General Electric Capital Corporation, 4.300%
due 7/1/1994
8,215,000
TOTAL COMMERCIAL PAPER (Cost $21,303,000)
21,303,000
TOTAL INVESTMENTS (Cost $263,220,120*) 99.9%
260,015,199
OTHER ASSETS AND LIABILITIES (NET) 0.1
241,517
NET ASSETS 100.0%
$260,256,716
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities
Act of 1933, as amended. These securities may be resold in transac-
tions exempt from registration to qualified institutional buyers.
Abbreviations:
ADR -- American Depositary Receipts.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) JUNE 30, 1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $263,220,120) (Note 1)
See accompanying schedule
$260,015,199
Cash
18,632
Receivable for Fund shares sold
2,106,973
Dividends and interest receivable
415,051
TOTAL ASSETS
262,555,855
LIABILITIES:
Payable for investment securities purchased $1,684,255
Investment advisory fee payable (Note 2) 161,899
Payable for Fund shares redeemed 140,579
Distribution fee payable (Note 3) 115,544
Transfer agent fees payable (Note 2) 75,000
Service fees payable (Note 3) 53,967
Custodian fees payable (Note 2) 8,400
Accrued expenses and other payables 59,495
TOTAL LIABILITIES
2,299,139
NET ASSETS
$260,256,716
NET ASSETS CONSIST OF:
Accumulated net investment loss $
(1,090,689)
Accumulated net realized loss on investments sold
(1,490,374)
Unrealized depreciation of investments
(3,204,921)
Par value
22,812
Paid-in capital in excess of par value
266,019,888
TOTAL NET ASSETS
$260,256,716
NET ASSET VALUE:
CLASS A SHARES:
Net asset value and redemption price per share
($74,838,180 / 6,504,976 shares of beneficial
interest outstanding)
$11.50
Maximum offering price per share ($11.50 / 0.95)
(based on sales charge of 5% of the offering price
on June 30, 1994)
$12.11
CLASS B SHARES:
Net asset value and offering price per share+
($185,418,536 / 16,306,597 shares of beneficial
interest outstanding)
$11.37
<FN>
+ Redemption price per share is equal to Net Asset Value less any applica-
ble contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes of
$54,305) $
766,085
Interest (net of foreign withholding taxes of $389)
458,231
TOTAL INVESTMENT INCOME
1,224,316
EXPENSES:
Investment advisory fee (Note 2) $953,606
Distribution fee (Note 3) 669,695
Service fees (Note 3) 317,869
Transfer agent fees (Notes 2 and 4) 215,994
Legal and audit fees 25,965
Custodian fees (Note 2) 24,028
Trustees' fees and expenses (Note 2) 7,422
Other 100,426
TOTAL EXPENSES
2,315,005
NET INVESTMENT LOSS
(1,090,689)
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 5):
Net realized loss on investments during the period
(58,724)
Net unrealized depreciation of investments during
the period
(28,847,695)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(28,906,419)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(29,997,108)
<FN>
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED
ENDED
06/30/94
12/31/93
(UNAUDITED)
<S> <C> <C>
Net investment loss $ (1,090,689) $
(693,424)
Net realized gain/(loss) on investments during
the period (58,724)
1,939,922
Net unrealized appreciation/(depreciation) of
investments during the period (28,847,695)
17,492,121
Net increase/(decrease) in net assets result-
ing from operations (29,997,108)
18,738,619
Distributions to shareholders from net real-
ized gain:
Class A --
(990,631)
Class B --
(1,990,565)
Net increase in net assets from Fund share
transactions (Note 6):
Class A 5,940,301
27,602,810
Class B 49,968,549
153,451,184
Net increase in net assets 25,911,742
196,811,417
NET ASSETS:
Beginning of period 234,344,974
37,533,557
End of period (including accumulated net in-
vestment loss of $1,090,689 at June 30,
1994) $260,256,716
$234,344,974
<FN>
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS YEAR YEAR
YEAR
ENDED ENDED ENDED
ENDED
06/30/94 12/31/93# 12/31/92**
12/31/91
(UNAUDITED)
<S> <C> <C> <C>
<C>
Net asset value, beginning of pe-
riod $ 12.86 $ 9.63 $ 8.68
$ 7.36
Income from investment operations:
Net investment income/(loss) (0.02) (0.04) 0.05
0.06
Net realized and unrealized gain/
(loss) on investments (1.34) 3.44 1.63
1.47
Total from investment operations (1.36) 3.40 1.68
1.53
Less distributions:
Distributions to shareholders from:
Dividends from net investment in-
come -- -- (0.02)
(0.06)
Distributions from net realized
capital gains -- (0.17) (0.71)
(0.14)
Distributions from capital -- -- --
(0.01)
Total distributions 0.00 (0.17) (0.73)
(0.21)
Net asset value, end of period $ 11.50 $ 12.86 $ 9.63
$ 8.68
Total return+++ (10.58)% 35.27% 19.41%
20.94%
Ratios to average net assets/sup-
plemental data:
Net assets, end of period (000's) $74,838 $77,564 $36,947
$34,643
Ratio of operating expenses to av-
erage net assets 1.24%++ 1.34% 1.31%
1.19%
Ratio of net investment in-
come/(loss) to average net assets (0.28)%++ (0.32)% 0.55%
0.67%
Portfolio turnover rate 5% 25% 64%
111%
<FN>
* The Fund commenced operations on January 1, 1984.
