<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
SMITH BARNEY
MANAGED
GOVERNMENTS Fund Inc.
STYLE PURE SERIES
SEMI-ANNUAL REPORT
JANUARY 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
Smith Barney Managed
Governments Fund Inc.
The Smith Barney Managed Governments Fund Inc. ("Fund") seeks high current
income consistent with liquidity and safety of capital. The Fund seeks to
achieve its objective primarily through investments in varied maturity
mortgage-backed debt obligations issued by the U.S. government or its agencies
such as GNMA, FNMA and FHLMC.
Smith Barney Managed Governments Fund Inc.
Average Annual Total Returns
January 31, 2000
Without Sales Charges(1)
------------------------------------------
Class A Class B Class L
================================================================================
Six-Months+ 0.62% 0.34% 0.39%
- --------------------------------------------------------------------------------
One-Year (1.80) (2.33) (2.25)
- --------------------------------------------------------------------------------
Five-Year 5.83 5.28 5.34
- --------------------------------------------------------------------------------
Ten-Year 7.01 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 7.98 4.94 4.17
================================================================================
With Sales Charges(2)
------------------------------------------
Class A Class B Class L
================================================================================
Six-Months+ (3.91)% (4.06)% (1.57)%
- --------------------------------------------------------------------------------
One-Year (6.22) (6.51) (4.15)
- --------------------------------------------------------------------------------
Five-Year 4.87 5.12 5.13
- --------------------------------------------------------------------------------
Ten-Year 6.52 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 7.65 4.94 4.02
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charge of 4.50% and 1.00%,
respectively; and Class B shares reflect the deduction of a 4.50% CDSC,
which applies if shares are redeemed within one year from purchase. This
CDSC declines by 0.50% the first year after purchase and thereafter by 1.00%
per year until no CDSC is incurred. Class L shares also reflect the
deduction of a 1.00% CDSC which applies if shares are redeemed within the
first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
++ Inception dates for Class A, B and L shares are September 4, 1984, November
6, 1992 and June 29, 1993, respectively.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
During the period covered by this report, interest rates rose and bond prices
declined. Our income-oriented strategy's focus was on selling lower coupon
mortgage-backed securities in the 7% range and buying higher coupon mortgages at
the 8% level. For the most part, bond fund managers were penalized for taking
aggressive maturity positions the past six months. (Maturity is reaching the
date at which a debt instrument is due and payable.)
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SHMGX
Class B MGVBX
Class L SMGLX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter...........................................................1
Historical Performance.......................................................3
Smith Barney Managed Governments
Fund Inc. at a Glance........................................................6
Schedule of Investments......................................................7
Statement of Assets and Liabilities..........................................8
Statement of Operations......................................................9
Statements of Changes in Net Assets.........................................10
Notes to Financial Statements...............................................11
Financial Highlights........................................................16
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
Heath B. McLendon James E. Conroy
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for Smith Barney Managed
Governments Fund Inc. ("Fund") for the six months ended January 31, 2000. In
this report, we summarize the period's prevailing economic and market conditions
and briefly outline our portfolio strategy. A detailed summary of performance
and current holdings can be found in the appropriate sections that follow.1 We
hope you find this report to be useful and informative.
Performance Update
For the six months ended January 31, 2000, the Fund returned 0.62% for Class A
shares, excluding the effects of sales charges. In comparison, the average total
return for U.S. mortgage securities funds according to Lipper, Inc., an
independent fund-tracking organization, was 0.69%.
Also, in comparison, the Lehman Brothers Government Bond Index, a broad-based
index of all public debt obligations of the U.S. government and its agencies
that has an average maturity of roughly nine years, returned 0.32%. In addition,
the Fund distributed income dividends totaling $0.35 per Class A share during
the past six months.
Market Update
1999 turned out to be one of the two worst years for the bond market in the
1990s (with 1994 being the other), and perhaps one of the most challenging bond
markets in history. In our view, the bond market in 1999 was negatively impacted
by diminishing liquidity -- a direct result of the global financial crisis that
reached its climax in October of 1998 as well as ongoing Federal Reserve Board
("Fed") policy actions.
