- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. MCLENDON R. JAY GERKEN, CFA
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Smith Barney Large Cap
Blend Fund ("Fund"), formerly known as the Smith Barney Growth and Income Fund,
for the period ended July 31, 1998. For your convenience, we have outlined the
investment strategy of the Fund and its current portfolio strategy. A detailed
summary of performance and current holdings of the Fund can be found in the
appropriate sections that follow. We hope you find this report to be useful and
informative.
A Style Pure Fund
The Smith Barney Large Cap Blend Fund is a Style Pure Series Fund. Style Pure
Series mutual funds are Smith Barney Mutual Funds that are the basic building
blocks of asset allocation. Other than maintaining minimal cash or under
extraordinary market conditions, each Style Pure Series Fund is totally invested
100% of the time within its designated asset classes and its designated
investment style.
Performance Update
For the six months ended July 31, 1998, the Class A, B and O shares of the Smith
Barney Large Cap Blend Fund ("Fund") generated total returns of 8.24%, 8.01% and
8.07%, respectively, without sales charges. In comparison, the Lipper Analytical
Services, Inc. peer group average had a total return of 8.68% during the same
period. (Lipper is a major fund-tracking organization.) Moreover, the Standard &
Poor's 500 Index ("S&P 500"), had a total return of 15.20% during this time. As
you may know, at the end of March 1998 the Fund's shareholders approved a change
in the Fund's investment objective, specifically, the elimination of the
restriction on purchasing dividend-paying stocks. Over the last few months, the
Fund has entered into a number of trades to take advantage of this new
investment flexibility. Although no guarantees can be made, we believe that over
time these investment policy changes may prove to be beneficial to the Fund's
performance.
Market Overview ...
During the six months ended July 31, 1998, the U.S. financial markets have
proven quite resilient. Despite woes in Asia and signs of rising labor costs at
home, most stock and bond markets provided positive returns. Stock returns were
highly dependent on market capitalization: the bigger the company, the higher
the return. Bond market performance was more homogeneous, with the overall bond
market, as measured by the Lehman Brothers Aggregate Bond Index, up some 2.81%.
(The Lehman Aggregate Bond Index is an unmanaged index composed of the Lehman
Intermediate Government/Corporate Bond Index and the Mortgage-Backed Securities
Index and includes treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.)
The performance of the stock market was particularly noteworthy, as there was a
dramatic distinction between the popular averages and the broader stock market.
For example, the S&P 500, a measure of large capitalization domestic stocks,
returned roughly 15% for the period. In contrast, the Russell 2000, a measure of
smaller capitalization stocks, was actually down 2.40%. So although the popular
averages were up handsomely, there were some sharp reversals both in the broader
market and in smaller-sized company stocks.
Investors in larger capitalization stocks have enjoyed
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 1
<PAGE>
returns greater than the "average" year, but in half the time! A benign interest
rate environment and strong corporate earnings reports supported this increase.
And although the rate of earnings growth has not been overwhelming, most
companies' earnings came in ahead of analysts' expectations, supporting stock
prices. In contrast, smaller-sized companies stumbled from their April highs,
following earnings fears triggered by Asia's slowdown. These stocks proved
vulnerable to investors' "flight to safety" into larger capitalization stocks.
Bonds benefited from an extremely tame inflation environment. Reported
inflation, as measured by the Consumer Price Index, was only about 1% over the
past six months. And the economic woes in Asia have unleashed a torrent of cheap
imported goods to our shores, adding more downward pressure to prices. Asian
weakness also dispelled Federal Reserve Board concerns that U.S. economic growth
was too strong, and quashed any thoughts of raising interest rates.
... and Outlook
Looking toward the next six months, we anticipate a positive inflation and
interest rate backdrop. Asian economic troubles should slow the U.S. economy
somewhat, with two effects -- one favorable, one not. A slowing economy further
diminishes the chance of a Federal Reserve rate hike. Corporate profitability,
however, is a potential stock market concern as investors have begun to question
the earnings outlook. Many company managements are now warning of weaker results
in the second half of the year. The Asian weakness may have begun to offset some
of the strength in the previously unstoppable U.S. economy. There are, however,
no signs that corporate managements have lost their focus on the bottom line. We
anticipate that despite the challenges outlined above, corporations should
report decent, though not spectacular, earnings increases through the rest of
the year -- providing support to stock prices.
Portfolio Activity
During the past six months, there were a number of important transactions in the
Fund. Many of these were triggered by the change in investment policy discussed
at the start of this letter, allowing us more flexibility in selecting
investments for the Fund.
During the last six months, we sold the Fund's three bond positions, as well as
a Unocal convertible preferred stock. The Large Cap Blend Fund is now invested
entirely in stocks -- except for a minimal amount of "cash" investments. Our
intent going forward, under most market conditions, is to actively manage the
Fund as a fully invested stock portfolio. We believe this strategy should
provide superior return potential over time, a reflection of our long-term
investment philosophy.
The Fund's largest holding as of July 31, 1998, was Household International.
This position evolved from the Fund's original holding in Beneficial
Corporation. Beneficial was taken over by and subsequently merged into another
consumer finance company, Household International.
Companies purchased during the reporting period include stocks in a variety of
sectors, but particularly in the technology and airline industries. In the
technology area, Dell Computer, Intel, Maxim and Computer Associates were
purchased. Dell is the world's largest direct-selling personal computer
manufacturer and has a stellar record of sales and earnings growth. Intel is the
leader in building the microprocessors that are at the heart of most personal
computers. Maxim Integrated Products builds analog semiconductors, which goes
into a wide range of electronic and consumer products. Computer Associates is a
leading software company, which we purchased following a big price decline in
July. We believe the company's prospects are quite positive, as the firm
complements its mainframe software with products designed for personal computer
networks.
- --------------------------------------------------------------------------------
2 1988 Semi-Annual Report to Shareholders
<PAGE>
We purchased two airlines, AMR Corporation and Southwest Airlines, based on
their reasonable valuations and high passenger counts.
There were also a number of stocks we sold during the last six months. We
trimmed our real estate investment trust ("REIT") position by selling SL Green
Realty. In the consumer sector, we sold McDonald's and Genuine Parts. Despite
management's best attempts, McDonald's global fast food dominance appears to be
slipping. Genuine Parts faces tough competition in the auto parts business, as
well as a slowdown in sales of replacement parts due to the increased
reliability of new autos. We also sold Reuters Holdings. Much of the growth in
their data franchise had been coming from Asia, and that growth is now more
questionable.
Thank you for your investment in the Smith Barney Large Cap Blend Fund. We look
forward to continuing to help you pursue your long-term financial goals.
Sincerely
/s/ Heath B. McLendon /s/ R. Jay Gerken, CFA
Heath B. McLendon R. Jay Gerken, CFA
Chairman Vice President and
Investment Officer
August 20, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings* As of July 31, 1998
- --------------------------------------------------------------------------------
1. Household International, Inc. 2.9%
- --------------------------------------------------------------------------------
2. General Electric Co. 2.5
- --------------------------------------------------------------------------------
3. Rite Aid Corp. 2.4
- --------------------------------------------------------------------------------
4. Hewlett-Packard Co. 2.4
- --------------------------------------------------------------------------------
5. LM Ericsson Telephone Co. ADR 2.4
- --------------------------------------------------------------------------------
6. Johnson & Johnson 2.3
- --------------------------------------------------------------------------------
7. Chase Manhattan Corp. 2.3
- --------------------------------------------------------------------------------
8. MCI Communications Corp. 2.2
- --------------------------------------------------------------------------------
9. Walt Disney Co. 2.2
- --------------------------------------------------------------------------------
10. Eli Lilly & Co. 2.1
- --------------------------------------------------------------------------------
* As a percentage of total common stock.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $15.72 $16.60 $0.09 $0.33 8.24%+
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/98 14.30 15.72 0.19 0.70 16.30
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/97 12.16 14.30 0.20 0.18 20.97
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/96 9.62 12.16 0.20 0.20 30.97
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/95 10.36 9.62 0.19 0.14 (3.93)
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/94 9.58 10.36 0.23 0.00 10.70
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 1/31/93 9.50 9.58 0.00 0.00 0.84+
====================================================================================================================================
Total $1.10 $1.55
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $15.72 $16.59 $0.07 $0.33 8.01%+
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/98 14.33 15.72 0.14 0.70 15.65
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/97 12.19 14.33 0.15 0.18 20.43
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/96 9.65 12.19 0.15 0.20 30.23
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/95 10.38 9.65 0.14 0.14 (4.33)
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/94 9.58 10.38 0.15 0.00 10.01
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 1/31/93 9.50 9.58 0.00 0.00 0.84+
====================================================================================================================================
Total $0.80 $1.55
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception* -- 7/31/98 $16.89 $16.61 $0.03 $0.33 0.51%+
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class O Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $15.72 $16.60 $0.07 $0.33 8.07%+
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/98 14.33 15.72 0.14 0.70 15.65
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/97 12.19 14.33 0.15 0.18 20.43
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/96 9.65 12.19 0.15 0.20 30.23
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 1/31/95 9.91 9.65 0.06 0.14 (0.58)+
====================================================================================================================================
Total $0.57 $1.55
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $15.73 $16.64 $0.10 $0.33 8.49%+
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/98 14.34 15.73 0.28 0.70 16.76
- ------------------------------------------------------------------------------------------------------------------------------------
1/31/97 12.16 14.34 0.22 0.18 21.48
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* -- 1/31/96 12.08 12.16 0.00 0.00 N/A**
====================================================================================================================================
Total $0.60 $1.21
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
-------------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 8.24% 8.01% N/A 8.07% 8.49%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 7.14 6.66 N/A 6.66 7.63
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 7/31/98 15.66 15.09 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 14.18 13.62 0.51%+ 18.34 19.12
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
-------------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 2.81% 3.01% N/A 7.07% 8.49%
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31/98 1.77 1.70 N/A 5.67 7.63
- ------------------------------------------------------------------------------------------------------------------------------------
Five Years Ended 7/31/98 14.48 14.97 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Inception* through 7/31/98 13.16 13.62 (1.46)%+ 18.34 19.12
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
====================================================================================================================================
<S> <C>
Class A (Inception* through 7/31/98) 113.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B (Inception* through 7/31/98) 107.94
- ------------------------------------------------------------------------------------------------------------------------------------
Class L (Inception* through 7/31/98) 0.51
- ------------------------------------------------------------------------------------------------------------------------------------
Class O (Inception* through 7/31/98) 94.87
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y (Inception* through 7/31/98) 54.90
====================================================================================================================================
</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
reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, L, O and Y shares are November 6, 1992,
November 6, 1992, June 15, 1998, August 15, 1994 and January 31, 1996,
respectively.
