[GRAPHIC OMITTED]
Smith Barney
Telecommunications
Income Fund
------------------
SEMI-ANNUAL REPORT
------------------
June 30, 1999
[Logo] Smith Barney
Mutual Funds
<PAGE>
Smith Barney
Telecommunications
Income Fund
[PHOTO OMITTED]
Heath B. McLendon
Chairman
[PHOTO OMITTED]
Robert E. Swab
Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the period ended June 30,
1999 for the Smith Barney Telecommunications Income Fund ("Fund"). We hope you
find this report to be informative and useful. In this report, we review the
factors driving the Fund's performance during the reporting period and discuss
our outlook for the Bell operating companies that currently represent about 95%
of the Fund's holdings. A more detailed summary of the Fund's performance and
current holdings can be found in the appropriate sections that follow.
Market and Performance Update
As you know, the primary investment objective of the Fund is to provide our
shareholders with current income. Capital appreciation is a secondary objective.
The Fund's total return for the six months ended June 30, 1999 was 12.15% versus
the Standard & Poor's 500 Index, which returned 12.38%. (The S&P 500 is a
capitalization-weighted measure of 500 widely held common stocks.) In addition,
the Lipper Inc. peer group average for all telecommunication funds posted 26.86%
for the same time period. (Lipper Inc. is a major fund-tracking organization.)
The Fund's performance was directly impacted by the price changes of the
Regional Bell Operating Companies ("RBOCs") which represent approximately 84% of
the Fund's assets. In this report, we provide a general overview of the changing
telecommunications service industry and briefly discuss our outlook for the
sector.
Market Overview
The telecommunications industry is going through a major transition period as
deregulation, outlined by the Telecommunications Act of 1996, has increased
competition and accelerated technological innovation. These changes have created
both opportunities and risks. The new environment is forcing telecommunication
service providers to broaden their product lines in order to remain more
competitive. The altering of the competitive landscape has increased
consolidation within the industry as RBOCs look to bolster their asset
profitability through long distance, wireless, data services and Internet
services.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 1
<PAGE>
In addition, these companies are also increasing their geographic reach to
compete in this new environment. We believe the interplay of deregulation and
consolidation should have an ongoing effect on the structure of the
telecommunications industry for years to come.
As reported in our last shareholder report, in order to gain an edge on the
competition and increase market share, all of the RBOCs have either merged,
entered merger discussions or have formed strategic alliances. For example,
Ameritech and SBC Communications are in the process of merging and are currently
negotiating with the FCC (Federal Communications Commission) on final merger
conditions. Later this year, we expect the FCC to approve the merger between
Bell Atlantic and GTE. Lastly, U.S. West is in the middle of a takeover attempt
by Quest Communications International. Additionally, Bell South has recently
agreed to purchase a 10% equity stake in Quest. In late June, Vodafone Group, a
leading international mobile telecommunications provider, completed its merger
with AirTouch Communications. Consequently, shares of Vodafone have replaced the
Fund's position in AirTouch.
Market Outlook
We remain positive about the outlook for the RBOCs. Yet, from an investment
standpoint, we also recognize that several issues need to be monitored
continuously. Issues such as regulatory approval of the mergers and
consolidations within the industry, the integration of these combinations, their
ultimate financial impact (i.e., cost savings derived through combining) and the
competitive implications brought on by the mergers need to be watched closely.
The RBOCs historically have been considered a "safe haven" for conservative
investors as the attractive dividend yields tend to provide a degree of downside
protection. Additionally, earnings growth for this sector should continue to be
in excess of 10% over the next few years as deregulation opens new markets. This
should bode well for select telecommunications industry stocks going forward.
In closing, thank you for investing in the Smith Barney Telecommunications
Income Fund.
Sincerely,
/s/ Heath B. McLendon /s/ Robert E. Swab
Heath B. McLendon Robert E. Swab
Chairman Vice President and
Investment Officer
July 16, 1999
- --------------------------------------------------------------------------------
2 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Period Beginning End Income Capital Gain Return Total
Ended of Period of Period Dividends Distributions of Capital Returns+
=========================================================================================
<S> <C> <C> <C> <C> <C> <C>
6/30/99 $176.20 $187.68 $ 0.92 $ 8.29 $0.00 12.15%++
- -----------------------------------------------------------------------------------------
12/31/98 134.06 176.20 2.22 22.08 0.00 53.72
- -----------------------------------------------------------------------------------------
12/31/97 104.62 134.06 2.83 13.61 0.00 45.11
- -----------------------------------------------------------------------------------------
12/31/96 119.69 104.62 3.12 9.72 0.00 (1.45)
- -----------------------------------------------------------------------------------------
12/31/95 95.62 119.69 3.58 11.50 0.00 42.93
- -----------------------------------------------------------------------------------------
12/31/94 107.62 95.62 4.05 6.06 0.00 (1.83)
- -----------------------------------------------------------------------------------------
12/31/93 102.67 107.62 4.42 6.87 0.00 16.00
- -----------------------------------------------------------------------------------------
12/31/92 110.75 102.67 4.55 15.23 0.00 10.89
- -----------------------------------------------------------------------------------------
12/31/91 129.06 110.75 6.05 14.62 1.18 3.30
- -----------------------------------------------------------------------------------------
12/31/90 140.93 129.06 5.79 3.20 0.00 (1.80)
- -----------------------------------------------------------------------------------------
12/31/89 99.10 140.93 5.85 2.81 0.00 52.11
- -----------------------------------------------------------------------------------------
12/31/88 90.28 99.10 5.40 0.99 0.00 17.12
=========================================================================================
Total $48.78 $114.98 $1.18
=========================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, twice a year.
