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Smith Barney
Large Cap
Blend Fund
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ANNUAL REPORT
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January 31, 1999
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day(R).
<PAGE>
Smith Barney
Large Cap Blend Fund
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The Smith Barney Large Cap Blend Fund ("Fund"), seeks long-term capital growth
by investing in the equity securities of large-capitalization companies that
exhibit growth and/or value attributes.
Smith Barney Large Cap Blend Fund
Average Annual Total Returns
January 31, 1999
Without Sales Charge(1)
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Class A Class B Class L Class O(2)
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One-Year 20.69% 20.13% N/A 20.14%
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Five-Year 16.40 15.83 N/A N/A
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Since Inception++ 14.95 14.38 11.57%+ 18.90
================================================================================
With Sales Charge(3)
-------------------------------------------
Class A Class B Class L Class O(2)
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One-Year 14.64% 15.13% N/A 19.14%
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Five-Year 15.20 15.71 N/A N/A
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Since Inception++ 14.01 14.38 9.45%+ 18.90
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B, L and O shares.
(2) On June 12, 1998, Class C shares were renamed Class O shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase and declines
thereafter by 1.00% per year until no CDSC is incurred. Class L and O
shares also reflect the deduction of a 1.00% CDSC, which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
++ Inception dates for Class A, B, L and O shares are November 6, 1992,
November 6, 1992, June 15, 1998 and August 15, 1994, respectively.
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FUND HIGHLIGHT
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The blend name is appropriate for the Fund not only because of the blend of
growth and value characteristics, but also because we employ a combination of
quantitative and qualitative portfolio management approaches. There are a number
of quantitative measures we look at to judge growth and value. And there are
qualitative measures that we also believe are important to successful stock
investing.
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NASDAQ SYMBOL
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Class A SGIAX
Class B SGIBX
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WHAT'S INSIDE
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Shareholder Letter........................................................... 1
Historical Performance....................................................... 4
Smith Barney Large Cap Blend Fund at a Glance................................ 6
Schedule of Investments...................................................... 7
Statement of Assets and Liabilities.......................................... 10
Statement of Operations...................................................... 11
Statements of Changes in Net Assets.......................................... 12
Notes to Financial Statements................................................ 13
Financial Highlights......................................................... 18
Independent Auditors' Report................................................. 23
Tax Information.............................................................. 24
Additional Shareholder Information........................................... 25
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IFC-2 1998 Semi-Annual Report to Shareholders
<PAGE>
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Shareholder Letter
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[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 annual report for the Smith Barney Large Cap Blend
Fund ("Fund") for the year ended January 31, 1999. 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 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 extra ordinary 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 year ended January 31, 1999, the Class A, B and O shares of the Fund
generated total returns of 20.69%, 20.13% and 20.14%, respectively, without the
effects of sales charges. From their inception on June 15, 1998, Class L shares
generated a total return of 11.57%, without the effects of sales charges. In
comparison, the Lipper Inc. growth and income peer group average had a total
return of 17.35% during the same period. (Lipper is a major fund-tracking
organization.) In addition, the Russell 1000 Index ("Russell 1000") had a return
of 28.75% over the same period. (The Russell 1000 consists of the largest 1000
companies in the Russell 3000 Index. This Index represents the universe of
large-capitalization stocks.)
Performance of the Fund was disappointing last year, as it lagged its Russell
1000 benchmark. There were several reasons for these results. First, 1998 was a
transition year for the Fund as it has evolved from a fund managed with a growth
and income, dividend-based investment philosophy to a blend fund. Share holders
approved this change in March 1998, so the Fund's portfolio was managed under
two different investment philosophies during the reporting period. Moreover,
there were some trading costs involved in making the Fund transition as well.
Second, partly as a result of its growth and income heritage, the Fund had a
value bias last year. This impeded performance, as value stocks underperformed
relative to the strong results of growth stocks. Third, the Fund also had an
average capitalization that was smaller than the Russell 1000. Smaller stocks
substantially underperformed larger ones. Our capitalization bias resulted from
where we found the best tradeoff between growth and value - which was in
relatively small stocks.
To bring the Fund closer to the Russell 1000, we are somewhat limiting the
position sizes that the Fund can make versus the Index starting this year. The
guidelines for the Fund will be to limit positions on both a sector and
individual stock basis. These guidelines for the Fund's portfolio are being
phased in over the next several months to take advantage of market volatility
and to minimize transaction costs. The result should be a mutual fund that
performs much more closely with its benchmark.
Market Overview
The year ended January 31, 1999 set records in the U.S. financial markets. The
rally was broad based, for we enjoyed all-time record highs in the popular stock
market averages, while bond market yields touched
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Smith Barney Large Cap Blend Fund 1
<PAGE>
levels last seen in the 1960s. Yet last year was also a tumultuous year.
Small-capitalization stock indices, such as the Russell 2000 Index, were
actually down for the year. And even large-capitalization stock indices twice
dipped into negative territory. At the end of August and again in the beginning
of October, stocks traded below levels prevalent at the beginning of the year.
But then stocks recovered and rallied strongly through year-end.
One of the underlying themes in last year's market was a flight to quality.
Large stocks outperformed small ones. High-quality bonds outperformed
lower-quality ones. In fact quality, not maturity or duration, was the main
factor distinguishing bond performance last year. Government bonds outperformed
corporate bonds, which in turn outperformed high yield issues. This reluctance
on the part of many investors to take on risk was due to problems in emerging
markets, as well as liquidity concerns caused by major troubled hedge funds.
Investment Philosophy
As befits its name, the Fund employs a "blend" stock selection philosophy. The
term "blend" refers to an investment approach that combines growth and value
styles. (Growth investors look for companies that they believe are going to grow
earnings quickly; value investors look for stocks that are priced at less than
their intrinsic value.) As blend investors, we try to pay as little as possible
for as much growth as possible. And we tend to focus on large-cap companies,
typically those with market capitalizations greater than $5 billion.
The blend name is appropriate for the Fund not only because of the blend of
growth and value characteristics, but also because we employ a combination of
quantitative and qualitative portfolio management approaches. There are a number
of quantitative measures we look at to judge growth and value. And there are
qualitative measures that we also believe are important to successful stock
investing.
Quantitative growth measures that we examine include historical earnings
progression, forecasted earnings growth, earnings revisions and corporate
profitability. Value measures include price-to-earnings, price-to-book and
price-to-sales ratios. Taken together, these measures provide a quantitative
look at our universe of large cap stocks. They also allow us to estimate the
growth and value characteristics of each stock, and to put together an optimal
blend portfolio that balances these characteristics.
In addition to quantitative measures, we believe that qualitative factors are
also key to making sound investment decisions. Issues such as management
changes, corporate strategy and evolution of the competitive landscape are
important to see and understand what is going on behind a company's reported
results.
Portfolio Activity*
The Fund is widely diversified, and participates in most of the major stock
market sectors. This is reflected in our stock purchases and sales, which have
ranged over a variety of industries since mid-year.
We purchased companies in several different industries, including health care,
technology and financial services. Within health care, we purchased two
pharmaceutical companies, Watson Pharmaceuticals and Pfizer. Watson is a leading
generic drug manufacturer, while Pfizer has a very promising new product
pipeline. Within technology, we bought Microsoft, BMC Software and SCI Systems.
Microsoft is the world's leading software company, while BMC concentrates on
mainframe and client/server software applications. SCI Systems is a contract
manufacturer with a rapidly growing base of business. In the financial services
sector, we purchased a brokerage stock, Morgan Stanley Dean Witter and a savings
and loan, Washington Mutual. Both were off their highs, and selling at very
reasonable prices relative to their growth prospects.
