<PAGE>
SMITH BARNEY
Telecommunications
Growth
Fund
SEMI- ..........................
ANNUAL
REPORT JUNE 30, 1995
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
DEAR SHAREHOLDER:
LOGO
We are pleased to provide you with
the semi-annual
report for the six months ended
June 30, 1995,
including the portfolio of
investments, for the Smith
Barney Telecommunications Growth
Fund. 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 holdings are concentrated in the areas
of communications,
telecommunications and technology.
The Fund's Class A total return (income plus
change in share price)
was 8.40% for the first six months of 1995. By
comparison, the
Standard & Poor's 500 Stock Index, an unmanaged
index used to
portray common stock price movement of large
U.S. companies, was up
20.19%. The Fund underperformed this index
because of concerns
generated by pending regulatory and legislative
actions, as well as
by the unveiling of major capital spending
plans to upgrade phone
networks to provide video, wireless and
somewhat ill-defined
"information superhighway" services. With fears
of entry barriers
coming down (deregulation and demonopolization
are now common
terminology), as well as capital investment
requirements
accelerating, it was difficult for investors to
maintain faith that
managements, amidst all the change and
spending, would continue to
successfully operate their existing core
businesses and, at the
same time, make value-enhancing long-term strategic
decisions.
We continue to believe that we are on the threshold of a
telecommunications
revolution that will impact societies across the globe. The
recognition of
growth in the areas of information access and communications
has increased
almost as fast as the leaps in technology associated with
this revolution. This
second wave of telecommunications stock recognition has been
centered on those
companies that are most directly involved in increasing
computer power,
digitizing data, increasing band-width and expanding and
simplifying access
through software, networking and providing online services.
Our goal is to
identify and invest in those stocks for the Fund.
1
<PAGE>
The debate in Congress over universal service and
deregulation with restriction
has hurt telephone, cable, cellular, and multimedia stocks,
most of which have
not participated in the most recent telecom boom. There is
no doubt this
information-communication revolution is going to be a major
engine of growth and
change well into the next millennium. Investors, no doubt,
recognize this. But,
at times, the influence of an economic slowdown or change in
regulation is not
correctly anticipated.
We believe the telecommunications sector will be a
predominant growth area in
the second half of this decade.
Thank you again for your continued confidence in the Fund.
Sincerely,
<TABLE>
<S> <C>
Heath B. McLendon Guy R. Scott
Chairman of the Board Investment Officer
and Investment
Officer
July 28, 1995
</TABLE>
2
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS (UNAUDITED)
JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
INDUSTRY BREAKDOWN
<TABLE>
Pie chart depicting the allocation of the Telecommunications
Growth Fund
investment securities held at June 30, 1995 by industry
classification. The pie
is broken into pieces representing industries in the
following percentages:
<CAPTION>
INDUSTRY PERCENTAGE
-------- ----------
<S> <C>
Capital Goods 2.3%
Energy 4.8%
Technology 8.5%
Consumer Services 9.8%
Communications 33.6%
Telecommunications 39.8%
Commercial Paper and Net Other
Assets and Liabilities 1.2%
</TABLE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Percentage of
Company
Net Assets
- ------------------------------------------------------------
- -----------
<S>
<C>
ERICSSON L M TELEPHONE COMPANY, CLASS B, ADR
4.4%
GENERAL INSTRUMENTS CORPORATION
4.3
TELLABS INC.
3.8
AIRTOUCH COMMUNICATIONS INC.
3.5
MCI COMMUNICATIONS CORPORATION
3.5
CAPITAL CITIES ABC INC.
3.4
MOTOROLA INC.
3.3
TELE-COMMUNICATIONS INC., CLASS A
3.1
VODAFONE GROUP PLC, ADR
2.9
SCIENTIFIC-ATLANTA, INC.
