[PHOTO]
[PHOTO] Smith Barney
Premium Total
Return Fund
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SEMI-ANNUAL REPORT
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June 30, 1999
[LOGO] Smith Barney
Mutual Funds
<PAGE>
Smith Barney Premium
Total Return Fund
================================================================================
The Smith Barney Premium Total Return Fund ("Fund") seeks total return
consisting of long-term capital appreciation and income.
Smith Barney Premium Total Return Fund Average Annual Total Returns Ended June
30, 1999
Without Sales Charges(1)
-------------------------------------------
Class A Class B Class L Class O
================================================================================
Six Months+ 3.20% 2.96% 2.82% 2.98%
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One-Year 2.04 1.53 1.26 1.59
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Five-Year 15.66 15.09 N/A 15.13
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Ten-Year N/A 13.46 N/A N/A
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Since Inception++ 14.25 13.32 3.06 13.80
================================================================================
Without Sales Charges(2)
-------------------------------------------
Class A Class B Class L Class O
================================================================================
Six Months+ (1.98)% (2.04)% 0.77% 1.98%
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One-Year (3.08) (3.15) (0.67) 0.65
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Five-Year 14.48 14.98 N/A 15.13
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Ten-Year N/A 13.46 N/A N/A
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Since Inception++ 13.37 13.32 2.08 13.80
================================================================================
(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, L and O shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class L and O
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, L and O shares are November 6, 1992,
September 16, 1985, June 15, 1998 and June 1, 1993, respectively.
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FUND HIGHLIGHT
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In our view, the Fund seeks the best of two worlds from our investment strategy.
First, within each asset class we look for the best individual opportunities.
Second, between asset classes, we have the opportunity to take advantage of the
temporary dislocations that sometimes happen in one market but not another. By
utilizing a team of nine experienced co-managers on the Fund, we believe we are
more prepared than most fund managers to uncover relative values. By using our
strategy we also believe that we can offer a mutual fund that captures most of
the market's long term appreciation, while offering a combination of a monthly
dividend and lower volatility than the S&P 500.
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NASDAQ SYMBOL
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Class A SOPAX
Class B SOPTX
Class L SBPLX
Class O SPTCX
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WHAT'S INSIDE
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Shareholder Letter ........................................................... 1
An Interview with Lead Portfolio Manager
Ross S. Margolies ............................................................ 4
Historical Performance........................................................ 6
Smith Barney Premium Total Return Fund
at a Glance .................................................................. 9
Schedule of Investments ..................................................... 10
Statement of Assets and Liabilities ......................................... 21
Statement of Operations...................................................... 22
Statements of Changes in Net Assets.......................................... 23
Notes to Financial Statements ............................................... 24
Financial Highlights ........................................................ 30
Additional Shareholder Information........................................... 35
<PAGE>
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Shareholder Letter
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[PHOTO] [PHOTO]
HEATH B. ROSS
MCLENDON MARGOLIES
Chairman Investment Officer
Dear Shareholder:
We are pleased to present the semi-annual report for the Smith Barney Premium
Total Return Fund ("Fund") for the period ended June 30, 1999. We hope you find
this report to be informative and useful. In this report we discuss stock market
conditions and review our investment strategy during the reporting period. A
more detailed summary of performance and current holdings can be found in the
appropriate sections that follow. In addition, an interview with the Fund's new
portfolio manager, Ross S. Margolies, appears on page four.
Special Shareholder Notice
On June 30, 1999, the shareholders of the Fund approved a new sub-investment
advisory agreement ("Agreement") with Salomon Brothers Asset Management Inc.
("SaBAM"). The Agreement will be in effect for an initial two-year period ending
June 30, 2001, and may continue thereafter from year to year only if
specifically approved at least annually by the Board of Trustees or by the vote
of a majority of the outstanding voting shares of the Fund, and in either event,
the vote of a majority of the non-interested Trustees.
Please note that SaBAM has designated Ross S. Margolies, a Managing Director and
Co-Chief Investment Officer of SaBAM, as well as his investment team, the new
portfolio managers of the Fund. The Fund's investment objective -- total return
consisting of long-term capital appreciation and income -- remains unchanged.
A Classic Investor Series Fund
The Fund is part of the Classic Investor Series of Smith Barney Mutual Funds.
The Classic Investor Series funds are mutual funds whose investment decisions
are determined by experienced portfolio managers, based on each fund's
investment objectives and guidelines. Funds in the Smith Barney Classic Investor
Series invest across asset classes and sectors, utilizing a range of strategies
in order to achieve their objectives.
Performance Overview
For the six months ended June 30, 1999, the Fund provided a total return of
3.20% for its Class A shares without sales charges. During this time the U.S.
stock market, as measured by the Standard & Poor's 500 Composite Stock Index
("S&P 500"), had a total return of 12.38%. Additional performance information
regarding the Fund's other share classes can be found on page six.
Investment Strategy
While the Fund utilizes multiple asset classes to accomplish its investment
objectives, most of the market value of the portfolio will be invested in a
combination of equity and debt securities of U.S. issuers. We also use options
and futures, primarily based on the S&P 500, to manage risk and maintain a
minimum level of participation in the stock market's moves. Starting in August
1999, the Fund expects to return to its original mandate of paying a monthly
income dividend. The restructuring that will be effectively completed during the
third quarter of 1999 will also lead to a portfolio that has a significant
amount of equity market participation, albeit with lower expected volatility
than the overall market.
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Smith Barney Premium Total Return Fund 1
<PAGE>
There are three key parts to our investment strategy. First, the Fund will have
a fixed income component composed of roughly equal amounts of short duration
(i.e. low interest sensitivity) investment grade bonds complemented by an
allocation to below investment grade bonds. Investments in high yield, lower
quality corporate bonds involve credit risk because of the lower credit quality
of the issuers. This combination seeks current yield with relatively low
interest rate sensitivity for the overall portfolio. Second, the equity, or
stock, part of our strategy involves using a blend approach (both value and
growth) in order to have participation in the market when either style is in
favor. This contrasts with the primarily value approach that the portfolio
employed in the past. Lastly, we have changed the old option strategy to one
that is expected to both maintain participation in the market and to offer
incremental downside protection in the event of a sharp, severe market decline.
In our view, the Fund seeks the best of two worlds from our investment strategy.
First, within each asset class we look for the best individual opportunities.
Second, between asset classes, we have the opportunity to take advantage of the
temporary dislocations that sometimes happen in one market but not another. By
utilizing a team of nine experienced co-managers on the Fund, we believe we are
more prepared than most fund managers to uncover relative values. By using our
strategy we believe that we can offer a mutual fund that captures most of the
market's long term appreciation, while offering a combination of a monthly
dividend and lower volatility than the S&P 500.
Market Overview and Outlook
During the six-month period ended June 30, 1999, the U.S. economy continued to
show signs of benign inflation and productivity-driven growth. Domestic demand
growth outstripped even optimistic estimates of the economy's long-term
capacity, and a combination of rising productivity, a flood of goods from
abroad, and more intensive use of labor kept inflation from overheating.
Globally, there were strong signs that the world economy had bottomed and was on
the road to recovery. While the biggest market risk in the period remained the
lingering threat of eventual overheating resulting in Federal Reserve
tightening, policy-makers, led by Chairman Alan Greenspan, held their stance on
the sidelines until implementing a well-telegraphed twenty-five basis point
tightening on June 30, 1999. Continued improvement in international stability
after last summer's economic turmoil caused investors to focus on cyclical
stocks that had mostly under-performed for the last several quarters. As a
result, the market experienced both an increase in breadth and a significant
rotation into cyclicals. Importantly, this increase in market breadth permitted
sector rotations without causing a significant sell-off in the broad market
averages.
The rotation that has recently taken place in the equity markets has principally
benefited three categories: value stocks, cyclical stocks, and small/mid-cap
stocks. We believe that this rotation, while no longer in its early stages, will
continue. At the same time, while many market valuation indicators appear
expensive, we are still able to find selected companies that have attractive
fundamental profiles at reasonable prices. While the secular case supporting the
long term bull market still appears to be intact, the cyclical recovery of many
depressed economies around the world does create the potential for rising U.S.
interest rates. This, in turn, could dampen near term enthusiasm for U.S.
equities. Our strategy in the
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2 1999 Semi-Annual Report to Shareholders
<PAGE>
Fund is not to try to time markets but, rather, to continue to evaluate the
risk/reward of each security we own and use position size to reflect our views
of risk and potential return.
Thank you for your investment in the Smith Barney Premium Total Return Fund. We
look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Ross S. Margolies
Heath B. McLendon Ross S. Margolies
Chairman Investment Officer
August 23, 1999
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Top Ten Holdings* As of June 30, 1999
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1. SLM Holding Corp. 3.7%
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2. Bristol-Myers Squibb Co. 3.3
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3. MCI WorldCom, Inc. 3.2
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4. Loews Corp. 2.4
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5. Federated Department Stores, Inc. 1.6
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6. Ace Ltd. 1.3
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7. Morgan Stanley Dean Witter & Co. 1.3
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8. Schering-Plough Corp. 1.2
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9. Allmerica Financial Corp. 1.2
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10. Tele Danmark A/S, ADR 1.2
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* As a percentage of total investments, excluding short-term securities.
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Smith Barney Premium Total Return Fund 3
<PAGE>
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An Interview with Lead Portfolio Manager
Ross S. Margolies
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As previously noted, on June 30, 1999, the shareholders of the Fund approved a
new sub-investment advisory agreement with Salomon Brothers Asset Management
Inc. ("SaBAM"). Effective April 26, 1999, SaBAM designated Ross S. Margolies, a
Managing Director and Co-Chief Investment Officer of SaBAM, as well as his
investment team, the new portfolio managers of the Fund. Ross S. Margolies has
more than 18 years investment experience and holds a BA in Economics from John
Hopkins University and an MBA in Finance from New York University. We recently
had the pleasure of speaking with Ross S. Margolies about his investment
strategy for the Fund and he shared with us an update on the portfolio's ongoing
restructuring.
Q: Ross, how has the Fund performed since the investment team took over its
management in late April 1999?