Another key factor that weighed down the U.S. bond market during the period was
the stellar returns posted by many U.S. stocks, causing most investors to lose
interest in bonds and gravitate to hot stock market sectors such as technology
and telecommunications. Other noteworthy trends during the period included the
big non-event of Y2K, a hotly contested race for the Republican Party
Presidential nomination and a U.S. Treasury Department announcement of its
intent to buy back U.S. Treasuries as federal government surplus mounts.
During the reporting period, the Fed continued to tighten monetary policy and
raised rates. On February 2, 2000, the Fed raised rates for a fourth time in
less than eight months, aiming to keep inflation at bay and to curb the nation's
rapidly growing economy. In fact, in the fourth quarter of 1999, the U.S.
economy posted an annual growth rate of roughly 5.8%. Yet the strength of
economic growth relative to inflation was historically low at this point in the
economic cycle.
- ----------
1 Please note the holdings are as of January 31, 2000 and are subject to change.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 1
<PAGE>
The chart below shows the yields for various U.S. Treasuries during the
reporting period.2
Yields from U.S. Treasuries
1/31/00 7/30/99
------- -------
3-month U.S. Treasury Bills 5.68% 4.74%
2-year U.S. Treasury Bills 6.59 5.62
5-year U.S. Treasury Notes 6.69 5.79
10-year U.S. Treasury Bonds 6.66 5.90
30-year U.S. Treasury Bonds 6.49 6.10
Investment Strategy
As previously noted, the Fund seeks high current income consistent with
liquidity and safety of capital. The Fund seeks to achieve its objective
primarily through investments in varied maturity mortgage-backed debt
obligations such as Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC").
During the period covered by this report interest rates rose and bond prices
declined, and our income-oriented strategy's focus was on selling lower coupon
mortgage-backed securities in the 7% range and buying higher coupon mortgages at
the 8% level. For the most part, bond fund managers were penalized for taking
aggressive maturity positions the past six months. (Maturity is reaching the
date at which a debt instrument is due and payable.)
To maintain the Fund's neutral duration during the period, we also purchased
longer dated U.S. Treasuries. (Duration is a common gauge of the price
sensitivity of an asset or portfolio to a change in interest rates.) The Fund's
performance generally mirrored the performance of short maturity 1-year U.S.
Treasuries.
Market Outlook
It is our belief that the Fed will most likely maintain a tight monetary policy
over the near term. We also think that many bond market investors will closely
watch for a possible continuation of the current stock market correction. In our
view, bond market investors are worried that the "wealth factor" from stock
market investments may have created a false sense of prosperity, particularly if
consumers accumulate higher levels of personal debt. As the U.S. Treasury
proceeds with its security buyback program, we think that short-term rates may
go higher.
In closing, thank you for investing in the Smith Barney Managed Governments Fund
Inc. We look forward to helping you pursue your financial goals in the new
century.
Sincerely,
/s/ Heath B. McLendon /s/ James E. Conroy
Heath B. McLendon James E. Conroy
Chairman Vice President and
Investment Officer
February 29, 2000
- -----------
2 Source: Bloomberg L.P.
- --------------------------------------------------------------------------------
2 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1/31/00 $12.09 $11.82 $0.35 $0.00 $0.00 0.62%+
- -------------------------------------------------------------------------------------------------------------------------------
7/31/99 12.73 12.09 0.72 0.00 0.00 0.58
- -------------------------------------------------------------------------------------------------------------------------------
7/31/98 12.84 12.73 0.80 0.00 0.00 5.51
- -------------------------------------------------------------------------------------------------------------------------------
7/31/97 12.27 12.84 0.82 0.00 0.00 11.80
- -------------------------------------------------------------------------------------------------------------------------------
7/31/96 12.63 12.27 0.82 0.00 0.01 3.76
- -------------------------------------------------------------------------------------------------------------------------------
7/31/95 12.50 12.63 0.74 0.00 0.04 7.67
- -------------------------------------------------------------------------------------------------------------------------------
7/31/94 13.29 12.50 0.61 0.00 0.19 0.08
- -------------------------------------------------------------------------------------------------------------------------------
7/31/93 12.88 13.29 0.66 0.23 0.00 10.43
- -------------------------------------------------------------------------------------------------------------------------------
7/31/92 12.09 12.88 0.91 0.00 0.08 15.25
- -------------------------------------------------------------------------------------------------------------------------------
7/31/91 12.13 12.09 0.98 0.00 0.11 9.02
- -------------------------------------------------------------------------------------------------------------------------------
7/31/90 12.19 12.13 1.07 0.00 0.03 9.01
===============================================================================================================================
Total $8.48 $0.23 $0.46
===============================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1/31/00 $12.09 $11.82 $0.31 $0.00 $0.00 0.34%+
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/99 12.73 12.09 0.66 0.00 0.00 0.06
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/98 12.84 12.73 0.73 0.00 0.00 4.99
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/97 12.27 12.84 0.76 0.00 0.00 11.23
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/96 12.63 12.27 0.76 0.00 0.01 3.24
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/95 12.50 12.63 0.67 0.00 0.04 7.04