2.8
</TABLE>
3
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
(NOTE 1)
- ------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCK -- 98.8%
TELECOMMUNICATIONS -- 39.8%
314,000 AirTouch Communications Inc.+
$ 8,949,000
210,000 Analog Devices Inc.+
7,140,000
114,000 C-TEC Corporation, Class B+
2,807,250
291,000 Hong Kong Telecommunications Ltd., ADR
5,783,625
402,700 MCI Communications Corporation
8,859,400
65,000 Newbridge Networks Corporation+
2,291,250
70,000 Perusahaan Perseroan Indonesian Satellite, ADR+
2,677,500
57,000 Philippine Long Distance Telephone Company+
3,669,375
158,550 Sprint Corporation
5,331,244
100,000 Tele Danmark A/S, Class B, ADR+
2,800,000
41,500 Telcom Corporation Argentina Stet-France, ADR++
1,888,250
82,900 Telecom Corporation New Zealand Ltd., ADR
5,025,813
40,000 TelecomAsia Corporation Pub. Ltd.++
1,460,000
101,000 Telecommunication Brasillinas, ADR
3,396,125
73,000 Telefonica de Argentina SA, ADR, Class B++
1,797,625
127,000 Telefonica de Espana SA, ADR
4,921,250
130,200 Telefonos de Mexico SA, ADR
3,857,175
476,000 Telekom Malaysia, ADR
3,611,977
166,000 Telephone & Data Systems Inc.
6,038,250
200,000 Tellabs Inc.+
9,625,000
270,000 Thai Telephone & Telecommunications++
2,209,439
192,000 Vodafone Group Plc, ADR
7,272,000
- ------------
101,411,548
- ------------
COMMUNICATIONS -- 33.6%
196,300 Advanced Information Services, ADR
2,873,832
82,000 Capital Cities/ABC Inc.
8,599,750
101,333 Cellular Communications Inc.+
3,103,323
117,500 Cellular Communications Inc., Series A+
5,346,250
150,000 Clearnet Communications Inc., Class A+
1,687,500
218,700 Comcast Corporation, Class A+
3,977,606
109,350 Comcast Corporation, Class A Special+
2,029,809
130,000 DSC Communications+
6,045,000
560,000 Ericsson LM Telephone Company, Class B, ADR
11,200,000
16,800 Grupo Iusacell SA, Series D, ADR+
176,400
134,200 Grupo Iusacell SA, Series L, ADR+
1,610,400
272,000 Intermedia Communications, Florida, Inc.+
3,060,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (continued)
JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
(NOTE 1)
- ------------------------------------------------------------
- -----------------------------
<C> <S>
<C> <C>
COMMON STOCK (CONTINUED)
COMMUNICATIONS (CONTINUED)
171,200 MFS Communications Company, Inc.+
$ 5,521,200
206,000 NEXTEL Communications Inc., Class A+
2,909,750
73,000 NYNEX Cable Communications Group, ADR+
1,478,250
81,500 Rogers Cantel Mobile Communications, Inc.,
Class B+
1,935,625
328,000 Scientific-Atlanta, Inc.
7,216,000
134,500 Time Warner, Inc.
5,531,312
163,500 Vanguard Cellular Systems Inc., Class A+
3,924,000
20,000 Viacom Inc., Class A+
930,000
137,400 Viacom Inc., Class B+
6,371,925
- ------------
85,527,932
- ------------
CONSUMER SERVICES -- 9.8%
245,000 Bell Cablemedia Plc., ADR+
4,655,000
100,000 Comcast UK Cable Partners Ltd.+
1,612,500
145,000 International Family Entertainment Inc., Class
B+ 2,283,750
80,000 Peoples Choice TV Corporation+
2,010,000
333,400 Tele-Communications Inc., Class A+
7,814,063
125,000 Turner Broadcasting Corporation, Class B
2,562,500
236,200 United International Holdings Inc., Class A+
3,956,350
- ------------
24,894,163
- ------------
TECHNOLOGY -- 8.5%
105,000 Chipcom Corp.+
2,493,750
285,000 General Instruments Corporation+
10,936,875
124,000 Motorola Inc.
8,323,500
- ------------
21,754,125
- ------------
ENERGY -- 4.8%
780,000 Global Marine Inc.+
4,485,000
64,200 Schlumberger, Ltd.