Ross: The Fund's performance has improved since we assumed management on April
26, 1999. For the period from May 1, 1999 through June 30, 1999, the Fund's
returned 3.76% without sales charges vs. 3.06% for the S&P 500*. This compares
favorably with our goal to provide at least 75% of the S&P 500's total return in
up years and no more than 75% in down years.
Q: How much of the portfolio restructuring has taken place? How much additional
portfolio restructuring may be required?
Ross: About 60% of the Fund's restructuring had taken place by June 30, 1999. By
the time shareholders receive this semi-annual report, we anticipate that
90%-95% of the restructuring should be completed with the remaining assets to be
invested opportunistically.
Q: Is the 42/42/16 asset allocation model a valid way to view the Fund's
restructured portfolio?
Ross: Yes. The 42/42/16 asset allocation model reflects the Fund's holdings of
42% of fixed income securities, 42% equity securities, and 16% index futures and
options. The Fund's proposed fixed income and equity allocations are expected to
be about 42% on average and range within 10% plus or minus based on market
fluctuations. The 16% allocated to option and futures strategies is a good
estimate and should range between 10% and 20%. One of the important points to
keep in mind is that by combining the three pieces together, we can create a
portfolio that pays out a significant amount of current income yet still has the
potential to provide most of the stock market's long-term appreciation, while
offering more downside protection than the market as a whole.
Q: What is your team seeking to achieve with the portfolio's restructuring?
Ross: As previously noted, the Premium Total Return Fund's investment objective
is to provide investors with total return consisting of long-term capital
appreciation and income through asset class diversification. Our team seeks to
generate a reliable monthly dividend to shareholders and provide participation
in the stock market with lower volatility than the stock market.
- ----------
* Please note: the Fund returned a negative 1.43% with sales charges over
the same two month period. In addition, the Fund posted total returns of
2.04%, 15.66% and 14.25%, respectively, for the one year period ended June
30, 1999, five year period ended June 30, 1999 and from inception through
June 30, 1999, without sales charges.
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4 1999 Semi-Annual Report to Shareholders
<PAGE>
Q: Ross, what challenges, if any, have you encountered since you were designated
the lead portfolio manager of the Premium Total Return Fund?
Ross: I am pleased to report that the Fund's restructuring has gone according to
plan. The biggest issue we are continually grappling with is to minimize the
after-tax cost of the portfolio restructuring to current shareholders. While
large fund restructurings of this sort usually require some cost in the form of
realizing capital gains and incurring transaction costs, the strong performance
of the fund during the restructuring period has helped us to minimize the impact
of transaction costs. The determination of any capital gains distribution that
we may pay will occur in November. Our focus is to keep the net after-tax costs
to shareholders as low as we can without sacrificing the dual goals of growth
and income.
Q: What is your outlook regarding the Fund's future dividend payment schedule?
Ross: We expect to pay our first monthly dividend in August 1999.
Q: How do you manage interest-rate risk in the fixed income portion of the Fund?
Ross: We take relatively little interest-rate risk and attempt to dilute what's
left. About half of our fixed income allocation is relatively interest rate
insensitive and involves shorter duration securities and floating rate
investment grade bonds. This leaves only an estimated 21% of the entire
portfolio with some moderate interest-rate sensitivity.
Q: Ross, why did you become a portfolio manager?
Ross: As hard to believe as it is, being a portfolio manager is what I have
always wanted to do. It just took my Organic Chemistry class while I was a
pre-med at Johns Hopkins to make me sure!
Ross, thank you for spending some time with us today.
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Smith Barney Premium Total Return Fund 5
<PAGE>
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Historical Performance -- Class A Shares
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<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>
6/30/99 $21.38 $21.70 $0.19 $0.16 $0.00 3.20%+
- ---------------------------------------------------------------------------------------------------
12/31/98 22.19 21.38 0.25 1.89 0.00 6.20
- ---------------------------------------------------------------------------------------------------
12/31/97 19.14 22.19 0.38 1.25 0.00 25.19
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12/31/96++ 17.40 19.14 0.16 0.47 0.00 13.80+
- ---------------------------------------------------------------------------------------------------
7/31/96 16.33 17.40 0.37 0.91 0.00 14.76
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7/31/95 15.69 16.33 0.43 0.14 0.71 12.92
- ---------------------------------------------------------------------------------------------------
7/31/94 15.65 15.69 0.55 0.52 0.21 8.65
- ---------------------------------------------------------------------------------------------------
Inception* -- 7/31/93 15.15 15.65 0.20 0.49 0.33 10.31+
===================================================================================================
Total $2.53 $5.83 $1.25
===================================================================================================
</TABLE>
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Historical Performance -- Class B Shares
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<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>
6/30/99 $21.26 $21.58 $0.14 $0.16 $0.00 2.96%+
- ---------------------------------------------------------------------------------------------------
12/31/98 22.17 21.26 0.23 1.89 0.00 5.64
- ---------------------------------------------------------------------------------------------------
12/31/97 19.14 22.17 0.29 1.25 0.00 24.55
- ---------------------------------------------------------------------------------------------------
12/31/96++ 17.40 19.14 0.12 0.47 0.00 13.57+
- ---------------------------------------------------------------------------------------------------
7/31/96 16.33 17.40 0.29 0.91 0.00 14.21
- ---------------------------------------------------------------------------------------------------
7/31/95 15.69 16.33 0.34 0.14 0.72 12.36
- ---------------------------------------------------------------------------------------------------
7/31/94 15.65 15.69 0.49 0.52 0.20 8.12
- ---------------------------------------------------------------------------------------------------
7/31/93 15.21 15.65 0.19 0.63 0.44 11.68
- ---------------------------------------------------------------------------------------------------
7/31/92 14.26 15.21 0.22 0.00 0.98 15.68
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7/31/91 13.30 14.26 0.24 0.00 0.96 17.53
- ---------------------------------------------------------------------------------------------------
7/31/90 13.98 13.30 0.22 0.00 1.06 4.62
- ---------------------------------------------------------------------------------------------------
7/31/89 12.90 13.98 0.89 0.26 0.33 21.49
===================================================================================================
Total $3.66 $6.23 $4.69
===================================================================================================
</TABLE>
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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>
6/30/99 $21.29 $21.61 $0.11 $0.16 $0.00 2.82%+
- ---------------------------------------------------------------------------------------------------
Inception* -- 12/31/98 23.06 21.29 0.00 1.82 0.00 0.36+
===================================================================================================
Total $0.11 $1.98 $0.00
===================================================================================================
</TABLE>
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6 1999 Semi-Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class O 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>
6/30/99 $21.28 $21.60 $0.14 $0.16 $0.00 2.98%+
- ---------------------------------------------------------------------------------------------------
12/31/98 22.18 21.28 0.23 1.89 0.00 5.69
- ---------------------------------------------------------------------------------------------------
12/31/97 19.15 22.18 0.30 1.25 0.00 24.60
- ---------------------------------------------------------------------------------------------------
12/31/96++ 17.41 19.15 0.12 0.47 0.00 13.58+
- ---------------------------------------------------------------------------------------------------
7/31/96 16.33 17.41 0.29 0.91 0.00 14.30
- ---------------------------------------------------------------------------------------------------
7/31/95 15.69 16.33 0.35 0.14 0.71 12.36
- ---------------------------------------------------------------------------------------------------
7/31/94 15.65 15.69 0.49 0.52 0.20 8.12
- ---------------------------------------------------------------------------------------------------
Inception* -- 7/31/93 15.45 15.65 0.04 0.09 0.07 2.60+
===================================================================================================
Total $1.96 $5.43 $0.98
===================================================================================================
</TABLE>
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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>
6/30/99 $21.49 $21.81 $0.23 $0.16 $0.00 3.36%+
- ---------------------------------------------------------------------------------------------------
12/31/98 22.24 21.49 0.27 1.89 0.00 6.56
- ---------------------------------------------------------------------------------------------------
12/31/97 19.17 22.24 0.44 1.25 0.00 25.61
- ---------------------------------------------------------------------------------------------------
12/31/96++ 17.42 19.17 0.18 0.47 0.00 13.95+
- ---------------------------------------------------------------------------------------------------
Inception* -- 7/31/96 17.57 17.42 0.21 0.46 0.00 2.93+
===================================================================================================
Total $1.33 $4.23 $0.00
===================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
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Smith Barney Premium Total Return Fund 7
<PAGE>
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Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------------------
Class A Class B Class L Class O Class Y
================================================================================
Six Months Ended 6/30/99+ 3.20% 2.96% 2.82% 2.98% 3.36%
- --------------------------------------------------------------------------------
Year Ended 6/30/99 2.04 1.53 1.26 1.59 2.38
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 15.66 15.09 N/A 15.13 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/99 N/A 13.46 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 6/30/99 14.25 13.32 3.06 13.80 15.33
================================================================================
With Sales Charge(2)
-------------------------------------------------
Class A Class B Class L Class O Class Y
================================================================================
Six Months Ended 6/30/99+ (1.98)% (2.04)% 0.77% 1.98% 3.36%
- --------------------------------------------------------------------------------
Year Ended 6/30/99 (3.08) (3.15) (0.67) 0.65 2.38
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 14.48 14.98 N/A 15.13 N/A
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/99 N/A 13.46 N/A N/A N/A
- --------------------------------------------------------------------------------
Inception* through 6/30/99 13.37 13.32 2.08 13.80 15.33
================================================================================
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Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 6/30/99) 142.48%
- --------------------------------------------------------------------------------
Class B (6/30/89 through 6/30/99) 253.68
- --------------------------------------------------------------------------------
Class L (Inception* through 6/30/99) 3.19
- --------------------------------------------------------------------------------
Class 0 (Inception* through 6/30/99) 119.46
- --------------------------------------------------------------------------------
Class Y (Inception* through 6/30/99) 62.26
================================================================================
(1) Assumes reinvestment of all dividend 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, L and O shares.
(2) Assumes reinvestment of all dividend and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase and declines
thereafter by 1.00% per year until no CDSC occurs. Class L and O shares
also reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
++ For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year end of the Fund.
+ 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, O and Y shares are November 6, 1992,
September 16, 1985, June 15, 1998, June 1, 1993 and February 7, 1996,
respectively.