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/94 13.29 12.50 0.56 0.00 0.17 (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Inception* -- 7/31/93 12.64 13.29 0.41 0.16 0.00 9.92+
===================================================================================================================================
Total $4.86 $0.16 $0.22
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1/31/00 $12.09 $11.82 $0.32 $0.00 $0.00 0.39%+
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/99 12.73 12.09 0.67 0.00 0.00 0.15
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/98 12.84 12.73 0.74 0.00 0.00 5.07
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/97 12.27 12.84 0.76 0.00 0.00 11.26
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/96 12.63 12.27 0.76 0.00 0.01 3.25
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/95 12.50 12.63 0.67 0.00 0.04 7.04
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/94 13.29 12.50 0.56 0.00 0.17 (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Inception* -- 7/31/93 13.18 13.29 0.03 0.02 0.00 1.25+
===================================================================================================================================
Total $4.51 $0.02 $0.22
===================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Return Total
Period Ended of Period of Period Dividends Distributions of Capital Returns(1)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1/31/00 $12.10 $11.82 $0.37 $0.00 $0.00 0.72%+
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/99 12.74 12.10 0.77 0.00 0.00 0.92
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/98 12.84 12.74 0.84 0.00 0.00 5.94
- -----------------------------------------------------------------------------------------------------------------------------------
7/31/97 12.27 12.84 0.86 0.00 0.00 12.16
- -----------------------------------------------------------------------------------------------------------------------------------
Inception* -- 7/31/96 12.86 12.27 0.44 0.00 0.01 (1.10)+
===================================================================================================================================
Total $3.28 $0.00 $0.01
===================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges(1)
-------------------------------------------------------------------
Class A Class B Class L Class Y
=================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 1/31/00+ 0.62% 0.34% 0.39% 0.72%
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 1/31/00 (1.80) (2.33) (2.25) (1.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 1/31/00 5.83 5.28 5.34 N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 1/31/00 7.01 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Inception* through 1/31/00 7.98 4.94 4.17 4.56
=================================================================================================================================
<CAPTION>
With Sales Charges(2)
--------------------------------------------------------------------
Class A Class B Class L Class Y
=================================================================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 1/31/00+ (3.91)% (4.06)% (1.57)% 0.72%
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended 1/31/00 (6.22) (6.51) (4.15) (1.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 1/31/00 4.87 5.12 5.13 N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Ten Years Ended 1/31/00 6.52 N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------------
Inception* through 1/31/00 7.65 4.94 4.02 4.56
=================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
================================================================================
Class A (1/31/90 through 1/31/00) 96.90%
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/00) 41.77
- --------------------------------------------------------------------------------
Class L (Inception* through 1/31/00) 30.96
- --------------------------------------------------------------------------------
Class Y (Inception* through 1/31/00) 19.46
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum sales charge of 4.50% and 1.00%, respectively; and
Class B shares reflect the deduction of a 4.50% CDSC, which applies if
shares are redeemed within one year from purchase. This CDSC declines by
0.50% the first year after purchase and thereafter by 1.00% per year until
no CDSC is incurred. Class L shares also reflect the deduction of a 1.00%
CDSC, which applies if shares are redeemed within the first year of
purchase.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
* Inception dates for Class A, B, L and Y shares are September 4, 1984,
November 6, 1992, June 29, 1993 and February 7, 1996, respectively.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 5
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A Shares of the Smith Barney Managed
Governments Fund Inc. vs. Lehman Brothers Government Bond Index and Lipper
Mortgage Securities Average+
- --------------------------------------------------------------------------------
January 1990 -- January 2000
[GRAPH]
Smith Barney Lehman Brothers
Managed Governments Lipper Mortgage Government
Fund Inc. Securities Average Bond Index
Jan 1990 9,552 10,000 10,000
July 1990 10,153 10,555 10,501
July 1991 11,068 11,661 11,555
July 1992 12,757 13,201 13,317
July 1993 14,087 14,320 14,756
July 1994 14,098 14,035 14,736
July 1995 15180 15,262 17,310
July 1996 15,749 16,016 18,204
July 1997 17,613 17,626 20,056
July 1998 18,585 18,730 21,731
July 1999 18,692 19,032 22,327
Jan 2000 18,808 19,163 22,399
+ Hypothetical illustration of $10,000 invested in Class A shares on January
31, 1990, assuming deduction of the maximum 4.50% sales charge at the time
of investment and reinvestment of dividends and capital gains, if any, at
net asset value through January 31, 2000. The Lehman Brothers Government
Bond Index is a broad-based index of all public debt obligations of the
U.S. government and its agencies and has an average maturity of
approximately nine years. The index is unmanaged and is not subject to the
same management and trading expenses as a mutual fund. The Lipper, Inc.