3,988,425
142,000 Varco International, Inc.+
1,171,500
210,000 Weatherford International, Inc.+
2,651,250
- ------------
12,296,175
- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (continued)
JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
MARKET VALUE
SHARES
(NOTE 1)
- ------------------------------------------------------------
- -----------------------------
<C> <S>
<C> <C>
COMMON STOCK (CONTINUED)
CAPITAL GOODS -- 2.3%
337,000 Rowan Inc. +
$ 2,738,125
119,300 Tidewater, Inc.
2,997,412
- ------------
5,735,537
- ------------------------------------------------------------
- -----------------------------
TOTAL COMMON STOCK (COST $219,629,147)
251,619,480
- ------------------------------------------------------------
- -----------------------------
FACE VALUE
- ----------
COMMERCIAL PAPER -- 1.2% (COST
$2,967,000)
$2,967,000 General Electric Capital Corporation
6.200% due 7/3/95
2,967,000
- ------------------------------------------------------------
- -----------------------------
TOTAL INVESTMENTS (COST $222,596,147*)
100.0% 254,586,480
OTHER ASSETS AND LIABILITIES (NET)
0.0 (44,377)
- ------------------------------------------------------------
- -----------------------------
NET ASSETS
100.0% $254,542,103
- ------------------------------------------------------------
- -----------------------------
<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
transactions exempt from
registration to qualified institutional buyers.
Abbreviations:
ADR -- American Depositary Receipts.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C> <C>
ASSETS:
Investments, at value (Cost $222,596,147) (Note 1)
See accompanying schedule
$254,586,480
Dividends and interest receivable
338,010
Receivable for Fund shares sold
248,051
- ------------------------------------------------------------
- -----------------------------
TOTAL ASSETS
255,172,541
- ------------------------------------------------------------
- -----------------------------
LIABILITIES:
Payable for Fund shares redeemed
$282,214
Investment advisory fee payable (Note 2)
114,029
Distribution fee payable (Note 3)
75,505
Administration fee payable (Note 2)
41,465
Service fee payable (Note 3)
36,493
Transfer agent fees payable (Note 2)
35,016
Custodian fees payable (Note 2)
7,600
Due to custodian
3,794
Accrued expenses and other payables
34,322
- ------------------------------------------------------------
- -----------------------------
TOTAL LIABILITIES
630,438
- ------------------------------------------------------------
- -----------------------------
NET ASSETS
$254,542,103
- ------------------------------------------------------------
- -----------------------------
NET ASSETS consist of:
Accumulated net investment loss
$ (894,441)
Accumulated net realized loss on investments sold
(4,130,295)
Net unrealized appreciation of investments
31,990,333
Par value
19,875
Paid-in capital in excess of par value
227,556,631
- ------------------------------------------------------------
- -----------------------------
TOTAL NET ASSETS
$254,542,103
- ------------------------------------------------------------
- -----------------------------
NET ASSET VALUE:
CLASS A SHARES:
Net Asset Value and redemption price per share
($79,462,390 / 6,154,649 shares of beneficial interest
outstanding)
$12.91
- ------------------------------------------------------------
- -----------------------------
Maximum offering price per share ($12.91 / 0.95)
(based on sales charge of 5.00% of the offering price on
June 30, 1995)
$13.59
- ------------------------------------------------------------
- -----------------------------
CLASS B SHARES:
Net Asset Value and offering price per share+
($174,411,257 / 13,668,562 shares of beneficial interest
outstanding)
$12.76
- ------------------------------------------------------------
- -----------------------------
CLASS C SHARES:
Net Asset Value and offering price per share+
($668,456 / 51,586 shares of beneficial interest
outstanding) $12.96
- ------------------------------------------------------------
- -----------------------------
<FN>
+ Redemption price per share is equal to net asset value
less any applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS
ENDED JUNE 30, 1995
- ------------------------------------------------------------
- --------------------
<TABLE>
<S>
<C> <C>
INVESTMENT INCOME:
Dividends (net of withholding tax of $86,649)
$ 1,039,245
Interest
342,559
- ------------------------------------------------------------
- -----------------------------
TOTAL INVESTMENT INCOME
1,381,804
- ------------------------------------------------------------
