<PAGE>
[LOGO OF SMITH BARNEY]
SMITH BARNEY
PREMIUM TOTAL
RETURN Fund
Classic Investor Series
Annual Report
December 31, 1999
[LOGO OF SMITH BARNEY]
Not FDIC Insured . Not Bank Guaranteed . May Lose Value
<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
December 31, 1999
Without Sales Charges(1)
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Class A Class B Class L Class O
================================================================================
One-Year 5.37% 4.85% 4.60% 4.83%
- --------------------------------------------------------------------------------
Five-Year 15.66 15.08 N/A 15.12
- --------------------------------------------------------------------------------
Ten-Year N/A 13.09 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 13.51 12.96 3.19 12.98
================================================================================
With Sales Charges(2)
- --------------------------------------------------------------------------------
Class A Class B Class L Class O
================================================================================
One-Year 0.08% 0.63% 2.69% 3.98%
- --------------------------------------------------------------------------------
Five-Year 14.47 14.97 N/A 15.12
- --------------------------------------------------------------------------------
Ten-Year N/A 13.09 N/A N/A
- --------------------------------------------------------------------------------
Since Inception++ 12.70 12.96 2.53 12.98
================================================================================
(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.
++ 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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Our investment strategy is designed to provide our shareholders with the
potential for upside stock market participation, a competitive stream of income
and downside protection. The way we accomplish our strategy is to combine
equities (stocks and convertibles) with bonds and stock market index exposure
(S&P Index futures and options). The bonds provide most of the income while the
stocks should provide long-term appreciation. The Index exposure assures that
the Fund will participate with the market, in both directions, even if our
quality investment approach is temporarily out of favor.
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NASDAQ SYMBOL
- --------------------------------------------------------------------------------
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
Historical Performance......................................................5
Smith Barney Premium Total Return Fund at a Glance .........................8
Schedule of Investments ....................................................9
Statement of Assets and Liabilities .......................................22
Statement of Operations....................................................23
Statements of Changes in Net Assets........................................24
Notes to Financial Statements .............................................25
Financial Highlights ......................................................32
Independent Auditors' Report ..............................................37
Additional Shareholder Information.........................................38
Tax Information ...........................................................39
<PAGE>
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Shareholder Letter
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[PHOTO] [PHOTO]
HEATH B. MCLENDON ROSS MARGOLIES
Chairman Investment Officer
Dear Shareholder:
We are pleased to present the annual report for the Smith Barney Premium Total
Return ("Fund") for the year ended December 31, 1999. 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. Any discussion of the Fund's holdings
is as of December 31, 1999. Please refer to pages nine through twenty for a list
of the Fund's holdings. We hope you find this report to be informative and
useful.
Performance Overview
For the year ended December 31, 1999 the Fund provided a total return of 5.37%
for its Class A shares, excluding the effects of sales charges. During this same
period, the U.S. stock market, as measured by the Standard and Poor's 500 Index
("S&P 500"), had a total return of 21.03%. (The S&P 500 is a market
capitalization-weighted measure of 500 widely held common stocks.)
The Fund's relative performance has improved over the past year.* We believe
that our new investment strategy, which is described in greater detail later on
in this letter, has contributed significantly to the Fund's performance relative
to the market. (Of course, past performance is not indicative of future
results.) For the period from May 1, 1999 through December 31, 1999 the Fund's
Class A shares returned 5.95%, excluding the effects of sales charges, versus
10.04% for the S&P 500.** Additional Fund performance information can be found
beginning on page five.
Investment Strategy
The Fund's investment strategy is designed to capture as much as possible of the
stock market's long-term appreciation potential while at the same time seeking
to pay a regular monthly income dividend and having substantially lower
potential volatility than the overall stock market. Another way to view the
Fund's strategy is that our goal is to generate a compound annual return at or
around that of the S&P 500 over an entire market cycle that includes both a bull
and bear market. (Of course, no guarantees can be made that our goal will be
met.)
At the same time, because the Fund assumes less risk than the overall stock
market, its annual volatility (i.e., a measure of risk) should be substantially
lower than that of the S&P 500. (Again, no assurances can be made that the Fund
will in fact have lower volatility than the S&P 500.) Over shorter periods of
time such as one year, we expect that the Fund should post a
- ----------
* Ross S. Margolies, a Managing Director and Co-Chief Investment Officer of
Salomon Brothers Asset Management Inc., ("SaBAM"), and his investment team
were designated portfolio managers of the Fund on April 26, 1999. On June
30, 1999, the shareholders of the Fund approved a new sub-investment
advisory agreement ("Agreement") with 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 a 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. The Fund's investment objective --
total return consisting of long-term capital appreciation and income --
remains unchanged.
** Please note that the Fund's Class A shares returned 0.65% with sales
charges over the same time period. Moreover, the Fund's average annual
total returns were 0.08%, 14.47% and 12.70%, with sales charges,
respectively, for the one-year period ended December 31, 1999, five-year
period ended December 31, 1999 and from inception (11/6/92) through
December 31, 1999.
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Smith Barney Premium Total Return Fund 1
<PAGE>
total return (including dividends) of more than 75% of the S&P 500's during up
markets and participate in less than 75% of the stock market's decline during
down years. We believe that these three Fund attributes (the potential for
upside participation, competitive monthly income and potential protection) are
appropriate based on the risk and reward profiles of our shareholders.
Our core investment style is centered on a bottom-up stock picking*** strategy.
We focus on thoroughly understanding a company's business, its strategy,
competitive position and industry. Our seasoned financial analysis pays close
attention to a company's resources to meet its goals and the consistency of the
numbers to determine their quality (e.g., are receivables growing much faster
than sales, a sign that current sales may overstate a long-term trend).
Moreover, we carefully analyze the numbers to create a framework to ascertain a
stock's valuation and risk. These and other factors are then weighed before we
make a final judgement. If all of these factors lead us to conclude that the
risk and reward trade-off of a particular security is favorable, we will then
invest.
Our portfolio is designed to meet a strict set of investment objectives. We use
tools such as diversification, position weighting and asset allocation to
determine exactly how much of each security to own in the portfolio. For
instance, in the Fund, not only do our best ideas get higher weightings, our
higher risk ideas get lower weightings. We also try to make sure that the Fund's
portfolio has some exposure to important growing parts of the economy such as
technology, telecommunications, healthcare, financials and consumer.
As mentioned previously, the Fund's investment strategy is designed to provide
our shareholders with the potential for some upside participation, a competitive
stream of income and downside protection. The way we accomplish our strategy is
to combine equities (i.e., stocks and convertibles) with bonds and stock market
index exposure (i.e., S&P 500 futures and options).
The bonds provide most of the income while the stocks should provide long-term
appreciation potential based on our bottom-up stock selection process. In our
view, the index exposure assures that the Fund will participate with the stock
market, in both directions, even if our equity investment approach is
temporarily out of favor.
As you may remember, before our designation as managers, the Fund relied on a
deep value investment strategy. This style has been out of favor in recent years
and led the previous investment team to have virtually no exposure to the
fast-growing technology sector. While value strategies may be viable over the
long term, both pure value and pure growth strategies are susceptible to
significant periods of being out of favor with the market. We believe that our
blend approach to the stock and index portions of the Fund's portfolio assures
some stock market participation under most conditions.
In addition to our core investment strategy that seeks low volatility, we
regularly buy some puts on the stock market as an added measure of insurance.
(Puts are options that increase in value when the market goes down, softening
the impact of any decline on the portfolio.) This small portion of the Fund's
Portfolio, as of December 31, 1999, becomes meaningful in the event of a sharp
or large decline in the market. Please refer to the Fund's holdings on page
nineteen for additional information on these options as of December 31, 1999.
Market Overview and Outlook
The 1999 stock market will go down in history as one of the most unusual markets
of all time. After recovering from the effects of the 1998 Asian
- -----------
*** Bottom-up stock picking is an investment approach that management uses to
search for outstanding performance of individual stocks before considering
the impact of economic trends.
- --------------------------------------------------------------------------------
2 1999 Annual Report to Shareholders
<PAGE>
economic crises, the stock market soared to new heights and increased
volatility. During the beginning of the year, the market was very narrow with
only a small group of blue-chip stocks appreciating. In mid April, we
experienced a violent rotation into undervalued broad market stocks. By the end
of the year, while the market broadening continued to help some stocks, most of
the market's focus had shifted to the NASDAQ-listed technology companies. During
1999, market indices such as the S&P 500, and the Russell 3000 Index**** were up
over 20%; the NASDAQ composite Index+ ("NASDAQ") increased by 85.59% led by both
blue chip and speculative technology issues.
The most fundamental change in the market that we observed in 1999 was that all
of the historical rules of traditional security analysis seemed to be discarded.
Particularly in the Internet sector, the market rewarded concepts over profits.
In many cases it became disrespectful to report earnings -- the market instead
focused on issues such as number of potential customers instead of profitable
sales to actual customers. While the market seems to think that profitability
and cash flow are no longer important, the strategy of "buying sales" (i.e.
losing money on sales in order to establish a market share position) is as old
as commerce itself. The only difference this time is that the stock market is
ignoring the fact that in the end companies need to generate cash flow and
profits in order to survive and thrive.
How does one invest in this environment? The biggest adjustment to our process
in 1999 has been to increase our focus on the Internet. The development of the
Internet is one of those events that will change the way we live and work
forever. It is as fundamental a change as was the development of telephones or
the harnessing of electricity. These advances happen regularly throughout
history and we are living through one of those momentous times right now.
If you closely examine the Fund's portfolio, you will see that relatively little
of your money is invested in traditional Internet companies (i.e., the
"dot.coms"). We find the long-term risk and reward proposition in most of these
companies to be very unattractive. Most of these companies do not have
sustainable business models (translation: in our opinion they will always lose
money), while others have valuations that assume they will be the only survivors
in the eventual shakeout.
However, you will see a lot of your money invested in companies++ that benefit
from or build the Internet. In the Fund, we own companies such as...