** Information is not meaningful since the class was only open for one day.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A and B Shares of the
Smith Barney Large Cap Blend Fund vs. Standard &Poor's 500 Index+
- --------------------------------------------------------------------------------
[The following table was depicted as a line chart in the printed material.]
November 1992 -- July 1998
SB G&I Class A SB G&I Class B S&P
Nov 1992 9500 10000 10000
Jan 1993 9580 9584 10554
Jan 1994 10605 10694 11910
Jan 1995 10188 10314 11973
Jan 1996 13344 13362 16596
Jan 1997 16142 16546 20965
Jan 1998 18773 19251 26606
July 1998 20321 20794 30650
+ Hypothetical illustration of $10,000 invested in Class A and B shares at
inception on November 6, 1992, assuming deduction of the maximum 5.00%
sales charge at the time of investment for Class A shares and the
deduction of the maximum 5.00% CDSC for Class B shares. It also assumes
reinvestment of dividends and capital gains, if any, at net asset value
through July 31, 1998. The Standard & Poor's 500 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 A and 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*
- --------------------------------------------------------------------------------
[The following table was depicted as a bar chart in the printed material.]
Banks 9.5%
Consumer Non-Durables 8.6%
Electronic Technology 12.1%
Consumer Services 5.0%
Financial Services 9.1%
Healthcare and Pharmaceuticals 8.2%
Technology Services 4.2%
Manufacturing--Diversified Industries 8.2%
Retail 7.1%
Telephone/Communications 4.9%
Other 23.1%
* As a percentage of total common stock.
Investment Breakdown
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Cash Equivalent 0.3%
Common Stock 99.7%
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================
<S> <C> <C> <C>
COMMON STOCK -- 99.7%
Aerospace/Defense -- 1.1%
110,000 Gulfstream Aerospace Corp.+ $ 5,032,500
- -------------------------------------------------------------------------------------------------
Banks -- 9.5%
140,000 Chase Manhattan Corp. 10,587,500
70,000 J.P. Morgan & Co., Inc. 8,820,000
260,000 KeyCorp 8,840,000
120,000 NationsBank Corp. 9,570,000
100,000 State Street Corp. 6,931,250
- -------------------------------------------------------------------------------------------------
44,748,750
- -------------------------------------------------------------------------------------------------
Commercial Services -- 1.6%
170,000 W.W. Grainger, Inc. 7,501,250
- -------------------------------------------------------------------------------------------------
Consumer Durables -- 1.9%
220,000 Leggett & Platt, Inc.++ 5,898,750
170,000 Shaw Industries Inc. 3,145,000
- -------------------------------------------------------------------------------------------------
9,043,750
- -------------------------------------------------------------------------------------------------
Consumer Non-Durables -- 8.5%
100,000 Coca-Cola Co. 8,068,750
100,000 Colgate-Palmolive Co. 9,243,750
150,000 Dole Food Co., Inc. 7,068,750
50,000 Kimberly-Clark Corp. 2,246,875
150,000 Liz Claiborne, Inc.++ 5,793,750
100,000 Procter & Gamble Co.++ 7,937,500
- -------------------------------------------------------------------------------------------------
40,359,375
- -------------------------------------------------------------------------------------------------
Consumer Services -- 5.0%
120,000 TCA Cable Television, Inc. 6,907,500
90,000 Viacom Inc., Class B Shares+ 6,165,000
300,000 Walt Disney Co. 10,331,250
- -------------------------------------------------------------------------------------------------
23,403,750
- -------------------------------------------------------------------------------------------------
Electronic Technology -- 12.1%
75,000 Dell Computer Corp.+ 8,144,531
200,000 Hewlett-Packard Co. 11,100,000
70,000 Intel Corp. 5,910,625
400,000 LM Ericsson Telephone Co. ADR 11,075,000
135,000 Maxim Integrated Products, Inc.+ 4,320,000
120,000 Motorola, Inc. 6,270,000
60,000 Royal Philips Electronics N.V. ADR++ 4,901,250
50,000 Xerox Corp. 5,278,125
- -------------------------------------------------------------------------------------------------
56,999,531
- -------------------------------------------------------------------------------------------------
Energy -- 4.7%
130,000 Exxon Corp. 9,116,250
90,000 Mobil Corp. 6,277,500
150,000 Phillips Petroleum Co. 6,628,125
- -------------------------------------------------------------------------------------------------
22,021,875
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================
<S> <C> <C> <C>
Financial Services -- 9.1%
115,000 A.G. Edwards, Inc. $ 4,492,188
100,000 Conseco, Inc. 4,200,000
170,000 Greenpoint Financial Corp. 6,746,875
110,000 H&R Block, Inc. 4,675,000
275,001 Household International, Inc. 13,681,299
200,000 Mercury General Corp. 9,187,500
- -------------------------------------------------------------------------------------------------
42,982,862
- -------------------------------------------------------------------------------------------------
Healthcare and Pharmaceuticals -- 8.1%
105,000 Arterial Vascular Engineering, Inc.+ 4,147,500
150,000 Eli Lilly & Co. 10,087,500
140,000 Johnson & Johnson 10,815,000
80,000 Merck & Co., Inc. 9,865,000
125,000 Mylan Laboratories Inc. 3,398,438
- -------------------------------------------------------------------------------------------------
38,313,438
- -------------------------------------------------------------------------------------------------
Industrial Services -- 1.1%
120,000 Fluor Corp.++ 5,047,500
- -------------------------------------------------------------------------------------------------
Manufacturing - Diversified Industries -- 8.2%
140,000 Caterpillar Inc.++ 6,790,000
165,000 Dana Corp. 8,208,750
130,000 General Electric Co. 11,610,625
100,000 Minnesota Mining & Manufacturing Co. 7,487,500
200,000 Pall Corp.++ 4,500,000
- -------------------------------------------------------------------------------------------------
38,596,875
- -------------------------------------------------------------------------------------------------
Minerals -- 1.0%
167,142 Broken Hill Proprietary Co., Ltd. 1,355,605
225,000 Worthington Industries, Inc. 3,248,438
- -------------------------------------------------------------------------------------------------
4,604,043
- -------------------------------------------------------------------------------------------------
Paper Packaging -- 2.1%
100,000 Bemis Co., Inc. 3,862,500
120,000 Temple-Inland Inc. 6,247,500
- -------------------------------------------------------------------------------------------------
10,110,000
- -------------------------------------------------------------------------------------------------
Real Estate -- 2.2%
145,000 Arden Realty, Inc. 3,425,625
130,000 Kilroy Realty Corp. 2,949,375
100,000 Starwood Hotels & Resorts 4,106,250
- -------------------------------------------------------------------------------------------------
10,481,250
- -------------------------------------------------------------------------------------------------
Retail -- 7.1%
150,000 May Department Stores Co. 9,628,125
300,000 Nordstrom, Inc. 9,365,625
290,000 Rite Aid Corp. 11,455,000
45,000 Wal-Mart Stores, Inc. 2,840,625
- -------------------------------------------------------------------------------------------------
33,289,375
- -------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1988 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================
<S> <C> <C> <C>
Technology Services -- 4.2%
120,000 Automatic Data Processing Inc.++ $ 8,122,500
125,000 Computer Associates International, Inc. 4,148,438
210,000 Electronic Data Systems Corp. 7,389,375
- -------------------------------------------------------------------------------------------------
19,660,313
- -------------------------------------------------------------------------------------------------
Telephone/Communications -- 4.9%
110,000 AT&T Corp. 6,668,750
110,000 GTE Corp. 5,981,250
160,000 MCI Communications Corp. 10,360,000
- -------------------------------------------------------------------------------------------------
23,010,000
- -------------------------------------------------------------------------------------------------
Transportation -- 3.6%
70,000 AMR Corp.+ 5,000,625
160,000 Knightsbridge Tankers Ltd.++ 3,920,000
250,000 Southwest Airlines Co.++ 8,234,375
- -------------------------------------------------------------------------------------------------
17,155,000
- -------------------------------------------------------------------------------------------------
Utilities -- 3.7%
200,000 Ameritech Corp. 9,837,500
135,000 Duke Energy Corp. 7,711,875
- -------------------------------------------------------------------------------------------------
17,549,375
- -------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $320,862,343) 469,910,812
=================================================================================================
<CAPTION>
=================================================================================================
FACE
AMOUNT SECURITY VALUE
=================================================================================================
REPURCHASE AGREEMENT -- 0.3%
$1,609,000 Goldman, Sachs & Co., 5.600% due 8/3/98; Proceeds
at maturity -- $1,609,751; (Fully collateralized by
U.S. Treasury Notes, 5.375% due 7/31/00;
Market value -- $1,641,929) (Cost -- $1,609,000) 1,609,000
=================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $322,471,343*) $471,519,812
=================================================================================================
</TABLE>
+ Non-income producing security.
++ A portion of this security is on loan (Note 8).