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* Please note the Fund's holdings are subject to change.
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2 1999 Annual Report to Shareholders
<PAGE>
Over the same six months we sold a number of stocks. In the natural resource
sector we sold Broken Hill Proprietary, an Australian company, as well as Temple
Inland. Both companies stumbled due to lower worldwide commodity prices.
Minnesota Mining and Manufacturing is a well-respected company with a
diversified product line. We sold the stock, however, due to disappointing
revenue growth. We also sold Kimberly Clark as its profitability suffered from
poor markets in Latin America and increased price competition in developed
markets.
Outlook
Over the next twelve months we anticipate further volatility in the U.S. stock
market. Some sectors, such as Internet-related stocks, should swing wildly over
the next year. By and large, your Fund should be cushioned from these kinds of
extreme swings in sentiment and prices. Further, we expect the underlying
fundamentals of the economy and markets to remain solid. Corporate earnings
should accelerate in 1999 versus 1998, while inflation remains low.
Thank you for your investment in the Smith Barney Large Cap Blend Fund. We
encourage you to visit our Web site at www.smithbarney.com. We look forward to
continuing to help you pursue your financial goals in the years to come.
Sincerely,
/s/ Heath B. McLendon /s/ R. Jay Gerken
Heath B. McLendon R. Jay Gerken
Chairman Vice President
and Investment Officer
February 25, 1999
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Top Ten Holdings* As of January 31, 1999
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1. Hewlett-Packard Co. 3.0%
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2. Dell Computer Corp. 2.9
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3. Eli Lilly & Co. 2.7
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4. General Electric Co. 2.6
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5. Ameritech Corp. 2.5
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6. MCI WorldCom, Inc. 2.4
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7. Johnson & Johnson 2.3
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8. Merck & Co., Inc. 2.2
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9. Chase Manhattan Corp. 2.1
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10. Nordstrom, Inc. 2.0
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* As a percentage of total common stock.
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Smith Barney Large Cap Blend Fund 3
<PAGE>
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Historical Performance -- Class A Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/99 $15.72 $17.88 $ 0.12 $ 0.87 20.69%
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1/31/98 14.30 15.72 0.19 0.70 16.30
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1/31/97 12.16 14.30 0.20 0.18 20.97
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1/31/96 9.62 12.16 0.20 0.20 30.97
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1/31/95 10.36 9.62 0.19 0.14 (3.93)
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1/31/94 9.58 10.36 0.23 0.00 10.70
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Inception* -- 1/31/93 9.50 9.58 0.00 0.00 0.84+
====================================================================================================================================
Total $ 1.13 $ 2.09
====================================================================================================================================
</TABLE>
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Historical Performance -- Class B Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/99 $15.72 $17.86 $ 0.06 $ 0.87 20.13%
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1/31/98 14.33 15.72 0.14 0.70 15.65
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1/31/97 12.19 14.33 0.15 0.18 20.43
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1/31/96 9.65 12.19 0.15 0.20 30.23
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1/31/95 10.38 9.65 0.14 0.14 (4.33)
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1/31/94 9.58 10.38 0.15 0.00 10.01
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Inception* -- 1/31/93 9.50 9.58 0.00 0.00 0.84+
====================================================================================================================================
Total $ 0.79 $ 2.09
====================================================================================================================================
</TABLE>
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Historical Performance -- Class L Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Inception* -- 1/31/99 $16.89 $17.87 $ 0.01 $ 0.87 11.57%+
====================================================================================================================================
</TABLE>
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Historical Performance -- Class O Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/99 $15.72 $17.86 $ 0.06 $ 0.87 20.14%
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1/31/98 14.33 15.72 0.14 0.70 15.65
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1/31/97 12.19 14.33 0.15 0.18 20.43
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1/31/96 9.65 12.19 0.15 0.20 30.23
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Inception*-- 1/31/95 9.91 9.65 0.06 0.14 (0.58)+
====================================================================================================================================
Total $ 0.56 $ 2.09
====================================================================================================================================
</TABLE>
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4 1999 Annual Report to Shareholders
<PAGE>
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Historical Performance -- Class Y Shares
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<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
1/31/99 $15.73 $17.93 $ 0.15 $ 0.87 21.16%
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1/31/98 14.34 15.73 0.28 0.70 16.76
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1/31/97 12.16 14.34 0.22 0.18 21.48
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Inception*-- 1/31/96 12.08 12.16 0.00 0.00 N/A**
====================================================================================================================================
Total $ 0.65 $ 1.75
====================================================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
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Average Annual Total Return
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<TABLE>
<CAPTION>
Without Sales Charge(1)
-----------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/99 20.69% 20.13% N/A 20.14% 21.16%
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Five Years Ended 1/31/99 16.40 15.83 N/A N/A N/A
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Inception* through 1/31/99 14.95 14.38 11.57%+ 18.90 20.00
====================================================================================================================================
<CAPTION>
With Sales Charge(2)
-----------------------------------------------------------------------------
Class A Class B Class L Class O Class Y
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended 1/31/99 14.64% 15.13% N/A 19.14% 21.16%
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Five Years Ended 1/31/99 15.20 15.71 N/A N/A N/A
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Inception* through 1/31/99 14.01 14.38 9.45%+ 18.90 20.00
====================================================================================================================================
</TABLE>
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Cumulative Total Return
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Without Sales Charge(1)
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Class A (Inception* through 1/31/99) 138.50%
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Class B (Inception* through 1/31/99) 131.26
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Class L (Inception* through 1/31/99) 11.57+
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Class O (Inception* through 1/31/99) 116.62
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Class Y (Inception* through 1/31/99) 72.99
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(1) Assumes reinvestment of all dividend and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B, L and O shares.
(2) Assumes reinvestment of all dividend and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase and declines
thereafter by 1.00% per year until no CDSC occurs. Class L and O shares
also reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
+ 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.
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Smith Barney Large Cap Blend Fund 5
<PAGE>
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Smith Barney Large Cap Blend Fund at a Glance (unaudited)
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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+
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[GRAPHIC OMITTED]
[The following table was depicted as a line chart in the printed material.]
November 1992 -- January 1999
Smith Barney Smith Barney
Large Cap Large Cap
Blend Fund -- Blend Fund -- Standard & Poor's
Class A Shares Class B Shares 500 Index
-------------- -------------- -----------------
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
Jan 1999 22658 23126 35650
+ 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 January 31,
1999. The Standard & Poor's 500 Index is composed of 500 widely held common
stocks listed on the New York Stock Ex change, 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*
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[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
7.1% Technology Services
3.9% Process Industries
6.9% Retail Trade
4.7% Energy/Minerals
16.6% Finance
11.4% Health Technology
9.7% Miscellaneous
16.2% Electronic Technology
7.5% Consumer Durables/Non-Durables
10.6% Utilities
5.4% Consumer Services
* As a percentage of total common stock.