. Seagate (a company that provides disk drives and software for storage as
well as indirect exposure with partial ownership of companies such as
Veritas)
. Federated Department Stores (one of the leading operators of full-line
department stores and a leader in the "clicks and mortar" e-commerce
strategy and owner of several valuable Internet businesses)
. GTE (a company merging with Bell Atlantic, the combined company will be the
leading U.S. wireless company also offering telecom services such as local,
long distance and high speed Internet access)
It is our strong belief that over time the leading established companies that
embrace today's new technologies should emerge as the dominant and most
profitable companies in the economy. Their stocks should recognize this over
time. On the other hand, we believe the stock market will eventually lose
patience with those traditional Internet companies that cannot transform
themselves into growth companies with enough profits to support their stock
price.
- -----------
**** The Russell 3000 Index measures the performance of the 3,000 largest U.S.
companies based on total market capitalization, which represents
approximately $2.8 billion.
+ The NASDAQ covers 4,500 stocks traded over the counter. It is a
value-weighted index calculated on price change only and does not include
income.
++ Please note that the Fund's holdings are subject to change. A complete list
of portfolio holdings as of December 31, 1999 can be found beginning on
page nine.
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Smith Barney Premium Total Return Fund 3
<PAGE>
Going forward, we expect many companies to reap the benefits of their current
investments in technology. We also expect many technology companies to continue
to grow as they innovate. There will also be a maturing in the technology
sector, as it has become a bigger part of the market and economy than energy was
in the 1980s. During the next decade the technology sector will not go the way
of the energy sector, but the two industries in our view share a common factor.
The early 1980s expectations of oil prices soaring to $100 per barrel led to
extreme valuations for these companies and a gold rush effect of too much
capital being put into the sector. Eventually the laws of large numbers and
diminishing returns caught up with the energy sector. Cost of energy became too
large of an input into the economy and people figured out ways to utilize it
more efficiently at the same time that capacity was expanding rapidly.
With technology companies representing about 30% of the S&P 500, similar
long-term risks exist in the technology sector. This is partly offset by the
fact that technology investment improves productivity while higher energy prices
are merely increased costs. We keep these factors in mind even when we are only
forecasting out one year as stock prices discount the long-term prospects of
companies.
You can expect the Fund to consistently apply its investment strategy in the
future. We will invest in both users and manufacturers of technology when we
believe that their risk/reward ratios are favorable. At the same time the index
exposure in the Fund should provide some participation in the stock market
whether our particular investment style is in or out of favor.
Thank you for your investment in the Smith Barney Premium Total Return Fund. We
are looking forward to continuing to help you pursue your financial goals in the
new century.
Sincerely,
/s/ Heath B. McLendon /s/ Ross S. Margolies
Heath B. McLendon Ross S. Margolies
Chairman Investment Officer
February 7, 2000
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Top Ten Holdings* As of December 31, 1999
- --------------------------------------------------------------------------------
1. Bristol-Myers Squibb Co. 2.6%
- --------------------------------------------------------------------------------
2. MCI WorldCom, Inc. 2.2
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3. Federated Department Stores, Inc. 1.6
- --------------------------------------------------------------------------------
4. Costco Wholesale Corp. 1.6
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5. Seagate Technology, Inc. 1.5
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6. GTE Corp. 1.5
- --------------------------------------------------------------------------------
7. SLM Holding Corp. 1.4
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8. Safeway Inc. 1.3
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9. Nabisco Group Holdings Corp. 1.1
- --------------------------------------------------------------------------------
10. PepsiCo, Inc. 1.1
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* As a percentage of total investments, excluding short-term securities.
- --------------------------------------------------------------------------------
4 1999 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/99 $21.38 $18.07 $0.49 $3.86 $0.00 5.37%
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
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 $2.83 $9.53 $1.25
===============================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===============================================================================================================
12/31/99 $21.26 $17.94 $0.39 $3.86 $0.00 4.85%
- ---------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------
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
===============================================================================================================
Total $3.02 $9.67 $4.36
===============================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
===============================================================================================================
12/31/99 $21.29 $17.97 $0.34 $3.86 $0.00 4.60%
- ---------------------------------------------------------------------------------------------------------------
Inception* -- 12/31/98 23.06 21.29 0.00 1.82 0.00 0.36+
===============================================================================================================
Total $0.34 $5.68 $0.00
===============================================================================================================
</TABLE>
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Smith Barney Premium Total Return Fund 5
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class O Shares
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/99 $21.28 $17.95 $0.40 $3.86 $0.00 4.83%
- ---------------------------------------------------------------------------------------------------------------------
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 $2.22 $9.13 $0.98
=====================================================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Return Total
Year Ended of Year of Year Dividends Distributions of Capital Returns(1)
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
12/31/99 $21.49 $18.22 $0.53 $3.86 $0.00 5.72%
- ---------------------------------------------------------------------------------------------------------------------
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 $1.63 $7.93 $0.00
=====================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
6 1999 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return
- -----------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
-------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 12/31/99 5.37% 4.85% 4.60% 4.83% 5.72%
- -----------------------------------------------------------------------------------------------------------------
Five Years Ended 12/31/99 15.66 15.08 N/A 15.12 N/A
- -----------------------------------------------------------------------------------------------------------------
Ten Years Ended 12/31/99 N/A 13.09 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Inception* through 12/31/99 13.51 12.96 3.19 12.98 13.88
=================================================================================================================
<CAPTION>
Without Sales Charge(2)
-------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 12/31/99 0.08% 0.63% 2.69% 3.98% 5.72%
- -----------------------------------------------------------------------------------------------------------------
Five Years Ended 12/31/99 14.47 14.97 N/A 15.12 N/A
- -----------------------------------------------------------------------------------------------------------------
Ten Years Ended 12/31/99 N/A 13.09 N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Inception* through 12/31/99 12.70 12.96 2.53 12.98 13.88
=================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return
- -----------------------------------------------------------------------------------------------------------------
Without Sales Charge(1)
=================================================================================================================
Class A (Inception* through 12/31/99) 147.59%
- -----------------------------------------------------------------------------------------------------------------
Class B (12/31/89 through 12/31/99) 242.09
- -----------------------------------------------------------------------------------------------------------------
Class L (Inception* through 12/31/99) 4.97
- -----------------------------------------------------------------------------------------------------------------
Class 0 (Inception* through 12/31/99) 123.41
- -----------------------------------------------------------------------------------------------------------------
Class Y (Inception* through 12/31/99) 65.98
=================================================================================================================
</TABLE>
(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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 7
<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+
- --------------------------------------------------------------------------------
December 1989 -- December 1999
[GRAPH]
Smith Barney Premium Total Return Fund Standard & Poor's 500 Index
Dec./89 10,000 10,000
Dec./90 10,206 9,690
Dec./91 13,153 12,636
Dec./92 14,810 13,598
Dec./93 16,466 14,964
Dec./94 16,947 15,161
Dec./95 20,648 20,852
Dec./96 24,796 24,035
Dec./97 30,884 32,053
Dec./98 32,626 41,219
Dec./99 34,209 49,889
+ Hypothetical illustration of $10,000 invested in Class B shares on December
31, 1989, assuming reinvestment of dividends and capital gains, if any, at
net asset value through December 31, 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.
Industry Diversification of Common Stock*
- --------------------------------------------
Financials 15.0%
Communications 13.2%
Consumer Non-Cyclicals 13.7%
Consumer Cyclicals 7.3%
Energy 3.3%
Healthcare 8.6%
Transportation 0.8%
Capital Goods 0.8%
Real Estate Investment Trusts 9.6%
Technology 20.9%
Utilities 6.7%
* As a percentage of total common stock.
Investment Breakdown**
- --------------------------------------------
[CHART]