- -----------------------------
EXPENSES:
Investment advisory fee (Note 2)
$696,087
Distribution fee (Note 3)
652,923
Service fee (Note 3)
316,403
Administration fee (Note 2)
253,123
Transfer agent fees (Notes 2 and 4)
230,256
Custodian fees (Note 2)
26,654
Legal and audit fees
17,853
Trustees' fees and expenses (Note 2)
11,310
Other
71,636
- ------------------------------------------------------------
- -----------------------------
TOTAL EXPENSES
2,276,245
- ------------------------------------------------------------
- -----------------------------
NET INVESTMENT LOSS
(894,441)
- ------------------------------------------------------------
- -----------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTES 1 AND 5):
Net realized gain on investments during the period
3,375,615
Net unrealized appreciation of investments during the
period 16,913,811
- ------------------------------------------------------------
- -----------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
20,289,426
- ------------------------------------------------------------
- -----------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$19,394,985
- ------------------------------------------------------------
- -----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
6/30/95 ENDED
(UNAUDITED) 12/31/94
<S>
<C> <C>
Net investment loss $
(894,441) $ (2,329,471)
Net realized gain/(loss) on investments during the period
3,375,615 (5,848,735)
Net unrealized appreciation/(depreciation) of investments
during the period
16,913,811 (10,566,252)
- ------------------------------------------------------------
- -----------------------------
Net increase/(decrease) in net assets resulting from
operations
19,394,985 (18,744,458)
Distributions to shareholders from net investment income:
Class A
- -- (910,324)
Class B
- -- (540,581)
Class C
- -- (392)
Net increase/(decrease) in net assets from Fund share
transactions (Note 6):
Class A
(10,703,518) 12,894,874
Class B
(24,663,637) 42,850,730
Class C
464,861 154,589
- ------------------------------------------------------------
- -----------------------------
Net increase/(decrease) in net assets
(15,507,309) 35,704,438
NET ASSETS:
Beginning of period
270,049,412 234,344,974
- ------------------------------------------------------------
- -----------------------------
End of period (including accumulated net investment
loss of $894,441 at June 30, 1995)
$254,542,103 $270,049,412
- ------------------------------------------------------------
- -----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------
- --------------------
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR YEAR YEAR
06/30/95
ENDED ENDED ENDED
(UNAUDITED)
12/31/94# 12/31/93# 12/31/92*
<S> <C>
<C> <C> <C>
Net asset value, beginning of period $11.91
$12.86 $9.63 $8.68
- ------------------------------------------------------------
- -------------------------------
Income from investment operations:
Net investment income/(loss) (0.01)
(0.04) (0.04) 0.05
Net realized and unrealized gain/(loss) on
investments 1.01
(0.78) 3.44 1.63
- ------------------------------------------------------------
- -------------------------------
Total from investment operations 1.00
(0.82) 3.40 1.68
- ------------------------------------------------------------
- -------------------------------
Less distributions:
Dividends from net investment income --
(0.13) -- (0.02)
Distributions from net realized capital
gains --
- -- (0.17) (0.71)
Distributions from capital (Note 1) --
- -- -- --
- ------------------------------------------------------------
- -------------------------------
Total distributions 0.00
(0.13) (0.17) (0.73)
- ------------------------------------------------------------
- -------------------------------
Net asset value, end of year $12.91
$11.91 $12.86 $9.63
- ------------------------------------------------------------
- -------------------------------
Total return++ 8.40%
(6.37)% 35.27% 19.41%
- ------------------------------------------------------------
- -------------------------------
Ratios/supplemental data:
Net assets, end of year (000's) $ 79,462
$83,918 $77,564 $36,947
Ratio of operating expenses to average net
assets 1.27%+
1.24% 1.34% 1.31%
Ratio of net investment income/(loss) to
average
net assets (0.18)%+
(0.29)% (0.32)% 0.55%
Portfolio turnover rate 4%
19% 25% 64%
- ------------------------------------------------------------
- -------------------------------
<FN>
* 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.
+ Annualized.
++ Total return represents aggregate total return for the
periods indicated and does
not reflect any applicable sales charge.