U.S. Mortgage Securities Bond Fund Average ("Lipper Mortgage Securities
Average") is composed of the Fund's peer group of mutual funds (63 funds as
of January 31, 2000) investing in U.S. mortgage-backed securities. Lipper,
Inc. is a widely-recognized mutual fund information service. The
performance of the Fund's other classes may be greater or less than the
Class A shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in other classes.
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.
Investment Breakdown*
- --------------------------------------------------------------------------------
[GRAPH]
FNMA 20.5%
U.S. Treasury Notes 5.0%
GNMA 74.5%
* As a percentage of total investments.
U.S. Treasury Securities are debt obligations of the United States Government.
They are secured by the full faith and credit of the Federal Government, and
include such instruments as Treasury bonds, notes and bills.
Mortgage-Backed Securities are debt securities issued by U.S. Government
Agencies such as the Federal Home Loan Mortgage Corporation (FHLMC), Federal
National Mortgage Association (FNMA) and Government National Mortgage
Association (GNMA). They represent thousands of individual home mortgages that
are pooled to form securities. As homeowners pay interest and principal each
month, these payments are passed on to investors. Mortgage-backed securities are
backed by the full faith and credit of the issuing agency.
- --------------------------------------------------------------------------------
6 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) January 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount SECURITY VALUE
======================================================================================================================
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-- 100.0%
$ 25,000,000 U.S. Treasury Note, 5.875% due 11/15/04 $ 24,174,250
Federal National Mortgage Association (FNMA):
3,709,572 7.500% due 9/1/29+ 3,621,471
70,316,219 7.000% due 12/1/29+ 67,041,594
102,000,000 Zero coupon bond to yield 7.139% due 6/1/17 29,632,020
Government National Mortgage Association I (GNMA):
62,748,107 6.500% due 10/15/28+ 57,983,016
25,000,000 8.000% due 2/15/29* 24,929,500
64,058,740 7.000% due 5/15/29+ 60,975,592
75,464,078 7.500% due 7/15/29+ 73,600,870
146,505,074 8.000% due 12/15/29+++ 146,184,228
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $507,315,869**) $488,142,541
======================================================================================================================
</TABLE>
+ Date shown represents the last in range of maturity dates of mortgage
certificates owned.
* Security has been issued on a "to-be-announced" basis (See Note 9).
++ Security partially segregated by custodian for "to-be-announced" trades.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) January 31, 2000
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $507,315,869) $488,142,541
Receivable for Fund shares sold 309,132
Interest receivable 3,033,692
Other assets 3,011
- --------------------------------------------------------------------------------
Total Assets 491,488,376
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 25,069,792
Payable to bank 278,187
Investment advisory fees payable 179,794
Administration fees payable 79,908
Payable for Fund shares purchased 19,106
Distribution fees payable 4,633
Other liabilities 1,119,399
Accrued expenses 78,236
- --------------------------------------------------------------------------------
Total Liabilities 26,829,055
- --------------------------------------------------------------------------------
Total Net Assets $464,659,321
================================================================================
NET ASSETS:
Par value of capital shares $ 39,312
Capital paid in excess of par value 516,470,061
Overdistributed net investment income (750,884)
Accumulated net realized loss from security transactions (31,925,840)
Net unrealized depreciation of investments (19,173,328)
- --------------------------------------------------------------------------------
Total Net Assets $464,659,321
================================================================================
Shares Outstanding:
Class A 24,549,088
---------------------------------------------------------------------------
Class B 4,162,258
---------------------------------------------------------------------------
Class L 323,678
---------------------------------------------------------------------------
Class Y 10,277,374
---------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $11.82
---------------------------------------------------------------------------
Class B * $11.82
---------------------------------------------------------------------------
Class L ** $11.82
---------------------------------------------------------------------------
Class Y (and redemption price) $11.82
---------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 4.71% of net asset value per share) $12.38
---------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $11.94
================================================================================
* Redemption price is NAV of Class B shares reduced by a 4.50% CDSC if shares
are redeemed within one year from purchase.