Common Stock 39.8%
Corporate Bonds 27.8%
Asset-Backed Securities 9.0%
Convertible Bonds 8.5%
Convertible Preferred Stock 6.0%
Purchase Options 5.6%
Repurchase Agreements 1.9%
U.S. Treasury Obligations 1.2%
Preferred Stock 0.2%
** As a percentage of total investments.
- --------------------------------------------------------------------------------
8 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==========================================================================================================
<S> <C> <C>
COMMON STOCK -- 39.8%
Capital Goods -- 0.3%
125,000 Illinois Tool Works Inc. $ 8,445,312
- ----------------------------------------------------------------------------------------------------------
Communications -- 5.3%
485,000 GTE Corp.(a) 34,222,812
975,000 MCI WorldCom, Inc.(b)(c) 51,735,937
95,000 Rogers Cantel Mobile Communications Inc., Class B Shares(b) 3,455,625
405,000 SBC Communications Inc. 19,743,750
350,000 Tele Danmark A/S, ADR 13,212,500
100,000 Telephone & Data Systems, Inc.(c) 12,600,000
- ----------------------------------------------------------------------------------------------------------
134,970,624
- ----------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 2.9%
400,000 Costco Wholesale Corp.(b) 36,500,000
750,000 Federated Department Stores, Inc.(a)(b) 37,921,875
- ----------------------------------------------------------------------------------------------------------
74,421,875
- ----------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 5.5%
200,000 Alberto-Culver Co., Class A Shares 4,350,000
150,000 AT&T Corp. - Liberty Media, Class A Shares(a) 8,512,500
500,000 Delhaize America, Inc., Class A Shares 10,156,250
140,000 Hearst-Argyle Television, Inc.(a)(b) 3,727,500
184,600 Hormel Foods Corp. 7,499,375
200,000 Loews Corp. 12,137,500
2,500,000 Nabisco Group Holdings Corp. 26,562,500
170,000 The News Corp Ltd., ADR 5,684,375
700,000 PepsiCo, Inc. 24,675,000
194,000 PRIMEDIA Inc.(b) 3,201,000
850,000 Safeway Inc.(a)(b) 30,228,125
270,000 Sinclair Broadcast Group, Inc.(b) 3,294,844
- ----------------------------------------------------------------------------------------------------------
140,028,969
- ----------------------------------------------------------------------------------------------------------
Energy -- 1.3%
600,000 Devon Energy Corp. 19,725,000
50,000 Exxon Mobil Corp. 4,028,125
650,000 Hugoton Royalty Trust 5,281,250
170,000 Tosco Corp.(a) 4,621,875
- ----------------------------------------------------------------------------------------------------------
33,656,250
- ----------------------------------------------------------------------------------------------------------
Financials -- 6.1%
800,000 ACE Ltd. 13,350,000
275,667 Altiva Financial Corp.(b) 258,438
150,000 Everest Reinsurance Holdings, Inc. 3,346,875
100,000 Financial Security Assurance Holdings Ltd. 5,212,500
350,000 Freddie Mac 16,471,875
450,000 Golden State Bancorp Inc.(a)(b) 7,762,500
145,000 H & R Block, Inc. 6,343,750
150,000 JSB Financial, Inc. 7,781,250
100,000 Morgan Stanley Dean Witter & Co.(a) 14,275,000
100,000 PartnerRe Ltd. 3,243,750
187,500 Republic New York Corp. 13,500,000
750,000 SLM Holding Corp. 31,687,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==========================================================================================================
<S> <C> <C>
Financials -- 6.1% (continued)
150,000 Transatlantic Holdings, Inc. $ 11,709,375
510,000 Trizec Hahn Corp. 8,606,250
200,000 XL Capital Ltd., Class A Shares 10,375,000
- ----------------------------------------------------------------------------------------------------------
153,924,063
- ----------------------------------------------------------------------------------------------------------
Healthcare -- 3.5%
950,000 Bristol-Myers Squibb Co. 60,978,125
150,000 Merck & Co., Inc. 10,059,375
400,000 Schering-Plough Corp. 16,875,000
- ----------------------------------------------------------------------------------------------------------
87,912,500
- ----------------------------------------------------------------------------------------------------------
Real Estate Investment Trust -- 3.5%
180,000 AMB Property Corp. 3,588,750
125,000 Apartment Investment & Management Co., Class A Shares(a) 4,976,563
199,200 Avalonbay Communities, Inc. 6,835,050
300,000 Boston Properties, Inc. 9,337,500
215,000 Charles E. Smith Residential Realty, Inc. 7,605,625
110,000 Cousins Properties, Inc. 3,733,125
250,000 Equity Office Properties Trust 6,156,250
100,000 Equity Residential Properties Trust 4,268,750
150,000 JDN Realty Corp. 2,418,750
150,000 Kimco Realty Corp. 5,081,250
175,000 The Macerich Co. 3,642,187
345,000 ProLogis Trust 6,641,250
70,200 PS Business Parks Inc., Class A Shares 1,597,050
190,000 Reckson Associates Realty Corp. 3,895,000
180,000 Regency Realty Corp. 3,600,000
315,000 Simon Property Group, Inc. 7,225,312
215,000 Spieker Properties, Inc. 7,834,062
- ----------------------------------------------------------------------------------------------------------
88,436,474
- ----------------------------------------------------------------------------------------------------------
Technology -- 8.4%
110,000 Advanced Micro Devices Inc. 3,183,125
93,000 Amdocs Ltd.(a)(b) 3,208,500
111,600 America Online, Inc.(b) 8,418,825
13,000 Applied Micro Circuits Corp.(b) 1,654,250
26,500 Braun Consulting, Inc.(b) 1,894,750
40,000 CIENA Corp.(b) 2,300,000
189,700 Cisco Systems, Inc.(b) 20,321,613
15,400 CMGI Inc.(a)(b) 4,263,875
30,000 Comdisco, Inc. 1,117,500
75,000 Compaq Computer Corp. 2,029,688
59,000 Compuware Corp.(b) 2,197,750
20,000 Comverse Technology, Inc.(b) 2,895,000
63,000 Concord Communications, Inc.(b) 2,795,625
52,500 Corning Inc.(a) 6,769,219
73,000 Cypress Semiconductor Corp.(b)(c) 2,363,375
136,500 Dell Computer Corp.(a)(b) 6,961,500
102,000 Digital Microwave Corp.(b) 2,390,625
25,000 Electronic Data Systems Corp. 1,673,438
40,000 EMC Corp.(a)(b) 4,370,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
========================================================================================================
<S> <C> <C>
Technology -- 8.4% (continued)
21,000 Hewlett-Packard Co. $ 2,392,688
60,000 Informix Corp.(b) 682,500
101,500 Intel Corp.(a) 8,354,719
54,500 International Business Machines Corp. 5,886,000
35,000 Legato Systems, Inc.(b) 2,408,438
60,000 Micro Linear Corp.(b) 513,750
150,000 Micron Electronics, Inc.(b) 1,668,750
110,000 Microsoft Corp.(b) 12,842,500
38,000 Motorola, Inc.(a) 5,595,500
138,000 Newbridge Networks Corp.(b) 3,113,625
108,200 Newport Corp. 4,950,150
35,000 Nortel Networks Corp.(a) 3,535,000
63,500 Oak Industries Inc. 6,738,937
25,500 Ortel Corp.(b) 3,060,000
20,000 Parametric Technology Corp.(b) 541,250
50,000 PC-Tel, Inc.(b) 2,625,000
10,000 PlanetRx.com, Inc.(a)(b) 145,000
750,000 Seagate Technology, Inc.(a)(b) 34,921,875
55,000 Siebel Systems, Inc.(b) 4,620,000
50,000 Solectron Corp.(b) 4,756,250
64,000 Sun Microsystems, Inc.(a)(b) 4,956,000
168,000 S3 Inc.(b) 1,942,500
50,000 Technology Solutions Co.(b) 1,637,500
52,700 Tellabs, Inc.(a)(b) 3,382,681
26,000 Teradyne, Inc.(b) 1,716,000
22,000 Texas Instruments Inc. 2,131,250
67,000 3Com Corp.(b) 3,149,000
10,500 TranSwitch Corp.(b) 761,906
57,000 Visual Networks, Inc.(b) 4,517,250
- --------------------------------------------------------------------------------------------------------
214,354,677
- --------------------------------------------------------------------------------------------------------
Transportation -- 0.3%
400,000 Canadian Pacific Ltd. 8,625,000
- --------------------------------------------------------------------------------------------------------
Utilities -- 2.7%
200,000 AGL Resources Inc. 3,400,000
125,000 Alliant Energy Corp. 3,437,500
150,000 Central & South West Corp.(a) 3,000,000
150,000 CMS Energy Corp. 4,678,125
100,000 Dominion Resources, Inc.(a) 3,925,000
250,000 Entergy Corp. 6,437,500
400,000 FirstEnergy Corp.(a) 9,075,000
72,000 Hawaiian Electric Industries Inc.(a) 2,079,000
150,000 KeySpan Corp.(a) 3,478,125
250,000 Pinnacle West Capital Corp. 7,640,625
100,000 Potomac Electric Power Co.(a) 2,293,750
300,000 Public Service Co. of New Mexico 4,875,000
75,000 Public Service Enterprise Group Inc.(a) 2,610,937
100,000 Puget Sound Energy, Inc.(a) 1,937,500
350,000 Sempra Energy(a) 6,081,250
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
===============================================================================================================
<S> <C> <C>
Utilities -- 2.7% (continued)
50,000 Texas Utilities Co. $ 1,778,125
125,000 Western Resources, Inc. 2,125,000
- ---------------------------------------------------------------------------------------------------------------
68,852,437
- ---------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $712,488,822) 1,013,628,181
===============================================================================================================
CONVERTIBLE PREFERRED STOCK -- 6.0%
Capital Goods -- 0.2%
200,000 Ingersoll-Rand Co., 6.750% 5,100,000
- ---------------------------------------------------------------------------------------------------------------
Basic Materials -- 1.2%
600,000 Crown Cork & Seal, 4.500% due 2/26/00 12,450,000
150,000 International Paper Capital Trust, 5.250% due 7/20/25 8,175,000