# Security is on loan (Note 8).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $322,471,343) $471,519,812
Cash 307
Collateral for securities on loan (Note 8) 50,550,393
Receivable for securities sold 2,473,518
Receivable for Fund shares sold 4,707,080
Dividends and interest receivable 508,276
- -------------------------------------------------------------------------------------------------
Total Assets 529,759,386
- -------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 8) 50,550,393
Dividends payable 9,100,507
Payable for securities purchased 1,918,388
Investment advisory fees payable 182,346
Administration fees payable 81,924
Distribution fees payable 22,510
Accrued expenses 19,475
- -------------------------------------------------------------------------------------------------
Total Liabilities 61,875,543
- -------------------------------------------------------------------------------------------------
Total Net Assets $467,883,843
=================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 28,170
Capital paid in excess of par value 305,766,360
Overdistributed net investment income (210,746)
Accumulated net realized gain from security transactions 13,251,590
Net unrealized appreciation of investments 149,048,469
- -------------------------------------------------------------------------------------------------
Total Net Assets $467,883,843
=================================================================================================
Shares Outstanding:
Class A 9,904,693
--------------------------------------------------------------------------------------------
Class B 9,234,672
--------------------------------------------------------------------------------------------
Class L 20,706
--------------------------------------------------------------------------------------------
Class O 354,729
--------------------------------------------------------------------------------------------
Class Y 8,655,594
--------------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $16.60
--------------------------------------------------------------------------------------------
Class B* $16.59
--------------------------------------------------------------------------------------------
Class L** $16.61
--------------------------------------------------------------------------------------------
Class O** $16.60
--------------------------------------------------------------------------------------------
Class Y (and redemption price) $16.64
--------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $17.47
--------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $16.78
=================================================================================================
</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.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 4,521,194
Interest 607,745
Less: Foreign withholding tax (17,375)
- -------------------------------------------------------------------------------------------------
Total Investment Income 5,111,564
- -------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 1,066,775
Distribution fees (Note 2) 843,083
Administration fees (Note 2) 479,275
Shareholder and system servicing fees 212,157
Registration fees 49,726
Shareholder reporting 34,738
Audit and legal 21,432
Trustees' fees 12,432
Custody 4,774
Other 994
- -------------------------------------------------------------------------------------------------
Total Expenses 2,725,386
- -------------------------------------------------------------------------------------------------
Net Investment Income 2,386,178
- -------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 71,214,903
Cost of securities sold 57,967,190
- -------------------------------------------------------------------------------------------------
Net Realized Gain 13,247,713
- -------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 129,407,253
End of period 149,048,469
- -------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 19,641,216
- -------------------------------------------------------------------------------------------------
Net Gain on Investments 32,888,929
- -------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 35,275,107
=================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended July 31, 1998 (unaudited)
and the Year Ended January 31, 1998
<TABLE>
<CAPTION>
July 31 January 31
=================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,386,178 $ 5,090,806
Net realized gain 13,247,713 24,987,653
Increase in net unrealized appreciation 19,641,216 28,895,818
- -------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 35,275,107 58,974,277
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,371,830) (5,088,324)
Net realized gains (9,100,506) (18,011,944)
- -------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (11,472,336) (23,100,268)
- -------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 47,444,186 108,117,839
Net asset value of shares issued for
reinvestment of dividends 1,395,413 15,187,036
Cost of shares reacquired (34,370,527) (81,176,417)
- -------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 14,469,072 42,128,458
- -------------------------------------------------------------------------------------------------
Increase in Net Assets 38,271,843 78,002,467
NET ASSETS:
Beginning of period 429,612,000 351,609,533
- -------------------------------------------------------------------------------------------------
End of period* $467,883,843 $429,612,000
=================================================================================================
* Includes overdistributed net investment income of: $(210,746) $(225,094)
=================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Large Cap Blend Fund ("Fund"), formerly known as the Smith
Barney Growth and Income Fund, a separate investment fund of the Smith Barney
Equity 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 one other
separate investment fund, Concert Social Awareness Fund. The financial
statements and financial highlights for the other fund are presented in a
separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets;
securities for which no sales price were reported and U.S. government agencies
and obligations are valued at current quoted bid prices; (c) securities that
have a maturity of more than 60 days are valued at prices based on market
quotations for securities of similar type, yield and maturity; (d) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates value; (e) dividend income is recorded on
the ex-dividend date and interest income is recorded on an accrual basis; (f)
gains or losses on the sale of securities are calculated by using the specific
identification method; (g) dividends and distributions to shareholders are
recorded on the ex-dividend date; (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 or 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; (j) the Fund intends to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all Federal income and excise taxes;
(k) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At January 31, 1998, 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. Net investment
income, net realized gains and net assets were not affected by this change; and
(l) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment advisor to the Trust. The Fund pays MMC an
advisory fee calculated at an annual rate of 0.45% of the average daily net
assets. This fee is calculated daily and paid monthly.
MMC also acts as the Fund's administrator for which it receives a fee calculated
at an annual rate of 0.20% of the average daily net assets. This fee is
calculated daily and paid monthly.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Fund shares and primary broker for its portfolio agency transactions. For the
six months ended July 31, 1998, SB received brokerage commissions of $1,863.
On June 12, 1998, the Fund's existing Class C shares were renamed as Class O
shares. In addition, on June 15, 1998, transactions in Class L shares, which are
being sold at net asset value plus a maximum initial sales charge of 1.00%,
commenced. For the six months ended July 31, 1998, SB received sales charges of
approximately $55,000 for sales of the Fund's Class A shares and $2,000 for
sales of the Fund's Class L shares.
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 thereafter
declines by 1.00% per year until no CDSC is incurred. Class L and O shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the year ended July 31, 1998, CDSCs paid to SB were:
Class B
================================================================================
CDSCs $59,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B, L and O shares calculated at the annual rate of 0.25% of the average
daily net assets for each respective class. In addition, the Fund 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 for each
class, respectively.
For the six months ended July 31, 1998, total Distribution Plan fees incurred
were:
Distribution
Plan Fees
================================================================================
Class A $212,912
- --------------------------------------------------------------------------------
Class B 607,771
- --------------------------------------------------------------------------------
Class L 251
- --------------------------------------------------------------------------------
Class O 22,149
================================================================================
All officers and one Trustee of the Trust are employees of SB.
3. Investments
During the six months ended July 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $88,702,105
- --------------------------------------------------------------------------------
Sales 71,214,903
================================================================================
At July 31, 1998, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $159,737,568
Gross unrealized depreciation (10,689,099)
- --------------------------------------------------------------------------------
Net unrealized appreciation $149,048,469
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
5. Reverse Repurchase Agreement
The Fund may enter into reverse repurchase agreement transactions for leveraging
purposes. A reverse repurchase agreement involves a sale by the Fund of
securities that it holds with an agreement by the Fund to repurchase the same
securities at an agreed upon price and date. A reverse repurchase agreement
involves the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of the securities. The Fund will establish a
segregated account with its custodian, in which the Fund will maintain cash,
U.S. government securities or other liquid high grade debt obligations equal in
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
value to its obligations with respect to reverse repurchase agreements.
At July 31, 1998, the Fund had no reverse repurchase agreements.
6. 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 made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract. The Fund enters into such
contracts to hedge a portion of its portfolio. The Fund bears the market risk
that arises from changes in the value of the financial instruments and
securities indices (futures contracts).
At July 31, 1998, the Fund had no open futures contracts.
7. Option Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments which are marked-to-market daily. When a purchase 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 origanally paid.
At July 31, 1998, the Fund had no open purchased call or put option contracts.
When a Fund writes a covered 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 cost of the security sold will be
decreased by the premium originally received. When a put option is exercised,
the amount of the premium originally received will reduce the cost of the
security which the Fund purchased upon exercise. When written index options are
exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
During the six months ended July 31, 1998, the Fund did not write any options.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
8. 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. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. Government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Fund maintains exposure for the risk of any losses in
the investment of amounts received as collateral.
At July 31, 1998, the Fund had loaned common stocks having a value of
$49,370,232 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank of Montreal, 5.563% due 8/3/98 $ 364,702
Svenska Handelsbanken, 5.688% due 8/3/98 9,301,501
Deutsche Bank, 5.688% due 8/3/98 9,301,501
Repurchase Agreements:
Goldman Sachs, 5.700% due 8/3/98 10,527,816
Merrill Lynch, 5.670% due 8/3/98 9,301,501
Morgan Stanley, 5.670% due 8/3/98 5,758,072
Commercial Paper:
Riverwood Funding, 5.520% due 9/14/98 5,995,300
- --------------------------------------------------------------------------------
Total $50,550,393
================================================================================
9. Shares of Beneficial Interest
At July 31, 1998, 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, including those specifically related to the distribution of its
shares. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class O shares.
At July 31, 1998, 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 $101,489,952 $78,223,561 $357,833 $4,889,109 $120,834,075
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited) (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
July 31, 1998 January 31, 1998
---------------------------- -----------------------------
Shares Amount Shares Amount
====================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 1,026,366 $ 17,777,600 1,710,260 $ 26,635,444
Shares issued on reinvestment 49,237 859,180 499,592 7,860,894
Shares redeemed (823,583) (14,301,868) (1,874,428) (29,033,664)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 252,020 $ 4,334,912 335,424 $ 5,462,674
===================================================================================================================================
Class B
Shares sold 565,986 $ 9,766,055 1,910,597 $ 29,398,347
Shares issued on reinvestment 29,516 514,995 450,933 7,110,288
Shares redeemed (1,136,469) (19,610,212) (2,161,382) (33,300,840)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (540,967) $ (9,329,162) 200,148 $ 3,207,795
===================================================================================================================================
Class L+
Shares sold 20,693 $ 357,600 -- --
Shares issued on reinvestment 13 233 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 20,706 $ 357,833 -- --
===================================================================================================================================
Class O++
Shares sold 61,564 $ 1,056,851 151,583 $ 2,360,172
Shares issued on reinvestment 1,203 21,005 13,673 215,854
Shares redeemed (26,494) (458,447) (53,223) (853,352)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 36,273 $ 619,409 112,033 $ 1,722,674
===================================================================================================================================
Class Y
Shares sold 1,071,800 $ 18,486,080 3,240,170 $ 49,723,876
Shares redeemed -- -- (1,108,079) (17,988,561)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 1,071,800 $ 18,486,080 2,132,091 $ 31,735,315
===================================================================================================================================
</TABLE>
+ Transactions for Class L shares are for the period from June 15, 1998
(inception date) to June 30, 1998.