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended January 31, 2000
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 17,082,874
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 1,111,396
Distribution fees (Note 2) 616,185
Administration fees (Note 2) 493,954
Shareholder and system servicing fees 138,747
Registration fees 50,684
Shareholder communication fees 37,052
Audit and legal 32,945
Directors' fees 30,410
Custody 17,288
Other 8,111
- --------------------------------------------------------------------------------
Total Expenses 2,536,772
- --------------------------------------------------------------------------------
Net Investment Income 14,546,102
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS (NOTE 3):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 203,211,670
Cost of securities sold 207,621,055
- --------------------------------------------------------------------------------
Net Realized Loss (4,409,385)
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments:
Beginning of period (12,258,704)
End of period (19,173,328)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (6,914,624)
- --------------------------------------------------------------------------------
Net Loss on Investments (11,324,009)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,222,093
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 9
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended January 31, 2000 (unaudited)
and the Year Ended July 31, 1999
2000 1999
================================================================================
OPERATIONS:
Net investment income $ 14,546,102 $ 27,915,680
Net realized loss (4,409,385) (9,401,797)
Increase in net unrealized depreciation (6,914,624) (14,584,287)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 3,222,093 3,929,596
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (14,058,031) (30,793,285)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (14,058,031) (30,793,285)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 29,723,673 127,955,837
Net asset value of shares issued for
reinvestment of dividends 6,838,432 15,923,744
Cost of shares reacquired (66,830,311) (152,838,825)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (30,268,206) (8,959,244)
- --------------------------------------------------------------------------------
Decrease in Net Assets (41,104,144) (35,822,933)
NET ASSETS:
Beginning of period 505,763,465 541,586,398
- --------------------------------------------------------------------------------
End of period* $464,659,321 $505,763,465
================================================================================
* Includes overdistributed net investment income of: $(750,884) $(1,238,955)
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Managed Governments Fund Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company.
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 price on such markets;
securities for which no sales price was reported and U.S. government agencies
and obligations are valued at bid price, or in the absence of a recent bid
price, at the bid equivalent obtained from one or more of the major market
makers; (c)securities for which market quotations are not available will be
valued in good faith at fair value by or under the direction of the Board of
Directors; (d)securities 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; (e)securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (f) interest
income is recorded on an accrual basis; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded on the ex-dividend
date; (i) direct expenses are charged to each class; management fees and general
fund expenses are allocated on the basis of the relative net assets of each
class; (j) 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; (k) the character of
income and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
July 31, 1999, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
overdistributed net investment income amounting to $1,384,574 was reclassified
to paid-in capital. Net investment income, net realized gains and net assets
were not affected by these changes; and (l) estimates and assumptions are
required to be made regarding assets, liabilities and changes in net assets
resulting from operations when financial statements are prepared. Changes in the
economic environment, financial markets and any other parameters used in
determining these estimates could cause actual results to differ.
2. Investment Advisory Agreement,
Administration Agreement and
Other Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment adviser
to the Fund. The Fund pays SSBC an investment advisory fee calculated at an
annual rate of 0.45% of the average daily net assets up to $1 billion and 0.415%
of the average daily net assets in excess of $1 billion. This fee is calculated
daily and paid monthly.
Effective October 1999, Smith Barney Private Trust Company ("Private Trust"),
another subsidiary of Citigroup, became the Fund's transfer agent and PFPC
Global Fund Services ("PFPC") became the sub-transfer agent. Private Trust
receives account fees and asset-based fees that vary according to the account
size and type of account. PFPC is responsible for shareholder recordkeeping and
financial processing for all shareholder accounts and is paid by Private Trust.