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8 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class B Shares of the
Smith Barney Premium Total Return Fund vs. Standard & Poor's 500 Index+
- --------------------------------------------------------------------------------
[LINE CHART]
June 1989--June 1999
Smith Barney
Premium Total Return Fund S&P 500
6/89 10,000 10,000
12/89 10,429 11,297
12/90 10,745 10,946
12/91 13,848 14,274
12/92 15,593 15,361
12/93 17,337 16,905
12/94 17,843 17,128
12/95 21,739 23,556
12/96 26,107 27,152
12/97 32,028 36,210
12/98 34,351 46,616
6/99 35,368 52,330
+ Hypothetical illustration of $10,000 invested in Class B shares on June
30, 1989, assuming reinvestment of dividends and capital gains, if any, at
net asset value through June 30, 1999, compared to the Standard & Poor's
500 Index. The index is composed of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange and
over-the-counter market. The index is unmanaged and is not subject to the
same management and trading expenses as a mutual fund. The performance of
the Fund's other classes may be greater or less than the Class B shares'
performance indicated on this chart, depending on whether greater or
lesser sales charges and fees were incurred by shareholders investing in
the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No
adjustment has been made for shareholder tax liability on dividends or
capital gains.
[BAR CHART]
Industry Diversification of Common Stock*
- --------------------------------------------------------------------------------
Financial Services 26.0%
Communications 14.6%
Consumer Non-Cyclicals 11.4%
Consumer Cyclicals 7.6%
Energy 5.4%
Healthcare 10.6%
Transportation 1.2%
Capital Goods 0.7%
Real Estate Investment Trusts 4.7%
Consumer Services 5.6%
Technology 6.9%
Utilities 5.3%
* As a percentage of total common stock.
[PIE CHART]
Investment Breakdown
- --------------------------------------------------------------------------------
Perferred Stock 0.5%
Corporate Bonds 14.4%
Purchased Options 1.2%
Repurchase Agreements 9.0%
Common Stock 53.2%
U.S. Treasury Obligations 9.2%
Asset-Backed Securities 3.6%
Convertible Bonds 5.2%
Convertible Preferred Stock 3.7%
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=============================================================================================================
<S> <C> <C>
COMMON STOCK -- 53.2%
Capital Goods -- 0.4%
100,000 Raytheon Co., Class B Shares $ 7,037,500
100,000 W.W. Grainger, Inc. 5,381,250
- -------------------------------------------------------------------------------------------------------------
12,418,750
- -------------------------------------------------------------------------------------------------------------
Communications -- 7.8%
29,827 AT&T Corp. 1,664,719
130,000 Frontier Corp. 7,670,000
440,000 GTE Corp. 33,330,000
100,000 General Motors Corp., Class H Shares(a) 5,625,000
1,200,000 MCI Worldcom, Inc.(b)(c) 103,500,000
150,000 Omnipoint Corp.(a)(b) 4,340,625
220,000 PanAmSat Corp.(a)(b) 8,566,250
185,000 Rogers Cantel Mobile Communications Inc., Class B Shares(b) 3,040,938
265,000 SBC Communications Inc.(a) 15,370,000
15,000 SCI Systems, Inc.(a)(b) 712,500
1,500,000 Tele Danmark A/S, ADR 38,625,000
400,000 Telephone & Data Systems, Inc. 29,225,000
- -------------------------------------------------------------------------------------------------------------
251,670,032
- -------------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 3.8%
200,000 Costco Cos., Inc.(b) 16,012,500
69,893 Delphi Automotive Systems 1,297,389
1,000,000 Federated Department Stores, Inc.(a)(b) 52,937,500
100,000 General Motors Corp.(a) 6,600,000
450,000 Hasbro, Inc. 12,571,875
80,000 Payless Shoesource, Inc.(b) 4,280,000
500,000 Waste Management, Inc.(d) 26,875,000
- -------------------------------------------------------------------------------------------------------------
120,574,264
- -------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 6.4%
180,000 AT&T Corp. - Liberty Media, Class A Shares(b) 6,615,000
300,000 Alberto-Culver Co., Class A Shares 6,843,750
250,000 Fortune Brands, Inc. 10,343,750
70,000 Hearst-Argyle Television, Inc.(b) 1,680,000
1,000,000 Loews Corp. 79,125,000
250,000 Nabisco Group Holdings Corp. 4,890,625
360,000 Nestle SA, ADR 32,850,000
401,000 Philip Morris Cos. Inc. 16,115,188
225,000 Premark International, Inc. 8,437,500
200,033 RJ Reynolds Tobacco Holdings, Inc.(b) 6,301,040
170,000 The News Corp Ltd, ADR 5,365,625
135,000 Sinclair Broadcast Group, Inc.(a)(b) 2,210,625
600,000 UST Inc. 17,550,000
200,000 Viacom Inc., Class B Shares(b) 8,800,000
- -------------------------------------------------------------------------------------------------------------
207,128,103
- -------------------------------------------------------------------------------------------------------------
Consumer Services -- 3.0%
275,000 Bowne & Co., Inc. 3,575,000
300,000 Deluxe Corp. 11,681,250
740,000 Dun & Bradstreet Corp.(a) 26,223,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Semi-Annual Report to Shareholders
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=============================================================================================================
<S> <C> <C>
Consumer Services -- 3.0% (continued)
589,200 H & R Block, Inc. $ 29,460,000
800,000 Viad Corp. 24,750,000
- -------------------------------------------------------------------------------------------------------------
95,690,000
- -------------------------------------------------------------------------------------------------------------
Energy -- 2.5%
450,000 Elf Aquitaine SA, ADR 33,103,125
750,000 Hugoton Royalty Trust 7,640,625
50,000 Mobil Corp. 4,950,000
175,000 PennzEnergy Co. 2,920,313
150,000 Pennzoil-Quaker State Co. 2,250,000
700,000 Tosco Corp. 18,156,250
150,000 Total Fina SA, ADR 9,665,625
150,000 Ultramar Diamond Shamrock Corp. 3,271,875
- -------------------------------------------------------------------------------------------------------------
81,957,813
- -------------------------------------------------------------------------------------------------------------
Financials -- 13.8%
1,500,000 Ace Ltd. 42,375,000
646,000 Allmerica Financial Corp. 39,284,875
200,000 Allstate Corp. 7,175,000
131,136 American International Group, Inc. 15,351,108
300,000 Aon Corp. 12,375,021
100,000 The Bank of New York Co., Inc.(a) 3,668,750
250,000 CIGNA Corp. 22,250,000
320,000 Everest Reinsurance Holdings, Inc. 10,440,000
176,800 FBR Asset Investment Corp.(b) 2,386,800
100,000 Financial Security Assurance Holdings Ltd. 5,200,000
450,000 Freddie Mac 26,100,000
800,000 Golden State Bancorp Inc.(a)(b) 17,600,000
143,700 JSB Financial, Inc. 7,310,738
400,000 Morgan Stanley Dean Witter & Co. 41,000,000
150,000 Partnerre Ltd. 5,606,250
187,500 Republic New York Corp. 12,785,156
2,608,000 SLM Holding Corp. 119,479,000
300,000 TransAtlantic Holdings, Inc.(a) 22,481,250
600,000 XL Capital Ltd., Class A Shares 33,900,000
- -------------------------------------------------------------------------------------------------------------
446,768,948
- -------------------------------------------------------------------------------------------------------------
Healthcare -- 5.6%
125,000 Abbott Laboratories 5,687,500
1,500,000 Bristol-Myers Squibb Co.(c) 105,656,250
250,000 Merck & Co., Inc. 18,500,000
208,200 Pharmacia & Upjohn, Inc. 11,828,363
750,000 Schering-Plough Corp. 39,750,000
- -------------------------------------------------------------------------------------------------------------
181,422,113
- -------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts -- 2.5%
112,600 Anthracite Capital, Inc. 738,938
125,000 Apartment Investment & Management Co., Class A Shares 5,343,750
200,000 Avalon Bay Communities, Inc.(a) 7,400,000
440,000 Captec Net Lease Realty, Inc. 5,967,500
154,800 Charles E. Smith Residential Realty, Inc. 5,253,525
150,000 Equity Office Properties 3,843,750
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 11
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=============================================================================================================
<S> <C> <C>
Real Estate Investment Trusts -- 2.5% (continued)
50,000 Equity Residential Properties Trust $ 2,253,125
100,000 Glenborough Realty Trust Inc. 1,750,000
75,000 Highwoods Properties, Inc. 2,057,813
400,000 Host Marriott Corp. 4,750,000
100,000 JDN Realty Corp. 2,237,500
100,000 Kimco Realty Corp.(a) 3,912,500
35,000 Manufactured Home Communities, Inc. 910,000
75,000 Mid-Atlantic Realty Trust 834,375
70,000 Mills Corp. 1,518,125
50,000 Simon Property Group, Inc. 1,268,750
50,000 Spieker Properties, Inc. 1,943,750
950,000 Trizec, Hahn Corp. 19,356,250
400,000 Walden Residential Properties, Inc. 9,800,000
- -------------------------------------------------------------------------------------------------------------
81,139,651
- -------------------------------------------------------------------------------------------------------------