Investment Breakdown
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[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
0.3% Cash Equivalent
99.7% Common Stock
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6 1999 Annual Report to Shareholders
<PAGE>
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Schedule of Investments January 31, 1999
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<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C>
COMMON STOCK -- 99.7%
Commercial Services -- 1.3%
170,000 W.W. Grainger, Inc. $ 6,927,500
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Consumer Durables -- 3.1%
105,000 Ford Motor Co. 6,450,937
220,000 Leggett & Platt, Inc. 4,482,500
240,000 Shaw Industries, Inc. 5,085,000
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16,018,437
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Consumer Non-Durables -- 4.4%
100,000 Coca-Cola Co. 6,543,750
70,000 Colgate-Palmolive Co. 5,630,625
79,000 Dole Food Co., Inc. 2,394,688
100,000 Liz Claiborne, Inc. 3,825,000
50,000 Procter & Gamble Co. 4,543,750
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22,937,813
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Services -- 5.4%
110,000 H&R Block, Inc.+ 4,826,250
240,000 TCA Cable Television, Inc. 9,255,000
90,000 Viacom Inc., Class B Shares++ 7,650,000
200,000 Walt Disney Co. 6,600,000
- ----------------------------------------------------------------------------------------------------------------------------------
28,331,250
- ----------------------------------------------------------------------------------------------------------------------------------
Electronic Technology -- 16.1%
50,000 Cisco Systems, Inc.++ 5,535,937
150,000 Dell Computer Corp.++ 14,981,250
110,000 Gulfstream Aerospace Corp.++ 6,050,000
200,000 Hewlett-Packard Co. 15,675,000
70,000 Intel Corp. 9,865,625
350,000 LM Ericsson Telephone Co. ADR+ 9,734,375
150,000 Maxim Integrated Products, Inc.++ 7,762,500
70,000 Motorola, Inc. 5,057,500
60,000 Royal Philips Electronics N.V. ADR 4,368,750
100,000 SCI Systems, Inc.+++ 5,500,000
- ----------------------------------------------------------------------------------------------------------------------------------
84,530,937
- ----------------------------------------------------------------------------------------------------------------------------------
Energy/Minerals -- 4.7%
185,000 Conoco Inc., Class A Shares 3,688,437
100,000 Exxon Corp. 7,043,750
90,000 Mobil Corp. 7,891,875
150,000 Phillips Petroleum Co. 5,793,750
- ----------------------------------------------------------------------------------------------------------------------------------
24,417,812
- ----------------------------------------------------------------------------------------------------------------------------------
Finance -- 16.6%
135,000 A.G. Edwards, Inc. 4,573,125
80,000 Arden Realty, Inc. 1,800,000
120,000 BankAmerica Corp. 8,025,000
140,000 Chase Manhattan Corp. 10,771,250
100,000 Conseco, Inc.+ 3,093,750
170,000 GreenPoint Financial Corp.+ 5,567,500
</TABLE>
See Notes to Financial Statements.
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Smith Barney Large Cap Blend Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C>
Finance -- 16.6% (continued)
125,000 Household International, Inc. $ 5,492,188
70,000 J.P. Morgan & Co., Inc. 7,385,000
260,000 KeyCorp 8,287,500
120,000 Kilroy Realty Corp. 2,617,500
200,000 Mercury General Corp.+ 7,600,000
70,000 Morgan Stanley Dean Witter & Co. 6,076,875
100,000 Starwood Hotels & Resorts Worldwide, Inc.+ 2,500,000
100,000 State Street Corp. 7,150,000
140,000 Washington Mutual, Inc. 5,880,000
- ----------------------------------------------------------------------------------------------------------------------------------
86,819,688
- ----------------------------------------------------------------------------------------------------------------------------------
Health Technology -- 11.4%
150,000 Eli Lilly & Co. 14,053,125
140,000 Johnson & Johnson 11,900,000
80,562 Medtronic, Inc. 6,419,808
80,000 Merck & Co., Inc. 11,740,000
125,000 Mylan Laboratories Inc. 3,812,500
50,000 Pfizer Inc. 6,431,250
100,000 Watson Pharmaceuticals, Inc.++ 5,462,500
- ----------------------------------------------------------------------------------------------------------------------------------
59,819,183
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Services -- 0.9%
120,000 Fluor Corp. 4,575,000
- ----------------------------------------------------------------------------------------------------------------------------------
Non-Energy Minerals -- 0.6%
225,000 Worthington Industries, Inc.+ 3,093,750
- ----------------------------------------------------------------------------------------------------------------------------------
Process Industries -- 3.9%
60,000 Bemis Co., Inc. 2,040,000
130,000 General Electric Co. 13,633,750
200,000 Pall Corp.+ 4,637,500
- ----------------------------------------------------------------------------------------------------------------------------------
20,311,250
- ----------------------------------------------------------------------------------------------------------------------------------
Producer Manufacturing -- 3.6%
140,000 Caterpillar Inc. 6,063,750
165,000 Dana Corp. 6,785,625
50,000 Xerox Corp. 6,200,000
- ----------------------------------------------------------------------------------------------------------------------------------
19,049,375
- ----------------------------------------------------------------------------------------------------------------------------------
Retail Trade -- 6.8%
150,000 May Department Stores Co. 9,056,250
250,000 Nordstrom, Inc. 10,593,750
200,000 Rite Aid Corp.+ 9,825,000
75,000 Wal-Mart Stores, Inc. 6,450,000
- ----------------------------------------------------------------------------------------------------------------------------------
35,925,000
- ----------------------------------------------------------------------------------------------------------------------------------
Technology Services -- 7.0%
240,000 Automatic Data Processing, Inc. 10,215,000
100,000 BMC Software, Inc.+++ 4,675,000
125,000 Computer Associates International, Inc.+ 6,328,125
150,000 Electronic Data Systems Corp. 7,865,625
45,000 Microsoft Corp.++ 7,846,875
- ----------------------------------------------------------------------------------------------------------------------------------
36,930,625
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C>
Transportation -- 3.3%
70,000 AMR Corp.++ $ 4,112,500
160,000 Knightsbridge Tankers Ltd.+ 3,340,000
375,000 Southwest Airlines Co.+ 10,078,125
- ----------------------------------------------------------------------------------------------------------------------------------
17,530,625
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities -- 10.6%
200,000 Ameritech Corp. 13,025,000
110,000 AT&T Corp. 9,982,500
140,000 Coastal Corp. 4,173,750
55,000 Duke Energy Corp. 3,399,688
110,000 GTE Corp. 7,425,000
160,000 MCI WorldCom, Inc.++ 12,740,000
310,000 Niagara Mohawk Power Corp. 4,746,875
- ----------------------------------------------------------------------------------------------------------------------------------
55,492,813
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $334,692,494) 522,711,058
==================================================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
==================================================================================================================================
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 0.3%
$1,679,000 Goldman, Sachs & Co., 4.710% due 2/1/99; Proceeds at
maturity -- $1,679,659; (Fully collateralized by
U.S. Treasury Notes, 5.625% to 11.125% due 11/30/99 to
8/15/25; Market value -- $1,712,580)(Cost -- $1,679,000) 1,679,000
==================================================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $336,371,494*) $524,390,058
==================================================================================================================================
</TABLE>
+ All or a portion of this security is on loan (See Note 8).
++ Non-income producing security.