+++ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
ENDED ENDED ENDED
12/31/91 12/31/90 12/31/89+++ 12/31/88+++
12/31/87+++ 12/31/86+++ 12/31/85+++
<S> <C> <C> <C>
<C> <C> <C>
$7.36 $8.78 $7.08 $ 6.10
$11.05 $12.64 $10.20
- ------------------------------------------------------------
- ----------------------------------------
0.06 0.14 0.17 0.12
0.31 0.26 0.33
1.47 (1.32) 2.51 0.96
(0.61) 1.86 2.75
- ------------------------------------------------------------
- ----------------------------------------
1.53 (1.18) 2.68 1.08
(0.30) 2.12 3.08
- ------------------------------------------------------------
- ----------------------------------------
(0.06) (0.14) (0.16) (0.10)
(0.69) (0.32) (0.45)
(0.14) (0.10) (0.82) --
(3.96) (3.39) (0.19)
(0.01) -- -- --
- -- -- --
- ------------------------------------------------------------
- ----------------------------------------
(0.21) (0.24) (0.98) (0.10)
(4.65) (3.71) (0.64)
- ------------------------------------------------------------
- ----------------------------------------
$8.68 $7.36 $8.78 $7.08
$6.10 $11.05 $12.64
- ------------------------------------------------------------
- ----------------------------------------
20.94% (13.46)% 37.85% 17.69%
(3.53)% (18.84)% 31.68%
- ------------------------------------------------------------
- ----------------------------------------
$34,643 $ 33,130 $40,595 $30,253
$30,160 $38,840 $38,516
1.19% 1.20% 1.17% 1.21%
1.06% 1.08% 1.32%
0.67% 1.77 1.93% 1.72%
2.63% 2.14% 2.95%
111% 107% 94% 49%
115% 71% 108%
- ------------------------------------------------------------
- ----------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------
- --------------------
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
YEAR PERIOD
06/30/95 ENDED
ENDED ENDED
(UNAUDITED) 12/31/94#
12/31/93# 12/31/92*
<S> <C> <C>
<C> <C>
Net asset value, beginning of
year $11.82 $12.77
$9.63 $9.33
- ------------------------------------------------------------
- -----------------------------------
Income from investment
operations:
Net investment loss (0.06) (0.14)
(0.14) (0.00)**
Net realized and unrealized
gain/(loss) on investments 1.00 (0.78)
3.45 1.02
- ------------------------------------------------------------
- -----------------------------------
Total from investment
operations 0.94 (0.92)
3.31 1.02
- ------------------------------------------------------------
- -----------------------------------
Less distributions:
Dividends from net investment
income -- (0.03)
- -- (0.01)
Distributions from net realized
capital gains -- --
(0.17) (0.71)
- ------------------------------------------------------------
- -----------------------------------
Total distributions 0.00 (0.03)
(0.17) (0.72)
- ------------------------------------------------------------
- -----------------------------------
Net asset value, end of period $12.76 $11.82
$12.77 $9.63
- ------------------------------------------------------------
- -----------------------------------
Total return++ 7.95%
(7.17)% 34.34% 10.98%
- ------------------------------------------------------------
- -----------------------------------
Ratios/supplemental data:
Net assets, end of year (000's) $174,411 $185,980
$156,781 $ 586
Ratio of operating expenses to
average net assets 2.04%+ 2.07%
2.18% 2.21%+
Ratio of net investment loss to
average net assets (0.95)%+
(1.11)% (1.16)% (0.38)%+
Portfolio turnover rate 4% 19%
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 indicated
and does not reflect any applicable sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------
- --------------------
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
12/31/94 ENDED
(UNAUDITED) 12/31/94*#
<S>
<C> <C>
Net asset value, beginning of period
$12.00 $12.70
- ------------------------------------------------------------
- -----------------------------
Income from investment operations:
Net investment loss
(0.04) (0.01)
Net realized and unrealized gain/(loss) on investments
1.00 (0.66)
- ------------------------------------------------------------
- -----------------------------
Total from investment operations
0.96 (0.67)
- ------------------------------------------------------------
- -----------------------------
Less distributions:
Dividends from net investment income
- -- (0.03)
- ------------------------------------------------------------
- -----------------------------
Total distributions
0.00 (0.03)
- ------------------------------------------------------------
- -----------------------------
Net asset value, end of period
$12.96 $12.00
- ------------------------------------------------------------
- -----------------------------
Total return++
8.00% (5.24)%
- ------------------------------------------------------------
- -----------------------------
Ratios/supplemental data:
Net assets, end of period (000's)
$ 668 $ 151
Ratio of operating expenses to average net assets
2.15%+ 2.08%+
Ratio of net investment loss to average net assets
(1.06)%+ (1.13)%+
Portfolio turnover rate
4% 19%
- ------------------------------------------------------------
- -----------------------------
<FN>
* The Fund commenced selling Class C shares on November
7, 1994.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not
reflect any applicable sales charge.