Technology -- 3.7%
43,500 ADC Telecommunications, Inc.(b) 1,981,969
80,000 Amdocs Ltd.(b) 1,820,000
31,000 America Online, Inc.(b) 3,425,500
38,500 Applied Micro Circuits Corp.(b) 3,166,625
16,000 ASM Lithography Holdings NV(b) 950,000
133,200 Cisco Systems, Inc.(b) 8,591,400
15,400 CMGI Inc.(a)(b) 1,756,563
43,000 Compaq Computer Corp. 1,018,563
38,500 Compuware Corp.(b) 1,224,781
30,500 Comverse Technology, Inc.(b) 2,302,750
21,500 Concord Communications, Inc.(b) 967,500
73,000 Corning Inc. 5,119,125
46,500 Dell Computer Corp.(b) 1,720,500
38,000 Electronic Data Systems Corp. 2,149,375
74,000 EMC Corp.(b) 4,070,000
200,000 First Data Corp. 9,787,500
51,500 Hewlett-Packard Co. 5,175,750
40,000 Intel Corp. 2,380,000
60,000 International Business Machines Corp. 7,755,000
33,000 Lattice Semiconductor Corp.(b) 2,054,250
35,000 Legato Systems, Inc.(b) 2,021,250
128,000 Microsoft Corp.(b) 11,544,000
26,000 Micron Technology, Inc. 1,048,125
45,000 Motorola, Inc. 4,263,750
13,000 Nokia Corp., ADR 1,190,313
28,000 Nortel Networks Corp.(a) 2,430,750
61,000 Oak Industries Inc. 2,664,938
193,000 S3 Inc.(b) 1,755,094
23,000 Sanmina Corp.(a)(b) 1,745,125
61,000 Seagate Technology, Inc.(b) 1,563,125
50,000 ShowCase Corp.(b) 431,250
39,000 Siebel Systems, Inc.(a)(b) 2,588,625
50,000 Solectron Corp.(a)(b) 3,334,375
32,000 Sun Microsystems, Inc.(a)(b) 2,204,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Semi-Annual Report to Shareholders
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=============================================================================================================
<S> <C> <C>
Technology -- 3.7% (continued)
34,000 Tellabs, Inc.(b) $ 2,297,125
13,000 Teradyne, Inc.(b) 932,750
23,000 Texas Instruments Inc. 3,335,000
55,500 TranSwitch Corp.(b) 2,629,306
51,000 Visual Networks, Inc.(b) 1,632,000
42,000 Xilinx, Inc.(b) 2,404,500
- -------------------------------------------------------------------------------------------------------------
119,432,552
- -------------------------------------------------------------------------------------------------------------
Transportation -- 0.6%
850,000 Canadian Pacific Ltd. 20,240,625
- -------------------------------------------------------------------------------------------------------------
Utilities -- 3.1%
750,000 Azurix Corp.(a)(b) 15,000,000
170,000 CMS Energy Corp. 7,118,750
180,000 Columbia Energy Group 11,283,750
700,000 Entergy Corp. 21,875,000
750,000 FirstEnergy Corp. 23,250,000
215,000 KN Energy, Inc. 5,563,125
250,000 Pinnacle West Capital Corp. 10,062,500
340,000 Public Service Company of New Mexico 6,757,500
- -------------------------------------------------------------------------------------------------------------
100,910,625
- -------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $1,041,848,351) 1,719,353,476
=============================================================================================================
CONVERTIBLE PREFERRED STOCK -- 3.7%
Capital Goods -- 0.2%
200,000 Ingersoll-Rand Co., 6.750% 6,000,000
- -------------------------------------------------------------------------------------------------------------
Basic Materials -- 0.4%
246,000 Crown Cork & Seal, 4.500% due 2/26/00 6,595,875
100,000 International Paper Capital Trust, 5.250% due 7/20/25 5,275,000
- -------------------------------------------------------------------------------------------------------------
11,870,875
- -------------------------------------------------------------------------------------------------------------
Financials -- 0.5%
4,000 Altiva Financial Corp., Series A, due 6/18/00(b) 1,080,004
50,000 American General Delaware L.L.C., Series A, 6.000% due 5/31/25 4,675,000
990,800 Local Financial Corp.(b)(d) 9,908,000
25,000 Morgan Stanley Dean Witter & Co., Series AMAT, 6.000% due 5/15/00 1,337,500
- -------------------------------------------------------------------------------------------------------------
17,000,504
- -------------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 0.1%
50,000 Wendy's Financing, Series A, 5.000% due 9/15/26 3,025,000
- ----------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 0.3%
125,000 Ralston Purina Co., 7.000% due 8/1/00 5,812,500
50,000 Seagram Co. Ltd, 7.500% due 6/21/02 2,496,875
- -------------------------------------------------------------------------------------------------------------
8,309,375
- -------------------------------------------------------------------------------------------------------------
Energy -- 1.0%
50,000 Apache Corp., 6.500% due 5/15/02 1,850,000
50,000 Pogo Trust, Series A, 6.500% due 6/1/29 2,540,500
1,000,000 Tesoro Petroleum Corp., 7.250% due 7/1/01 15,750,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 13
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=============================================================================================================
<S> <C> <C>
Energy -- 1.0% (continued)
100,000 Tosco Financial Trust, 5.750% due 12/15/16 $ 4,875,000
150,000 Unocal Capital Trust, 6.250% 8,400,000
- -------------------------------------------------------------------------------------------------------------
33,415,500
- -------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts -- 1.0%
350,000 General Growth Properties 7.250% due 7/15/08 8,400,000
200,000 First Washington Realty Inc., Series A, Exchange 9.750% 5,912,500
600,000 SL Green Realty Corp., 8.000% due 4/15/08 13,612,500
100,000 Vornado Realty Trust, Series A, 6.500% 5,050,000
- -------------------------------------------------------------------------------------------------------------
32,975,000
- -------------------------------------------------------------------------------------------------------------
Technology -- 0.2%
125,000 Amdocs, Ltd. 6.750% 2,781,250
317,792 Goldman Sachs Group Inc., Series SIII, 6.000% due 6/2/00 2,774,324
- -------------------------------------------------------------------------------------------------------------
5,555,574
- -------------------------------------------------------------------------------------------------------------
Transportation -- 0.0%
23,000 Canadian National Railway Co., 5.250% due 6/30/29 1,230,500
- -------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost -- $124,248,852) 119,382,328
=============================================================================================================
PREFERRED STOCK -- 0.5%
Real Estate Investment Trusts -- 0.5%
135,500 Crown American Realty Trust, Series A, Exchange 11.000% 6,385,438
243,000 Prime Retail Inc., Series A, Exchange 10.500% 4,814,438
200,000 Walden Residential Property, Units, 9.200% 4,325,000
- -------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost -- $17,777,750) 15,524,876
=============================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
=============================================================================================================
<S> <C> <C>
U.S. TREASURY OBLIGATIONS(e) -- 9.2%
$150,000,000 US Treasury Bill, 4.00% due 9/23/99 148,393,500
150,000,000 US Treasury Bill, 4.05% due 9/9/99 148,669,500
- -------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost -- $297,072,250) 297,063,000
=============================================================================================================
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================
<S> <C> <C> <C>
CORPORATE BONDS -- 14.4%
Basic Materials -- 1.4%
10,000,000 Ba2* AK Steel Corp., Sr. Notes, 7.875% due 2/15/09(d) 9,700,000
6,000,000 A+ Huntsman ICI Chemicals, Sr. Sub. Notes, 10.125% due 7/1/09(d) 6,030,000
4,000,000 A- ICI Wilmington, Company Gtd., 6.750% due 9/15/02 4,000,000
10,000,000 BB Lyondell Chemical, Secured, 9.875% due 5/1/07(d) 10,200,000
5,500,000 BBB+ Nova Chemicals, Notes, 6.500% due 9/22/00 5,472,500
5,000,000 B2* Polymer Group Inc., Company Gtd., 9.000% due 7/1/07 4,900,000
6,000,000 B ZSC Specialty Chemicals, Sr. Notes, 11.000% due 7/1/09(d) 6,060,000
- -------------------------------------------------------------------------------------------------------------
46,362,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Semi-Annual Report to Shareholders
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================
<S> <C> <C> <C>
Capital Goods -- 0.9%
$ 5,000,000 BB- American Standard, Inc., Company Gtd, 8.250% due 6/1/09 $ 4,875,000
10,000,000 B1* BE Aerospace, Sr. Sub. Notes, 9.500% due 11/1/08 10,125,000
5,000,000 BBB+ Lockheed Martin Corp., Company Gtd., 6.850% due 5/15/01 5,037,500
5,000,000 B+ Nortek Inc., Sr. Notes, 8.875% due 8/1/08(d) 5,137,500
5,000,000 Baa1* Raytheon Co., Notes, 6.450% due 8/15/02(a) 5,000,000
- -------------------------------------------------------------------------------------------------------------
30,175,000
- -------------------------------------------------------------------------------------------------------------
Communications -- 1.7%