During the period October 1, 1999 through January 31, 2000, the Fund paid
transfer agent fees of $86,091 to Private Trust.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
SSBC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets up to $1
billion and 0.185% of the average daily net assets in excess of $1 billion. This
fee is calculated daily and paid monthly.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney Inc.
("SSB"), another subsidiary of SSBH, was the Fund's distributor. SSB, as well as
certain other broker-dealers, continues to sell Fund shares to the public as a
member of the selling group.
There is a contingent deferred sales charge ("CDSC") of 4.50% on Class B shares,
which applies if redemption occurs within one year from purchase. This CDSC
declines by 0.50% the first year after purchase and thereafter by 1.00% per year
until no CDSC is incurred. Class L shares also have a 1.00% CDSC, which applies
if redemption occurs within the first year of purchase. Class A shares also have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed $500,000
in the aggregate. These purchases do not incur an initial sales charge.
For the six months ended January 31, 2000, CFBDS and SSB received sales charges
of approximately $81,000 and $5,000 on sales of the Fund's Class A and Class L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
Class B Class L
================================================================================
CDSCs $39,000 $1,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and L shares calculated at an annual rate of 0.25% of the average
daily net assets of each respective class. In addition, the Fund pays a
distribution fee with respect to Class B and L shares calculated at an annual
rate of 0.50% and 0.45% of the average daily net assets for each class,
respectively. For the six months ended January31, 2000, total Distribution Plan
fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $390,334 $211,794 $14,057
================================================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the six months ended January 31, 2000, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $229,799,672
- --------------------------------------------------------------------------------
Sales 203,211,670
================================================================================
At January 31, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ --
Gross unrealized depreciation (19,173,328)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(19,173,328)
================================================================================
4. Capital Loss Carryforward
At July 31, 1999, the Fund had, for Federal income tax purposes, capital loss
carryforwards of approximately $13,805,000 available, subject to certain
limitations, to offset future capital gains. To the extent that these capital
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed.
The amount and expiration of the carryforwards are indicated below. Expiration
occurs on July 31 of the year indicated:
2003 2004
================================================================================
Carryforward Amounts $10,207,000 $3,598,000
================================================================================
- --------------------------------------------------------------------------------
12 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
5. 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.
6. Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreement transactions for leveraging
purposes. A reverse repurchase agreement involves a sale by the Fund of
securities that it holds with an agreement by the Fund to repurchase the same
securities at an agreed upon price and date. A reverse repurchase agreement
involves the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of the securities. The Fund will establish a
segregated account with its custodian, in which the Fund will maintain cash,
U.S. government securities or other liquid high grade debt obligations equal in
value to its obligations with respect to reverse repurchase agreements.
During the six months ended January 31, 2000, the Fund had no reverse repurchase
agreements outstanding.
7. Option Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, it will realize a gain or loss from the sale of the underlying security
and the proceeds from such sale will be decreased by the premium originally
paid. When the Fund exercises a call option, the cost of the security which the
Fund purchases upon exercise will be increased by the premium originally paid.
At January 31, 2000, the Fund had no purchased call or put options outstanding.
When a Fund writes a call or put option, an amount equal to the premium received
by the Fund is recorded as a liability, the value of which is marked-to-market
daily. When a written option expires, the Fund realizes a gain. When the Fund
enters into a closing purchase transaction, the Fund realizes a gain or loss
depending upon whether the cost of the closing transaction is greater or less
than the premium originally received, without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
eliminated. When a written call option is exercised, the cost of the security
sold will be reduced by the premium originally received. When a written put
option is exercised, the amount of the premium received will reduce the cost of
the security which the Fund purchased upon exercise. When written index options
are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
call option is that the Fund gives up the opportunity to participate in any
decrease in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Fund is exposed to the risk of loss if
the market price of the underlying security declines.
During the six months ended January 31, 2000, the Fund did not write any call or
put options.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian and is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking-to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transactions and the Fund's basis in the
contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At January 31, 2000, the Fund had no open futures contracts.
9. Securities Traded on a
To-Be-Announced Basis
The Fund may trade portfolio securities on a "to-be-announced" ("TBA") basis. In
a TBA transaction, the Fund commits to purchasing or selling securities for
which all specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the Fund,
normally 15 to 45 days later. These transactions are subject to market
fluctuation and their current value is determined in the same manner as for
other portfolio securities.