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
================================================================================
Six Months Ended 6/30/99++ 12.15%
- --------------------------------------------------------------------------------
Year Ended 6/30/99 52.65
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 27.67
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/99 18.79
- --------------------------------------------------------------------------------
1/1/84* through 6/30/99 19.80
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return+
- --------------------------------------------------------------------------------
================================================================================
6/30/89 through 6/30/99 459.50%
================================================================================
+ Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in
the Smith Barney Telecommunications Income Fund vs.
Standard & Poor's 500 Index and Lipper Equity Income Fund Index+
- --------------------------------------------------------------------------------
June 1989 -- June 1999
<INSERT PLOT POINTS>
+ Hypothetical illustration of $10,000 invested in the Smith Barney
Telecommunications Income Fund on June 30, 1989, assuming reinvestment of
dividends and capital gains, if any, at net asset value through June 30,
1999. The Standard & Poor's 500 Index is composed of widely held common
stocks listed on the New York Stock Exchange, American Stock Exchange and
the over-the-counter market. Figures for the index include reinvestment of
dividends. The Lipper Equity Income Fund Index is a net asset value
weighted index of the 30 largest funds in the Equity Income category. The
indexes are unmanaged and are not subject to the same management and
trading expenses as a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
- --------------------------------------------------------------------------------
4 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 100%
Telecommunications
264,684 Ameritech Corp. $ 19,454,274
323,180 Bell Atlantic Corp. 21,127,893
378,888 Bellsouth Corp. 17,760,375
341,394 SBC Communications Inc. 19,800,852
146,858 U.S. West Communications Inc. 8,627,908
82,218 Vodafone AirTouch PLC 16,196,945
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $9,831,857) 102,968,247
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $9,831,857*) $102,968,247
================================================================================
* Aggregate cost for Federal income tax purposes is $7,231,321.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Cost -- $9,831,857*) $102,968,247
- --------------------------------------------------------------------------------
Total Assets 102,968,247
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 836,348
Investment advisory fees payable 66,068
Administration fees payable 15,927
Accrued expenses 17,146
- --------------------------------------------------------------------------------
Total Liabilities 935,489
- --------------------------------------------------------------------------------
Total Net Assets $102,032,758
================================================================================
NET ASSETS:
Par value of capital shares $ 544
Capital paid in excess of par value 6,425,976
Overdistributed net investment income (73,251)
Accumulated net realized gain on investments 2,543,099
Net unrealized appreciation of investments 93,136,390
- --------------------------------------------------------------------------------
Total Net Assets $102,032,758
================================================================================
Shares Outstanding 543,663
- --------------------------------------------------------------------------------
Net Asset Value, per share (and redemption price) $187.68
================================================================================
* Aggregate cost for Federal income tax purposes is $7,231,321.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999
INVESTMENT INCOME:
Dividends $ 812,504
Interest 4,011
- --------------------------------------------------------------------------------
Total Investment Income 816,515
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 262,319
Administration fees (Note 2) 95,389
Audit and legal fees 19,041
Shareholder and system servicing fees 17,551
Trustees' fees 14,876
Shareholder communication fees 3,968
Custody 2,083
Other 1,488
- --------------------------------------------------------------------------------
Total Expenses 416,715
- --------------------------------------------------------------------------------
Net Investment Income 399,800
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 4,270,355
Cost of securities sold 801,248
- --------------------------------------------------------------------------------
Net Realized Gain 3,469,107
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 85,789,366
End of period 93,136,390
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 7,347,024
- --------------------------------------------------------------------------------
Net Gain on Investments 10,816,131
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $11,215,931
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (unaudited)
and the Year Ended December 31, 1998
1999 1998
================================================================================
OPERATIONS:
Net investment income $ 399,800 $ 1,213,027
Net realized gain+ 3,469,107 9,998,888
Increase in net unrealized appreciation 7,347,024 24,613,883
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 11,215,931 35,825,798
- --------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income (493,957) (1,189,940)
Net realized gains (4,412,393) (11,691,275)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (4,906,350) (12,881,215)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net asset value of shares issued
for reinvestment of dividends 2,163,262 5,413,986
Cost of shares reacquired (2,893,296) (5,178,814)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (730,034) 235,172
- --------------------------------------------------------------------------------
Increase in Net Assets 5,579,547 23,179,755
NET ASSETS:
Beginning of period 96,453,211 73,273,456
- --------------------------------------------------------------------------------
End of period* $ 102,032,758 $ 96,453,211
================================================================================