* 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 January 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $336,371,494) $524,390,058
Collateral for securities on loan (Note 8) 60,365,272
Receivable for securities sold 1,052,105
Receivable for Fund shares sold 521,618
Dividends and interest receivable 444,165
- -------------------------------------------------------------------------------------
Total Assets 586,773,218
- -------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 8) 60,365,272
Payable for Fund shares purchased 214,769
Investment advisory fees payable 176,333
Administration fees payable 78,371
Distribution fees payable 14,315
Accrued expenses 118,748
- -------------------------------------------------------------------------------------
Total Liabilities 60,967,808
- -------------------------------------------------------------------------------------
Total Net Assets $525,805,410
=====================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 29,393
Capital paid in excess of par value 325,922,726
Undistributed net investment income 1,800
Accumulated net realized gain from security transactions 11,833,022
Net unrealized appreciation of investments and foreign currencies 188,018,469
- -------------------------------------------------------------------------------------
Total Net Assets $525,805,410
=====================================================================================
Shares Outstanding:
Class A 10,003,120
--------------------------------------------------------------------------------
Class B 9,061,156
--------------------------------------------------------------------------------
Class L 110,365
--------------------------------------------------------------------------------
Class O 321,159
--------------------------------------------------------------------------------
Class Y 9,896,746
--------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $17.88
--------------------------------------------------------------------------------
Class B* $17.86
--------------------------------------------------------------------------------
Class L** $17.87
--------------------------------------------------------------------------------
Class O** $17.86
--------------------------------------------------------------------------------
Class Y (and redemption price) $17.93
--------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share) $18.82
--------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $18.05
=====================================================================================
</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 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended January 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 8,046,314
Interest 704,637
Less: Foreign withholding tax (17,375)
- -------------------------------------------------------------------------------
Total Investment Income 8,733,576
- -------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 2,108,469
Distribution fees (Note 2) 1,613,986
Administration fees (Note 2) 937,097
Shareholder and system servicing fees 408,139
Registration fees 99,452
Shareholder communications 88,147
Audit and legal 50,865
Trustees' fees 24,865
Custody 19,248
Other 8,487
- -------------------------------------------------------------------------------
Total Expenses 5,358,755
- -------------------------------------------------------------------------------
Net Investment Income 3,374,821
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 133,423,273
Cost of securities sold 106,114,392
- -------------------------------------------------------------------------------
Net Realized Gain 27,308,881
- -------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Foreign Currencies:
Beginning of year 129,407,253
End of year 188,018,469
- -------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 58,611,216
- -------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 85,920,097
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 89,294,918
===============================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended January 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
===================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,374,821 $ 5,090,806
Net realized gain 27,308,881 24,987,653
Increase in net unrealized appreciation 58,611,216 28,895,818
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 89,294,918 58,974,277
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,147,777) (5,088,324)
Net realized gains (24,580,392) (18,011,944)
- ---------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (27,728,169) (23,100,268)
- ---------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 85,496,495 108,117,839
Net asset value of shares issued for
reinvestment of dividends 17,167,175 15,187,036
Cost of shares reacquired (68,037,009) (81,176,417)
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 34,626,661 42,128,458
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets 96,193,410 78,002,467
NET ASSETS:
Beginning of year 429,612,000 351,609,533
- ---------------------------------------------------------------------------------------------------
End of year* $525,805,410 $429,612,000
===================================================================================================
* Includes undistributed (overdistributed) net investment income of: $1,800 $(225,094)
===================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 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 share holders 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 in tends 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 in come tax regulations which may differ from generally accepted
accounting principles. At January 31, 1999, reclassifications were made to the
Fund's capital ac counts to reflect permanent book/tax differences and income
and gains available for distributions under in come 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
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
advisor to the Trust. The Fund pays SSBC 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.
SSBC 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 (continued)
- --------------------------------------------------------------------------------
On October 8, 1998, CFBDS, Inc., became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), another subsidery of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group.
On June 12, 1998, the Fund's existing Class C shares were renamed as Class O
shares. In addition, June 15, 1998 is the inception date for Class L shares,
which are being sold at net asset value plus a maximum initial sales charge of
1.00%. Class L and O shares also have a 1.00% contingent deferred sales charge
("CDSC"), which applies if redemption occurs within the first year of purchase.
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 year ended January 31, 1999, SSB received brokerage commissions of
$5,463 and sales charges of $82,000 and $15,000 on sales of the Fund's Class A
and Class L shares, respectively. In addition, CDSCs paid to SSB were
approximately:
Class B
================================================================================
CDSCs $110,000
================================================================================
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 year ended January 31, 1999, total Distribution Plan fees incurred were:
Distribution
Plan Fees
================================================================================
Class A $ 412,419
- --------------------------------------------------------------------------------
Class B 1,154,546
- --------------------------------------------------------------------------------
Class L 5,063
- --------------------------------------------------------------------------------
Class O 41,958
================================================================================
All officers and one Trustee of the Trust are employees of SSB.
3. Investments
During the year ended January 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $150,898,555
- --------------------------------------------------------------------------------
Sales 133,423,273
================================================================================
At January 31, 1999, aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $204,306,661
Gross unrealized depreciation (16,288,097)
- --------------------------------------------------------------------------------
Net unrealized appreciation $188,018,564
================================================================================
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
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
price and date. A reverse repurchase agreement involves the risk that the market
value of the securities sold by the Fund may decline below the repurchase price
of the securities. The Fund will establish a segregated account with its
custodian, in which the Fund will maintain cash, U.S. government securities or
other liquid high grade debt obligations equal in value to its obligations with
respect to reverse repurchase agreements.
At January 31, 1999, 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 January 31, 1999, 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 originally paid.
At January 31, 1999, 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 de pending 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
de creased 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.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 year ended January 31, 1999, the Fund did not write any options.
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 January 31, 1999, the Fund had loaned common stocks having a value of
$59,266,999 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank of Brussels Lambert, 4.843% due 2/1/99 $22,171,430
DeutscheBank London, 4.843% due 2/1/99 16,333,141
Bank of Montreal, 4.812% due 2/1/99 4,497,035
Societe Generale, 4.750% due 2/1/99 6,119,785
Commercial Paper:
Par Capital, 5.429% due 2/5/99 11,243,881
- --------------------------------------------------------------------------------
Total $60,365,272
================================================================================
Interest income earned by the Fund from securities loaned for the year ended
January 31, 1999 was $67,149.
9. Shares of Beneficial Interest
At January 31, 1999, the Trust had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, 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 January 31, 1999, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class L Class O Class Y
===========================================================================================
<S> <C> <C> <C> <C> <C>
Total Paid-in Capital $103,410,790 $75,762,278 $1,811,008 $4,374,207 $140,593,836
===========================================================================================
</TABLE>
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
January 31, 1999 January 31, 1998
------------------------------- -------------------------------
Shares Amount Shares Amount
===================================================================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 1,569,148 $ 26,492,698 1,710,260 $ 26,635,444
Shares issued on reinvestment 558,601 9,218,773 499,592 7,860,894
Shares reacquired (1,777,302) (29,455,721) (1,874,428) (29,033,664)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 350,447 $ 6,255,750 335,424 $ 5,462,674
===================================================================================================================================
Class B
Shares sold 1,056,092 $ 17,599,116 1,910,597 $ 29,398,347
Shares issued on reinvestment 462,610 7,622,062 450,933 7,110,288
Shares reacquired (2,233,185) (37,011,623) (2,161,382) (33,300,840)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (714,483) $(11,790,445) 200,148 $ 3,207,795
===================================================================================================================================
Class L+
Shares sold 115,141 $ 1,880,488 -- --
Shares issued on reinvestment 2,240 36,677 -- --
Shares reacquired (7,016) (106,157) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 110,365 $ 1,811,008 -- --
===================================================================================================================================
Class O++
Shares sold 75,695 $ 1,278,352 151,583 $ 2,360,172
Shares issued on reinvestment 17,564 289,663 13,673 215,854
Shares reacquired (90,556) (1,463,508) (53,223) (853,352)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,703 $ 104,507 112,033 $ 1,722,674
===================================================================================================================================
Class Y
Shares sold 2,312,952 $ 38,245,841 3,240,170 $ 49,723,876
Shares reacquired -- -- (1,108,079) (17,988,561)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,312,952 $ 38,245,841 2,132,091 $ 31,735,315
===================================================================================================================================
</TABLE>
+ Transactions for Class L shares are for the period from June 15, 1998
(inception date) to January 31, 1999.