++ On June 12, 1998, Class C shares were renamed Class O shares.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1998(1) 1998 1997 1996(2) 1995 1994(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.72 $14.30 $12.16 $9.62 $10.36 $9.58
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.09 0.21 0.19 0.20 0.20 0.20
Net realized and unrealized gain
(loss) 1.21 2.10 2.33 2.74 (0.61) 0.81
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.30 2.31 2.52 2.94 (0.41) 1.01
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.09) (0.19) (0.20) (0.20) (0.19) (0.23)
Net realized gains (0.33) (0.70) (0.18) (0.20) (0.14) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.42) (0.89) (0.38) (0.40) (0.33) (0.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.60 $15.72 $14.30 $12.16 $9.62 $10.36
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.24%++ 16.30% 20.97% 30.97% (3.93)% 10.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $164,448 $151,696 $133,272 $110,089 $95,054 $4,468
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.09%+ 1.09% 1.12% 1.16% 1.41% 1.54%
Net investment income 1.07+ 1.35 1.48 1.77 1.86 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 17% 9% 15% 127% 79%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class B Shares 1998(1) 1998 1997 1996(2) 1995 1994(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.72 $14.33 $12.19 $9.65 $10.38 $9.58
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.13 0.13 0.14 0.17 0.15
Net realized and unrealized gain 1.20 2.10 2.34 2.75 (0.62) 0.80
(loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.27 2.23 2.47 2.89 (0.45) 0.95
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.14) (0.15) (0.15) (0.14) (0.15)
Net realized gains (0.33) (0.70) (0.18) (0.20) (0.14) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.84) (0.33) (0.35) (0.28) (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.59 $15.72 $14.33 $12.19 $9.65 $10.38
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.01%++ 15.65% 20.43% 30.23% (4.33)% 10.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $153,199 $153,651 $137,187 $112,891 $92,153 $68,144
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.59%+ 1.59% 1.62% 1.65% 1.90% 1.99%
Net investment income 0.58+ 0.86 0.98 1.27 1.38 1.55
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 17% 9% 15% 127% 79%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class L Shares 1998(1)
================================================================================
Net Asset Value, Beginning of Period $16.89
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.02
Net realized and unrealized gain 0.06
- --------------------------------------------------------------------------------
Total Income From Operations 0.08
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03)
Net realized gains (0.33)
- --------------------------------------------------------------------------------
Total Distributions (0.36)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $16.61
- --------------------------------------------------------------------------------
Total Return++ 0.51%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $344
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.71%
Net investment income (0.17)
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 15%
================================================================================
(1) For the period from June 15, 1998 (inception date) to June 30, 1998
(unaudited).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class O Shares(1) 1998(2) 1998 1997 1996(3) 1995(4)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.72 $14.33 $12.19 $ 9.65 $ 9.91
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.07 0.13 0.14 0.13 0.07
Net realized and unrealized gain (loss) 1.21 2.10 2.33 2.76 (0.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.28 2.23 2.47 2.89 (0.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.14) (0.15) (0.15) (0.06)
Net realized gains (0.33) (0.70) (0.18) (0.20) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.84) (0.33) (0.35) (0.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.60 $15.72 $14.33 $12.19 $ 9.65
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.07%++ 15.65% 20.43% 30.23% (0.58)%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,887 $5,007 $2,958 $961 $85
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.50%+ 1.57% 1.61% 1.62% 1.83%+
Net investment income 0.55+ 0.86 0.94 1.11 1.44+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 17% 9% 15% 127%
====================================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class O shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(4) For the period from August 15, 1995 (inception date) to July 31, 1995.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class Y Shares 1998(1) 1998 1997 1996(2)(3)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.73 $14.34 $12.16 $12.08
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.12 0.27 0.22 --
Net realized and unrealized gain 1.22 2.10 2.36 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.34 2.37 2.58 0.08
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.10) (0.28) (0.22) --
Net realized gains (0.33) (0.70) (0.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.43) (0.98) (0.40) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $16.64 $15.73 $14.34 $12.16
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return 8.49%++ 16.76% 21.48% N/A*
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $144,006 $119,258 $78,192 $5
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.69%+ 0.69% 0.73% N/A*
Net investment income 1.45+ 1.73 1.73 N/A*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 17% 9% 15%
====================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(3) Inception date is January 31, 1996.
* Information is not meaningful since the class was only open for one day.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On March 25, 1998, a special meeting of shareholders of the Trust was held for
the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies; and
3. Consideration of an amendment to the Fund's investment objective.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted Percentage Shares
Name of Trustees For Shares Voted Against Voted Against
====================================================================================================================================
<S> <C> <C> <C> <C>
Lee Abraham 24,712,213.110 96.158% 987,322.617 3.842%
Allan J. Bloostein 24,715,212.679 96.170 984,323.048 3.830
Richard E. Hanson, Jr. 24,723,973.398 96.204 975,562.329 3.796
Heath B. McLendon 24,739,115.536 96.263 960,420.191 3.737
====================================================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain modifications to the
fundamental investment policies of the Fund in order to modernize them in view
of certain regulatory, business or industry developments that have occurred
since original adoption of these policies by the Fund. The following chart
demonstrates that all Proposals were approved by the shareholders.
================================================================================
Diversification Approved
- --------------------------------------------------------------------------------
Industry Concentration Approved
- --------------------------------------------------------------------------------
Borrowing Approved
- --------------------------------------------------------------------------------
Lending by the Fund Approved
- --------------------------------------------------------------------------------
Real Estate Approved
- --------------------------------------------------------------------------------
Underwriting Approved
================================================================================
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.*
<TABLE>
<CAPTION>
Percentage Shares Percentage Percentage
Shares of Shares Voted of Shares Shares of Shares
Voted For Voted Against Voted Against Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
14,258,424.730 89.650% 546,522.836 3.436% 1,100,664.457 6.920%
====================================================================================================================================
</TABLE>
* Broker non-votes constituted less than one percent of voted shares.
Proposal 3 requested that shareholders approve changing the investment objective
of the Fund from income and long-term capital growth to long-term capital growth
only. The following chart demonstrates that the Proposal was approved by
shareholders.
The results of the vote on Proposal 3 were as follows:*
<TABLE>
<CAPTION>
Percentage Shares Percentage Percentage
Shares of Shares Voted of Shares Shares of Shares
Voted For Voted Against Voted Against Abstaining Abstained
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
14,225,278.215 89.630% 577,209.602 3.629% 1,072,085.772 6.741%
====================================================================================================================================
</TABLE>
* Broker non-votes constituted less than one percent of voted shares.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 23
<PAGE>
[This page intentionally left blank]
[PHOTO OMITTED]
[GRAPHIC OMITTED] Concert Social
Awareness Fund
------------------
SEMI-ANNUAL REPORT
------------------
July 31, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day(SM).
<PAGE>
Concert Social
Awareness Fund
================================================================================
The Concert Social Awareness Fund ("Fund") seeks high total return consisting of
capital appreciation and current income by investing in a combination of equity
and fixed-income securities of issuers who demonstrate a positive awareness of
their impact on society.
Concert Social Awareness Fund
Average Annual Total Returns
July 31, 1998
Without Sales Charge(1)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months+ 13.01% 12.61% 12.58%
- --------------------------------------------------------------------------------
One-Year 17.45 16.59 16.61
- --------------------------------------------------------------------------------
Five-Year 15.11 14.23 14.28
- --------------------------------------------------------------------------------
Ten-Year N/A 13.54 N/A
- --------------------------------------------------------------------------------
Since Inception++ 15.77 12.13 14.22
================================================================================
With Sales Charge(3)
-------------------------------------
Class A Class B Class L(2)
================================================================================
Six Months+ 7.38% 7.61% 10.45%
- --------------------------------------------------------------------------------
One-Year 11.57 11.59 14.46
- --------------------------------------------------------------------------------
Five-Year 13.93 14.12 14.05
- --------------------------------------------------------------------------------
Ten-Year N/A 13.54 N/A
- --------------------------------------------------------------------------------
Since Inception++ 14.75 12.13 14.00
================================================================================
(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 and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) 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 charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed less than one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B and L shares are November 6, 1992, February
2, 1987 and May 5, 1993, respectively.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
The Fund's total return of 13.01% for Class A shares for the six months ended
July 31, 1998, outperformed its Lipper flexible portfolio peer group return of
7.77% for the same period. Moreover, during the reporting period, the Fund
outperformed the category average every month, the up cycles as well as the down
ones. We remained active managers, yet our total asset turnover (well below 15%)
was relatively low.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SSIAX
Class B SESIX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter ........................................................ 1
Historical Performance .................................................... 5
Concert Social Awareness Fund at a Glance ................................. 7
Schedule of Investments ................................................... 8
Statement of Assets and Liabilities ....................................... 12
Statement of Operations ................................................... 13
Statements of Changes in Net Assets ....................................... 14
Notes to Financial Statements ............................................. 15
Financial Highlights ...................................................... 20
Additional Shareholder Information ........................................ 24
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. MCLENDON ELLEN S. CAMMER
Chairman Vice President and Investment Officer
[PHOTO OMITTED]
ROBERT J. BRADY, CFA
Vice President and Investment Officer
Dear Shareholder:
We are pleased to provide the semi-annual report for the Concert Social
Awareness Fund ("Fund") for the period ended July 31, 1998. In this report, we
summarize the period's prevailing economic and market conditions and outline our
portfolio strategy. A detailed summary of performance and current holdings can
be found in the appropriate sections that follow.
A Specialty Series Fund
The Smith Barney Convertible Fund is part of the Specialty Series of Smith
Barney Mutual Funds. The Specialty Series Funds are mutual funds that explore
opportunities in a narrower sector of the market or by using a narrower
investment focus.
Performance Update
We are pleased to report that your Fund posted a total return of 13.01% for
Class A shares for the six months ended July 31, 1998. (The Fund is categorized
by Lipper Analytical Services, Inc. as a flexible portfolio fund, which means it
holds both bonds and stocks. Lipper is an independent fund-tracking
organization.) In comparison, the Standard & Poor's 500 Index* ("S&P 500 Index")
returned 15.20% and the Lehman Brothers Government/Corporate Bond Index**
returned 2.81% for the same period.
Moreover, the Fund outperformed its Lipper flexible portfolio peer group return
of 7.77% for the same period. During the reporting period, the Fund outperformed
the category average every month, through up cycles as well as the down ones. We
remained active managers during this period, yet our total portfolio turnover
(well below 15%) was relatively low.
Stock Market Update and Portfolio Changes
The six months ended July 31, 1998 proved to be a trying period for many stock
investors. Viewed through the lens of the S&P 500 Index or the Dow Jones
Industrial Average, the stock market picture looked pretty good. During this
period, those two highly publicized indices of stock performance rose between
12% and 15% -- not a bad six-month return for investors. However, the broad
spectrum of public companies showed a decidedly different outcome. For instance,
if the same 500 companies employed in the S&P 500 Index were measured on an
equal basis rather than giving preference to the largest companies, investment
return would have been in the mid-single digits, some 5% to 8% lower. The same
analysis holds true for the stocks of middle-sized companies. Moreover, any
investor focused on the small company arena was lucky to break even.
While these market distortions were severe and the conditions that produced such
a tiered result were numerous, we can capture the essence of the situation by
focusing on two elements: slowing demand in Asia and a possible re-emergence of
inflation in the U.S. economy. First, many investors came to believe that
- ----------
* The S&P 500 Index is a capitalization-weighted measure of 500 widely held
common stocks.
** The Lehman Brothers Government/Corporate Bond Index is a combination of
pulicly issued intermediate- and long-term U.S. government bonds.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 1
<PAGE>
corporate profit growth was slowing and would continue to moderate, possibly
resulting in losses. These investors believed the intermittent emergence of the
Asian recession/deflation backlash would stall the U. S. economy and adversely
impact global profits. Until very recently, many investors feared that the
Federal Reserve ("Fed") would have to raise short-term interest rates to contain
domestic inflation by slowing business growth. Higher interest rates would have
the same negative profit consequences as slowing demand. As a result, stock
investors reacted with a flight-to-quality by seeking big, industry-leading
companies with inherently more predictable earnings.