# 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------
- --------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Telecommunications Trust (the "Trust") was
organized as an
unincorporated business trust under the laws of the
Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated
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 investment company,
consisting of two
portfolios, Smith Barney Telecommunications Growth Fund (the
"Fund") and Smith
Barney 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 attached.
At the time of this report the Fund offered four classes of
shares: Class A,
Class B, Class C and Class Y shares. Class A shares are sold
with a front-end
sales charge. Class B and Class C shares may be subject to a
contingent deferred
sales charge ("CDSC") upon redemption. Class B shares will
convert automatically
to Class A shares approximately eight years after the date
of original purchase.
Class Y shares are available to investors making an initial
investment of at
least $5 million and are not subject to any sales charges,
distribution or
service fees. As of June 30, 1995, no Class Y shares had
been sold. All classes
of shares have identical rights and privileges except with
respect to the effect
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 national
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 transactions.
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
14
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
- ------------------------------------------------------------
- --------------------
fixed rate of return that is not subject to market
fluctuations during the
Fund's holding period. 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 collateral
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
decline in the value of
the underlying securities during the period while the Fund
seeks to assert its
rights. The Fund's investment adviser or sub-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
recorded on the accrual
basis. Realized gains or losses on sales of investments are
recorded on the
identified cost basis. Investment income, realized 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 were
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 4.00% nondeductible 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 securities held
by the Fund, timing differences and differing
characterization of distributions
made by the Fund as a whole.
Federal taxes: It is the Fund's policy to qualify as a
regulated investment
company, if such qualification is in the best interest of
its shareholders, by
complying with the requirements of the Internal Revenue Code
of 1986, as
amended, applicable
15
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
- ------------------------------------------------------------
- --------------------
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 on behalf of the Fund has entered into an
investment advisory
agreement (the "Advisory Agreement") with Smith Barney
Strategy Advisers Inc.
("SBSA"), a division of Smith Barney Mutual Funds
Management, Inc. ("SBMFM").
SBMFM is a wholly-owned subsidiary of Smith Barney Holdings
Inc. ("Holdings"),
which is in turn a wholly-owned subsidiary of Travelers
Group Inc. Under this
agreement, the Fund paid a monthly fee at the annual rate of
0.55% of the value
of the Fund's average daily net assets.
The Fund has entered into a sub-investment advisory
agreement (the "Sub-Advisory
Agreement") with the Boston Company Advisors, Inc. ("Boston
Advisors"), an
indirect wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Under
the terms of the Sub-Advisory Agreement, SBSA pays Boston
Advisors a monthly fee
at an annual rate based on the value of the Fund's average
daily net assets.
The Fund has also entered into an administration agreement
(the "Administration
Agreement') with SBMFM. For administrative services rendered
the Fund pays SBMFM
a monthly fee at an annual rate of 0.20% of the value of the
Fund's average
daily net assets.
The Fund and SBMFM have also entered into a sub-
administration agreement (the
"Sub-Administration Agreement") with Boston Advisors. Under
the
Sub-Administration Agreement, SBMFM pays Boston Advisors a
portion of its
administration fee at a rate agreed upon from time to time
between SBMFM and
Boston Advisors.
For the six months ended June 30, 1995, the Fund incurred
total brokerage
commissions of $21,522 of which $6,250 was paid to Smith
Barney Inc. ("Smith
Barney").