** On November 6, 1992 the Fund commenced selling Class B shares. Any
shares outstanding prior to November 6, 1992 were designated as Class A
shares.
# The average monthly shares method was used to calculate per share data
as the undistributed net investment income method does not accord with
results of operations for this year.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
ENDED
12/31/90 12/31/89+ 12/31/88+ 12/31/87+ 12/31/86+ 12/31/85+
12/31/84+*
<S> <C> <C> <C> <C> <C>
<C>
$ 8.78 $ 7.08 $ 6.10 $ 11.05 $ 12.64 $ 10.20
$ 8.75
0.14 0.17 0.12 0.31 0.26 0.33
0.54
(1.32) 2.51 0.96 (0.61) 1.86 2.75
0.91
(1.18) 2.68 1.08 (0.30) 2.12 3.08
1.45
(0.14) (0.16) (0.10) (0.69) (0.32) (0.45)
- --
(0.10) (0.82) -- (3.96) (3.39) (0.19)
- --
-- -- -- -- -- --
- --
(0.24) (0.98) (0.10) (4.65) (3.71) (0.64)
- --
$ 7.36 $ 8.78 $ 7.08 $ 6.10 $ 11.05 $ 12.64
$ 10.20
(13.46)% 37.85% 17.69% (3.53)% 18.84% 31.68%
16.62%
$33,130 $40,595 $30,253 $30,160 $38,840 $38,516
$32,915
1.20% 1.17% 1.21% 1.06% 1.08% 1.32%
1.29%
1.77% 1.93% 1.72% 2.63% 2.14% 2.95%
5.66%
107% 94% 49% 115% 71% 108%
67%
<FN>
+ Per share data and the number of shares outstanding reflect a 7-for-1
stock dividend issued on August 7, 1989, to shareholders of record at
the close of business on August 4, 1989.
++ Annualized.
+++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
FINANCIAL HIGHLIGHTS
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS YEAR
PERIOD
ENDED ENDED
ENDED
06/30/94 12/31/93#
12/31/92*
(UNAUDITED)
<S> <C> <C>
<C>
Net asset value, beginning of period $ 12.77 $ 9.63 $
9.33
Income from investment operations:
Net investment income/(loss) (0.06) (0.14)
0.00**
Net realized and unrealized gain/(loss) on
investments (1.34) 3.45
1.02
Total from investment operations (1.40) 3.31
1.02
Less distributions:
Distributions to shareholders from:
Dividends from net investment income -- --
(0.01)
Distributions from net realized capital
gains -- (0.17)
(0.71)
Total distributions 0.00 (0.17)
(0.72)
Net Asset Value, end of period $ 11.37 $ 12.77 $
9.63
Total return+++ (10.96)% 34.34%
10.98%
Ratios to average net assets/supplemental
data:
Net assets, end of period (000's) $185,419 $156,781 $
586
Ratio of operating expenses to average net
assets 2.07%+ 2.18%
2.21%+
Ratio of net investment (loss) to average
net assets (1.10)%+ (1.16)%
(0.38)%+
Portfolio turnover rate 5% 25%
64%
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Amount represents less than $0.01 per share.
# The average monthly shares method was used to calculate per share data
as the undistributed net investment income method does not accord with
results of operations for this period.
+ Annualized.
+++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson Telecommunications Trust (the "Trust") was organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts on June 2, 1983. The Trust is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a non-diversified, open-end management in-
vestment company, consisting of two portfolios, Smith Barney Shearson
Telecommunications Growth Fund (the "Fund") and Smith Barney Shearson
Telecommunications Income Fund, each with a separate investment objective.