++ 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
year ended January 31, except where noted:
<TABLE>
<CAPTION>
Class A Shares 1999(1) 1998 1997 1996(1) 1995
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $15.72 $14.30 $12.16 $9.62 $10.36
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.13 0.21 0.19 0.20 0.20
Net realized and unrealized gain (loss) 3.02 2.10 2.33 2.74 (0.61)
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.15 2.31 2.52 2.94 (0.41)
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.12) (0.19) (0.20) (0.20) (0.19)
Net realized gains (0.87) (0.70) (0.18) (0.20) (0.14)
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.99) (0.89) (0.38) (0.40) (0.33)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.88 $15.72 $14.30 $12.16 $9.62
- -----------------------------------------------------------------------------------------------------------
Total Return 20.69% 16.30% 20.97% 30.97% (3.93)%
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $178,847 $151,696 $133,272 $110,089 $95,054
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.09% 1.09% 1.12% 1.16% 1.41%
Net investment income 0.77 1.35 1.48 1.77 1.86
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 17% 9% 15% 127%
===========================================================================================================
</TABLE>
(1) 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.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended January 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 1999(1) 1998 1997 1996(1) 1995
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $15.72 $14.33 $12.19 $9.65 $10.38
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.05 0.13 0.13 0.14 0.17
Net realized and unrealized gain (loss) 3.02 2.10 2.34 2.75 (0.62)
- -----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.07 2.23 2.47 2.89 (0.45)
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.14) (0.15) (0.15) (0.14)
Net realized gains (0.87) (0.70) (0.18) (0.20) (0.14)
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.93) (0.84) (0.33) (0.35) (0.28)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.86 $15.72 $14.33 $12.19 $9.65
- -----------------------------------------------------------------------------------------------------------
Total Return 20.13% 15.65% 20.43% 30.23% (4.33)%
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $161,801 $153,651 $137,187 $112,891 $92,153
- -----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.59% 1.59% 1.62% 1.65% 1.90%
Net investment income 0.29 0.86 0.98 1.27 1.38
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 17% 9% 15% 127%
===========================================================================================================
</TABLE>
(1) 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.
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
period ended January 31:
Class L Shares 1999(1)(2)
================================================================================
Net Asset Value, Beginning of Period $16.89
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.04)
Net realized and unrealized gain 1.90
- --------------------------------------------------------------------------------
Total Income From Operations 1.86
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01)
Net realized gains (0.87)
- --------------------------------------------------------------------------------
Total Distributions (0.88)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $17.87
- --------------------------------------------------------------------------------
Total Return++ 11.57%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,972
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.85%
Net investment loss (0.37)
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 29%
================================================================================
(1) For the period from June 15, 1998 (inception date) to January 31, 1999.
(2) Per share amounts have been calculated using the monthly average shares
method.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended January 31 except where noted:
<TABLE>
<CAPTION>
Class O Shares(1) 1999(2) 1998 1997 1996(2) 1995(3)
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $15.72 $14.33 $12.19 $9.65 $9.91
- -----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.05 0.13 0.14 0.13 0.07
Net realized and unrealized gain (loss) 3.02 2.10 2.33 2.76 (0.13)
- -----------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 3.07 2.23 2.47 2.89 (0.06)
- -----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.06) (0.14) (0.15) (0.15) (0.06)
Net realized gains (0.87) (0.70) (0.18) (0.20) (0.14)
- -----------------------------------------------------------------------------------------------------------------
Total Distributions (0.93) (0.84) (0.33) (0.35) (0.20)
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.86 $15.72 $14.33 $12.19 $9.65
- -----------------------------------------------------------------------------------------------------------------
Total Return 20.14% 15.65% 20.43% 30.23% (0.58)%++
- -----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $5,736 $5,007 $2,958 $961 $85
- -----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.59% 1.57% 1.61% 1.62% 1.83%+
Net investment income 0.28 0.86 0.94 1.11 1.44+
- -----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 17% 9% 15% 127%
=================================================================================================================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class O shares.
(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) For the period from August 15, 1994 (inception date) to January 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
year ended January 31, except where noted:
<TABLE>
<CAPTION>
Class Y Shares 1999(1) 1998 1997 1996(1)(2)
==================================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $15.73 $14.34 $12.16 $12.08
- --------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.19 0.27 0.22 --
Net realized and unrealized gain 3.03 2.10 2.36 0.08
- --------------------------------------------------------------------------------------------------
Total Income From Operations 3.22 2.37 2.58 0.08
- --------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) (0.28) (0.22) --
Net realized gains (0.87) (0.70) (0.18) --
- --------------------------------------------------------------------------------------------------
Total Distributions (1.02) (0.98) (0.40) --
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $17.93 $15.73 $14.34 $12.16
- --------------------------------------------------------------------------------------------------
Total Return 21.16% 16.76% 21.48% N/A*
- --------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $177,449 $119,258 $78,192 $5
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.69% 0.69% 0.73% N/A*
Net investment income 1.14 1.73 1.73 N/A*
- --------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 29% 17% 9% 15%
==================================================================================================
</TABLE>
(1) 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.
(2) Inception date is January 31, 1996.
* Information is not meaningful since the class was only open for one day.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of
the Smith Barney Equity Funds:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Smith Barney Large Cap Blend Fund of
Smith Barney Equity Funds as of January 31, 1999, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the four-year period then ended. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The financial
highlights for the year ended January 31, 1995 were audited by other auditors
whose report thereon, dated March 22, 1995, expressed an unqualified opinion on
those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1999, by correspondence with the custodian. As to securities sold
but not yet delivered, we performed other appropriate auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Smith Barney Large Cap Blend Fund of Smith Barney Equity Funds as of January 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the four-year period then ended,
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 8, 1999
- --------------------------------------------------------------------------------
Smith Barney Large Cap Blend Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
January 31, 1999:
o A corporate dividends received deduction of 98.31%.
o Total long-term capital gain distributions paid of $24,331,712.
- --------------------------------------------------------------------------------
24 1999 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 which includes all Funds; 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 25
<PAGE>
Smith Barney
Large Cap
Blend 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
R. Jay Gerken
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Advisor
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of Smith
Barney Equity Funds -- Smith Barney Large Cap Blend Fund. It is not authorized
for distribution to prospective investors unless accom panied or preceded by a
current Prospectus for the Fund, which contains in for ma tion concerning the
Fund's investment policies and expenses as well as other pertinent information.
SALOMON SMITH BARNEY
- ---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a Service mark of Salomon Smith Barney Inc.
Smith Barney Large Cap
Blend Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD01089 3/99
Diversification --
the Essence of the Concert Social Awareness Fund
[PHOTO OMITTED]
Concert Social
Awareness Fund
-------------
[GRAPHIC OMITTED] ANNUAL REPORT
-------------
January 31, 1999
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<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.