* Includes undistributed (overdistributed)
net investment income of: $(73,251) $20,906
================================================================================
+ Net realized gains for Federal income tax purposes are $3,469,107 and
$10,292,661, for the six months ended June 30, 1999 and the year ended
December 31, 1998, respectively.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Telecommunications Income Fund ("Fund"), an investment fund of
the Smith Barney Telecommunications Trust ("Trust"), a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company. Shares of the Fund are
not currently offered for sale to new investors.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets;
securities for which no sales price were reported are valued at current quoted
bid prices; securities, other than U.S. government agencies and obligations,
that have a maturity of more than 60 days are valued at prices based on market
quotations for securities of similar type, yield and maturity; (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 the accrual basis; (e)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (f) gains or losses on the sale of securities are calculated using the
average-cost method for financial reporting purposes and the specific
identification method for tax purposes; (g) the Fund intends to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended,
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (h) income distributions and capital gain distributions are
determined in accordance with income tax regulations which differ from generally
accepted accounting principles. These differences are primarily due to differing
accounting methods adopted for income tax purposes, and various timing
differences; and (i) 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
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
adviser to the Trust. The Fund pays SSBC an investment advisory fee calculated
at an annual rate of 0.55% of the average daily net assets. This fee is
calculated daily and paid monthly.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
SSBC also acts as the administrator of the Trust for which it receives a fee
calculated at an annual rate of 0.20% of the average daily net assets of each
fund. This fee is calculated daily and paid monthly.
All officers and one Trustee of the Trust are employees of SSB.
3. Investments
During the six months ended June 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases --
- --------------------------------------------------------------------------------
Sales $4,270,355
================================================================================
At June 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were as follows:
================================================================================
Gross unrealized appreciation $93,136,390
Gross unrealized depreciation --
- --------------------------------------------------------------------------------
Net unrealized appreciation $93,136,390
================================================================================
4. Repurchase Agreements
The Fund 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 Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
5. Shares of beneficial interest
At June 30, 1999, the Trust had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share.
Transactions in shares of the Fund were as follows:
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
================================================================================
Shares issued on reinvestment 12,393 36,069
Shares reacquired (16,127) (35,263)
- --------------------------------------------------------------------------------
Net Increase (Decrease) (3,734) 806
================================================================================
6. Concentration of Risk
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 economic
and business cycle risks associated with the concentration of the Fund in only
one industry could mean that adverse conditions could substantially impact the
income earned by the Fund and the value of the Fund's holdings.
- --------------------------------------------------------------------------------
Smith Barney Telecommunications Income Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of beneficial interest outstanding throughout each year ended
December 31, except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $176.20 $134.06 $104.62 $119.69 $ 95.62 $107.62
- ------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income 0.75 2.26 2.83 3.12 3.58 4.02
Net realized and unrealized
gain (loss) 19.94 64.18 43.05 (5.35) 35.57 (5.91)
- ------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 20.69 66.44 45.88 (2.23) 39.15 (1.89)
- ------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.92) (2.22) (2.83) (3.12) (3.58) (4.05)
Net realized gains (8.29) (22.08) (13.61) (9.72) (11.50) (6.06)
- ------------------------------------------------------------------------------------------------------
Total Distributions (9.21) (24.30) (16.44) (12.84) (15.08) (10.11)
- ------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $187.68 $176.20 $134.06 $104.62 $119.69 $ 95.62
- ------------------------------------------------------------------------------------------------------
Total Return 12.15%++ 53.72% 45.11% (1.45)% 42.93% (1.83)%
- ------------------------------------------------------------------------------------------------------
Net Assets, End of
Period (millions) $ 102 $ 96 $ 73 $ 63 $ 75 $ 61
- ------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 0.87%+ 0.89% 0.92% 0.90% 0.95% 0.95%
Net investment income 0.84+ 1.51 2.35 2.80 3.23 3.80
- ------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0% 0% 0% 0% 00%
======================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
SALOMON SMITH BARNEY
--------------------
A member of citigroup[LOGO]
Trustees
Paul R. Ades
Herbert Barg
Dwight B. Crane
Frank G. Hubbard
Heath B. McLendon, Chairman
Jerome Miller
Ken Miller
John F. White, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Robert E. Swab
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSBC Fund Management Inc.
Administrator
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Service Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of Smith
Barney Telecommunications Income Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Telecommunications
Income Fund
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0412 8/99