For the six months ended June 30, 1995, Smith Barney
received from investors
$30,069 representing commissions (sales charges) on sales of
Class A shares.
A CDSC is generally payable by a shareholder in connection
with the redemption
of certain Class A, Class B and Class C shares. In
circumstances in which the
CDSC is imposed, the amount will vary depending on the
number of years since the
date of
16
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
- ------------------------------------------------------------
- --------------------
purchase. For the six months ended June 30, 1995, Smith
Barney received from
investors $426,843 in CDSC on the redemption of Class B
shares.
No officer, director or employee of Smith Barney, or any of
its affiliates
receives any compensation from the Trust for serving as a
Trustee or officer of
the Trust. The Trust pays each Trustee who is not an
officer, director or
employee of Smith Barney or any of its affiliates $4,500 per
annum plus $250 for
each meeting attended and reimburses 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 distribution
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 Class A, Class
B and Class C
shareholders, and covers expenses incurred in distributing
Class B and Class C
shares. Smith Barney is paid an annual service fee with
respect to Class A,
Class B and Class C shares of the Fund at the rate of 0.25%
of the value of the
average daily net assets of each respective class of shares.
Smith Barney is
also paid an annual distribution fee with respect to Class B
and Class C shares
at the rate of 0.75% of the value of the average daily net
assets attributable
to those shares. For the six months ended June 30, 1995, the
Fund paid service
fees of $98,762, $217,128 and $513 for Class A, Class B and
Class C shares,
respectively. For the six months ended June 30, 1995, the
Fund paid $651,385 and
$1,538 in distribution fees for Class B and Class C shares,
respectively.
4. EXPENSE ALLOCATION
Expenses of the Fund not directly attributable to the
operations of any class of
shares are prorated among 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 service
and distribution
fees, class specific operating expenses include transfer
agent fees. For the six
months ended June 30,
17
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
- ------------------------------------------------------------
- --------------------
1995, the Fund paid transfer agent fees of $67,146,
$162,491, and $619 for Class
A, Class B and Class C shares, respectively.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities,
excluding short-term
securities, aggregated $8,804,025 and $32,222,001,
respectively, during the six
months ended June 30, 1995.
At June 30, 1995, aggregate gross unrealized appreciation
for all securities in
which there was an excess of value over tax cost was
$49,817,293, and aggregate
gross unrealized depreciation for all securities in which
there was an excess of
tax cost over value was $17,826,960.
<TABLE>
6. SHARES OF BENEFICIAL INTEREST
The Trustees have authority to issue an unlimited number of
shares of beneficial
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 are divided into four classes, Class A, Class B, Class
C and Class Y.
Changes in shares of beneficial interest in the Fund were as
follows:
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
6/30/95
12/31/94
CLASS A SHARES: SHARES AMOUNT
SHARES AMOUNT
<S> <C> <C>
<C> <C>
- ------------------------------------------------------------
- -----------------------------------
Sold 110,657 $
1,309,525 2,118,919 $ 26,465,297
Issued as reinvestment of
dividends -- --
69,569 828,566
Redeemed (1,003,828)
(12,013,043) (1,170,354) (14,398,989)
- ------------------------------------------------------------
- -----------------------------------
Net increase/(decrease) (893,171)
$(10,703,518) 1,018,134 $ 12,894,874
- ------------------------------------------------------------
- -----------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
6/30/95
12/31/94*
CLASS A SHARES: SHARES AMOUNT
SHARES AMOUNT
<S> <C> <C>
<C> <C>
- ------------------------------------------------------------
- -----------------------------------
Sold 584,194 $
6,925,537 6,989,940 $ 85,839,378
Issued as reinvestment of
dividends -- --
43,682 516,322
Redeemed (2,656,402)
(31,589,174) (3,572,347) (43,504,970)
- ------------------------------------------------------------
- -----------------------------------
Net increase/(decrease) (2,072,208)
$(24,663,637) 3,461,275 $ 42,850,730
- ------------------------------------------------------------
- -----------------------------------
</TABLE>
18
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (continued)
- ------------------------------------------------------------
- --------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
PERIOD ENDED
6/30/95
6/30/94*
CLASS C SHARES: SHARES
AMOUNT SHARES AMOUNT
- ------------------------------------------------------------
- -----------------------------------
<S> <C> <C>
<C> <C>
Sold 40,298
$481,615 12,569 $154,200
Issued as reinvestment of
dividends --
- -- 32 389
Redeemed (1,313)
(16,754) -- --
- ------------------------------------------------------------
- -----------------------------------
Net increase 38,985
$464,861 12,601 $154,589
- ------------------------------------------------------------
- -----------------------------------
<FN>
* The Fund commenced selling Class C shares on November 7,
1994.