170,000 LTV Corp., 8.250%(d) 10,603,750
- ---------------------------------------------------------------------------------------------------------------
31,228,750
- ---------------------------------------------------------------------------------------------------------------
Communications -- 0.6%
100,000 Sinclair Broadcast Group Inc., 6.000% 3,506,250
125,000 Sprint Corp., 8.250% due 3/31/00 9,281,250
50,000 UnitedGlobalCom, Series D, 7.000% 3,125,000
- ---------------------------------------------------------------------------------------------------------------
15,912,500
- ---------------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 0.4%
200,000 Wendy's Financing I, Series A, 5.000% due 9/15/26 9,575,000
- ---------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 0.2%
140,000 Ralston Purina Co., 7.000% due 8/1/00 5,118,750
- ---------------------------------------------------------------------------------------------------------------
Energy -- 1.8%
100,000 Apache Corp., 6.500% due 5/15/02 3,550,000
200,000 Kerr-Mcgee Corp., 5.500% due 8/2/04 6,600,000
150,000 Nuevo Financing I, Series A, 5.750% due 12/15/26 4,087,500
150,000 Pogo Trust I, Series A, 6.500% due 6/1/29 7,387,500
1,000,000 Tesoro Petroleum Corp., 7.250% due 7/1/01 12,000,000
200,000 Tosco Financial Trust, 5.750% due 12/15/26 9,525,000
50,000 Unocal Capital Trust, 6.250% 2,437,500
- ---------------------------------------------------------------------------------------------------------------
45,587,500
- ---------------------------------------------------------------------------------------------------------------
Real Estate Investment Trust -- 1.2%
115,300 Crown American Realty Trust, Series A, 11.000% 4,078,738
350,000 General Growth Properties, 7.250% due 7/15/08 7,000,000
215,000 SL Green Realty Corp., 8.000% due 4/15/08 5,106,250
100,000 Vornado Realty Trust, Series A, 6.500% 4,662,500
400,000 Walden Residential Properties, Inc., Series B, 9.160% 9,725,000
- ---------------------------------------------------------------------------------------------------------------
30,572,488
- ---------------------------------------------------------------------------------------------------------------
Technology -- 0.3%
100,000 Amdocks (TRACES) Trust Automatic Common Exchange Securities,
6.750% due 9/11/02 3,212,500
325,000 Goldman Sachs Group Inc., Series SIII, 6.000% due 6/2/00 3,579,875
- ---------------------------------------------------------------------------------------------------------------
6,792,375
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================
<S> <C> <C>
Transportation -- 0.1%
75,000 Canadian National Railway Co., 5.250% due 6/30/29 $ 3,150,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost -- $165,430,860) 153,037,363
==================================================================================================================
PREFERRED STOCK -- 0.2%
Communications -- 0.2%
52,849 CSC Holdings Inc., Series M, 11.125% due 4/1/08 (Cost -- $5,668,945) 5,786,967
==================================================================================================================
FACE
AMOUNT SECURITY VALUE
==================================================================================================================
U.S. TREASURY OBLIGATIONS -- 1.2%
$ 30,000,000 US Treasury Bill, 4.980% due 1/27/00(e) (Cost -- $29,890,583) 29,890,583
==================================================================================================================
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
==================================================================================================================
<S> <C> <C> <C>
CORPORATE BONDS -- 27.8%
Basic Materials -- 3.5%
10,000,000 BB AK Steel Corp., Sr. Notes, 7.875% due 2/15/09 9,525,000
4,500,000 A- BHP Finance, Notes, 5.625% due 11/1/00 4,460,625
200,000 BBB Fort James Corp., Notes, 6.234% due 3/15/01 198,000
7,000,000 B+ Huntsman ICI Chemicals, Sr. Sub. Notes, 10.125% due 7/1/09(d) 7,245,000
4,000,000 A- ICI Wilmington, Company Gtd., 6.750% due 9/15/02 3,935,000
2,000,000 A- ICI Wilmington, Notes, 7.500% due 1/15/02 1,997,500
2,500,000 BB- LTV Corp., Sr. Notes, 11.750% due 11/15/09(d) 2,612,500
10,000,000 BB Lyondell Chemical, Secured, 9.875% due 5/1/07 10,375,000
10,000,000 BB Norampac Inc., Sr. Notes, 9.500% due 2/1/08 10,350,000
5,500,000 BBB Nova Chemicals, Notes, 6.500% due 9/22/00 5,451,875
5,000,000 B P & L Coal Holdings Corp., Company Gtd., 9.625% due 5/15/08 4,875,000
5,000,000 B Polymer Group Inc., Company Gtd., 9.000% due 7/1/07 4,900,000
10,000,000 B Renco Metals Inc., Sr. Notes, 11.500% due 7/1/03 8,225,000
7,000,000 BBB+ Temple Inland, Debentures, 9.000% due 5/1/01 7,166,250
7,000,000 B ZSC Specialty Chemicals, Company Gtd., 11.000% due 7/1/09(d) 7,280,000
- ------------------------------------------------------------------------------------------------------------------
88,596,750
- ------------------------------------------------------------------------------------------------------------------
Capital Goods -- 3.0%
10,000,000 B+ Allied Waste North America, Sr. Sub. Notes, 10.000% due 8/1/09(a)(d) 8,950,000
American Standard, Inc. Company Gtd.:
5,000,000 BB- 8.250% due 6/1/09 4,812,500
3,921,000 BB- 9.250% due 12/1/16 3,921,000
5,000,000 B BE Aerospace, Sr. Sub. Notes, 9.875% due 2/1/06 4,750,000
2,000,000 B- Blount Inc., Sr. Sub. Notes, 13.000% due 8/1/09(d) 2,110,000
10,000,000 BB- Easco Corp., Sr. Notes, 10.000% due 3/15/01 10,100,000
5,000,000 BBB- Lockheed Martin Corp., Company Gtd., 6.850% due 5/15/01 4,962,500
5,000,000 B+ Newport News Shipbuilding, Sr. Sub. Notes, 9.250% due 12/1/06 5,050,000
10,000,000 B- Nortek Inc., Sr. Notes, 9.875% due 3/1/04 9,900,000
7,500,000 B+ Safety-Kleen Corp., Company Gtd., 9.250% due 5/15/09 7,162,500
9,000,000 BB Sequa Corp., Sr. Notes, 9.000% due 8/1/09 8,752,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
============================================================================================================================
<S> <C> <C> <C>
Capital Goods -- 3.0% (continued)
$ 7,000,000 BBB Waste Management, Inc., Sr, Notes, 6.000% due 5/15/01(d) $ 6,698,930
- ----------------------------------------------------------------------------------------------------------------------------
77,169,930
- ----------------------------------------------------------------------------------------------------------------------------
Communications -- 4.4%
10,000,000 B+ Adelphia Communications, Sr. Notes, 7.750% due 5/1/09 9,050,000
2,000,000 A- Aristar Inc., 7.250% due 6/15/01 2,002,500
10,000,000 NR Charter Comm. Hldgs. LLC, Sr. Disc. Notes,
zero coupon until 4/1/11 thereafter 9.920% due 4/1/04(d) 5,900,000
6,000,000 BBB+ Cox Communications Inc., Notes, 6.375% due 6/15/00 5,992,500
7,275,000 BB- CSC Holdings Inc., Sr. Sub. Notes, 9.875% due 5/15/06 7,638,750
6,000,000 B Energis PLC, Notes, 9.750% due 6/15/09(a) 6,240,000
5,500,000 A- MCI WorldCom Inc., Notes, 6.125% due 4/15/02 5,376,250
12,500,000 BBB Metronet Communications, zero coupon until 6/15/03 thereafter
9.950% due 6/15/08 9,843,750
15,000,000 B- NTL Inc., Sr. Notes, zero coupon until 4/1/03 thereafter 9.750% due 4/1/08 10,462,500
11,750,000 B Nextel Communications, Sr. Disc. Notes, zero coupon until 9/15/02
thereafter 10.650% due 9/15/07 8,841,875
5,000,000 BBB Orange PLC, Sr. Notes, 8.750% due 6/1/06 5,331,250
7,000,000 B+ Price Communications Wireless, Company Gtd., 9.125% due 12/15/06 7,175,000
2,000,000 BB+ Rogers Cantel Mobile Communications, Debentures, 9.375% due 6/1/08 2,140,000
10,000,000 B+ Telewest Communications, Debentures, zero coupon until 10/1/00
thereafter 11.000% due 10/1/07 9,350,000
10,000,000 CCC+ US Unwired Inc., Sr Discount Notes, zero coupon until 11/1/04 thereafter
13.375% due 11/1/09(d) 5,950,000
10,000,000 NR United Pan European Communications NV, Senior Notes,
10.875% due 8/1/09(d) 10,187,500
- ----------------------------------------------------------------------------------------------------------------------------
111,481,875
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals -- 3.5%
4,000,000 B American Axle & Manufacturing Inc., Company Gtd., 9.750% due 3/1/09 4,040,000
6,000,000 B Collins & Aikman Production, Company Gtd., 11.500% due 4/15/06 5,940,000
10,000,000 BB+ Federal Mogul Co., Notes, 7.375% due 1/15/06 9,287,500
12,500,000 BB HMH Properties Inc., Sr. Notes, 8.450% due 12/1/08 11,625,000
9,000,000 B- J.L. French Auto Casting, Company Gtd., 11.500% due 6/1/09(a) 9,090,000
15,000,000 BB+ Lear Corp., Sr. Notes, 8.110% due 5/15/09(d) 14,231,250
7,050,000 BB- Navistar International, Sr. Sub. Notes, 8.000% due 2/1/08 6,785,625
Sears Roebuck Acceptance, Notes:
1,000,000 A- 5.720% due 2/6/01 982,500
5,000,000 A- 6.950% due 5/15/02 4,931,250
5,810,000 BB+ Tanger Properties L.P., Company Gtd., 8.750% due 3/11/01 5,795,475
5,000,000 BBB TRW Inc., Notes, 6.450% due 6/15/01 4,937,500
4,000,000 A- Tyco International Ltd., Notes, 6.500% due 11/1/01 3,930,000
8,500,000 BB Westpoint Stevens Inc., Sr. Notes, 7.875% due 6/15/05 7,820,000
- ----------------------------------------------------------------------------------------------------------------------------
89,396,100
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 5.0%