With the business cycle possibly reversing, the goal for many investors was to
avoid companies unduly exposed to the downside of the profit cycle, whether due
to their operating nature, poor industry position or inferior price/cost
controls. Coinciding with this investor response was a second internal market
dynamic that further exacerbated the stock price disparity between large and
small companies. Asset managers, both professionals and individuals, were faced
with a challenge to systematically invest huge money flows (regularly in the
$2-$3 billion per week range) earmarked for long-term savings. More often than
not, big, industry-leading companies possessed sufficient stock market liquidity
to accommodate those investment needs. Thus, supply and demand factors
simultaneously favored large companies, and when that occurs, their prices rise.
When we analyze our stock performance during this period several points stand
out:
o We outperformed the best of the indices;
o We maintained a highly diversified portfolio with no one stock accounting
for more than 3% of the Fund's assets;
o We remained active managers during the period, but the total amount of
portfolio turnover was low;
o Our excess performance came from both our sector emphasis and our stock
selection within their sectors.
During the reporting period, 39 separate stock transactions were completed. We
added 8 new stocks, added to 21 existing holdings, reduced exposure to 6 stocks
and eliminated 4 stocks all together. We increased our investment in stocks by
$14.2 million. Our new positions included investments in a diverse group of
industries including trucking, restaurants, real estate investment trusts
("REITs"), energy, agriculture, low technology, health care and education. Our
additions to established positions included many of the same areas, as well as
water, appliances and insurance.
At period end, we held 72 stock issues, with an emphasis on consumer cyclical,
financial services, technology and health care industries. There has not been
any significant change in our industry emphasis or our top holdings other than
minor adjustments due to relative price performance. At the end of July, six of
our top ten holdings were also in the top list on January 31, 1998. Two of the
four dropouts were the result of active profit taking on our part, but the other
two simply reflected relative market performance. (For a complete description of
all of the Fund holdings, please turn to page 8.)
Moreover, all of our holdings continued to satisfy our socially aware investing
criteria. In our opinion, one does not have to sacrifice performance for a
socially aware portfolio. In fact, the Fund's performance tends to support our
contention that factors believed by many to be social considerations are
actually important business issues. When these social considerations are dealt
with properly by organizations, we believe they can have a positive influence on
future investment performance.
Bond Market Update and Portfolio Changes
The Asian financial crisis is now one year old and the fixed income and currency
markets have maintained events in Asia as their central theme. While the
benchmark 30-year U.S. Treasury bond had remained stubbornly confined to a
narrow trading range for a good part of the year so far, interest rates moved
sharply lower in the middle of June. Long-term U.S.
- --------------------------------------------------------------------------------
2 1998 Semi-Annual Report to Shareholders
<PAGE>
Treasury bonds ended the second quarter yielding 5.71%, which provided a stellar
total return performance of 4.12% for the six months ended July 31, 1998.
Shorter-term maturity bonds did not participate in the rally to the same degree.
Long-term interest rates declined more than short-term rates mostly due to
falling oil prices, the continuing strength of the U.S. dollar versus the yen
and expectations of slower domestic economic growth. Shorter maturities were
anchored by a 5.50% federal-funds rate as the Fed maintained a steady policy,
although with a bias toward raising rates. (The federal-funds rate is the
interest rate banks charge each other for overnight loans and a closely watched
indicator of the direction of interest rates.)
In our view, the Fed has artfully walked a fine line between two opposing
forces: global deflation and domestic inflationary concerns. We continue to
believe Fed policy will remain on hold for some time as its officials become
more confident that Asian weakness will cool the rapid pace of growth seen in
the first quarter. We believe that as long as price inflation remains subdued
and commodity prices hover near their lows, the Fed should be willing to leave
short-term interest rates unchanged. We view the situation in Asia as so
unstable that the Fed will not risk any action that has the potential to
exacerbate current problems.
The bond portion of the Fund has participated nicely in the returns posted for
the bond market for the six months ended July 31, 1998. The Lehman Brothers
Government/Corporate Bond Index posted a 2.81% return for the six month period
ended July 31, 1998 while our bond component is estimated to have outperformed
the index by 90 plus basis points. (A basis point is one-hundreth of a percent.)
With the decline in long-term interest rates in the second quarter, Treasury
securities have been the best performing asset class of the bond market. The
investment grade corporate bond market has experienced a high level of new
issuance as many corporate treasurers took advantage of the historically low
levels of interest rates. So far this year, high-grade corporate bond issuance
is at $156 billion, already surpassing the total 1997 issuance of $150 billion.
While corporate bonds slightly lagged the U.S. Treasury market, we have
selectively added several names such as Fred Meyers and Computer Associates
during the reporting period, all of which have performed quite well.
The laggard for the year is the mortgage market, which continues to suffer from
prepayment fears. The decline in ten-year U.S. Treasury rates (which is the key
rate determining mortgages) has pushed the mortgage REFI index sharply higher.
It is important to note that while mortgage-backed securities have lagged their
U.S. Treasury brethren, the "plain vanilla" mortgage passthrough market in which
the Fund invests has been the best performer among mortgage bonds.
Outlook
We view the prospects for the second half of the year as uncertain. Our stock
investment discipline, which focuses on large- to mid-capitalization companies,
has served us well in the market conditions we have described. Our analysis
indicates that the second tier of the market (i.e., those below the very largest
companies) are increasingly offering relative value. Accordingly, we have begun
to emphasize middle-sized companies a bit more in our recent stock purchases.
However, the better performance from those companies may still be several months
away.
Currently, bond yields remain intricately linked to the U.S. dollar to yen
exchange rate as the world waits to see if Japan can get its house in order.
Stability in Asia and its recovery remains very reliant on Japan's own economic
recovery. We will continue to monitor events closely both on the Asia front as
well as domestically as we maintain the portfolio in its current posture.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 3
<PAGE>
We thank you for your continued support of our efforts on your behalf, and look
forward to another exciting and challenging year.
Sincerely,
/s/ Heath B. McLendon /s/ Robert J. Brady
Heath B. McLendon Robert J. Brady, CFA
Chairman Vice President and
Investment Officer
/s/ Ellen S. Cammer
Ellen S. Cammer
Vice President and
Investment Officer
August 13, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings* As of July 31, 1998
- --------------------------------------------------------------------------------
1. Schering-Plough Corp. 3.0%
- --------------------------------------------------------------------------------
2. Chase Manhattan Corp. 3.0
- --------------------------------------------------------------------------------
3. Cisco Systems, Inc. 3.0
- --------------------------------------------------------------------------------
4. Lowe's Cos., Inc. 2.7
- --------------------------------------------------------------------------------
5. Xerox Corp. 2.7
- --------------------------------------------------------------------------------
6. EMC Corp. 2.7
- --------------------------------------------------------------------------------
7. International Business Machines Corp. 2.3
- --------------------------------------------------------------------------------
8. Unilever NV 2.2
- --------------------------------------------------------------------------------
9. Home Depot, Inc. 2.1
- --------------------------------------------------------------------------------
10. Compaq Computer Corp. 2.1
- --------------------------------------------------------------------------------
* As a percentage of total common stock
- --------------------------------------------------------------------------------
4 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===========================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $20.57 $22.89 $0.18 $0.18 13.01%+
- -------------------------------------------------------------------------------------------
1/31/98 19.36 20.57 0.55 1.99 19.89
- -------------------------------------------------------------------------------------------
1/31/97 19.00 19.36 0.60 1.32 12.41
- -------------------------------------------------------------------------------------------
1/31/96 15.91 19.00 0.52 0.52 26.47
- -------------------------------------------------------------------------------------------
1/31/95 17.72 15.91 0.47 0.66 (3.82)
- -------------------------------------------------------------------------------------------
1/31/94 16.85 17.72 0.56 1.46 17.80
- -------------------------------------------------------------------------------------------
Inception* -- 1/31/93 16.80 16.85 0.11 0.85 6.12+
===========================================================================================
Total $2.99 $6.98
===========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===========================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $20.63 $22.96 $0.09 $0.18 12.61%+
- -------------------------------------------------------------------------------------------
1/31/98 19.42 20.63 0.40 1.99 18.95
- -------------------------------------------------------------------------------------------
1/31/97 19.05 19.42 0.45 1.32 11.60
- -------------------------------------------------------------------------------------------
1/31/96 15.97 19.05 0.42 0.52 25.58
- -------------------------------------------------------------------------------------------
1/31/95 17.79 15.97 0.35 0.66 (4.54)
- -------------------------------------------------------------------------------------------
1/31/94 16.84 17.79 0.34 1.46 16.88
- -------------------------------------------------------------------------------------------
1/31/93 17.26 16.84 0.50 1.49 9.68
- -------------------------------------------------------------------------------------------
1/31/92 15.61 17.26 0.55 0.88 19.96
- -------------------------------------------------------------------------------------------
1/31/91 15.57 15.61 0.51 0.46 6.80
- -------------------------------------------------------------------------------------------
1/31/90 15.03 15.57 0.71 0.38 10.76
- -------------------------------------------------------------------------------------------
1/31/89 13.62 15.03 0.48 0.11 15.10
===========================================================================================
Total $4.80 $9.45
===========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===========================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $20.68 $23.01 $0.09 $0.18 12.58%+
- -------------------------------------------------------------------------------------------
1/31/98 19.46 20.68 0.40 1.99 18.97
- -------------------------------------------------------------------------------------------
1/31/97 19.08 19.46 0.45 1.32 11.65
- -------------------------------------------------------------------------------------------
1/31/96 15.97 19.08 0.42 0.52 25.77
- -------------------------------------------------------------------------------------------
1/31/95 17.79 15.97 0.35 0.66 (4.54)
- -------------------------------------------------------------------------------------------
Inception* -- 1/31/94 17.54 17.79 0.28 1.46 11.83+
===========================================================================================
Total $1.99 $6.13
===========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns(1)
===========================================================================================
<S> <C> <C> <C> <C> <C>
7/31/98 $20.62 $22.96 $0.20 $0.18 13.22%+
- -------------------------------------------------------------------------------------------
1/31/98 19.39 20.62 0.61 1.99 20.31
- -------------------------------------------------------------------------------------------
Inception* -- 1/31/97 19.00 19.39 0.49 1.32 11.94+
===========================================================================================
Total $1.30 $3.49
===========================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charge(1)
----------------------------------------------
Class A Class B Class L Class Y
=======================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 13.01% 12.61% 12.58% 13.22%
- ---------------------------------------------------------------------------------------
Year Ended 7/31/98 17.45 16.59 16.61 17.88
- ---------------------------------------------------------------------------------------
Five Years Ended 7/31/98 15.11 14.23 14.28 N/A
- ---------------------------------------------------------------------------------------
Ten Years Ended 7/31/98 N/A 13.54 N/A N/A
- ---------------------------------------------------------------------------------------
Inception* through 7/31/98 15.77 12.13 14.22 19.73
=======================================================================================
</TABLE>
<TABLE>
<CAPTION>
With Sales Charge(1)
----------------------------------------------
Class A Class B Class L Class Y
=======================================================================================
<S> <C> <C> <C> <C>
Six Months Ended 7/31/98+ 7.38% 7.61% 10.45% 13.22%
- ---------------------------------------------------------------------------------------
Year Ended 7/31/98 11.57 11.59 14.46 17.88
- ---------------------------------------------------------------------------------------
Five Years Ended 7/31/98 13.93 14.12 14.05 N/A
- ---------------------------------------------------------------------------------------
Ten Years Ended 7/31/98 N/A 13.54 N/A N/A
- ---------------------------------------------------------------------------------------
Inception* through 7/31/98 14.75 12.13 14.00 19.73
=======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 7/31/98) 131.60%
- --------------------------------------------------------------------------------
Class B (7/31/88 through 7/31/98) 255.88
- --------------------------------------------------------------------------------
Class L (Inception* through 7/31/98) 100.75
- --------------------------------------------------------------------------------
Class Y (Inception* through 7/31/98) 52.47
================================================================================
(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 and L 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 charge of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed less than one year from purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, B, L and Y shares are November 6, 1992,
February 2, 1987, May 5, 1993 and March 28, 1996, respectively.