Concert Social Awareness Fund
Average Annual Total Returns
January 31, 1999
Without Sales Charge(1)
----------------------------------------------
Class A Class B Class L(2)
================================================================================
One-Year 30.47% 29.50% 29.53%
- --------------------------------------------------------------------------------
Five-Year 16.42 15.56 15.61
- --------------------------------------------------------------------------------
Ten-Year N/A 14.13 N/A
- --------------------------------------------------------------------------------
Since Inception+ 17.08 12.90 15.69
================================================================================
With Sales Charge(3)
----------------------------------------------
Class A Class B Class L(2)
================================================================================
One-Year 23.96% 24.50% 27.23%
- --------------------------------------------------------------------------------
Five-Year 15.24 15.45 15.38
- --------------------------------------------------------------------------------
Ten-Year N/A 14.13 N/A
- --------------------------------------------------------------------------------
Since Inception+ 16.12 12.90 15.48
================================================================================
(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.
+ Inception dates for Class A, B and L shares are November 6, 1992, February
2, 1987 and May 5, 1993, respectively.
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
We have just completed a very satisfying year for the Concert Social Awareness
Fund. This represented the second year where we controlled all aspects of the
Fund's investment process, asset allocation (which we assumed in February of
1997), as well as our previous stock and bond selection responsibilities.
Throughout the year we were able to successfully navigate through some very
turbulent financial markets. Pick your time and style and there was a shock to
latch onto -- currency collapses, deflation, recessions, political impeachment
and hedge fund debacles.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SSIAX
Class B SESIX
Class L SESLX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter ........................................................ 1
Historical Performance .................................................... 6
Concert Social Awareness Fund
at a Glance ............................................................... 8
Schedule of Investments ................................................... 9
Statement of Assets and Liabilities ....................................... 13
Statement of Operations ................................................... 14
Statements of Changes in Net Assets ....................................... 15
Notes to Financial Statements ............................................. 16
Financial Highlights ...................................................... 21
Independent Auditors' Report .............................................. 24
Additional Shareholder Information ........................................ 25
Tax Information ........................................................... 25
<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 annual report for the Concert Social Awareness
Fund ("Fund") for the year ended January 31, 1999. 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. We hope you find this report to be useful
and informative. An interview with Portfolio Managers Bob Brady and Ellen Cammer
appears on pages four and five.
A Special Discipline Series Fund
The Concert Social Awareness Fund is part of the Special Discipline Series of
Smith Barney Mutual Funds. Special Discipline Series mutual funds explore
opportunities in a narrower sector of the market or by using a narrower
investment focus.
Performance Update
We are pleased to report that the Fund posted a total return of 30.47% for Class
A shares, without sales charges, for the year ended January 31, 1999. In
comparison, the Standard & Poor's 500 Index* ("S&P 500 Index") returned 32.51%
and the Lehman Brothers Government/Corporate Bond Index** returned 8.72% for the
same period. Moreover, the Fund outperformed its Lipper Inc. peer group return
of 15.31% for the same period. (Lipper Inc. is a major fund-tracking
organization.)
Overview
We have just completed a very satisfying year for the Concert Social Awareness
Fund. This represented the second year where we controlled all aspects of the
Fund's investment process, asset allocation (which we assumed in February of
1997), as well as our previous stock and bond selection responsibilities.
Throughout the year we were able to successfully navigate some very turbulent
financial markets. Pick your time and style and there was a shock to latch onto
- -- currency collapses, deflation, recessions, political impeachment and hedge
fund debacles.
Despite all of that, the U.S. economy remained very strong, with inflation and
unemployment extremely low at the same time. Our financial markets translated
these events into several distinct up and down price cycles, along with an
obvious flight to quality. Yet, when it was all over, the markets had put
another strong performance into the record books.
The allocation of Fund assets between stocks and bonds for the year averaged our
long-term objective of 75% stocks and 25% bonds. We began the year with about
70% in stocks, and used the late summer market correction to shift some
additional money from bonds into stocks. At the end of January 1999, we held
approximately 77% in stocks and 23% in bonds. (Our most recent actions, however,
have been to slightly reverse these earlier decisions, taking some stock profits
to bring our allocation back into line with our long-term guidelines.)
Both the stock and bond portions of the Fund outper-
- ----------
* 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
publicly issued intermediate- and long-term U.S. government bonds and
corporate bonds.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 1
<PAGE>
formed their respective benchmarks; as a consequence the Fund achieved between
90% and 95% of the stock market's return while only being invested in about 75%
stocks. 1999 should be a year with both new and revisited sets of challenges.
Although no guarantees can be made, we enter the Fund's new fiscal year with the
goal and expectation of again delivering positive competitive performance.
However, we believe it will prove difficult to duplicate the Fund's 1998
absolute returns.
Stock Market Update and Portfolio Changes
We were fairly active in the stock component of the Fund during the last fiscal
year ended January 31, 1999. In sum, we were net buyers of approximately $171/2
million of stock, via some 200 individual trades. But the activity was very
concentrated on both the buy and sell sides. More than one-half of the buys took
place on two days in early September, when the stock market was near the bottom
of its sharp fall. The second much smaller cluster of buys took place earlier in
March, when we were still in the process of adjusting our stock exposure upwards
from the Fund's very conservative stance we inherited in early 1997.
On the sell side there were also two clusters of activity. The first entailed
recognizing tax loss opportunities in early October --- selling positions where
losses existed to reduce the shareholder tax burdens by offsetting previously
realized capital gains. The larger portion of our selling took place in January
1999, when we decided to take some profits in the technology sector and move the
proceeds to the Fund's bond portion (partially neutralizing the opposite action
we took in September).
Reflecting the manner by which we accomplished our interim allocation shift, the
Fund's stock portfolio at year-end was not significantly different then when we
started the year. On a quality, relative yield or valuation basis, the beginning
and ending of the reporting period look quite similar. Our relative sector
emphasis within the marketplace has remained virtually intact, with most of our
emphasis on consumer cyclical, financial, transportation, and selected utility
sectors. We continue to de-emphasize basic material, capital goods,
communication services and energy. Moreover, we recently moved to a neutral
weighting in the technology sector. The fact that we moved some money from
stocks to bonds by taking some profits in several of 1998's leaders undeniably
suggests a bit of caution for the near-term. Yet, those actions should not be
misinterpreted as a change in our long held positive outlook for the U.S.
economy and its high-quality companies.
Bond Market Update and Portfolio Changes
1998 ended up being a year dominated by the global economic outlook. Asia may
have been the opening act in July of 1997, but by mid-1998, Russia had devalued
its currency and defaulted on some of its debt. In a short period of 11 days at
the end of August, the Dow Jones Industrial Average ("DJIA") lost about 12%,
world economies were decimated and a massive flight to quality helped U.S.
Treasuries to become the best-performing sector of the bond market. It was not
the way U.S. Treasury market investors had hoped to break through the 5% barrier
and while U.S. Treasury prices soared, spread product (i.e., corporate bonds and
mortgage-backed securities) fell from favor and performed poorly on a relative
basis.
Emerging market debt and high-yield bonds were the obvious casualties, as
investors wanted the safety and liquidity of the most recently issued U.S.
Treasury issues. These major shifts in the bond markets caused complex bets by
hedge funds to go awry, exacerbating market woes. Due to the high-quality nature
of the Fund's bond portfolio (i.e., "AA" on average) it was able to perform
extremely well in this volatile market.
The Federal Reserve Board, well aware of the growing liquidity problems in the
bond market, engineered three moves starting on September 29, 1998 to reduce the
federal-funds rate to 4.75% and the discount rate to 4.50%. After falling to the
historic low of 4.70% on the long Treasury bond in early October, interest rates
have bounced around in a rather narrow trading range. At the end of January long
rates yielded 5.09% still some 80 basis points (8/10 of 1%) lower than where we
began the year providing a year of attractive returns for total return investors
invested in high grade securities. The
- --------------------------------------------------------------------------------
2 1999 Annual Report to Shareholders
<PAGE>
Lehman Brothers Government/Corporate Bond index returned 8.72% for the year
ended January 31, 1999. We estimate that the bond component of the Fund
outperformed the Index by approximately 1%.