As of June 30, 1995 no Class Y shares had been sold.
</TABLE>
7. CONCENTRATION OF CREDIT
Because the Fund concentrates its investments in one
industry, its portfolio may
be subject to greater risk and market fluctuations than a
portfolio of
securities representing a broader range of investment
alternatives. The risks
could adversely affect the ability and inclination of the
issuers 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. CAPITAL LOSS CARRYFORWARD
As of December 31, 1994, the Fund had available for Federal
tax purposes an
unused capital loss carryforward of $5,387,295 expiring in
the year 2002.
9. LINE OF CREDIT
The Fund and several affiliated entities participate in a
$50 million line of
credit provided by Bank of America, N.A. under an Amended
and Restated Line of
Credit Agreement (the "Agreement") dated April 30, 1992, and
renewed effective
May 31, 1994, primarily for temporary or emergency purposes,
including the
meeting of redemption requests that otherwise might require
the untimely
disposition of securities. The Fund may borrow up to the
lesser of $25 million
or 25% of its net assets. However, pursuant to the Fund's
prospectus, the Fund
may only borrow up to 10% of its net assets. 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 allocated 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 aggregate amount of indebtedness pursuant
to the Agreement of
no less than 5 to 1. During the six months ended June 30,
1995, the Fund did not
borrow under the Agreement.
19
<PAGE>
Smith Barney
Telecommunications Growth Fund
- ------------------------------------------------------------
- --------------------
PARTICIPANTS
- ------------------------------------------------------------
- --------------------
DISTRIBUTOR COUNSEL
Smith Barney Inc. Willkie Farr &
Gallagher
388 Greenwich Street 153 East 53rd Street
New York, New York 10013 New York, New York
10022
INVESTMENT ADVISER AND TRANSFER AGENT
ADMINISTRATOR The Shareholder
Services Group Inc.
Smith Barney Mutual Funds Exchange Place
Management Inc. Boston, Massachusetts
02109
388 Greenwich Street
New York, New York 10013
CUSTODIAN
SUB-INVESTMENT ADVISOR Boston Safe Deposit and
The Boston Company Advisors, Inc. Trust Company
One Boston Place One Boston Place
Boston, Massachusetts 02108 Boston, Massachusetts
02108
20
<PAGE>
SMITH BARNEY
Telecommunications ------------
Growth Fund
A Member of
TravelersGroup
TRUSTEES
Paul R. Ades
Herbert Barg
Alger B. Chapman
Dwight B. Crane
Frank G. Hubbard
Allan Johnson
Heath B. McLendon
Ken Miller
John F. White
OFFICERS
Heath B. McLendon
Chairman of the Board
and Investment Officer
Jessica Bibliowicz
President
This report is
submitted for
Lewis E. Daidone the general
information of the
Senior Vice President shareholders of
Smith Barney
and Treasurer Telecommunications
Growth
Fund. It is not
authorized for
Guy R. Scott distribution to
prospective
Investment Officer investors unless
accompanied
or preceded by an
effective
Thomas M. Reynolds Prospectus for the
fund which
Controller contains information
concern-
ing the Fund's
investment
Christina T. Sydor policies, fees,
applicable sales
Secretary charges and expenses
as well
as other pertinent
information.
SMITH BARNEY
MUTUAL FUNDS
388 Greenwich Street
New York, New York
10013
[RECYCLED LOGO] Fund 12, 207, 476,
452
FD 0414 8/95