- --------------------------------------------------------------------------------
6 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Concert Social Awareness Fund at a Glance (unaudited)
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Class B Shares of the Concert Social Awareness
Fund vs. the Lehman Government/Corporate Bond Index, Lehman Government/Corporate
Long-Term Bond Index and Standard & Poor's 500 Index+
- --------------------------------------------------------------------------------
July 1988 -- July 1998
[The following table was depicted as a line chart in the printed material.]
Leh gov Leh c.b.
soc corp bond long-term S&P
7/88 10000 10000 10000 10000
1/89 10418 10482 10774 11143
1/90 11693 11654 12057 12755
1/91 12615 12940 13400 13826
1/92 15292 14638 15371 16964
1/93 16891 16333 17613 18759
1/94 19859 18015 20402 21176
1/95 18956 17455 18981 21287
1/96 23805 20549 24049 29515
1/97 26567 21039 23944 37285
1/98 31602 23390 28035 47315
7/98 35588 24047 30113 54507
+ Hypothetical illustration of $10,000 invested in Class B shares on July
31, 1988, assuming reinvestment of dividends and capital gains, if any, at
net asset value through July 31, 1998. The Lehman Government/Corporate
Bond Index is a combination of the Government and Corporate Bond indexes,
including U.S. Treasury and agency securities and yankee bonds. The Lehman
Government/Corporate Long-Term Bond Index is a combination of Government
and Corporate bonds with maturities of 10 years or more. The Standard &
Poor's 500 Index is composed of widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange and over-the-counter
market. Figures for the index include reinvestment of dividends. The
indexes are unmanaged and are 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 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*
- --------------------------------------------------------------------------------
[The following table was depicted as a bar graph in the printed material.]
Basic Materials 6.3%
Communication Services 3.2%
Consumer Cyclicals 22.0%
Consumer Staples 8.4%
Financial Services 22.4%
Health Care 9.8%
Technology 18.5%
Transportation 4.1%
Utilities 5.3%
* As a percentage of total common stock.
Investment Breakdown**
- --------------------------------------------------------------------------------
[The following table was depicted as a pie chart in the printed material.]
Mortgage-Backed Securities 4.7%
Corporate Bonds and Notes 9.0%
Asset-Backed Securities 1.5%
Common Stock 74.0%
U.S. Government Obligations 10.8%
** As a percentage of total investments.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=========================================================================================
<S> <C> <C>
COMMON STOCK -- 74.0%
Basic Materials -- 3.0%
50,000 Aluminum Co. of America* $ 3,465,625
200,000 Engelhard Corp. 4,175,000
115,000 Praxair, Inc. 5,663,750
- -----------------------------------------------------------------------------------------
13,304,375
- -----------------------------------------------------------------------------------------
Capital Goods -- 2.4%
100,000 Anixter International, Inc. 1,818,750
70,000 Deere & Company* 2,813,125
60,000 Pitney Bowes, Inc. 3,030,000
88,000 U.S. Filter Corp. 2,376,000
- -----------------------------------------------------------------------------------------
10,037,875
- -----------------------------------------------------------------------------------------
Communication Services -- 2.3%
93,200 MCI Communications Corp. 6,034,700
75,000 WorldCom Inc.* 3,965,625
- -----------------------------------------------------------------------------------------
10,000,325
- -----------------------------------------------------------------------------------------
Consumer Cyclicals -- 13.1%
50,000 Black & Decker Corp. 2,843,750
48,500 Caliber Learning Network, Inc. 485,000
127,000 Dollar General Corp.* 5,207,000
160,000 Home Depot, Inc. 6,700,000
143,400 Kaufman & Broad Home Corp.* 4,006,237
84,700 Liz Clairborne, Inc.* 3,271,537
220,000 Lowe's Cos., Inc. 8,470,000
90,500 May Department Stores Co. 5,808,969
14,352 Payless ShoeSource, Inc.+ 810,888
51,800 Phillips Electronics N.V. 4,231,412
130,000 Staples Inc. * 4,273,750
82,500 Sylvan Learning Systems, Inc. 2,340,937
55,100 Toys 'R' Us, Inc.+ 1,253,525
92,000 Wal-Mart Corp. 5,807,500
- -----------------------------------------------------------------------------------------
55,510,505
- -----------------------------------------------------------------------------------------
Consumer Staples -- 8.5%
194,000 American Stores Co.* 4,498,375
150,000 Brinker International, Inc. 2,925,000
97,400 Kroger Co.+ 4,608,238
65,000 Newell Co. 3,347,500
100,000 Rite Aid Corp. 3,950,000
248,000 Sysco Corp. 5,890,000
100,000 Unilever NV 6,950,000
171,000 Wendy's International, Inc.* 3,815,437
- -----------------------------------------------------------------------------------------
35,984,550
- -----------------------------------------------------------------------------------------
Energy -- 0.9%
45,000 British Petroleum Company* 3,611,250
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=========================================================================================
<S> <C> <C>
Financial Services -- 16.6%
135,000 Ace Ltd. $ 4,952,813
141,094 Allstate Corp. 5,987,678
50,000 American Express Co. 5,518,750
60,000 Associates First Capital Corp. 4,661,250
70,000 Bank of Boston Corp. 3,386,250
50,622 BankAmerica Corp. 4,543,325
124,176 Chase Manhattan Corp. 9,390,810
105,200 Federal Home Loan Mortgage Corp. 4,970,700
64,800 H.F. Ahmanson & Co. 4,280,850
50,000 Hartford Financial Services, Inc. 2,603,125
100,000 Indymac Mortgage Holdings, Inc. 2,106,250
30,900 J.P. Morgan & Co. 3,893,400
42,200 Lincoln National Corp.* 4,040,650
70,000 Provident Cos., Inc. 2,581,250
100,800 St. Paul Cos., Inc. 3,647,700
32,000 Transamerica Corp. 3,780,000
- -----------------------------------------------------------------------------------------
70,344,801
- -----------------------------------------------------------------------------------------
Health Care -- 7.5%
75,000 Amgen, Inc. 5,507,813
150,000 DENTSPLY International Inc. 3,825,000
55,000 Johnson & Johnson 4,248,750
75,000 Mylan Laboratories Inc.* 2,039,062
98,000 Schering-Plough Corp. 9,481,500
27,500 Stryker Corp.* 1,194,531
190,500 Tenet Healthcare Corp. 5,703,094
- -----------------------------------------------------------------------------------------
31,999,750
- -----------------------------------------------------------------------------------------
Technology -- 13.3%
60,000 Automatic Data Processing, Inc.* 4,061,250
97,500 Cisco Systems, Inc. 9,335,625
200,000 Compaq Computer Corp. 6,575,000
52,500 Computer Associates International, Inc. 1,742,344
170,000 EMC Corp.+* 8,330,000
20,000 Intel Corp. 1,688,750
54,800 International Business Machine Corp. 7,261,000
70,926 Lucent Technologies, Inc. 6,556,222
45,000 Motorola, Inc. 2,351,250
80,000 Xerox Corp. 8,445,000
- -----------------------------------------------------------------------------------------
56,346,441
- -----------------------------------------------------------------------------------------
Transportation -- 3.1%
112,500 Mesaba Holdings, Inc.+ 2,643,750
60,000 Norfolk Southern Corp. 1,792,500
112,500 Southwest Airlines Co.* 3,705,469
195,000 USFreightways Corp. 4,875,000
- -----------------------------------------------------------------------------------------
13,016,719
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
=========================================================================================
<S> <C> <C>
Utilities -- 3.3%
121,100 Enron Corp. $ 6,410,731
25,000 Western Atlas Inc. 1,635,938
190,000 Williams Cos., Inc. 6,091,875
- -----------------------------------------------------------------------------------------
14,138,544
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $184,794,290) 314,295,135
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================
FACE
AMOUNT SECURITY VALUE
==========================================================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 10.8%
9,400,000 U.S. Treasury Notes, 6.375% due 1/15/99 9,445,778
2,000,000 U.S. Treasury Notes, 5.625% due 10/31/99 2,002,980
750,000 U.S. Treasury Notes, 7.125% due 2/29/00 768,293
4,400,000 U.S. Treasury Notes, 6.250% due 8/31/00 4,465,428
2,000,000 U.S. Treasury Notes, 6.250% due 10/31/01 2,041,420
3,000,000 U.S. Treasury Notes, 5.875% due 11/30/01 3,029,850
2,978,000 U.S. Treasury Notes, 6.375% due 8/15/02 3,064,511
3,000,000 U.S. Treasury Notes, 6.500% due 10/15/06 3,175,260
1,000,000 U.S. Treasury Bonds, 7.125% due 2/15/23 1,169,310
16,300,000 U.S. Treasury Bonds, 6.000% due 2/15/26 16,767,810
- ------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $43,571,272) 45,930,640
==========================================================================================
CORPORATE BONDS AND NOTES -- 9.0%
Financial Services -- 4.4%
2,000,000 American Express Co., Sr. Notes, 6.750% due 6/23/04 2,060,000
2,500,000 Associates Corp. North American, Notes, 7.250% due 9/1/99 2,531,525
2,000,000 Bankers Trust Capital Trust B, Private Placement Notes,
7.750% due 12/1/26 2,040,000
2,000,000 Chase Manhattan Corp., Sr. Notes, 5.875% due 8/4/99 2,000,000
2,000,000 Countrywide Home Loan, Medium Term Notes, 6.380% due 10/8/02 2,010,000
1,000,000 First USA Bank, Notes, 6.375% due 10/23/00 1,008,750
1,000,000 Merrill Lynch & Co., Inc., Notes, 6.000% due 1/15/01 1,001,250
2,000,000 Pitney Bowes Credit Corp., Notes, 5.650% due 1/15/03 1,970,000
2,000,000 Swiss Bank Corp., 7.375% due 6/15/17 2,190,000
2,000,000 Xerox Capital Trust, 8.000% due 2/1/27 2,160,000
- ------------------------------------------------------------------------------------------
18,971,525
- ------------------------------------------------------------------------------------------
Industrial -- 3.5 %
2,000,000 Computer Associates International, 6.375% due 4/15/05 2,007,840
2,000,000 Fred Meyer, Inc., 7.375% due 3/1/05 2,021,000
2,000,000 Kroger Co., Sr. Notes, 7.650% due 4/15/07 2,155,000
1,500,000 Lucent Technologies, Inc., Notes, 7.250% due 7/15/06 1,601,250
1,000,000 Nippon Telegraph & Telephone, 9.375% due 11/28/98 1,009,470
329,488 Southwest Airlines Co., Series 1994-A3, 8.700% due 7/1/11 375,211
1,450,000 Staples Inc., Sr. Notes, 7.125% due 8/15/07 1,500,750
2,000,000 Tenet Healthcare Corp., Sr. Notes, 8.625% due 12/1/03 2,105,000
2,000,000 Time Warner Inc., 6.950% due 1/15/28 1,992,500
- ------------------------------------------------------------------------------------------
14,768,021
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (unaudited) (continued) July 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
==========================================================================================
<S> <C> <C> <C>
Utilities -- 1.1%
$2,000,000 HNG Internorth, Inc., Notes, 9.625% due 3/15/06 $ 2,392,500
2,000,000 Norfolk Southern Corp., Debentures, 7.800% due 5/15/27 2,285,000
- ------------------------------------------------------------------------------------------
4,677,500
- ------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $37,350,994) 38,417,046
==========================================================================================
ASSET-BACKED SECURITIES -- 1.5%
389,768 Equity Credit Corp., Home Equity Loan Trust, Series 1993-3,
5.150% due 9/15/08 380,975
875,000 Sears Credit Account Master Trust, Series 95-A, 6.250% due
1/15/03 876,462
2,000,000 Sears Credit Account Master Trust, Series 95-2A, 8.100% due
6/15/04 2,064,080
3,000,000 Standard Credit Card, Series 95-10A, 5.900% due 2/7/01 3,002,940
- ------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $6,258,719) 6,324,457