By November with yield premiums on corporate bonds at the highest level of the
last ten years, investors re-entered the corporate bond market making it the
best month historically for corporate bond performance. Many corporate issues
were able to retrace close to 70% of their losses (on a spread basis). In this
period of market disarray we were able to add selectively to our corporate
holdings such as MCI WorldCom, Xerox, and Qwest Communication,* all of which
have performed well through the end of the reporting period. The year ended with
bond market rates trading in a narrow range coupled with an attractive amount of
yield premium in corporate bonds and mortgage-backed securities.
We begin the year with a rather robust economic picture. Many forecasters are
still awaiting a marked slowdown in the U.S. economy. Yet this certainly seems
to be an economy that takes a licking and still keeps on ticking. Although many
of the themes remain the same this year, we think there are a few new twists to
consider. The introduction of the euro (i.e., the new global currency for most
of Europe) and Y2K concerns (i.e., a failure of older computers that recognize
dates by two digits to be able to distinguish the year 2000 from the year 1900)
are key issues that the bond markets are well aware, but how the markets will
react remains somewhat uncertain. Yet we still believe 1999 should be a positive
year for bond investors.
But the intra-market focus may change. Last year excess cash seems to have
poured into stocks and U.S. Treasuries.
We believe that 1999 will see a shift away from U.S. Treasuries and into spread
product creating a narrowing of their spreads as well as providing excellent
total return potential. Corporate bond and mortgage yields are still very
attractive and seem to be discounting a lot of negative news going forward. We
have recently increased our allocation to mortgages believing they should
continue to provide attractive value. Over the coming months we see
opportunities through changing sector weightings as well as through modest
shifts in our duration. The bond component of the Fund has a duration (i.e., a
gauge of sensitivity to interest rate change) of 5.5 years as of January 29,
1999.
At the close of the reporting period, the Fund's bond assets were made up of 41%
governments, 35% corporate bonds, 22% mortgage-backed securities, and 2%
asset-backed securities.
We thank you for your continued support of our efforts on your behalf. We
encourage you to visit our Web site at www.smithbarney.com. We look forward to
another exciting and challenging year helping you to pursue your investment
goals.
Sincerely,
/s/ Heath B. McLendon
------------------------------
Heath B. McLendon
Chairman
/s/ Ellen S. Cammer /s/ Robert J. Brady, CFA
- ---------------------------- ---------------------------------
Ellen S. Cammer Robert J. Brady, CFA
Vice President and Vice President and
Investment Officer Investment Officer
February 22, 1999
- ----------
* Securities held in the Fund as of January 31, 1999 are subject to change.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 3
<PAGE>
- --------------------------------------------------------------------------------
An Interview with Portfolio Managers
Robert J. Brady and Ellen S. Cammer
- --------------------------------------------------------------------------------
Portfolio managers Bob Brady and Ellen Cammer recently spoke with us about the
Concert Social Awareness Fund and shared some insights regarding their
investment strategy.
Bob, what's the linkage between social awareness and the Smith Barney Concert
Social Awareness Fund?
Bob: In 1997 we decided to overlay onto the Fund's investment discipline
something that came from our investing approach. We refer to this as a socially
aware overlay, or a cultural analysis.
In looking at the environment today from an economic standpoint, we think for
many, many companies workplace societal issues are becoming increasingly
important business issues. As investors, we therefore consider not only the
financial aspects of an investment, but also how a company is dealing with these
other non-financial aspects of its everyday life that may impact its future
growth possibilities.
Ellen we have heard from you and Bob about "best of class" investing in the
past. What does this phrase mean?
Ellen: "Best of class" investing seeks to identify companies that are at the
leading edge of certain industries that face social and environmental concerns,
differentiating between the leaders and laggards in industry, and allowing us to
decide spotlight companies which seem to be moving in a constructive direction
rather than us withdrawing from the industry altogether.
Again, we believe strategic management teams see the convergence between
financial performance and environmental performance.
Bob, what are some of the underlying strategies that drive the Concert Social
Awareness Fund?
Bob: Well, there are several basic tenets that Ellen and I look at everyday.
Number one, we are investment managers, and therefore anything that we own in
the Fund must meet our strict investment disciplines. We are in the business of
productively employing our shareholders' assets for competitive investment
returns over time.
The Fund is constructed along the lines of a 75% stock and 25% bond composition.
In one sense, it's a hybrid balance fund. The reason? There's a large number of
investors out there that want to be in the stock market over time, but they want
less risk.
No matter what industry you look at, certain companies are identified as leaders
and certain ones are deemed to be laggards. And the thing that seem to separate
the leaders from the others is that their managements are smart enough to get
their companies ahead of the curve in their industry, regardless of what it is.
And lastly, as we have noted previously, we think that a lot of nonfinancial
matters, cultural issues, in fact, are increasingly important business issues.
And smart managements understand that if they are able to get their hands around
them, their companies will be able over time to enjoy strong, competitive
advantages.
Bob, could you walk us through the investment process that you and Ellen employ
in the Fund?
Bob: I'll speak about the equity side, and then Ellen can discuss the Fund's
fixed-income side. The equity side is essentially an investment discipline that
has evolved since the early 1980s when I came over to asset management from the
research side of the business.
Basically, I look at about 1,700 stocks weekly on an evaluation basis. I have
five different models that are quantitatively oriented. This analysis enables me
to ferret out a lot of companies. Then I overlay onto that the qualitative part
of our investment research, making sure that the numbers used in my analysis
make sense. Then, I attempt to identify the catalyst that could trigger the
market's recognition of our perceived values. And through that process I try and
narrow down my investment choices into where there is apparent relative growth
opportunities at the right price. Risk analysis is an essential ingredient
throughout this process. So it's a value-oriented approach, but clearly looking
to grow asset values over time. I am very attuned to risk and I follow a fairly
conservative portfolio diversification approach, but it seems to have stood the
test of time. (Of course, past performance is not indicative of future results.)
- --------------------------------------------------------------------------------
4 1999 Annual Report to Shareholders
<PAGE>
Ellen, how do you invest in bonds?
Ellen: The bond side of the Fund's portfolio is actively managed. It is a total
return strategy and could be called "duration constrained." I focus on a
five-year duration as a neutral posture for the portfolio that corresponds with
the Lehman Brothers Government Corporate Bond Index.
I utilize a full complement of securities such as government bonds,
mortgaged-backed securities, asset-backed securities and corporate bonds. And I
will overweight and underweight the sectors of the market depending on my
economic outlook.
Ellen, what is the Fund's current asset allocation, and is there any flexibility
with that asset allocation?
Ellen: The Fund's current allocation is approximately 75% stocks and 25% bonds
or close to that. Within that structure, Bob and I have the ability to shift up
to 10% around that weighting, so stocks can actually range from a low of 65% to
a high of 85%.
We view the Fund's asset allocation structure as balanced for the future. Our
somewhat overweighted stock allocation versus a traditional 60%-40% composition
that most funds have is a conscious design element. When we created the Fund, we
looked at the expected potential returns available from both markets, as well as
looking at some demographics on the general population. Because people are
living longer, we believed that we needed the higher equity weighting.
Bob, what types of companies does the Concert Social Awareness Fund usually
invest in?