10,000,000 B1* Adelphia Communications, Sr. Notes, 7.875% due 5/1/09 9,300,000
10,000,000 B+ Charter Comm. Hldgs. LLC, Sr. Disc. Notes, 9.920% due 4/1/11(d) 6,225,000
6,000,000 B1* Energis PLC, Sr. Unsubordinated Note, 9.750% due 6/15/09(d) 6,015,000
5,500,000 A- MCI Worldcom Inc., Notes, 6.125% due 4/15/12 5,445,000
11,750,000 B2* Nextel Communications, Sr. Disc. Notes,
0.000% until 9/15/02 thereafter 10.050% due 9/15/02 8,606,875
15,000,000 B- NTL Inc., Sr. Notes, zero coupon until 4/1/03 thereafter
9.750% due 4/1/03 10,293,750
5,000,000 BB- Orange PLC, 8.750% due 6/1/06 5,000,000
3,000,000 B+ Telewest Communications, Debentures, zero coupon
until 10/1/00 thereafter 11.000% due 10/1/00 2,677,500
- -------------------------------------------------------------------------------------------------------------
53,563,125
- -------------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 3.4%
4,000,000 Ba* American Axle & Manufacturing Inc., Company Gtd., 9.750% due 3/1/09 4,010,000
10,000,000 BB+ Federal Mogul Corp., Notes, 7.875% due 7/1/10 9,400,000
2,500,000 BBB+ Hertz Corp., Jr. Sub. Notes, 6.625% due 7/15/00 2,515,625
12,500,000 BB HMH Properties, Company Gtd., 7.875% due 8/1/08 11,500,000
9,000,000 A2* J.L. French Auto Casting, Sr. Sub. Notes, 11.500% due 6/1/09(a)(d) 9,112,500
15,000,000 BB+ Lear Corp, Sr. Notes, 8.110% due 5/15/09(d) 14,362,500
7,050,000 Ba2* Navistar International, Sr. Sub. Notes, 8.000% due 2/1/08 7,314,375
7,500,000 B+ Safety-Kleen Corp., Sr. Notes, 9.250% due 5/15/09(d) 7,575,000
5,000,000 A2* Sears Roebuck, Notes, 6.950% due 5/15/02 5,075,000
20,000,000 NR Starwood Hotels & Resorts Worldwide, 8.675% due 2/23/03 20,037,500
5,000,000 A- TJX Cos. Inc., Notes, 6.625% due 6/15/00 5,004,285
500,000 Baa* TRW Inc., Notes, 6.450% due 6/15/01(d) 500,000
5,000,000 BBB+ Waste Management Inc., Sr. Notes, 6.000% due 5/15/01 4,976,000
3,000,000 BB Westpoint Steven, Inc., Sr. Notes, 7.875% due 6/15/05 2,940,000
7,000,000 BB Westpoint Steven, Inc., Sr. Notes, 7.875% due 6/15/08 6,790,000
- -------------------------------------------------------------------------------------------------------------
111,112,785
- -------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 2.2%
10,000,000 B1* Aztar Corp., Sr. Notes, 8.875% due 5/15/07(d) 9,600,000
5,635,000 BBB- Comcast Corp., Sr. Sub. Notes, 9.375% due 5/15/05 6,050,581
4,500,000 BBB+ Conagra Inc., Sr. Notes, 5.500% due 10/15/02 4,353,750
3,260,000 B2* Dade International Inc., Sr. Sub. Notes, 11.125% due 5/1/06 3,533,025
5,000,000 BB+ Harrahs Operation Co. Inc., Company Gtd., 7.875% due 12/15/05 4,850,000
5,000,000 B+ Horseshoe Gaming Holdings, Sr. Sub. Notes, 8.625% due 5/15/09(d) 4,850,000
5,650,000 BB+ Keebler Corp., Sr. Sub. Notes, 10.750% due 7/1/06 6,130,250
6,000,000 B+ Mail-Well I Corp, Company Gtd., 8.75% due 12/15/08 5,850,000
5,000,000 BB+ Park Place Entertainment, Sr. Sub. Notes, 7.875% due 12/15/05 4,762,500
6,000,000 B Revlon Consumer Products, Sr. Notes, 9.000% due 11/1/06 6,000,000
6,000,000 BB+ Rogers Cable System, Sr. Notes, 10.000% due 3/15/05 6,480,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 15
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================
<S> <C> <C> <C>
Consumer Non-Cyclicals -- 2.2% (continued)
$ 5,000,000 BBB Safeway Inc., Notes, 5.875% due 11/15/01 $ 4,950,000
4,000,000 BBB Time Warner Inc., Pass thru Security, 6.100% due 12/30/01(d) 3,975,000
- -------------------------------------------------------------------------------------------------------------
71,385,106
- -------------------------------------------------------------------------------------------------------------
Consumer Services -- 0.4%
4,585,000 Baa1* Cendant Corp., Notes, 7.500% due 12/1/00 4,625,119
6,000,000 BB- Hollinger International Publishing Inc., Company Gtd., 9.250% due 2/1/06 6,135,000
3,000,000 B- Pierce Leahy Corp., Sr. Sub. Notes, 11.125% due 7/15/06 3,300,000
- -------------------------------------------------------------------------------------------------------------
14,060,119
- -------------------------------------------------------------------------------------------------------------
Energy -- 1.1%
3,050,000 BB+ Gulf Canada Resources, Sr. Notes, 8.375% due 11/15/05 3,034,750
9,000,000 BB- Ocean Energy, Inc., Company Gtd., 9.750% due 10/1/06 9,281,250
5,000,000 A1* Kansas City Power & Light, First Mortgage, 6.400% due 3/2/01 5,025,000
2,000,000 B Lomak Petroleum, Company Gtd., 8.750% due 1/15/07 1,810,000
2,500,000 B Magnum Hunter, Company Gtd., 10.000% due 6/1/07 2,250,000
5,750,000 Baa1* Noram Energy Corp, Notes, 7.500% due 8/1/00 5,814,688
5,000,000 A- Penn Power & Light Resources, Inc., First Mortgage, 6.000% due 6/1/00 5,000,000
3,500,000 BB- Western Gas Resources, Subordinate Notes, 10.000% due 6/15/09(d) 3,561,250
- -------------------------------------------------------------------------------------------------------------
35,776,938
- -------------------------------------------------------------------------------------------------------------
Financials -- 2.3%
5,500,000 A Aetna Services, Inc., Company Gtd., 6.750% due 8/15/01 5,520,625
4,500,000 B2* BankUnited Capital Trust, Company Gtd., 10.250% due 12/31/26 4,286,250
4,550,000 A- BHP Finance, 5.625% due 11/1/00 4,504,500
500,000 BBB Capital One Bank, Sr. Notes, 6.150% due 6/1/01 494,375
5,000,000 Aa3* CIT Group Holding, Inc., Sr. Notes, 6.500% due 6/14/02 5,012,500
5,300,000 BBB+ Comdisco Inc., Notes, 6.130 % due 4/1/04 5,280,125
5,000,000 BBB Conseco Inc., Sr. Notes, 7.600% due 6/21/01 5,012,500
4,985,000 B- Contifinancial Corp., Sr. Notes, 7.500% due 3/15/02 4,137,550
1,000,000 B- Contifinancial Corp., Sr. Notes, 8.125% due 3/15/02 830,000
1,450,000 B- Contifinancial Corp., Sr. Notes, 8.375% due 8/15/03 1,203,500
3,000,000 A- Donaldson Lufkin Jenrette, Sr. Notes, 5.875% due 4/1/02 2,947,500
5,000,000 A1* Finova Capital Corp, Notes, 6.500% due 7/28/02 5,000,000
5,000,000 BBB+ Gatx Capital Corp., Notes, 6.500% due 11/1/00 5,011,250
4,000,000 NR Hawthorne Financial Corp., Sr. Notes, 12.500% due 12/31/04 3,845,000
5,500,000 BBB+ IOS Capital Inc., Notes, 6.730% due 6/15/01 5,431,250
5,000,000 A Lehman Brothers Holdings, Notes, 6.750% due 9/24/01 4,981,250
5,500,000 A2* Mercantile BanCorp, Sr. Notes, 6.800% due 6/15/01 5,548,125
2,000,000 A- US West Capital Funding Inc., Company Gtd., 6.125% due 7/15/02 1,982,500
3,000,000 NR Wilshire Financial Services, Notes, 13.000% due 1/1/04 915,000
- -------------------------------------------------------------------------------------------------------------
71,943,800
- -------------------------------------------------------------------------------------------------------------
Healthcare -- 0.3%
3,040,000 B Fresenius Medical Capital Trust I, Company Gtd., 9.000% due 12/1/06 3,009,600
5,660,000 B1* Fresenius Medical Capital Trust II, Company Gtd, 7.875% due 2/1/08 5,263,800
- -------------------------------------------------------------------------------------------------------------
8,273,400
- -------------------------------------------------------------------------------------------------------------
Technology -- 0.2%
5,000,000 Ba1* Unisys Corp., Sr. Notes, 12.000% due 4/15/03 5,462,500
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Semi-Annual Report to Shareholders
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================
<S> <C> <C> <C>
Transportation -- 0.3%
$ 5,000,000 BBB+ Norfolk Southern Corp., Notes, 6.700% due 5/1/00 $ 5,037,500
4,500,000 BBB- Union Pacific Corp., Notes, 5.780% due 10/15/01 4,421,250
- -------------------------------------------------------------------------------------------------------------
9,458,750
- -------------------------------------------------------------------------------------------------------------
Utilities -- 0.2%
Columbia Energy Group, Notes;
774,000 A3* 6.390% due 11/28/00 776,901
771,000 A3* 6.610% due 11/28/02 768,109
5,000,000 Baa2* KN Energy Inc., Sr. Notes, 6.450% due 11/30/01 4,931,250
- -------------------------------------------------------------------------------------------------------------
6,476,260
- -------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $473,401,005) 464,050,283
=============================================================================================================
CONVERTIBLE BONDS -- 5.2%
Basic Materials -- 0.1%
2,500,000 BB+ INCO Ltd., 5.750% due 7/1/04 2,303,125
- -------------------------------------------------------------------------------------------------------------
Capital Goods -- 0.1%
2,500,000 Ba2* Mark IV Industries, 4.750% due 11/1/04 2,240,625
3,000,000 B- Integrated Process Equipment, 6.250% due 9/15/04 2,295,000
- -------------------------------------------------------------------------------------------------------------
4,535,625
- -------------------------------------------------------------------------------------------------------------
Communications -- 1.2%
25,000,000 NR Aspect Telecommunications, zero coupon due 8/10/18(a) 5,468,750