7,000,000 BBB- A.H. Belo Corp., Sr. Notes, 6.875% due 6/1/02 6,895,000
10,000,000 NR Airgate PCS Inc., zero coupon until 10/1/04 thereafter 13.500% due 10/1/09 6,500,000
5,000,000 B- Amerking, Inc., Sr. Notes, 10.750% due 12/1/06 4,650,000
10,000,000 B+ Aztar Corp., Sr. Sub Notes, 8.875% due 5/15/07 9,700,000
5,635,000 BBB- Comcast Corp., Sr. Sub. Debentures, 9.375% due 5/15/05 5,937,881
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=============================================================================================================================
<S> <C> <C> <C>
Consumer Non-Cyclicals -- 5.0% (continued)
$ 4,955,000 BBB+ Conagra Inc., Sr. Notes, 5.500% due 10/15/02 $ 4,732,025
5,000,000 B- Duane Reade Inc., Company Gtd., 9.250% due 2/15/08 4,900,000
10,000,000 BB+ Harrahs Operation Co. Inc., Company Gtd., 7.875% due 12/15/05 9,650,000
10,000,000 B+ Horseshoe Gaming Holdings, Company Gtd., 8.625% due 5/15/09 9,675,000
5,000,000 B+ Mail-Well I Corp, Company Gtd., 8.750% due 12/15/08 4,750,000
7,000,000 B National Wine & Spirits, Company Gtd., 10.125% due 1/15/09 7,070,000
5,000,000 BB+ Park Place Entertainment, Sr. Sub. Notes, 7.875% due 12/15/05 4,800,000
10,000,000 CCC+ Pathmark Stores, Sr. Sub. Notes, 9.625% due 5/1/03(a) 7,400,000
5,000,000 B Playtex Family Products Corp., Sr. Sub. Notes, 9.000% due 12/15/03 4,950,000
5,000,000 B- Premier International Foods PLC, Sr. Notes, 12.000% due 9/1/09(d) 5,000,000
6,000,000 B- Revlon Consumer Products, Sr. Notes, 8.125% due 2/1/06 4,515,000
6,000,000 BB+ Rogers Cable System, Sr. Notes, 10.000% due 3/15/05 6,510,000
7,000,000 BBB- Seagram & Sons, Company Gtd., 6.250% due 12/15/01 6,877,500
8,000,000 B+ Stater Brothers Holdings, Sr. Notes, 10.750% due 8/15/06 8,040,000
4,000,000 BBB Time Warner Inc., Pass thru Security, 6.100% due 12/30/01(d) 3,920,000
- -----------------------------------------------------------------------------------------------------------------------------
126,472,406
- -----------------------------------------------------------------------------------------------------------------------------
Consumer Services -- 1.6%
4,585,000 BBB Cendant Corp., Notes, 7.500% due 12/1/00 4,579,269
12,500,000 BB- Hollinger International Publishing Inc., Company Gtd., 9.250% due 3/15/07 12,406,250
10,000,000 BB- K-III Comm Corp., Series B, 8.500% due 2/1/06 9,812,500
3,000,000 B- Pierce Leahy Corp, Sr. Sub. Notes, 11.125% due 7/15/06 3,210,000
5,000,000 BBB- Service Corp. International, Notes, 6.750% due 6/1/01 4,706,250
Sun Media, Sr. Sub Notes:
3,500,000 BB- 9.500% due 2/15/07 3,482,500
1,500,000 BB- 9.500% due 5/15/07 1,492,500
- -----------------------------------------------------------------------------------------------------------------------------
39,689,269
- -----------------------------------------------------------------------------------------------------------------------------
Energy -- 1.4%
3,050,000 BB+ Gulf Canada Resources, Sr. Notes, 8.375% due 11/15/05 3,050,000
5,750,000 BBB+ Houston Industries Inc., Debentures, 9.375% due 6/1/01 5,915,313
10,000,000 BB+ Louis Dreyfus Natural Gas, Sr. Sub. Notes, 9.250% due 6/15/04 10,087,500
6,500,000 A- Phillips Petroleum, Debentures, 9.000% due 6/1/01 6,662,500
6,000,000 A Virginia Electric & Power Co., First Mortgage, 7.375% due 7/1/02 6,030,000
3,500,000 BB- Western Gas Resources, Company Gtd., 10.000% due 6/15/09 3,631,250
- -----------------------------------------------------------------------------------------------------------------------------
35,376,563
- -----------------------------------------------------------------------------------------------------------------------------
Financial -- 3.3%
5,500,000 A Aetna Services, Inc., Company Gtd., 6.750% due 8/15/01 5,458,750
8,000,000 A+ AT&T Capital Group, Company Gtd., 6.750% due 12/1/00 8,010,000
4,800,000 A Bear Stearns Co. Inc., Sr. Notes, 6.450% due 8/1/02 4,710,000
7,000,000 BBB- Capital One Bank, Sr. Notes, 6.150% due 6/1/01 6,886,250
7,000,000 BBB+ Comdisco Inc., Notes, 6.130% due 8/1/06 6,851,250
Contifinancial Corp., Sr. Notes:
1,960,000 CC 7.500% due 3/15/02 235,200
5,275,000 CC 8.375% due 8/15/03 633,000
1,750,000 CC 8.125% due 4/1/08 210,000
5,000,000 A- Countrywide Funding Corp., Sub. Notes, 8.250% due 7/15/02 5,112,500
4,000,000 BBB- Dime Bancorp Inc., Sr. Notes, 7.000% due 7/25/01 3,965,000
6,000,000 A- Firstar Corp., Sr. Notes, 6.350% due 7/13/01 5,932,500
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=========================================================================================================================
<S> <C> <C> <C>
Financial -- 3.3% (continued)
$ 700,000 A General Motors Accept Company, Sr. Unsubordinated, 6.750% due 2/7/02 $ 696,304
5,000,000 BBB+ Gatx Capital Corp., Notes, 6.500% due 11/1/00 4,982,450
7,000,000 A- Heller Financial Inc., Notes, 6.500% due 7/22/02 6,886,250
5,500,000 BBB+ IKON Capital Inc., Notes, 6.730% due 6/15/01 5,383,125
5,500,000 A- Merchantile BanCorp, Sr. Notes, 6.800% due 6/15/01 5,486,250
6,300,000 A- Textron Financial Corp., Notes, 7.180% due 10/15/02(d) 6,276,375
7,510,000 A Transamerica Finance Corp., Senior Notes, 6.125% due 11/1/01 7,387,963
- -------------------------------------------------------------------------------------------------------------------------
85,103,167
- -------------------------------------------------------------------------------------------------------------------------
Healthcare -- 0.3%
3,040,000 B+ Fresenius Medical Capital Trust I, Company Gtd., 9.000% due 12/1/06 2,926,000
5,660,000 B+ Fresenius Medical Capital Trust II, Company Gtd., 7.875% due 2/1/08 5,164,750
- -------------------------------------------------------------------------------------------------------------------------
8,090,750
- -------------------------------------------------------------------------------------------------------------------------
Technology -- 0.2%
5,000,000 BB+ Unisys Corp., Sr. Notes, 12.000% due 4/15/03 5,350,000
- -------------------------------------------------------------------------------------------------------------------------
Transportation -- 1.0%
3,500,000 BB- Continental Airlines, Notes, 8.000% due 12/15/05 3,228,750
7,000,000 BBB Royal Caribbean Cruises, Sr. Notes, 7.125% due 9/18/02 6,947,500
7,000,000 BBB- Union Pacific Corp., Notes, 5.780% due 10/15/01 6,833,750
7,500,000 B US Airways Inc., Senior notes, 9.625% due 2/1/01 7,368,750
- -------------------------------------------------------------------------------------------------------------------------
24,378,750
- -------------------------------------------------------------------------------------------------------------------------
Utilities -- 0.6%
Columbia Energy Group, Notes:
5,000,000 BBB+ Series A, 6.390% due 11/28/00 4,981,250
771,000 BBB+ Series B, 6.610% due 11/28/02 755,580
7,000,000 BBB+ Niagara Mohawk Power, First Mortgage, 6.875% due 3/1/01 6,973,750
4,000,000 BBB+ Texas Utilities, First Mortgage, 7.375% due 8/1/01 4,015,000
- -------------------------------------------------------------------------------------------------------------------------
16,725,580
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $723,203,960) 707,831,140
- -------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 8.5%
Basic Industries -- 0.3%
INCO Ltd.:
2,500,000 BB+ 5.750% due 7/1/04 2,381,250
7,000,000 BB+ 7.750% due 3/15/06 6,343,750
- -------------------------------------------------------------------------------------------------------------------------
8,725,000
- -------------------------------------------------------------------------------------------------------------------------
Capital Goods -- 0.2%
5,000,000 BB- Mark IV Industries, 4.750% due 11/1/04 4,081,250
- -------------------------------------------------------------------------------------------------------------------------
Communications -- 0.6%
Bell Atlantic:
5,000,000 A+ 5.750% due 4/1/03(d) 5,262,500
1,000,000 A+ 4.250% due 9/15/05(d) 1,230,050
8,500,000 NR NTL Inc., 5.750% due 12/15/09(d) 9,180,000
- -------------------------------------------------------------------------------------------------------------------------
15,672,550
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=================================================================================================================
<S> <C> <C> <C>
Consumer Cyclicals -- 0.2%
Sunbeam Corp.:
$ 30,000,000 Caa2* Zero coupon due 3/25/18(d) $ 4,650,000
5,000,000 Caa2* Zero coupon due 3/25/18(a) 775,000
- -----------------------------------------------------------------------------------------------------------------
5,425,000
- -----------------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 0.5%
15,000,000 BB- Rogers Communications Inc., 2.000% due 11/26/05 13,050,000
- -----------------------------------------------------------------------------------------------------------------
Energy -- 1.1%
5,000,000 A- Diamond Offshore, 3.750% due 2/15/07 5,075,000
9,500,000 BBB- Kerr-Mcgee Corp., 7.500% due 5/15/14 8,823,125
1,000,000 B3* Lomak Petroleum, 6.000% due 2/1/07 606,250
9,500,000 BB- Pogo Producing Co., 5.500% due 6/15/06 7,600,000
5,000,000 BBB- Seacor Holdings Inc., 5.375% due 11/15/06 4,812,500
- -----------------------------------------------------------------------------------------------------------------