Each commenced operations on January 1, 1984, by issuing shares of the
Trust in a tax-free exchange for shares of American Telephone & Telegraph
Company with rights to the divested Bell regional operating companies at-
tached. As of November 6, 1992, the Fund offered two classes of shares:
Class A shares and Class B shares. Class A shares are sold with a front-
end sales charge. Class B shares may be subject to a contingent deferred
sales charge ("CDSC"). Class B shares will automatically convert to Class
A shares eight years after the original purchase date. Both classes of
shares have identical rights and privileges except with respect to the ef-
fect of the respective sales charges, the distribution and/or service fees
borne by each class, expenses allocable exclusively to each class, voting
rights on matters affecting a single class, the exchange privilege of each
class and the conversion feature of Class B shares. The following is a
summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements:
Portfolio valuation: Investments in securities which are traded on a na-
tional securities exchange are valued at the last reported sales price or,
in the absence of a recorded sale, at the mean of the closing bid and
asked prices. Over-the-counter securities are valued at the closing bid
price. Short-term investments with maturities of 60 days or less from the
valuation date are valued on the basis of amortized cost.
Repurchase agreements: The Fund engages in repurchase agreement transac-
tions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Fund's holding pe-
riod. The value of the collateral is at least equal at all times to the
total amount of the repurchase obligations, including interest. In the
event of counterparty default, the Fund has the right to use the collat-
eral to offset losses incurred. There is potential loss to the Fund in the
event that the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities including the risk of a possible de-
cline in the value of the underlying securities during the period while
the Fund seeks to assert its rights. The Fund's investment adviser, acting
under the supervision of the Board of Trustees, reviews the value of the
collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income is re-
corded on the accrual basis. Realized gains or losses on sales of invest-
ments are recorded on the identified cost basis. Investment income, real-
ized and unrealized gains and losses are allocated based upon relative net
assets of each class.
Dividends and distributions to shareholders: Dividends from net
investment income determined on a class level, if any, of the Fund are
declared once a year, normally at the end of the year in which they are
earned or at the beginning of the next year. Distributions determined on a
Fund level, if any, of any net short- and long-term capital gains earned
by the Fund will be made annually after the close of the fiscal year in
which they are earned. Additional distributions of net investment income
and capital gains from the Fund may be made at the discretion of the
Trust's Board of Trustees in order to avoid the application of a 4% nonde-
ductible excise tax on certain undistributed amounts of ordinary income
and capital gains.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment se-
curities held by the Fund, timing differences and differing characteriza-
tion of distributions made by the Fund as a whole.
Federal taxes: It is the Fund's policy to qualify as a regulated invest-
ment company, if such qualification is in the best interest of its share-
holders, by complying with the requirements of the Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with The Boston Company Advisors, Inc. ("Boston Advisors"), an
indirect wholly owned subsidiary of Mellon Bank Corporation ("Mellon").
Under the Advisory Agreement, the Fund paid a monthly fee at the annual
rate of 0.75% of the value of its average daily net assets.
Prior to April 21, 1994, Boston Advisors provided the Fund with adminis-
tration services under the terms of the Advisory Agreement between the
Fund and Boston Advisors. As of the close of business on April 21, 1994,
Smith, Barney Advisers, Inc. ("SBA"), which is controlled by Smith Barney
Holdings Inc. ("Holdings"), a wholly owned subsidiary of The Travelers
Inc., succeeded Boston Advisors as the Fund's administrator. The Fund pays
SBA .20% of the value of the Fund's average daily net assets.
As of the close of business on April 21, 1994, the Fund entered into a
sub-administration agreement (the "Sub-Administration Agreement") with
Boston Advisors. Under the Sub-Administration Agreement, Boston Advisors
is paid by SBA at a rate agreed upon from time to time between SBA and
Boston Advisors.
For the six months ended June 30, 1994, the Fund incurred total brokerage
commissions of $90,105 of which $29,650 was paid to Smith Barney Inc.
("Smith Barney").
For the six months ended June 30, 1994, Smith Barney received from inves-
tors $248,733 representing commissions (sales charges) on sales of Class A
shares.