10,000,000 A+ Bell Atlantic, 5.750% due 4/1/03(d) 10,306,000
7,500,000 A+ Bell Atlantic, 4.250% due 9/15/05(d) 7,678,500
10,000,000 A1* DSC Communications Corp., 7.000% due 8/1/04 10,350,000
5,000,000 BB- Rogers Communications Inc., 2.000% due 11/26/05 3,875,000
- -------------------------------------------------------------------------------------------------------------
37,678,250
- -------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 0.4%
10,000,000 Baa2* Rite Aid Corp.,5.250% due 9/15/04 10,031,250
25,000,000 Caa2* Sunbeam Corp., zero coupon due 3/25/18(d) 4,187,500
- -------------------------------------------------------------------------------------------------------------
14,218,750
- -------------------------------------------------------------------------------------------------------------
Consumer Services -- 0.1%
2,500,000 NR Interpublic Group, 1.870% due 6/1/06 2,281,250
- -------------------------------------------------------------------------------------------------------------
Energy -- 0.9%
5,000,000 A1* Diamond Offshore, 3.750% due 2/15/07 4,956,250
5,000,000 Baa2* Kerr-Mcgee Corp., 7.500% due 5/15/14 4,987,500
15,000,000 B3* PennZenergy Co., 4.900% due 8/15/08 15,468,750
5,000,000 B+ Pogo Producing Co., 5.500% due 6/15/06 4,125,000
- -------------------------------------------------------------------------------------------------------------
29,537,500
- -------------------------------------------------------------------------------------------------------------
Healthcare -- 0.6%
2,500,000 B Alpharma Inc., 3.000% due 6/1/06(d) 3,112,500
2,500,000 B+ Centocor Inc., 4.750% due 2/15/05 2,837,500
5,000,000 BBB- HealthSouth Corp., 3.250% due 4/1/03 4,212,500
10,000,000 CCC+ Sepracor Inc., 7.000% due 12/15/05(d) 9,862,500
- -------------------------------------------------------------------------------------------------------------
20,025,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 17
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================
<S> <C> <C> <C>
Technology -- 1.8%
$ 3,500,000 NR Arbor Software, 4.500% due 3/15/05 $ 2,454,375
2,000,000 BB- Adaptec Inc, 4.750% due 2/1/04 1,912,500
1,500,000 NR Conexant Systems, 4.250% due 5/1/06(d) 2,137,500
2,500,000 B Cypress Semiconductor, 6.000% due 10/1/02 2,421,875
20,000,000 B Micron Technology Inc., 7.000% due 7/1/04 20,275,000
35,000,000 NR Network Associates, zero coupon due 2/13/18 10,543,750
1,000,000 B Photonics Inc., 6.000% due 6/1/04 1,098,750
5,000,000 B+ Quantum Corp., 7.000% due 8/1/04 4,775,000
3,000,000 NR Sanmina Corp., 4.250% 5/1/04(d) 3,363,750
10,000,000 A- Xerox Corp., 0.057% due 4/21/18(a) 6,400,000
3,500,000 B- Wind River System, 5.000% due 8/1/02 3,053,750
- -------------------------------------------------------------------------------------------------------------
58,436,250
- -------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost -- $165,450,570) 169,015,750
=============================================================================================================
ASSET-BACKED SECURITIES -- 3.6%
3,000,000 AA Countrywide, Series 1999-2, Class MV1,
Floating Rate 5.537% due 5/25/29 2,994,168
3,000,000 A Countrywide, Series 1999-2, Class MV2,
Floating Rate 5.828% due 5/25/29 2,992,293
3,000,000 BBB Countrywide, Class 99-2BV, Floating Rate 7.528% due 5/25/29 2,990,418
2,000,000 BBB Contimortgage Home Equity Loan Trust, Series 1999-3, Class B,
Floating Rate 7.000% due 7/25/30 1,687,500
10,000,000 NR CMO FL GRST 99-A Cl A,144A, Floating Rate 6.120% due 5/25/29 9,966,490
4,980,952 NR Freddie Mac, Floating Rate 10.000% due 9/1/20 5,399,092
12,366,141 Aaa* Merrill Lynch Mortgage Investors, Inc., Series 1995-2, Class A1,
Floating Rate 7.175% due 6/15/21 12,433,537
14,703,000 NR SB Mortgage Securities VII, Series 1999-AQ1, Class M3,
Floating Rate 7.913% due 4/25/29 14,679,005
13,801,000 Aa2* Saxon Asset Securities Trust, Series 1998-2, Class MV1,
Floating Rate 5.25% due 1/25/28 13,739,003
5,000,000 Aa2* Saxon Asset Securities Trust, Series 1998-3, Class MV1,
Floating Rate 5.542% due 4/25/28 5,002,344
4,000,000 Aa2* Saxon Asset Securities, Series 1992-2, Class MV1,
Floating Rate 5.350% due 4/25/29 3,995,000
15,386,000 NR Southern Pacific Fl, Series 996-C1, Class B,
Floating Rate 5.660% due 4/25/28 15,405,233
5,000,000 NR Southern Pacific Fl, Series 1996-C1, Class, 5.923% due 4/25/28 5,006,250
10,000,000 AAA Stanfield CLO Ltd., Series 1A, Class A1, 6.015% due 7/15/14 10,000,000
10,000,000 A3* Stanfield CLO Ltd., Series 1A, Class B1,
Floating Rate 6.865% due 7/15/14 10,000,000
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $116,412,294) 116,290,333
=============================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Semi-Annual Report to Shareholders
<PAGE>
- -------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) June 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
=============================================================================================================
<S> <C> <C>
PURCHASED OPTIONS -- 1.2%
300 Bristol Myers Squibb Co. Put @ $60, Expire 12/99 $ 656,250
200 MCI Worldcom, Inc. Put @ $90, Expire 7/99 975,000
200 MCI Worldcom, Inc. Put @ $90, Expire 8/99 1,350,000
100 MCI Worldcom, Inc. Put @ $80, Expire 9/99 275,000
200 MCI Worldcom, Inc. Put @ $75, Expire 12/99 775,000
125 S & P 500 Index, Put @ $1,100, Expire 1/2000 2,812,500
125 S & P 500 Index, Put @ $1,050, Expire 3/2000 3,132,812
125 S & P 500 Index, Put @ $1,225, Expire 7/99 109,375
100 S & P 500 Index, Put @ $1,100, Expire 9/99 462,500
50 S & P 500 Index, Put @ $1,250, Expire 9/99 975,000
100 S & P 500 Index, Put @ $1,100, Expire 12/99 1,662,500
500 S & P 500 Index, Call @ $1,050, Expire 3/2000 18,709,375
250 S & P 500 Index, Call @ $1,100, Expire 9/99 7,000,000
- -------------------------------------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS
(Cost -- $41,548,050) 38,895,312
=============================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
=============================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS -- 9.0%
$102,070,000 Goldman Sachs, 4.800% due 7/1/99;
Proceeds at maturity -- $102,083,609;
(Fully collateralized by U.S. Treasury Note, 6.125% due 8/15/07;
U.S. Treasury Note,5.250% due 5/15/04;
U.S. Treasury Note, 5.750% due 4/30/03;
U.S. Treasury Note, 5.500% due 2/28/03;
U.S. Treasury Note, 4.000% due 10/31/2000;
U.S. Treasury Bond, 8.750% due 5/15/17;
U.S. Treasury Bond, 7.250% due 5/15/16;
U.S. Treasury Bill due 3/2/2000;
Total market value -- $104,121,822) 102,070,000
189,297,000 Warburg Dillon Read LLC, 4.839% due 7/1/99;
Proceeds at maturity -- $189,322,444;
(Fully collaterized by U.S. Treasury Note, 10.750% due 5/15/03;
Market value -- $193,084,966) 189,297,000
- -------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $291,367,000) 291,367,000
=============================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $2,569,126,122**) $3,230,942,358
=============================================================================================================
</TABLE>
(a) All or a portion of this security is on loan (See Note 7).
(b) Non-income producing security.
(c) Security segregated by Custodian to cover written call options.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(e) Rate represents annualized yield to maturity.
++ All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's")
with the exception of those identified by an asterisk (*), which are rated
by Moody's Investor Service, Inc. ("Moody's").
** Aggregate cost for Federal income tax purposes is substantially the same.
See page 20 for a definition of bond ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "CCC" may be modified by the addition
of a plus (+) or a minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for
bonds in higher rated categories.
BB, B -- Bonds rated "BB" and "B" are regarded, on balance, as predominantly
and CCC speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB"
represents a lower degree of speculation than "B", and "CCC" the
highest degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Moody's -- Numerical modifiers 1, 2, and 3 may be applied to each generic
rating from "Aa" to "Caa", where 1 is the highest and 3 the lowest rating within
its generic category.
Aaa -- Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of these bonds.
Aa -- Bonds rated "Aa" are judged to be of the high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities, or fluctuation of protective elements may be of
greater amplitude, or there may be other elements present that make
the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds rated "A" possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered to be medium grade obligations;
that is they are neither highly protected nor poorly secured.
Interest payment and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. These
bonds lack outstanding investment characteristics and may have
speculative characteristics as well.