26,916,875
- -----------------------------------------------------------------------------------------------------------------
Real Estate Investment Trust -- 0.0%
700,000 B1* The Macerich Co., 7.250% due 12/15/02(d) 583,625
- -----------------------------------------------------------------------------------------------------------------
Healthcare -- 1.3%
2,500,000 B Alpharma Inc., 3.000% due 6/1/06(d) 2,693,750
5,000,000 BBB- Athena Neurosciences Inc., 4.750% due 11/15/04 5,100,000
2,500,000 AAA Centocor Inc., 4.750% due 2/15/05(a) 3,340,625
3,445,000 BBB Health Care Properties, 6.000% due 11/8/00(d) 3,311,506
5,000,000 BBB- HealthSouth Corp., 3.250% due 4/1/03 3,881,250
15,000,000 NR Roche Holdings, zero coupon due 4/20/10(d) 9,075,000
Sepracor Inc.:
4,000,000 CCC+ 7.000% due 12/15/05(d) 4,230,000
1,000,000 CCC+ 7.000% due 12/15/05(a) 1,057,500
- -----------------------------------------------------------------------------------------------------------------
32,689,631
- -----------------------------------------------------------------------------------------------------------------
Technology -- 4.2%
10,000,000 CCC+ Advanced Micro Devices Inc., 6.000% due 5/15/05 9,587,500
3,500,000 NR Arbor Software, 4.500% due 3/15/05 3,268,125
30,000,000 B- Aspect Telecommunications, zero coupon due 8/10/18(a)(c) 12,000,000
3,000,000 B2* ASM Lithography, 4.250% due 11/30/04(a)(d) 3,555,000
5,000,000 B Cypress Semiconductor, 6.000% due 10/1/02 7,218,750
10,000,000 A DSC Communications Corp.,7.000% due 8/1/04 10,500,000
3,000,000 B- Integrated Process Equipment, 6.250% due 9/15/04 2,163,750
17,500,000 B Micron Technology Inc., 7.000% due 7/1/04(a)(c) 22,596,875
30,000,000 NR Networks Associates, zero coupon due 2/13/18 11,325,000
15,000,000 B+ Quantum Corp., 7.000% due 8/1/04 11,400,000
2,500,000 B- Wind River System, 5.000% due 8/1/02(c) 3,168,750
20,000,000 A- Xerox Corp., 0.570% due 4/21/18 10,750,000
- -----------------------------------------------------------------------------------------------------------------
107,533,750
- -----------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(Cost -- $196,984,672) 214,677,681
=================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
=====================================================================================================================
ASSET-BACKED SECURITIES -- 9.0%
<S> <C> <C> <C>
$ 2,376,000 BBB American Residential Home Equity Loan Trust, Series 1998-1,
Class B, Floating Rate 7.931% due 5/25/29 $ 2,234,183
4,000,000 BBB+ Bear Stearns Commercial Mortgage Securities, Series 1999-WYN1,
Class C, Floating Rate 8.673% due 7/3/09 4,000,000
3,353,406 BBB Coast-Plymouth Tax Lien Capital, LLC, Series 1999-A,
Class B, Floating Rate 8.810% due 11/15/04
3,347,118 Countrywide Asset-Backed Certificates,
Series 1999-2:
3,000,000 AA Class MV1, Floating Rate 6.921% due 5/25/29 2,971,182
6,525,000 A Class MV2, Floating Rate 7.381% due 5/25/29 6,437,852
2,000,000 BBB Class BV, Floating Rate 9.081% due 5/25/29 1,972,500
Countrywide Asset-Backed Certificates, Series 1999-3:
4,000,000 Baa2* Class BV, Floating Rate 9.581% due 10/25/30 3,997,500
4,000,000 A2* Class MV2, Floating Rate 7.681% due 10/25/30 3,996,250
2,000,000 BBB- Contimortgage Home Equity Loan Trust, Series 1999-3,
Class B, Floating Rate 7.000% due 12/25/29 1,493,125
10,000,000 NR Guaranteed Residential Securities Trust, Series 1999-A,
Class A, Floating Rate 6.140% due 1/28/30 9,904,710
300,000 Baa3* CS First Boston Mortgage Securities Corp., Series 1998-FL1A,
Class F, Floating Rate 6.510% due 1/10/01 294,937
Donaldson, Lufkin & Jenrette Commercial Mortgage Corp.:
8,500,000 Baa1* Series 1998-ST1A, Class B1, Floating Rate 7.443% due 12/8/00 8,457,500
5,000,000 Baa2* Series 1999-STF1, Class B1, Floating Rate 8.976% due 9/5/01 5,000,000
4,719,728 AAA Equicon Home Equity Loan Trust, Series 1992-7, Class B,
Floating Rate 7.700% due 9/18/13 4,713,828
6,000,000 A First Dominion Funding I, Series 1A, Class B,
Floating Rate 6.254% due 7/10/13 5,640,000
5,000,000 Baa2* First Dominion Funding II, Series 1A, Class C,
Floating Rate 8.673% due 4/25/14 5,000,000
15,000,000 AA Fortress CBO Investments I, Limited, Series 1A, Class B,
Floating Rate 7.281% due 7/25/38 15,000,000
3,250,000 A- GMPT Commercial Mortgage Backed Securities, Series 1999-C1A,
Class E, Floating Rate 7.755% due 8/15/04 3,237,812
7,000,000 A- Highland Legacy Limited CLO, Series 1A, Class B2,
Floating Rate 7.389% due 6/1/11 6,995,625
4,608,000 BBB Merrill Lynch Mortgage Investors, Inc., Series 1999-NC1, Class B,
Floating Rate 9.361% due 6/20/30 4,564,080
8,500,000 A2* Nomura Depositor Trust, Series 1998-ST1A, Class A3A,
Floating Rate 5.994% due 1/15/03 8,324,688
1,158,688 NR Paragon Residual Interest, Series 1999-R, Class A,
Floating Rate 9.790% due 5/15/05 1,152,315
4,500,000 A- Pennant CBO Limited, Series 1A, Class B, Floating Rate
7.443% due 3/14/11 4,490,156
4,000,000 A3* Sabre Funding Ltd, Series 1A, Class A3, Floating Rate
7.430% due 12/31/40 3,955,040
Salomon Brothers Mortgage Securities VII:
12,968,000 A2* Series 1999-NC3, Class M2, Floating Rate 7.671% due 7/25/29 12,897,081
13,703,000 BBB Series 1999-AQ1, Class M3, Floating Rate 9.471% due 4/25/29 13,587,381
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING++ SECURITY VALUE
==========================================================================================================================
<S> <C> <C> <C>
ASSET-BACKED SECURITIES -- 9.0% (continued)
Sasco Floating Rate Commercial Mortgage:
$ 5,898,500 A2* Series 1998-C3A, Class D, Floating Rate 7.231% due 6/25/01 $ 5,852,419
2,999,393 A3* Series 1999-C3, Class G, Floating Rate 7.911% due 3/20/02 2,976,897
999,731 Baa3* Series 1999-C3, Class K, Floating Rate 7.911% due 7/22/02 965,540
Saxon Asset Securities Trust:
13,801,000 Aa2* Series 1998-2, Class MV1, Floating Rate 6.811% due 1/25/28 13,671,077
5,000,000 Aa2* Series 1998-3, Class MV1, Floating Rate 6.981% due 4/25/28 4,970,312
4,000,000 Aa2* Series 1999-2, Class MV1, Floating Rate 6.931% due 5/25/29 3,965,625
803,384 Baa2* Series 1999-3, Class BF1A, Floating Rate 8.640% due 7/25/02 798,614
3,061,276 Baa2* Series 1999-3, Class BV1A, Floating Rate 9.200% due 8/25/01 3,045,013
5,000,000 NR Southern Pacific Thrift And Loan Assoc., Series 1996-C1, Class C,
Floating Rate 7.481% due 4/25/28 5,012,500
Stanfield CLO Ltd., Series 1A:
10,000,000 AAA Class A1, Floating Rate 6.015% due 7/15/14 10,000,000
8,500,000 A3* Class B1, Floating Rate 6.865% due 7/15/14 8,500,000
Structured Asset Securities Corp.:
6,000,000 BBB Series 1999-BC1, Class B, Floating Rate 9.221% due 1/25/29 5,932,500
5,456,000 A2* Series 1999-RM1, Class M2, Floating Rate 6.890% due 7/25/29 5,430,425
3,000,000 A* Sutter CBO, Series 1999-1, Class A4L,
Floating Rate 7.616% due 11/30/11 2,966,190
11,500,000 A2* WMC Mortgage Loan Pass-Through Certificates, Series 1999-A, Class M2,
Floating Rate 6.880% due 10/15/29 11,492,813
- --------------------------------------------------------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost -- $230,269,213) 229,244,788
==========================================================================================================================
CONTRACTS SECURITY VALUE
==========================================================================================================================
PURCHASED OPTIONS -- 5.6%
Purchased Puts -- 0.5%
Bristol-Myers Squibb Co.
400 Put @ $67.50, Expire 1/2000 1,850,000
300 Put @ $70, Expire 1/2000 1,931,250
600 MCI Worldcom Inc. Put @ $75, Expire 1/2000 956,250
100 Merck & Co. Inc. Put @ $65, Expire 1/2000 140,625
50 Morgan Stanley Dean Witter & Co. Put @ $90, Expire 1/2000 10,938
S & P 500 Index:
100 Put @ $1,425, Expire 1/2000 1,431,250
150 Put @ $1,200, Expire 3/2000 1,059,375
50 Put @ $1,250, Expire 3/2000 534,375
50 Put @ $1,150, Expire 6/2000 665,625
100 Put @ $1,250, Expire 6/2000 2,306,250
50 Put @ $1,300, Expire 9/2000 2,071,875
150 Put @ $1,110, Expire 1/2001 51,563
250 SLM Holding Corp. Put @ $41.19, Expire 1/2000 222,500
100 Schering-Plough Corp. Put @ $50, Expire 1/2000 800,000
Telephone and Data Systems:
50 Put @ $120, Expire 1/2000 203,125
50 Put @ $85, Expire 2/2000 15,625
- --------------------------------------------------------------------------------------------------------------------------
14,250,626
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS SECURITY VALUE
====================================================================================================================
<S> <C> <C>
Purchased Calls -- 5.1%
S & P 500 Index:
100 Call @ $1,300, Expire 3/2000 $ 19,656,250
100 Call @ $1,350, Expire 3/2000 15,381,250
300 Call @ $1,300, Expire 6/2000 68,156,250
100 Call @ $1,300, Expire 9/2000 25,418,750
- --------------------------------------------------------------------------------------------------------------------
128,612,500
- --------------------------------------------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS
(Cost -- $137,218,250) 142,863,126
====================================================================================================================
WARRANTS -- 0.0%
200,000 Walden Residential Properties, Inc.
(Exercise price of $26.875 per share. Expire 1/1/02.
Each warrant exercisable for 0.333 shares of common stock.)