A CDSC is generally payable by a shareholder in connection with the re-
demption of Class B shares within five years (eight years in the case of
purchases by certain 401(k) plans) after the date of purchase. In circum-
stances in which the CDSC is imposed, the amount of the charge ranges be-
tween 5% and 0% of net asset value depending on the number of years since
the date of purchase. For the six months ended June 30, 1994, Smith Barney
received from investors $218,465 in CDSCs on the redemption of Class B
shares.
No officer, director or employee of Smith Barney or any parent or subsid-
iary of Smith Barney receives any compensation from the Trust for serving
as a Trustee or officer of the Trust. The Trust pays each of its Trustees
who is not an officer, director or employee of Smith Barney or any of its
affiliates $4,500 annually plus $250 for each meeting attended and reim-
burses each such Trustee for travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of Mellon, serves as the Trust's custodian. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, serves as the Trust's
transfer agent.
3. DISTRIBUTION PLAN
Smith Barney acts as distributor of the Fund's shares pursuant to a dis-
tribution agreement with the Fund and sells shares of the Fund through
Smith Barney or its affiliates.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a services
and distribution plan (the "Plan"). Under this Plan, the Fund compensates
Smith Barney for servicing shareholder accounts for both Class A and Class
B shareholders, and covers expenses incurred in distributing Class B
shares. Smith Barney is paid an annual service fee with respect to Class A
and Class B shares of the Fund at the rate of .25% of the value of the av-
erage daily net assets of each respective class of shares. Smith Barney is
also paid an annual distribution fee with respect to Class B shares at the
rate of .75% of the value of the average daily net assets attributable to
those shares. During the six months ended June 30, 1994, the Fund incurred
$94,637 in service fees for Class A shares. During the six months ended
June 30, 1994, the Fund incurred $223,232 in service fees and $669,695 in
distribution fees for Class B shares.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the operations of any
class of shares are prorated between the classes based upon the relative
net assets of each class. Operating expenses directly attributable to a
class of shares are charged to that class' operations. In addition to the
above servicing and distribution fees, class specific operating expenses
include transfer agent fees of $45,523 and $170,471 for Class A and Class
B shares, respectively.
5. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding short-
term obligations, aggregated $73,881,696 and $11,479,115, respectively,
during the six months ended June 30, 1994.
At June 30, 1994, aggregate gross unrealized appreciation for all securi-
ties in which there was an excess of value over tax cost was $17,135,929,
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $20,340,850.
6. SHARES OF BENEFICIAL INTEREST
The Trustees have authority to issue an unlimited number of shares of ben-
eficial interest of the Trust, with par value of $.001 per share. Each
Fund constitutes a sub-trust under an Amended and Restated Master Trust
Agreement. Shares of two sub-trusts have been authorized by the Trustees
of the Trust. The shares of the Fund which are divided into two classes,
Class A and Class B, are described herein.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
ENDED
6/30/94
12/31/93
CLASS A SHARES: SHARES AMOUNT SHARES
AMOUNT
<S> <C> <C> <C>
<C>
Sold 1,069,220 $ 13,153,919 3,444,398
$42,291,699
Issued as reinvestment of
capital gains distribu-
tion -- -- 70,818
910,725
Redeemed (593,930) (7,213,618) (1,321,071)
(15,599,614)
Net increase 475,290 $5,940,301 2,194,145
$27,602,810
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
ENDED
6/30/94
12/31/93
CLASS B SHARES: SHARES AMOUNT SHARES
AMOUNT
<S> <C> <C> <C>
<C>
Sold 5,337,787 $65,548,871 13,201,046
$165,712,928
Issued as reinvestment of
capital gains distribu-
tion -- -- 152,728
1,950,330
Redeemed (1,310,685) (15,580,322) (1,135,129)
(14,212,074)
Net increase 4,027,102 $49,968,549 12,218,645
$153,451,184
</TABLE>
7. CONCENTRATION OF CREDIT
Because the Fund concentrates its investments in one industry, its portfo-
lio may be subject to greater risk and market fluctuations than a portfo-
lio of securities representing a broader range of investment alternatives.
The risks could adversely affect the ability and inclination of the issu-
ers within the telecommunications industry to declare or pay dividends or
interest and the ability of holders of securities to realize any value
from the assets of the issuer upon liquidation or bankruptcy.
8. LINE OF CREDIT
The Fund and several affiliated entities participate in a $50 million line
of credit provided by Continental Bank N.A. under an Amended and Restated
Line of Credit Agreement (the "Agreement") dated April 30, 1992 and re-
newed effective May 31, 1994, primarily for temporary or emergency pur-
poses, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Under this Agreement, the
Fund may borrow up to the lesser of $25 million or 20% of its net assets.