Ba -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby may
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of desirable
investments. Assurance of interest and principal payment or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa -- Bonds rated "Caa" are of poor standing. These issues may be in
default, or present elements of danger may exist with respect to
principal or interest.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
- --------------------------------------------------------------------------------
20 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) June 30, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $2,569,126,122) $3,230,942,358
Collateral for securities on loan (Note 7) 135,388,230
Receivable for securities sold 106,537,043
Dividends and interest receivable 15,151,286
Receivable from broker--variation margin 5,625,000
Receivable for Fund shares sold 1,099,272
Prepaid expenses 21,572
- --------------------------------------------------------------------------------
Total Assets 3,494,764,761
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 135,388,230
Options written (Note 5) 3,969,913
Payable for securities purchased 3,458,859
Investment advisory fees payable 1,665,817
Administration fees payable 617,706
Payable for Fund shares purchased 524,987
Distribution fees payable 399,433
Payable to bank 92
Accrued expenses 337,955
- --------------------------------------------------------------------------------
Total Liabilities 146,362,992
- --------------------------------------------------------------------------------
Total Net Assets $3,348,401,769
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 154,912
Capital paid in excess of par value 2,246,941,649
Undistributed net investment income 54,622
Accumulated net realized gain from security
transactions, options and futures contracts 425,535,865
Net unrealized appreciation
of investments, options and futures contracts 675,714,721
- --------------------------------------------------------------------------------
Total Net Assets $3,348,401,769
================================================================================
Shares Outstanding:
Class A 35,700,784
--------------------------------------------------------------------------
Class B 109,988,813
--------------------------------------------------------------------------
Class L 1,293,910
--------------------------------------------------------------------------
Class O 3,839,981
--------------------------------------------------------------------------
Class Y 4,088,058
--------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $21.70
--------------------------------------------------------------------------
Class B * $21.58
--------------------------------------------------------------------------
Class L ** $21.61
--------------------------------------------------------------------------
Class O ** $21.60
--------------------------------------------------------------------------
Class Y (and redemption price) $21.81
--------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of
net asset value per share) $22.84
--------------------------------------------------------------------------
Class L (net asset value plus 1.01% of
net asset value per share) $21.83
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L and O shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended June 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $16,113,798
Dividends 36,041,130
Less: Interest expense (739,771)
- --------------------------------------------------------------------------------
Total Investment Income 51,415,157
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 11,435,787
Investment advisory fees (Note 2) 10,094,932
Administration fees (Note 2) 3,670,884
Shareholder and system servicing fees 1,536,433
Shareholder communications 257,863
Custody 89,260
Registration fees 64,465
Insurance 32,655
Audit and legal 23,554
Trustees' fees 7,439
Other 4,934
- --------------------------------------------------------------------------------
Total Expenses 27,218,206
- --------------------------------------------------------------------------------
Net Investment Income 24,196,951
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS AND FUTURES CONTRACTS (NOTES 3, 4 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 548,836,608
Options purchased 162,692
Options written (172,891,998)
Futures contracts 345,199
- --------------------------------------------------------------------------------
Net Realized Gain 376,452,501
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments, Options and Futures:
Beginning of period 990,765,330
End of period 675,714,721
- --------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (315,050,609)
- --------------------------------------------------------------------------------
Net Gain on Investments, Options and Futures Contracts 61,401,892
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $85,598,843
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (unaudited)
and the Year Ended December 31, 1998
<TABLE>
<CAPTION>
1999 1998
=======================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 24,196,951 $ 47,636,243
Net realized gain 376,452,501 400,749,678
Decrease in net unrealized appreciation (315,050,609) (219,828,757)
- ---------------------------------------------------------------------------------------
Increase in Net Assets From Operations 85,598,843 228,557,164
- ---------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (27,400,250) (44,780,880)
Net realized gains (24,836,905) (362,146,516)
- ---------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (52,237,155) (406,927,396)
- ---------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 108,774,026 709,931,258
Net asset value of shares issued for
reinvestment of dividends 39,940,959 323,023,241
Cost of shares reacquired (1,051,038,004) (784,966,599)
- ---------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (902,323,019) 247,987,900
- ---------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (868,961,331) 69,617,668
NET ASSETS:
Beginning of period 4,217,363,100 4,147,745,432
- ---------------------------------------------------------------------------------------
End of period* $3,348,401,769 $4,217,363,100
=======================================================================================
* Includes undistributed net investment income of: $54,622 $3,257,921
=======================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Premium Total Return Fund ("Fund"), a separate investment fund
of Smith Barney Income Funds ("Trust"), a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Trust consists of this
Fund and seven other separate investment funds: Smith Barney Exchange Reserve
Fund, Smith Barney Convertible Fund, Smith Barney High Income Fund, Smith Barney
Municipal High Income Fund, Smith Barney Diversified Strategic Income Fund,
Smith Barney Balanced Fund and Smith Barney Total Return Bond Fund. The
financial statements and financial highlights for the other Funds are presented
in separate semi-annual reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) investments are
valued at market value or, in the absence of market value with respect to any
portfolio securities, at fair value as determined by or under the direction of
the Board of Trustees. Portfolio securities that are traded primarily on a
domestic or foreign exchange are valued at the last sale price on that exchange
or, if there were no sales during the day, at the current quoted bid price.
Over-the-counter securities are valued on the basis of the bid price at the
close of business each day. Options are generally valued at the mean of the
quoted bid and asked prices. Investments in U.S. government securities (other
than short-term securities) are valued at the mean of the quoted bid and asked
price; (c) securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (d) interest
income, adjusted for amortization of premium and accretion of discount, is
recorded on the accrual basis; (e) dividend income is recorded on the
ex-dividend date; foreign dividend income is recorded on the ex-dividend date or
as soon as practical after the Fund determines the existence of a dividend
declaration after exercising reasonable due diligence; (f) dividends and
distributions to shareholders are recorded on the ex-dividend date; (g) gains or
losses on the sale of securities are calculated by using the specific
identification method; (h) the accounting records are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (i) direct expenses are charged to each
class; management fees and general fund expenses are allocated on the basis of
relative net assets of each class; (j) the character of income and gains
distributed are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. At December 31, 1998,
reclassifications were made to the Portfolio's capital accounts to reflect
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Net investment income, net realized gains and net
assets were not affected by this change; (k) 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; 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.
In addition, the Fund may from time to time enter into options and/or futures
contracts in order to hedge market risk.
- --------------------------------------------------------------------------------
24 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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 advisory fee calculated at an annual
rate of 0.55% of the average daily net assets. This fee is calculated daily and
paid monthly.
SSBC has entered into a sub-advisory agreement with Salomon Brothers Asset
Management ("SaBAM"), an affiliate of SSBC. Pursuant to the sub-advisory
agreement, SaBAM is responsible for the day-to-day portfolio operations and
investment decisions for the Fund. Effective June 14, 1999, SSBC pays SaBAM a
monthly fee calculated at an annual rate of 0.15% of the average daily net
assets of the Fund. This fee is paid monthly. Prior to June 14, 1999, SSBC had
entered into a sub-advisory agreement with Boston Partners Asset Management,
L.P. ("Boston Partners"). SSBC paid Boston Partners a monthly fee calculated at
an annual rate of 0.15% of the average daily net assets of the Fund. This fee
was paid monthly.
SSBC 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. This fee is
calculated daily and paid monthly.
CFBDS, Inc. acts as the Fund's distributor. Salomon Smith Barney Inc. ("SSB"),
another subsidiary of SSBH, as well as certain other broker-dealers, continues
to sell Fund shares to the public as a member of the selling group.
SSB acts as the primary broker for its portfolio agency transactions. For the
six months ended June 30, 1999, SSB received total brokerage commissions of
$266,469.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class L and O shares
also have a 1.00% contingent deferred sales charge ("CDSC"), which applies if
redemption occurs within the first year of purchase. In addition, Class A shares
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 June 30, 1999, CFBDS and SSB received sales charges of
$177,000 and $66,000 on sales of the Fund's Class A and Class L shares,
respectively. In addition, CDSCs paid to CFBDS and SSB were approximately:
Class A Class B Class L Class O
================================================================================
CDSCs $2,000 $3,384,000 $17,000 $9,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B, L and O shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B, L and O shares calculated at the annual rate of 0.50%,
0.75% and 0.45% of the average daily net assets of each class, respectively. For
the six months ended June 30, 1999, total Distribution Plan fees incurred were:
Distribution
Plan Fees
================================================================================
Class A $1,013,048
- --------------------------------------------------------------------------------
Class B 9,967,522
- --------------------------------------------------------------------------------
Class L 131,221
- --------------------------------------------------------------------------------
Class O 323,996
================================================================================
All officers and one Trustee of the Trust are employees of SSB.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
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 $1,328,862,511
- --------------------------------------------------------------------------------
Sales 2,948,153,621
================================================================================
At June 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $706,008,270
Gross unrealized depreciation (44,192,034)
- --------------------------------------------------------------------------------
Net unrealized appreciation $661,816,236
================================================================================
4. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the 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) and the credit
risk should a counterparty fail to perform under such contracts.
At June 30, 1999, the Fund had the following open futures contracts:
Purchased # of Basis Market Unrealized
Contracts Contracts Expiration Value Value Gain
================================================================================
S&P 500 900 9/99 $298,229,880 $310,882,500 $12,652,620
================================================================================
5. 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.
- --------------------------------------------------------------------------------
26 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
At June 30, 1999, the Fund had two purchased call options with a total cost of
$21,052,250 and eleven purchased put options with a total cost of $20,495,800.
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 equal to the
amount of the premium received. 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 proceeds of the security sold will be increased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally 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
covered call option is that the Fund gives up the opportunity to participate in
any increase 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.
The following covered call option transactions occurred during the six months
ended June 30, 1999:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
======================================================================================
<S> <C> <C>
Options written, outstanding at December 31, 1998 17,900 $ 177,699,152
Options written during the six months ended June 30, 1999 7,349 5,334,874
Options cancelled in closing purchase transactions (18,200) (177,818,248)
Options expired -- --
- --------------------------------------------------------------------------------------
Options written, outstanding at June 30, 1999 7,049 $ 5,215,778
======================================================================================
</TABLE>
The following table represents the covered call option written contracts open at
June 30, 1999:
Number of Strike
Contracts Expiration Price Value
================================================================================
1,000 Bristol-Myers Squibb Co. 1/22/00 $ 800 $ (300,000)
400 Centocor Inc. 1/22/00 500 (325,000)
324 Conexant Systems, Inc. 1/22/00 600 (433,350)
2,000 MCI WorldCom, Inc. 1/22/00 1,000 (1,275,000)
2,000 MCI WorldCom, Inc. 12/18/99 950 (1,375,000)
1,000 MCI WorldCom, Inc. 12/18/99 1,100 (225,000)
325 Rite Aid Corp. 10/16/99 300 (36,563)
- --------------------------------------------------------------------------------
Total Covered Call Options Written
(Premiums received -- $5,215,778) $(3,969,913)
================================================================================
6. 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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
7. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations, and receives a lenders fee. Fees earned by the Fund on securities
lending are recorded in interest income. Loans of securities by the Fund are
collateralized by cash, U.S. Government securities or high quality money market
instruments that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account. The Fund maintains exposure
for the risk of any losses in the investment of amounts received as collateral.
At June 30, 1999, the Fund had loaned common stocks having a value of
approximately $131,840,436 and holds the following collateral for loaned
securities:
Security Description Value
================================================================================
Time Deposits:
Banque Paribas, 5.875% due 7/1/99 $ 7,614,776
Barclays Bank, 5.750% due 7/1/99 12,388,533
Banco Bilbao Vizcaya, 5.875% due 7/1/99 22,260,645
Banque Paribas, 5.875% due 7/1/99 15,872,808
Bank of Montreal, 5.937% due 7/1/99 4,454,316
Bank of Montreal, 5.250% due 7/1/99 15,485,666
Cerificate of Deposit:
Svenska Handelsbanken, 4.940% due 10/25/99 12,993,968
Commercial Paper:
Moriarty LLC, 5.123% due 8/16/99 13,296,763
Moriarty LLC, 5.177% due 9/20/99 31,020,755
- --------------------------------------------------------------------------------
Total $135,388,230
================================================================================
Income earned by the Fund from securities loaned for the six months ended June
30, 1999 was $102,733.
8. 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. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses specifically related to the distribution of its shares.