(Cost -- $93,023) 1,000
- --------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
====================================================================================================================
REPURCHASE AGREEMENT -- 1.9%
$ 48,580,000 Morgan Stanley Dean Witter & Co., 2.500% due 1/3/00;
Proceeds at maturity -- $48,590,121 (Fully collateralized
by U.S. Treasury Notes, 6.000% to 7.250% due 8/15/22
to 2/15/26; Market value -- $50,017,520) (Cost -- $48,580,000) 48,580,000
====================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $2,249,828,328**) $2,545,540,829
====================================================================================================================
</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 Rating 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 21 for definition of bond ratings.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<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
CCC speculative with respect to capacity to pay interest and repay
and CC principal in accordance with the terms of the obligation. "BB"
indicates a lower degree of speculation and "CC" 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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $2,249,828,328) $2,545,540,829
Collateral for securities on loan (Note 7) 154,058,911
Receivable for securities sold 26,469,535
Receivable for Fund shares sold 596,054
Dividends and interest receivable 21,486,850
Receivable from broker--variation margin 388,450
Prepaid expenses 7,138
- ----------------------------------------------------------------------------------------------------------------------
Total Assets 2,748,547,767
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 154,058,911
Payable for securities purchased 38,935,160
Payable for Fund shares purchased 5,110,793
Options written (Note 5) 3,214,812
Investment advisory fees payable 1,203,650
Administration fees payable 449,645
Distribution fees payable 252,407
Payable to bank 5,277
Accrued expenses 421,212
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities 203,651,867
- ----------------------------------------------------------------------------------------------------------------------
Total Net Assets $2,544,895,900
======================================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 141,522
Capital paid in excess of par value 2,089,974,235
Undistributed net investment income 7,790,038
Accumulated net realized gain from security transactions, options and futures contracts 150,069,581
Net unrealized appreciation of investments, options and futures contracts 296,920,524
- ----------------------------------------------------------------------------------------------------------------------
Total Net Assets $2,544,895,900
======================================================================================================================
Shares Outstanding:
Class A 36,933,643
-----------------------------------------------------------------------------------------------------------------
Class B 95,246,888
-----------------------------------------------------------------------------------------------------------------
Class L 1,297,874
-----------------------------------------------------------------------------------------------------------------
Class O 3,321,324
-----------------------------------------------------------------------------------------------------------------
Class Y 4,722,311
-----------------------------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $18.07
-----------------------------------------------------------------------------------------------------------------
Class B * $17.94
-----------------------------------------------------------------------------------------------------------------
Class L ** $17.97
-----------------------------------------------------------------------------------------------------------------
Class O ** $17.95
-----------------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $18.22
-----------------------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $19.02
-----------------------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $18.15
======================================================================================================================
</TABLE>
* 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.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 69,371,534
Dividends 53,364,211
Less: Foreign withholding tax (958,324)
- -----------------------------------------------------------------------------------------
Total Investment Income 121,777,421
- -----------------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 20,408,757
Investment advisory fees (Note 2) 18,229,857
Administration fees (Note 2) 6,629,039
Shareholder and system servicing fees 3,082,812
Shareholder communications 520,001
Registration fees 164,959
Custody 159,161
Audit and legal 47,497
Trustees' fees 30,002
Insurance 17,337
Other 22,995
- -----------------------------------------------------------------------------------------
Total Expenses 49,312,417
- -----------------------------------------------------------------------------------------
Net Investment Income 72,465,004
- -----------------------------------------------------------------------------------------
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) 898,098,212
Options purchased (39,753,921)
Options written (169,601,107)
Futures contracts 53,669,090
- -----------------------------------------------------------------------------------------
Net Realized Gain 742,412,274
- -----------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments, Options and Futures Contracts:
Beginning of year 990,765,330
End of year 296,920,524
- -----------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (693,844,806)
- -----------------------------------------------------------------------------------------
Net Gain on Investments, Options and Futures Contracts 48,567,468
- -----------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 121,032,472
=========================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
===============================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 72,465,004 $ 47,636,243
Net realized gain 742,412,274 400,749,678
Decrease in net unrealized appreciation (693,844,806) (219,828,757)
- -----------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 121,032,472 228,557,164
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (65,811,807) (44,780,880)
Net realized gains (514,998,084) (362,146,516)
- -----------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (580,809,891) (406,927,396)
- -----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 220,257,176 709,931,258
Net asset value of shares issued for
reinvestment of dividends 452,975,960 323,023,241
Cost of shares reacquired (1,885,922,917) (784,966,599)
- -----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions (1,212,689,781) 247,987,900
- -----------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (1,672,467,200) 69,617,668
NET ASSETS:
Beginning of year 4,217,363,100 4,147,745,432
- -----------------------------------------------------------------------------------------------
End of year* $ 2,544,895,900 $ 4,217,363,100
===============================================================================================
* Includes undistributed net investment income of: $7,790,038 $3,257,921
===============================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 shareholder 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, 1999,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, a portion of accumulated net realized gains
amounting to $153,385,958 was reclassified to paid-in capital. 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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
In addition, the Fund may from time to time enter into options and/or futures
contracts in order to hedge market risk.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund Management
Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), which, in
turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment
adviser to the 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, Boston
Partners Asset Management, L.P. was the Fund's sub-advisor and was paid a
monthly fee calculated at an annual rate of 0.15% of the Fund's average daily
net assets.
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.
Effective October 1999, Smith Barney Private Trust Company ("Private Trust"),
another subsidiary of Citigroup, became the Fund's transfer agent and PFPC
Global Fund Services ("PFPC") became the sub-transfer agent. Private Trust
receives account fees and asset-based fees that vary according to the size and
type of account. PFPC is responsible for shareholder recordkeeping and financial
processing for all shareholder accounts and is paid by Private Trust. During the
period October 1, 1999 through December 31, 1999, the Fund paid transfer agent
fees of $531,292 to Private Trust.
CFBDS, Inc. ("CFBDS") 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
year ended December 31, 1999, SSB received total brokerage commissions of
$8,400.
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% 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 year ended December 31, 1999, CFBDS and SSB received sales charges of
$272,000 and $88,000 on sales of the Fund's Class A and Class L shares,
respectively. In addition, CDSCs paid to SSB were approximately:
Class A Class B Class L Class O
================================================================================
CDSCs $2,000 $5,736,000 $23,000 $10,000
================================================================================
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 year ended December 31, 1999, total Distribution Plan fees incurred were:
Distribution
Plan Fees
================================================================================
Class A $ 1,915,701
- --------------------------------------------------------------------------------
Class B 17,658,168
- --------------------------------------------------------------------------------
Class L 260,908
- --------------------------------------------------------------------------------
Class O 573,980
================================================================================
All officers and one Trustee of the Trust are employees of SSB.
3. Investments
During the year ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $2,842,809,006
- --------------------------------------------------------------------------------
Sales 4,718,050,327
================================================================================
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $375,774,413
Gross unrealized depreciation (80,061,912)
- --------------------------------------------------------------------------------
Net unrealized appreciation $295,712,501
================================================================================
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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 27
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At December 31, 1999, the Fund had the following open futures contracts:
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Gain
================================================================================
S&P 500 200 3/00 $71,687,500 $74,210,000 $2,522,500
================================================================================
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.
At December 31, 1999, the Fund had four purchased call options with a total cost
of $115,453,000 and sixteen purchased put options with a total cost of
$21,765,250.
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
purchases 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 written covered call option transactions occurred during the year
ended December 31, 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 year ended December 31, 1999 37,704 14,839,452
Options cancelled in closing purchase transactions (50,258) (190,564,549)
Options expired (501) (73,720)
- ---------------------------------------------------------------------------------------------------------
Options written, outstanding at December 31, 1999 4,845 $1,900,335
=========================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
28 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The following table represents the written covered call option contracts open at
December 31, 1999:
<TABLE>
<CAPTION>
Number of Strike
Contracts Expiration Price Value
============================================================================================
<S> <C> <C> <C> <C>
875 Aspect Telecommunications Corp. 3/18/00 $ 35.000 $ (787,500)
700 Cypress Semiconductor Corp. 1/22/00 30.000 (253,750)
1,000 MCI WorldCom, Inc. 1/22/00 56.625 (178,125)
500 Micron Technology, Inc. 1/22/00 80.000 (181,250)
500 Micron Technology, Inc. 2/19/00 90.000 (181,250)
500 Telephone and Data Systems, Inc. 2/19/00 100.000 (1,387,500)
770 Wind River Systems, Inc. 2/19/00 40.000 (245,437)
- --------------------------------------------------------------------------------------------
Total Covered Call Options Written
(Premiums received -- $1,900,335) $(3,214,812)
============================================================================================
</TABLE>
The following written covered put option transactions occurred during the year
ended December 31, 1999:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
===========================================================================================
<S> <C> <C>
Options written, outstanding at December 31, 1998 -- --
Options written during the year ended December 31, 1999 2,000 $1,572,077
Options cancelled in closing purchase transactions (2,000) (1,572,077)
- -------------------------------------------------------------------------------------------
Options written, outstanding at December 31, 1999 -- --
===========================================================================================
</TABLE>
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.