At January 31, 2000, the Fund held one TBA security with a total cost of
$24,953,129.
10. Dollar Roll Transactions
The Fund may enter into dollar roll transactions. A dollar roll transaction
involves a sale by the Fund of securities that it holds with an agreement by the
Fund to repurchase similar securities at an agreed upon price and date. The
securities repurchased will bear the same interest as those sold, but generally
will be collateralized by pools of mortgages with different prepayment histories
than those securities sold. Proceeds from the sale will be invested and the
income from these investments, together with any additional income received on
the sale, will generate income for the Fund exceeding the yield on the
securities sold.
At January 31, 2000, the Fund had no open dollar roll transactions.
11. Capital Shares
At January 31, 2000, the Fund had 500 million shares of capital stock authorized
with a par value of $0.001 per share. The Fund has the ability to issue multiple
classes of shares. Each share of a class represents an identical interest in the
Fund and has the same rights, except that each class bears certain expenses
specifically related to the distribution of its shares.
At January 31, 2000, total paid-in capital amounted to the following for each
class:
Amount
================================================================================
Class A $359,346,320
- --------------------------------------------------------------------------------
Class B 25,887,370
- --------------------------------------------------------------------------------
Class L 3,973,047
- --------------------------------------------------------------------------------
Class Y 127,302,636
================================================================================
- --------------------------------------------------------------------------------
14 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
January 31, 2000 July 31, 1999
------------------------------------- -------------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 1,419,709 $ 17,139,865 5,941,483 $ 76,042,708
Shares issued on reinvestment 486,640 5,875,851 1,067,610 13,435,336
Shares reacquired (3,973,910) (47,970,660) (9,789,455) (124,581,005)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease (2,067,561) $(24,954,944) (2,780,362) $ (35,102,961)
================================================================================================================================
Class B
Shares sold 345,990 $ 4,178,921 1,099,653 $ 14,006,795
Shares issued on reinvestment 73,221 884,212 183,648 2,312,409
Shares reacquired (1,336,030) (16,096,980) (2,013,572) (25,429,750)
- --------------------------------------------------------------------------------------------------------------------------------
Net Decrease (916,819) $(11,033,847) (730,271) $ (9,110,546)
================================================================================================================================
Class L
Shares sold 52,645 $ 632,955 316,056 $ 4,011,658
Shares issued on reinvestment 6,490 78,369 14,009 175,999
Shares reacquired (108,086) (1,306,484) (178,371) (2,253,226)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (48,951) $ (595,160) 151,694 $ 1,934,431
================================================================================================================================
Class Y
Shares sold 644,461 $ 7,771,932 2,671,406 $ 33,894,676
Shares issued on reinvestment -- -- -- --
Shares reacquired (120,913) (1,456,187) (46,198) (574,844)
- --------------------------------------------------------------------------------------------------------------------------------
Net Increase 523,548 $ 6,315,745 2,625,208 $ 33,319,832
================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 15
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended July 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 2000(1)(2) 1999(2) 1998 1997(2) 1996(2) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.09 $12.73 $12.84 $12.27 $12.63 $12.50
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.36 0.65 0.75 0.80 0.81 0.81
Net realized and unrealized gain (loss) (0.28) (0.57) (0.06) 0.59 (0.34) 0.10
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.08 0.08 0.69 1.39 0.47 0.91
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.35) (0.72) (0.80) (0.82) (0.82) (0.74)
Capital -- -- -- -- (0.01) (0.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (0.72) (0.80) (0.82) (0.83) (0.78)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.82 $12.09 $12.73 $12.84 $12.27 $12.63
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.62%++ 0.58% 5.51% 11.80% 3.76% 7.67%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $290,141 $321,860 $374,109 $414,571 $454,679 $528,533
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income 5.90%+ 5.18% 5.78% 6.43% 6.46% 6.57%
Interest expense -- -- 0.13 0.22 0.47 0.14
Other expenses 1.05+ 1.04 1.03 1.01 1.04 1.07
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 42% 205% 363% 121% 275% 292%
===================================================================================================================================
<CAPTION>