==========================================================================================
MORTGAGE-BACKED SECURITIES -- 4.7%
1,000,000 Federal Home Loan Bank, 5.500% due 7/14/00 996,680
7,970 Federal Home Loan Mortgage Corporation, 6.250% due 7/1/02 8,024
23,645 Federal Home Loan Mortgage Corporation, 8.500% due 12/1/02 24,930
4,689,147 Federal Home Loan Mortgage Corporation, 7.000% due 1/1/13 4,781,429
4,950,003 Federal Home Loan Mortgage Corporation, 6.000% due 6/1/13 4,894,316
9,827 Federal National Mortgage Association, 5.500% due 3/1/99 9,526
2,459,481 Federal National Mortgage Association, 7.500% due 10/1/09 2,530,191
1,537,206 Federal National Mortgage Association, 6.000% due 2/1/11 1,519,912
104,040 Federal National Mortgage Association, 8.000% due 7/1/24 107,875
4,962,740 Federal National Mortgage Association, 6.500% due 11/1/27 4,941,003
- ------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost -- $19,623,682) 19,813,886
==========================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $291,598,957**) $424,781,164
==========================================================================================
</TABLE>
+ Non-income producing security.
* A portion of the security is on loan (Note 7).
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) July 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $291,598,957) $ 424,781,164
Collateral for securities on loan (Note 7) 43,535,802
Interest and dividends receivable 1,898,885
Receivable for Fund shares sold 273,653
- --------------------------------------------------------------------------------
Total Assets 470,489,504
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 43,535,802
Dividends payable 3,295,004
Investment advisory fees payable 203,422
Payable to bank 159,045
Administration fees payable 73,972
Payable for Fund shares purchased 44,781
Distribution fees payable 36,042
Accrued expenses 42,742
- --------------------------------------------------------------------------------
Total Liabilities 47,390,810
- --------------------------------------------------------------------------------
Total Net Assets $ 423,098,694
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 18,459
Capital paid in excess of par value 282,027,147
Overdistributed net investment income (254,658)
Accumulated net realized gain from security
transactions 8,125,539
Net unrealized appreciation of investments 133,182,207
- --------------------------------------------------------------------------------
Total Net Assets $ 423,098,694
================================================================================
Shares Outstanding:
Class A 10,595,261
----------------------------------------------------------------------------
Class B 7,456,909
----------------------------------------------------------------------------
Class L 400,727
----------------------------------------------------------------------------
Class Y 6,098
----------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $22.89
----------------------------------------------------------------------------
Class B * $22.96
----------------------------------------------------------------------------
Class L ** $23.01
----------------------------------------------------------------------------
Class Y (and redemption price) $22.96
----------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value
per share) $24.09
----------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value
per share) $23.24
================================================================================
* 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 shares reduced by a 1.00% CDSC if
shares are redeemed within the first year of purchase. See Notes to
Financial Statements.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations (unaudited) For the Six Months Ended July 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 3,873,141
Dividends 1,601,270
- --------------------------------------------------------------------------------
Total Investment Income 5,474,411
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 1,201,240
Investment advisory fees (Note 2) 1,147,902
Administrative fees (Note 2) 417,419
Shareholder and system servicing fees 239,227
Shareholder communications 57,512
Registration fees 50,303
Audit and legal 24,080
Trustees' fees 10,550
Custody 9,178
Other 5,140
- --------------------------------------------------------------------------------
Total Expenses 3,162,551
- --------------------------------------------------------------------------------
Net Investment Income 2,311,860
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 51,838,966
Cost of securities sold 43,693,475
- --------------------------------------------------------------------------------
Net Realized Gain 8,145,491
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 94,867,519
End of period 133,182,207
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 38,314,688
- --------------------------------------------------------------------------------
Net Gain on Investments 46,460,179
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 48,772,039
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Six Months Ended July 31, 1998 (unaudited)
and the Year Ended January 31, 1998
<TABLE>
<CAPTION>
July 31 January 31
=====================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,311,860 $ 7,359,457
Net realized gain 8,145,491 27,912,262
Increase in net unrealized appreciation 38,314,688 30,386,758
- -----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 48,772,039 65,658,477
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (2,588,418) (8,605,756)
Net realized gains (3,295,004) (34,146,580)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,883,422) (42,752,336)
- -----------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 57,610,846 59,780,975
Net asset value of shares issued for
reinvestment of dividends 2,445,648 40,529,174
Cost of shares reacquired (61,380,877) (126,493,481)
- -----------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (1,324,383) (26,183,332)
- -----------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 41,564,234 (3,277,191)
NET ASSETS:
Beginning of period 381,534,460 384,811,651
- -----------------------------------------------------------------------------------------------------
End of period* $ 423,098,694 $ 381,534,460
=====================================================================================================
* Includes undistributed (overdistributed) net investment income of: $ (254,658) $ 21,900
=====================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Concert Social Awareness Fund ("Fund"), a separate investment fund of Smith
Barney Equity 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 one other
separate investment fund, the Smith Barney Large Cap Blend Fund (formerly known
as Smith Barney Growth and Income Fund). The financial statements and financial
highlights for the other fund are presented in a separate semi-annual report.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded in
national securities markets are valued at the closing prices in the primary
exchange on which they are traded or, if there were no sales during the day, at
current quoted bid price; securities primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, except that when a significant occurrence subsequent to
the time a value was so established is likely to have significantly changed the
value, then the fair value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees or its delegates; over-the-counter securities and U.S. government
agency and obligations are valued at the mean between the bid and asked prices;
(c) securities maturing within 60 days are valued at cost plus accreted
discount, or minus amortized premium, which approximates value; (d) dividend
income is recorded on the ex-dividend date; foreign dividends are 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;
(e) interest income is recorded on an accrual basis including the amortization
of premium and the accretion of discount, where applicable; (f) gains and losses
on the sale of securities are calculated by using the specific identification
method; (g) dividends and distributions to shareholders are recorded on the
ex-dividend date; (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 or 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; (j)
the Fund intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (k) the character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles. At
January 31,1998, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distribution under income tax regulations. Net investment income, net realized
gains and net assets were not affected by this change; 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.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Smith Barney Strategy Advisors Inc. ("SBSA"), a subsidiary of Mutual Management
Corp. ("MMC"), which, in turn, is a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays SBSA an
investment advisory fee calculated at an annual rate of 0.55% of the average
daily net assets. This fee is calculated daily and paid monthly.
MMC also acts as the Trust'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.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor of
Trust shares and primary broker for its portfolio agency transactions. For the
six months ended July 31, 1998, SB did not receive any brokerage commissions.
On June 12, 1998, the Fund's existing Class C shares were renamed as Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
There is also a 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.
For the six months ended July 31, 1998, SB received sales charges of $126,000
and $12,000 on sales of the Fund's Class A and Class L shares, respectively. In
addition, CDSCs paid to SB were:
Class B Class L
================================================================================
CDSC $ 56,000 $ 1,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and L shares calculated at an annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B and L shares calculated at an annual rate of 0.75% of
the average daily net assets for each class, respectively. For the six months
ended July 31, 1998, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $295,031 $866,450 $ 39,759
================================================================================
All officers and one Trustee of the Trust are employees of SB.
3. Investments
During the six months ended July 31, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $ 61,120,678
- --------------------------------------------------------------------------------
Sales 51,838,966
================================================================================
At July 31, 1998, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 138,914,835
Gross unrealized depreciation (5,732,628)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 133,182,207
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value of the collateral in amounts at least equal to
the repurchase price.
- --------------------------------------------------------------------------------
16 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
5. 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 made or received and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio. The
Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At July 31, 1998, the Fund had no open futures contracts.
6. 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 sales 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 July 31, 1998, the Fund had no open purchased call or put options.