At June 30, 1999, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class O Class Y
================================================================================================
<S> <C> <C> <C> <C> <C>
Total Paid-in Capital $569,487,197 $1,493,330,876 $28,577,592 $72,963,096 $82,737,800
================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
28 1999 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
June 30, 1999 December 31, 1998+
------------------------------ ------------------------------
Shares Amount Shares Amount
================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 2,182,735 $ 45,830,784 7,733,657 $ 175,026,027
Shares issued on reinvestment 502,876 10,567,742 3,269,724 70,506,884
Shares reacquired (8,910,416) (187,251,540) (6,634,829) (146,985,551)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) (6,224,805) $(130,853,014) 4,368,552 $ 98,547,360
================================================================================================
Class B
Shares sold 2,072,724 $ 43,456,641 19,483,013 $ 439,642,557
Shares issued on reinvestment 1,337,013 28,025,968 11,270,658 241,980,524
Shares reacquired (39,661,184) (828,969,796) (27,473,985) (607,825,219)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) (36,251,447) $(757,487,187) 3,279,686 $ 73,797,862
================================================================================================
Class L
Shares sold 342,253 $ 7,183,770 1,194,003 $ 26,489,637
Shares issued on reinvestment 14,353 302,044 66,851 1,405,157
Shares reacquired (259,060) (5,427,291) (64,490) (1,375,725)
- ------------------------------------------------------------------------------------------------
Net Increase 97,546 $ 2,058,523 1,196,364 $ 26,519,069
================================================================================================
Class O++
Shares sold 69,736 $ 1,457,099 1,752,049 $ 39,958,820
Shares issued on reinvestment 49,850 1,045,205 424,817 9,130,351
Shares reacquired (1,381,922) (28,971,780) (1,297,704) (28,780,104)
- ------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,262,336) $ (26,469,476) 879,162 $ 20,309,067
================================================================================================
Class Y
Shares sold 514,664 $ 10,845,732 1,305,089 $ 28,814,217
Shares issued on reinvestment -- -- 13 325
Shares reacquired (19,630) (417,597) -- --
- ------------------------------------------------------------------------------------------------
Net Increase 495,034 $ 10,428,135 1,305,102 $ 28,814,542
================================================================================================
</TABLE>
+ For Class L shares, transactions are for the period from June 15, 1998
(inception date) to December 31, 1998.
++ On June 12, 1998, Class C shares were renamed Class O shares.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 29
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1)(2) 1998(2) 1997(2) 1996(2)(3) 1996(4) 1995(5)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.38 $22.19 $19.14 $17.40 $16.33 $15.69
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.18 0.33 0.39 0.16 0.37 0.44
Net realized and unrealized gain 0.49 1.00 4.29 2.21 1.98 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.67 1.33 4.68 2.37 2.35 1.92
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.19) (0.25) (0.38) (0.16) (0.37) (0.43)
Net realized gains (0.16) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.71)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.35) (2.14) (1.63) (0.63) (1.28) (1.28)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.70 $21.38 $22.19 $19.14 $17.40 $16.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 3.20%++ 6.20% 25.19% 13.80%++ 14.76% 12.92%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $774,674 $896,342 $833,540 $608,203 $534,329 $471,578
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.16%+ 1.12% 1.11% 1.12%+ 1.12% 1.16%
Net investment income 1.70+ 1.48 1.89 2.05+ 2.16 2.81
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 43% 43% 30% 58% 63%
====================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(4) For the fiscal year August 1, 1995 through July 31, 1996.
(5) For the fiscal year August 1, 1994 through July 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
30 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1999(1)(2) 1998(2) 1997(2) 1996(2)(3) 1996(4) 1995(5)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.26 $22.17 $19.14 $17.40 $16.33 $15.69
- ---------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.12 0.22 0.29 0.12 0.28 0.36
Net realized and unrealized gain 0.50 0.99 4.28 2.21 1.99 1.48
- ---------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.62 1.21 4.57 2.33 2.27 1.84
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.14) (0.23) (0.29) (0.12) (0.29) (0.34)
Net realized gains (0.16) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.72)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (2.12) (1.54) (0.59) (1.20) (1.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.58 $21.26 $22.17 $19.14 $17.40 $16.33
- ---------------------------------------------------------------------------------------------------------------------------
Total Return 2.96%++ 5.64% 24.55% 13.57%++ 14.21% 12.36%
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $2,374 $3,110 $3,170 $2,355 $2,021 $1,655
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.65%+ 1.61% 1.60% 1.54%+ 1.62% 1.66%
Net investment income 1.19+ 0.99 1.39 1.63+ 1.66 2.31
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 43% 43% 30% 58% 63%
===========================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(4) For the fiscal year August 1, 1995 through July 31, 1996.
(5) For the fiscal year August 1, 1994 through July 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 31
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
period ended December 31, except where noted:
Class L Shares 1999(1)(2) 1998(2)(3)
================================================================================
Net Asset Value, Beginning of Period $21.29 $23.06
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.10 0.06
Net realized and unrealized gain (loss) 0.49 (0.01)
- --------------------------------------------------------------------------------
Total Income From Operations 0.59 0.05
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.11) --
Net realized gains (0.16) (1.82)
- --------------------------------------------------------------------------------
Total Distributions (0.27) (1.82)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $21.61 $21.29
- --------------------------------------------------------------------------------
Total Return++ 2.82% 0.36%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $27,960 $25,471
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.92% 1.82%
Net investment income 0.98 0.55
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 43%
================================================================================
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from June 15, 1998 (inception date) to December 31, 1998.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
32 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, except where noted:
<TABLE>
<CAPTION>
Class O Shares 1999(1)(2) 1998(2)(3) 1997(2) 1996(2)(4) 1996(5) 1995(6)(7)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.28 $22.18 $19.15 $17.41 $16.33 $15.69
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.13 0.23 0.30 0.12 0.29 0.36
Net realized and unrealized gain 0.50 0.99 4.28 2.21 1.99 1.48
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.63 1.22 4.58 2.33 2.28 1.84
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.14) (0.23) (0.30) (0.12) (0.29) (0.35)
Net realized gains (0.16) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.71)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.30) (2.12) (1.55) (0.59) (1.20) (1.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.60 $21.28 $22.18 $19.15 $17.41 $16.33
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 2.98%++ 5.69% 24.60% 13.58%++ 14.30% 12.36%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $82,929 $108,576 $93,676 $42,637 $31,044 $12,937
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.62%+ 1.59% 1.56% 1.55%+ 1.59% 1.62%
Net investment income 1.22+ 1.02 1.41 1.61+ 1.68 2.35
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 43% 43% 30% 58% 63%
====================================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (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 O shares.
(4) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(5) For the fiscal year August 1, 1995 through July 31, 1996.
(6) For the fiscal year August 1, 1994 through July 31, 1995.
(7) On November 7, 1994, the former Class D shares were renamed Class C
shares.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 33
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended December 31, except where noted:
<TABLE>
<CAPTION>
Class Y Shares 1999(1)(2) 1998(2) 1997(2) 1996(2)(3) 1996(4)
==================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.49 $22.24 $19.17 $17.42 $17.57
- ------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.22 0.40 0.47 0.17 0.19
Net realized and unrealized gain 0.49 1.01 4.29 2.23 0.33
- ------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.71 1.41 4.76 2.40 0.52
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.23) (0.27) (0.44) (0.18) (0.21)
Net realized gains (0.16) (1.89) (1.25) (0.47) (0.46)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (0.39) (2.16) (1.69) (0.65) (0.67)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.81 $21.49 $22.24 $19.17 $17.42
- ------------------------------------------------------------------------------------------------------------------
Total Return 3.36%++ 6.56% 25.61% 13.95%++ 2.93%++
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $89,166 $77,210 $50,882 $26,585 $13,192
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.82%+ 0.76% 0.76% 0.80%+ 0.87%+
Net investment income 2.10+ 1.82 2.22 2.36+ 2.24+
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 39% 43% 43% 30% 58%
==================================================================================================================
</TABLE>
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(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.
- --------------------------------------------------------------------------------
34 1999 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On May 12, 1999, a special meeting of shareholders of the Trust was held for the
purpose of electing Trustees to the Trust.
The results of the vote were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage
Names of Trustees For Shares Voted Against Shares Voted
===================================================================================
<S> <C> <C> <C> <C>
Lee Abraham 62,342,951.572 98.630% 865,940.611 1.370%
Allan J. Bloostein 62,384,540.377 98.696 824,351.806 1.304
Jane F. Dasher 62,392,002.787 98.708 816,889.396 1.292
Donald R. Foley 62,322,262.500 98.595 886,629.683 1.403
Richard E. Hanson Jr. 62,380,877.618 98.690 828,014.565 1.310
Paul Hardin 62,379,975.324 98.689 828,916.859 1.311
Heath B. McLendon 62,370,291.215 98.673 838,630.968 1.327
Roderick C. Rasmussen 62,346,471.848 98.636 862,420.335 1.364
John P. Toolan 62,396,377.832 98.715 812,514.351 1.285
===================================================================================
</TABLE>
On June 30, 1999, a special meeting of shareholders of the Fund was held for the
purpose of voting to approve or disapprove a new sub-investment advisory
agreement among the Fund, SSBC Fund Management Inc. and Salomon Brothers Asset
Management Inc.
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
<TABLE>
<CAPTION>
Percentage Percentage Percentage
Shares Voted of Shares Shares Voted of Shares Shares of Shares
For Voted Against Voted Abstaining Abstained
=====================================================================================
<S> <C> <C> <C> <C> <C>
82,801,141.000 90.172% 2,074,138.444 2.259% 6,950,768.200 7.569%
=====================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 35
<PAGE>
[This page intentionally left blank]
<PAGE>
Smith Barney
Premium Total
Return Fund
Trustees
Lee Abraham
Allan J. Bloostein
Jane F. Dasher
Donald R. Foley
Richard E. Hanson, Jr.
Paul Hardin
Heath B. McLendon, Chairman
Roderick C. Rasmussen
John P. Toolan
Joseph H. Fleiss, Emeritus
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Ross Margolies
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing 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 Income Funds -- Smith Barney Premium Total Return Fund. It is not
authorized for distribution to prospective investors unless accompanied by a
current Prospectus for the Fund, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
SALOMON SMITH BARNEY
- ---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney Premium
Total Return Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD2169 8/99