Class B Shares 2000(1)(2) 1999(2) 1998(2) 1997(2) 1996(2) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.09 $12.73 $12.84 $12.27 $12.63 $12.50
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.32 0.59 0.67 0.74 0.75 0.75
Net realized and unrealized gain (loss) (0.28) (0.57) (0.05) 0.59 (0.34) 0.09
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.04 0.02 0.62 1.33 0.41 0.84
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.31) (0.66) (0.73) (0.76) (0.76) (0.67)
Capital -- -- -- -- (0.01) (0.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.31) (0.66) (0.73) (0.76) (0.77) (0.71)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.82 $12.09 $12.73 $12.84 $12.27 $12.63
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.34%++ 0.06% 4.99% 11.23% 3.24% 7.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $49,178 $61,391 $73,905 $96,747 $110,724 $132,882
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income 5.38%+ 4.64% 5.27% 5.91% 5.94% 6.07%
Interest expense -- -- 0.13 0.22 0.47 0.14
Other expenses 1.58+ 1.57 1.56 1.53 1.56 1.57
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 42% 205% 363% 121% 275% 292%
===================================================================================================================================
</TABLE>
(1) For the six months ended January 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
16 2000 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of capital stock outstanding throughout each year
ended July 31, except where noted:
<TABLE>
<CAPTION>
Class L Shares 2000(1)(2) 1999(2) 1998(2)(3) 1997(2) 1996(2) 1995
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.09 $12.73 $12.84 $12.27 $12.63 $12.50
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.33 0.61 0.67 0.74 0.75 0.76
Net realized and unrealized gain (loss) (0.28) (0.58) (0.04) 0.59 (0.34) 0.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.05 0.03 0.63 1.33 0.41 0.84
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.32) (0.67) (0.74) (0.76) (0.76) (0.67)
Capital -- -- -- -- (0.01) (0.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (0.67) (0.74) (0.76) (0.77) (0.71)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.82 $12.09 $12.73 $12.84 $12.27 $12.63
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 0.39%++ 0.15% 5.07% 11.26% 3.25% 7.04%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $3,825 $4,505 $2,811 $1,866 $1,238 $299
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income 5.44%+ 4.76% 5.28% 6.01% 5.99% 6.12%
Interest expense -- -- 0.13 0.22 0.47 0.14
Other expenses 1.51+ 1.48 1.49 1.46 1.49 1.52
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 42% 205% 363% 121% 275% 292%
===================================================================================================================================
<CAPTION>
Class Y Shares 2000(1)(2) 1999(2) 1998 1997(2) 1996(2)(4)
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.10 $12.74 $12.84 $12.27 $12.86
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.38 0.70 0.80 0.84 0.35
Net realized and unrealized gain (loss) (0.29) (0.57) (0.06) 0.59 (0.49)
- -------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.09 0.13 0.74 1.43 (0.14)
- -------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.37) (0.77) (0.84) (0.86) (0.44)
Capital -- -- -- -- (0.01)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.37) (0.77) (0.84) (0.86) (0.45)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.82 $12.10 $12.74 $12.84 $12.27
- -------------------------------------------------------------------------------------------------------------------------
Total Return 0.72%++ 0.92% 5.94% 12.16% (1.10)%++
- -------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $121,515 $118,007 $90,761 $85,194 $27,215
- -------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Net investment income 6.25%+ 5.54% 6.10% 6.82% 6.62%+
Interest expense -- -- 0.13 0.22 0.47+
Other expenses 0.71+ 0.70 0.69 0.62 0.78+
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 42% 205% 363% 121% 275%
=========================================================================================================================
</TABLE>
(1) For the six months ended January 31, 2000 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On June 12, 1998, Class C shares were renamed Class L shares.
(4) For the period from February 7, 1996 (inception date) to July 31, 1996.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Managed Governments Fund Inc. 17
<PAGE>
Smith Barney
Managed
Governments
Fund Inc.
Directors
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
James E. Conroy
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Managed Governments Fund Inc., but it may also be used as sales
literature when proceeded or accompanied by the current Prospectus, which gives
details about charges, expenses, investment objectives and operating policies of
the Fund. If used as sales material after March 31, 2000, this report must be
accompanied by performance information for the most recently completed calendar
quarter.
[LOGO OF SALOMON SMITH BARNEY]
Smith Barney Managed
Governments Fund Inc.
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01181 3/00