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.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At December 31, 1999, the Fund had loaned common stocks having a value of
$150,629,374 and holds the following collateral for loaned securities:
Security Description Value
======================================================================
Time Deposits:
CAISSE, 12.000% due 1/3/00 $ 8,186,820
Chase, 4.500% due 1/3/00 12,464,612
Marshal & Isley, 2.000% due 1/3/00 1,422,378
Sun Trust Bank, 13.000% due 1/3/00 10,588,947
Sun Trust Bank, 4.500% due 1/3/00 15,009,169
Deutsche Bank, 11.000% due 1/3/00 33,024,920
Certificates of Deposit:
Deutsche Bank, 6.040% due 1/3/00 1,779,042
Marita Bank Ltd., 6.250% due 2/1/00 3,619,479
Yankee Certificates of Deposit:
Australia New Zealand, 6.290% due 1/14/00 2,032,183
Toronto Dominion, 6.740% due 1/14/00 3,688,035
Commercial Paper:
Sigma Finance, 5.959% due 2/10/00 2,374,296
Corporate Receivable, 6.191% due 1/20/00 5,658,971
Corporate Receivable, 6.126% due 2/2/00 2,572,312
CC USA Disc, 5.904% due 2/14/00 2,082,434
CC USA Disc, 5.937% due 2/22/00 4,633,754
Moriarity Disc, 5.912% due 2/1/00 1,477,717
Atlantis One, 5.920% due 2/23/00 3,077,226
Atlantis One, 5.973% due 3/20/00 4,274,465
Atlantis One, 5.992% due 1/25/00 695,199
Moriarity Disc, 6.258% due 1/10/00 415,867
Corporate Receivable, 6.181% due 1/27/00 2,208,119
Floating Rate Notes:
American Home, 5.508% due 4/20/00 5,057,966
Sigma Finance, 6.254% due 4/4/00 11,941,962
Goldman Sachs, 5.910% due 8/23/00 472,373
Institutional Money Market:
Institutional Money Market, 5.712% due 1/3/00 6,533
Interest Bearing Note:
Bank of Montreal, 6.680% due 1/14/00 15,294,133
- ----------------------------------------------------------------------
Total $154,058,911
======================================================================
Income earned by the Fund from securities loaned for the year ended December 31,
1999 was $206,284.
8. Shares of Beneficial Interest
At December 31, 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.
- --------------------------------------------------------------------------------
30 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At December 31, 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 $625,380,380 $1,270,489,793 $29,702,445 $65,039,456 $99,503,683
===========================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998+
----------------------------------- --------------------------------------
Shares Amount Shares Amount
===========================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 5,576,417 $ 114,564,826 7,733,657 $ 175,026,027
Shares issued on reinvestment 6,613,942 120,314,446 3,269,724 70,506,884
Shares reacquired (17,182,305) (350,048,640) (6,634,829) (146,985,551)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (4,991,946) $ (115,169,368) 4,368,552 $ 98,547,360
===========================================================================================================================
Class B
Shares sold 3,352,189 $ 68,275,906 19,483,013 $ 439,642,557
Shares issued on reinvestment 17,523,284 316,413,809 11,270,658 241,980,524
Shares reacquired (71,868,845) (1,468,014,821) (27,473,985) (607,825,219)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (50,993,372) $(1,083,325,106) 3,279,686 $ 73,797,862
===========================================================================================================================
Class L
Shares sold 503,863 $ 10,440,957 1,194,003 $ 26,489,637
Shares issued on reinvestment 243,173 4,381,254 66,851 1,405,157
Shares reacquired (645,526) (13,037,142) (64,490) (1,375,725)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase 101,510 $ 1,785,069 1,196,364 $ 26,519,069
===========================================================================================================================
Class O++
Shares sold 110,823 $ 2,284,326 1,752,049 $ 39,958,820
Shares issued on reinvestment 656,558 11,866,451 424,817 9,130,351
Shares reacquired (2,548,374) (52,147,892) (1,297,704) (28,780,104)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (1,780,993) $ (37,997,115) 879,162 $ 20,309,067
===========================================================================================================================
Class Y
Shares sold 1,261,008 $ 24,691,161 1,305,089 $ 28,814,217
Shares issued on reinvestment -- -- 13 325
Shares reacquired (131,721) (2,674,422) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase 1,129,287 $ 22,016,739 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 31
<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) 1998(1) 1997(1) 1996(1)(2) 1996(3) 1995(4)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.38 $22.19 $19.14 $17.40 $16.33 $15.69
- -------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.54 0.33 0.39 0.16 0.37 0.44
Net realized and unrealized gain 0.50 1.00 4.29 2.21 1.98 1.48
- -------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.04 1.33 4.68 2.37 2.35 1.92
- -------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.49) (0.25) (0.38) (0.16) (0.37) (0.43)
Net realized gains (3.86) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.71)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (4.35) (2.14) (1.63) (0.63) (1.28) (1.28)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $18.07 $21.38 $22.19 $19.14 $17.40 $16.33
- -------------------------------------------------------------------------------------------------------------------------------
Total Return 5.37% 6.20% 25.19% 13.80%++ 14.76% 12.92%
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $667,303 $896,342 $833,540 $608,203 $534,329 $471,578
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.12% 1.12% 1.11% 1.12%+ 1.12% 1.16%
Net investment income 2.63 1.48 1.89 2.05+ 2.16 2.81
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 93% 43% 43% 30% 58% 63%
===============================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(3) For the fiscal year August 1, 1995 through July 31, 1996.
(4) 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.
- --------------------------------------------------------------------------------
32 1999 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) 1998(1) 1997(1) 1996(1)(2) 1996(3) 1995(4)
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.26 $22.17 $19.14 $17.40 $16.33 $15.69
- ------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.41 0.22 0.29 0.12 0.28 0.36
Net realized and unrealized gain 0.52 0.99 4.28 2.21 1.99 1.48
- ------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.93 1.21 4.57 2.33 2.27 1.84
- ------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) (0.23) (0.29) (0.12) (0.29) (0.34)
Net realized gains (3.86) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.72)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions (4.25) (2.12) (1.54) (0.59) (1.20) (1.20)
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.94 $21.26 $22.17 $19.14 $17.40 $16.33
- ------------------------------------------------------------------------------------------------------------------
Total Return 4.85% 5.64% 24.55% 13.57%++ 14.21% 12.36%
- ------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,709 $3,110 $3,170 $2,355 $2,021 $1,655
- ------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.63% 1.61% 1.60% 1.54%+ 1.62% 1.66%
Net investment income 2.02 0.99 1.39 1.63+ 1.66 2.31
- ------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 93% 43% 43% 30% 58% 63%
==================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(3) For the fiscal year August 1, 1995 through July 31, 1996.
(4) 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 33
<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) 1998(1)(2)
================================================================================
Net Asset Value, Beginning of Year $21.29 $23.06
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.40 0.06
Net realized and unrealized gain (loss) 0.48 (0.01)
- --------------------------------------------------------------------------------
Total Income From Operations 0.88 0.05
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.34) --
Net realized gains (3.86) (1.82)
- --------------------------------------------------------------------------------
Total Distributions (4.20) (1.82)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $17.97 $21.29
- --------------------------------------------------------------------------------
Total Return 4.60% 0.36%++
Net Assets, End of Year (000s) $23,318 $25,471
Ratios to Average Net Assets:
Expenses 1.88% 1.82%+
Net investment income 1.93 0.55+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 93% 43%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) 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.
- --------------------------------------------------------------------------------
34 1999 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) 1998(1)(2) 1997(1) 1996(1)(3) 1996(4) 1995(5)(6)
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.28 $22.18 $19.15 $17.41 $16.33 $15.69
- -------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.42 0.23 0.30 0.12 0.29 0.36
Net realized and unrealized gain 0.51 0.99 4.28 2.21 1.99 1.48
- -------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.93 1.22 4.58 2.33 2.28 1.84
- -------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.40) (0.23) (0.30) (0.12) (0.29) (0.35)
Net realized gains (3.86) (1.89) (1.25) (0.47) (0.91) (0.14)
Capital -- -- -- -- -- (0.71)
- -------------------------------------------------------------------------------------------------------------------------
Total Distributions (4.26) (2.12) (1.55) (0.59) (1.20) (1.20)
- -------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.95 $21.28 $22.18 $19.15 $17.41 $16.33
- -------------------------------------------------------------------------------------------------------------------------
Total Return 4.83% 5.69% 24.60% 13.58%++ 14.30% 12.36%
Net Assets, End of Year (000s) $59,629 $108,576 $93,676 $42,637 $31,044 $12,937
Ratios to Average Net Assets:
Expenses 1.60% 1.59% 1.56% 1.55%+ 1.59% 1.62%
Net investment income 2.05 1.02 1.41 1.61+ 1.68 2.35
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 93% 43% 43% 30% 58% 63%
=========================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class O shares.
(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.
(6) 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 35
<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) 1998(1) 1997(1) 1996(1)(2) 1996(3)
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.49 $22.24 $19.17 $17.42 $17.57
- ------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.64 0.40 0.47 0.17 0.19
Net realized and unrealized gain 0.48 1.01 4.29 2.23 0.33
- ------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.12 1.41 4.76 2.40 0.52
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.53) (0.27) (0.44) (0.18) (0.21)
Net realized gains (3.86) (1.89) (1.25) (0.47) (0.46)
- ------------------------------------------------------------------------------------------------------------
Total Distributions (4.39) (2.16) (1.69) (0.65) (0.67)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $18.22 $21.49 $22.24 $19.17 $17.42
- ------------------------------------------------------------------------------------------------------------
Total Return 5.72% 6.56% 25.61% 13.95%++ 2.93%++
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $86,047 $77,210 $50,882 $26,585 $13,192
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.77% 0.76% 0.76% 0.80%+ 0.87%+
Net investment income 3.08 1.82 2.22 2.36+ 2.24+
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 93% 43% 43% 30% 58%
============================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 1, 1996 to December 31, 1996, which reflects a
change in the fiscal year-end of the Fund.
(3) 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.
- --------------------------------------------------------------------------------
36 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of
Smith Barney Income Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Premium Total Return Fund of Smith
Barney Income Funds as of December 31, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the three-year period then ended, the period
from August 1, 1996 to December 31, 1996 and for each of the years in the
two-year period ended July 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney Premium Total Return Fund of Smith Barney Income Funds as of December 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the periods referred to above, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 37
<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 1.405
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
proposal, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on the proposal.
<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>
- --------------------------------------------------------------------------------
38 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
December 31, 1999:
. A corporate dividends received deduction of 61.51%.
. Total long-term capital gain distributions paid of $660,562,110.
- --------------------------------------------------------------------------------
Smith Barney Premium Total Return Fund 39
<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
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 Manager
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Transfer Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney Income Funds -- Smith Barney Premium Total Return Fund. It is not 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. If used as sales
material after March 31, 2000, this report must be accompanied by performance
information for the most recently completed calendar quarter.
[LOGO OF SALOMON SMITH BARNEY]
Smith Barney Premium
Total Return Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD0420 2/00