Interest is payable either at the bank's Money Market Rate or the London
Interbank Offered Rate (LIBOR) plus .375% on an annualized basis. Under
the terms of the Agreement, as amended, the Fund and the other affiliated
entities are charged an aggregate commitment fee of $100,000 which is al-
located equally among each of the participants. The Agreement requires,
among other provisions, each participating fund to maintain a ratio of net
assets (not including funds borrowed pursuant to the Agreement) to aggre-
gate amount of indebtedness pursuant to the Agreement of no less than 5 to
1. During the six months ended June 30, 1994, the Fund did not borrow
under the Agreement.
9. SUBSEQUENT EVENT
On July 27, 1994, Smith Barney Strategy Advisers Inc. ("SBSA"), an affili-
ate of Smith Barney, succeeded Boston Advisors as the Fund's investment
adviser. The new investment advisory agreement contains the same terms and
conditions as the predecessor agreement. SBSA receives a monthly fee paid
at the annual rate of .55% of the value of the Fund's average daily net
assets.
As of the close of business on July 27, 1994, Boston Advisors was ap-
pointed as the Fund's sub-investment adviser pursuant to a written agree-
ment (the "Sub-Advisory Agreement"). Under the terms of the Sub- Advisory
Agreement, SBSA pays Boston Advisors a monthly fee at an annual rate of
.275% of the value of the Fund's average daily net assets.
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Smith Barney Strategy
Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
SUB-INVESTMENT ADVISER
AND SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services
Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit
and Trust Company
One Boston Place
Boston, Massachusetts 02108
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS) This is the increase (or decrease) in the market
value (price) of a security in your portfolio. If a stock or bond appreci-
ates in price, there is a capital gain; if it depreciates, there is a cap-
ital loss. A capital gain or loss is "realized" upon the sale of a secu-
rity; if net capital gains exceed net capital losses, there may be a capi-
tal gain distribution to shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE) One kind of back-end load, a CDSC
may be imposed if shares are redeemed during the first few years of owner-
ship. The CDSC may be expressed as a percentage of either the original
purchase price or the redemption proceeds. Most CDSCs decline over time,
and some will not be charged if shares are redeemed after a certain period
of time.
DISTRIBUTION RATE This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized capital gains to sharehold-
ers. A fund's distribution rate is usually expressed as an annualized per-
cent of the fund's offering price.
DIVIDEND This is income generated by securities in a portfolio and dis-
tributed after expenses to shareholders.
FRONT-END SALES CHARGE This is the sales charge applied to an investment
at the time of initial purchase.
NET ASSET VALUE (NAV) Net Asset Value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on
a given day. The total value of your investment would be the NAV multi-
plied by the number of shares you own.
SEC YIELD This standardized calculation of a mutual fund's yield is based
on a formula developed by the Securities and Exchange Commission (SEC) to
allow funds to be compared on an equal basis. It is an annualized yield
based on the portfolio's potential earnings from dividends, interest and
yield to maturity of its holdings, and it reflects the payments of all
portfolio expenses for the most recent 30-day period. Mutual funds are re-
quired to use this figure when stating yield.
TOTAL RETURN Total return measures a fund's performance, taking into ac-
count the combination of dividends paid and the gain or loss in the value
of the securities held in the portfolio. It may be expressed on an average
annual basis or cumulative basis (total change over a given period). In
addition, total return may be expressed with or without the effects of
sales charges or the reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average annual total return according to the standardized calculation de-
veloped by the SEC. The SEC average annual total return calculation in-
cludes the effects of all fees and sales charges and assumes the reinvest-
ment of all dividends and capital gains.
TELECOMMUNICATIONS
GROWTH
FUND
TRUSTEES
Paul R. Ades
Herbert Barg
Allan Johnson
Heath B. McLendon
Ken Miller
John F. White
OFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President,
Secretary and Treasurer
Guy R. Scott
Investment Administrator
Recycled
Recyclable
This report is submitted for
the general information of the
shareholders of Smith Barney
Shearson Telecommunications
Growth Fund. It is not authorized for
distribution to prospective investors
unless accompanied or preceded by
an effective Prospectus for the Fund,
which contains information
concerning the Fund's investment
policies, fees and expenses as well
as other pertinent information.
SMITH BARNEY
SMITH BARNEY SHEARSON
MUTUAL FUNDS
Two World Trade Center
New York, New York 10048
Fund 12, 207
FD0414 H4