When a Fund writes a covered 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 cost of the security sold will be
decreased by the premium originally received. When a written put option is
exercised, the amount of the premium originally received will reduce the cost of
the security which the Fund purchased upon exercise. When a written index option
is 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 a
loss if the market price of the underlying security declines.
During the six months ended July 31, 1998, the Fund did not write any call or
put options.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
7. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations, and receives a lenders fee. Fees earned by the Fund on securities
lending are recorded in interest income. Loans of securities by the Fund are
collateralized by cash, U.S. Government securities or high quality money market
instruments that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in a segregated account. The Fund maintains exposure
for the risk of any losses in the investment of amounts received as collateral.
At July 31, 1998, the Fund had loaned common stocks having a value of
$41,637,780 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Commercial Paper:
Morgan Stanley, 5.535% due 8/12/98 $ 2,586,543
Time Deposits:
Bank of Montreal, 5.563% due 8/3/98 192,658
Deutsche Bank, 5.688% due 8/3/98 8,578,733
Svenska Handelsbanken, 5.688% due 8/3/98 8,578,733
Repurchase Agreements:
Goldman Sachs, 5.700% due 8/3/98 9,709,758
Merrill Lynch, 5.670% due 8/3/98 8,578,733
Morgan Stanley, 5.670% due 8/3/98 5,310,644
- --------------------------------------------------------------------------------
Total $ 43,535,802
================================================================================
8. Shares of Beneficial Interest
At July 31, 1998, 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, including those specifically related to the distribution of its
shares. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class L shares.
At July 31, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class Y
========================================================================================
<S> <C> <C> <C> <C>
Total Paid-in Capital $179,945,746 $94,186,763 $7,802,407 $110,690
========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
18 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (unaudited)(continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
July 31, 1998 January 31, 1998
------------------------- -------------------------
Shares Amount Shares Amount
============================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 1,705,935 $ 38,515,634 1,563,683 $ 31,928,326
Shares issued on reinvestment 77,637 1,771,252 1,069,265 21,700,037
Shares redeemed (1,010,542) (22,987,241) (2,007,566) (40,819,586)
- --------------------------------------------------------------------------------------------
Net Increase 773,030 $ 17,299,645 625,382 $ 12,808,777
============================================================================================
Class B
Shares sold 691,234 $ 15,734,054 1,152,327 $ 23,614,622
Shares issued on reinvestment 28,100 643,435 891,901 18,139,669
Shares redeemed (1,605,518) (36,143,176) (4,134,755) (83,754,507)
- --------------------------------------------------------------------------------------------
Net Decrease (886,184) $(19,765,687) (2,090,527) $(42,000,216)
============================================================================================
Class L*
Shares sold 147,038 $ 3,361,158 203,584 $ 4,187,186
Shares issued on reinvestment 1,348 30,961 32,848 670,182
Shares redeemed (94,554) (2,150,460) (95,115) (1,919,388)
- --------------------------------------------------------------------------------------------
Net Increase 53,832 $ 1,241,659 141,317 $ 2,937,980
============================================================================================
Class Y
Shares sold -- $ -- 2,360 $ 50,841
Shares issued on reinvestment -- -- 948 19,286
Shares redeemed (4,590) (100,000) -- --
- --------------------------------------------------------------------------------------------
Net Increase (Decrease) (4,590) $ (100,000) 3,308 $ 70,127
============================================================================================
</TABLE>
* On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class A Shares 1998(1) 1998 1997 1996 1995 1994(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.57 $ 19.36 $ 19.00 $ 15.91 $ 17.72 $ 16.85
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.16 0.48 0.57 0.61 0.57 0.52
Net realized and unrealized gain (loss) 2.52 3.27 1.71 3.52 (1.25) 2.37
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.68 3.75 2.28 4.13 (0.68) 2.89
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.18) (0.55) (0.60) (0.52) (0.47) (0.56)
Net realized gains (0.18) (1.99) (1.32) (0.52) (0.66) (1.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (2.54) (1.92) (1.04) (1.13) (2.02)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.89 $ 20.57 $ 19.36 $ 19.00 $ 15.91 $ 17.72
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 13.01%++ 19.89% 12.41% 26.47% (3.82)% 17.80%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 242,543 $ 202,026 $ 178,072 $ 175,007 $ 159,247 $ 6,216
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.20%+ 1.19% 1.28% 1.21% 1.33% 1.25%
Net investment income 1.44+ 2.34 2.98 3.10 2.89 2.85
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 13% 62% 68% 81% 103% 131%
===================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class B Shares 1998(1) 1998 1997 1996 1995 1994(2)
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.63 $ 19.42 $ 19.05 $ 15.97 $ 17.79 $ 16.84
- -----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.08 0.33 0.43 0.49 0.39 0.38
Net realized and unrealized gain (loss) 2.52 3.27 1.71 3.53 (1.20) 2.37
- -----------------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.60 3.60 2.14 4.02 (0.81) 2.75
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.09) (0.40) (0.45) (0.42) (0.35) (0.34)
Net realized gains (0.18) (1.99) (1.32) (0.52) (0.66) (1.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (2.39) (1.77) (0.94) (1.01) (1.80)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.96 $ 20.63 $ 19.42 $ 19.05 $ 15.97 $ 17.79
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return 12.61%++ 18.95% 11.60% 25.58% (4.54)% 16.88%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 171,194 $ 172,115 $ 202,597 $ 226,360 $ 216,035 $ 334,408
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.96%+ 1.95% 2.03% 1.94% 2.00% 1.98%
Net investment income 0.69+ 1.62 2.23 2.37 2.21 2.11
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 13% 62% 68% 81% 103% 131%
===================================================================================================================================
</TABLE>
(1) For the six months ended July 31, 1998 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
Class L Shares(1) 1998(2) 1998 1997 1996 1995(3) 1994(4)(5)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 20.68 $ 19.46 $ 19.08 $ 15.97 $ 17.79 $ 17.54
- -----------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.08 0.34 0.44 0.45 0.38 0.32
Net realized and unrealized gain (loss) 2.52 3.27 1.71 3.60 (1.19) 1.67
- -----------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.60 3.61 2.15 4.05 (0.81) 1.99
- -----------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.09) (0.40) (0.45) (0.42) (0.35) (0.28)
Net realized gains (0.18) (1.99) (1.32) (0.52) (0.66) (1.46)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.27) (2.39) (1.77) (0.94) (1.01) (1.74)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 23.01 $ 20.68 $ 19.46 $ 19.08 $ 15.97 $ 17.79
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 12.58%++ 18.97% 11.65% 25.77% (4.54)% 11.83%++
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 9,222 $ 7,173 $ 4,000 $ 3,396 $ 1,972 $ 399
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.95%+ 1.93% 2.01% 1.94% 1.98% 1.93%+
Net investment income 0.68+ 1.54 2.25 2.31 2.24 2.16+
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 13% 62% 68% 81% 103% 131%
=============================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the six months ended July 31, 1998 (unaudited).
(3) On November 7, 1994, the former Class D shares were renamed Class C
shares.
(4) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method,
because it more accurately reflects the per share data for the period.
(5) For the period from May 5, 1993 (inception date) to January 31, 1994.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
22 1998 Semi-Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
period:
Class Y Shares 1998(1) 1998 1997(2)
================================================================================
Net Asset Value, Beginning of Period $ 20.62 $ 19.39 $ 19.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.22 0.56 0.51
Net realized and unrealized gain 2.50 3.27 1.69
- --------------------------------------------------------------------------------
Total Income From Operations 2.72 3.83 2.20
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.20) (0.61) (0.49)
Net realized gains (0.18) (1.99) (1.32)
- --------------------------------------------------------------------------------
Total Distributions (0.38) (2.60) (1.81)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 22.96 $ 20.62 $ 19.39
- --------------------------------------------------------------------------------
Total Return 13.22%++ 20.31% 11.94%++
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 140 $ 220 $ 143
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.84%+ 0.84% 0.90%+
Net investment income 1.82+ 2.64 3.31+
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 13% 62% 68%
================================================================================
(1) For the six months ended July 31, 1998 (unaudited).
(2) For the period from March 28, 1996 (inception date) to January 31, 1997.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On March 25, 1998, a special meeting of shareholders of the Trust was held for
the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage of Shares Voted Percentage of
Name of Trustees For Shares Voted Against Shares Voted
==============================================================================================================
<S> <C> <C> <C> <C>
Lee Abraham 24,712,213.110 96.158% 987,322.617 3.842%
Allan J. Bloostein 24,715,212.679 96.170 984,323.048 3.830
Richard E. Hanson, Jr. 24,723,973.398 96.204 975,562.329 3.796
Heath B. McLendon 24,739,115.536 96.263 960,420.191 3.737
==============================================================================================================
</TABLE>
Proposal 2 requested that shareholders approve certain modifications to the
fundamental investment policies of the Fund in order to modernize them in view
of certain regulatory, business or industry developments that have occurred
since original adoption of these policies by the Fund. The following chart
demonstrates that all proposals were approved by the shareholders.
================================================================================
Diversification Approved
- --------------------------------------------------------------------------------
Industry Concentration Approved
- --------------------------------------------------------------------------------
Borrowing Approved
- --------------------------------------------------------------------------------
Lending by the Fund Approved
- --------------------------------------------------------------------------------
Real Estate Approved
- --------------------------------------------------------------------------------
Underwriting Approved
================================================================================
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.*
<TABLE>
<CAPTION>
Percentage
Shares Voted Percentage of Shares Voted Percentage of Shares of Shares
For Shares Voted Against Shares Voted Abstained Abstained
=====================================================================================================
<S> <C> <C> <C> <C> <C>
8,474,248.789 87.652% 290,975.914 3.010% 902,818.435 9.338%
=====================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
24 1998 Semi-Annual Report to Shareholders
<PAGE>
Concert Social
Awareness Fund
Trustees
Lee Abraham
Allan J. Bloostein
Richard E. Hanson, Jr.
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Robert J. Brady, CFA
Vice President and
Investment Officer
Ellen S. Cammer
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Smith Barney Strategy Advisers Inc.
Administrator
Mutual Management Corp.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of Concert
Social Awareness Fund. It is not authorized for distribution to prospective
investors unless accompanied or preceded by a current Prospectus for the Fund,
which contains information concerning the Fund's investment policies and
expenses as well as other pertinent information.
SMITH BARNEY
A Member of Travelers Group[LOGO]
Concert Social Awareness Fund
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0423 9/98
[LOGO OMITTED]
Because we care about the environment, this annual report has
[RECYCLE LOGO] been printed with soy-based inks on 20% post-consumer recycled
paper, deinked using a non-chlorine bleach process.