Bob: We usually invest in mid- to large-cap companies that are well known and
well recognized. We want to be satisfied both as investors as well as be
comfortable about a company's cultural policies. We want enlightened companies
who understand the culture they operate in and managements that can deal with
all types of challenges effectively.
Bob and Ellen, thank you for spending some time with us.
- --------------------------------------------------------------------------------
Top Ten Holdings* As of January 31, 1999
- --------------------------------------------------------------------------------
1. EMC Corp. 3.9%
- --------------------------------------------------------------------------------
2. Lowe's Cos., Inc. 3.4
- --------------------------------------------------------------------------------
3. Cisco Systems, Inc. 3.0
- --------------------------------------------------------------------------------
4. International Business Machines Corp. 3.0
- --------------------------------------------------------------------------------
5. MCI Worldcom, Inc. 3.0
- --------------------------------------------------------------------------------
6. Xerox Corp. 2.9
- --------------------------------------------------------------------------------
7. Schering-Plough Corp. 2.8
- --------------------------------------------------------------------------------
8. Amgen, Inc. 2.8
- --------------------------------------------------------------------------------
9. Chase Manhattan Corp. 2.8
- --------------------------------------------------------------------------------
10. Compaq Computer Corp. 2.8
- --------------------------------------------------------------------------------
* As a percentage of total common stock.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
1/31/99 $20.57 $25.94 $0.26 $0.53 30.47%
- --------------------------------------------------------------------------------
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 $3.07 $7.33
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
1/31/99 $20.63 $25.96 $0.14 $0.53 29.50%
- --------------------------------------------------------------------------------
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
================================================================================
Total $4.37 $9.69
================================================================================
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
Net Asset Value
-----------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
1/31/99 $20.68 $26.03 $0.14 $0.53 29.53%
- --------------------------------------------------------------------------------
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 $2.04 $6.48
================================================================================
It is the Fund's policy to distribute dividends quarterly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
6 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charges(1)
---------------------------------
Class A Class B Class L
================================================================================
Year Ended 1/31/99 30.47% 29.50% 29.53%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/99 16.42 15.56 15.61
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/99 N/A 14.13 N/A
- --------------------------------------------------------------------------------
Inception* through 1/31/99 17.08 12.90 15.69
================================================================================
With Sales Charges(2)
---------------------------------
Class A Class B Class L
================================================================================
Year Ended 1/31/99 23.96% 24.50% 27.23%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/99 15.24 15.45 15.38
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/99 N/A 14.13 N/A
- --------------------------------------------------------------------------------
Inception* through 1/31/99 16.12 12.90 15.48
================================================================================
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 1/31/99) 167.38%
- --------------------------------------------------------------------------------
Class B (1/31/89 through 1/31/99) 274.84
- --------------------------------------------------------------------------------
Class B (Inception* through 1/31/99) 329.02
- --------------------------------------------------------------------------------
Class L (Inception* through 1/31/99) 130.96
================================================================================
(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 and L shares are November 6, 1992, February
2, 1987 and May 5, 1993, respectively.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 7
<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+
================================================================================
[THE FOLLOWING WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
Lehman Government/ Lehman Government/ Standard
Concert Social Corporate Corporate Long- & Poor's
Awareness Fund Bond Index Term Bond Index 500 Index
================================================================================
January 1989 10,000 10,000 10,000 10,000
January 1990 11,076 11,119 11,190 11,447
January 1991 11,829 12,345 12,437 12,408
January 1992 14,190 13,965 14,267 15,224
January 1993 15,563 15,582 16,348 16,835
January 1994 18,189 17,187 18,936 19,004
January 1995 17,323 16,652 17,617 19,104
January 1996 21,804 19,604 22,330 26,487
January 1997 24,333 20,071 22,224 33,460
January 1998 28,945 22,314 26,021 42,462
January 1999 37,485 24,260 29,135 56,263
================================================================================
+ Hypothetical illustration of $10,000 invested in Class B shares on January
31, 1989, assuming reinvestment of dividends and capital gains, if any, at
net asset value through January 31, 1999. 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 CHART WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL.]
Basic Materials 3.1%
Communication Services 4.1%
Consumer Cyclicals 20.0%
Consumer Staples 12.9%
Financial Services 19.6%
Health Care 9.9%
Technology 22.1%
Transportation 4.1%
Utilities 4.2%
* As a percentage of total common stock.
Investment Breakdown**
- --------------------------------------------------------------------------------
[THE FOLLOWING CHART WAS DEPICITED AS A PIE GRAPH IN THE PRINTED MATERIAL.]
Mortgage-Backed Securities 4.9%
Repurchase Agreement 1.1%
Corporate Bonds and Notes 7.8%
Asset-Backed Securities 0.5%
Common Stock 76.6%
U.S. Government Obligations 9.1%
** As a percentage of total investments.
- --------------------------------------------------------------------------------
8 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments January 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 76.6%
Basic Materials -- 2.4%
55,000 Alcoa, Inc. $ 4,599,375
55,937 BP Amoco PLC 4,537,889
80,000 Praxair, Inc. 2,585,000
- --------------------------------------------------------------------------------
11,722,264
- --------------------------------------------------------------------------------
Communication Services -- 3.1%
22,500 AT&T Corp. 2,041,875
140,000 Anixter International, Inc.++ 2,266,250
140,931 MCI Worldcom, Inc.++ 11,221,631
- --------------------------------------------------------------------------------
15,529,756
- --------------------------------------------------------------------------------
Consumer Cyclicals -- 15.3%
58,000 Black & Decker Corp.+ 3,074,000
43,500 Caliber Learning Network, Inc.++ 175,359
203,750 Dollar General Corp. 5,081,016
160,000 Home Depot, Inc.+ 9,660,000
242,500 Interface, Inc. 2,500,781
143,400 Kaufman & Broad Home Corp. 4,042,087
74,700 Liz Clairborne, Inc. 2,857,275
220,000 Lowe's Cos., Inc. 12,828,750
99,500 May Department Stores Co. 6,007,313
14,352 Payless Shoesource, Inc.++ 747,201
56,800 Philips Electronics NV 4,135,750
66,000 Pitney Bowes, Inc. 4,541,625
110,000 Rite Aid Corp.+ 5,403,750
219,450 Staples Inc.++ 6,281,756
101,000 Wal-Mart Corp. 8,686,000
- --------------------------------------------------------------------------------
76,022,663
- --------------------------------------------------------------------------------
Consumer Staples -- 9.9%
194,000 American Stores Co. 7,032,500
150,100 Brinker International, Inc.++ 4,127,750
107,400 Kroger Co.++ 6,819,900
139,800 Newell Co.+ 5,810,438
248,000 Sysco Corp. 6,758,000
69,800 Tribune Co. 4,462,838
26,000 Tricon Global Restaurants, Inc.++ 1,236,625
110,000 Unilever NV 8,415,000
187,000 Wendy's International, Inc. 4,371,125
- --------------------------------------------------------------------------------
49,034,176
- --------------------------------------------------------------------------------
Financial Services -- 15.0%
135,000 Ace Ltd. 3,780,000
141,094 Allstate Corp. 5,299,843
55,000 American Express Co. 5,658,125
41,400 American International Group, Inc. 4,261,613
132,000 Associates First Capital Corp. 5,354,250
82,941 BankAmerica Corp. 5,546,679
70,000 Bank of Boston Corp. 2,585,625
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) January 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Financial Services -- 15.0% (continued)
60,000 C.I.T. Group, Inc. $ 1,912,500
136,576 Chase Manhattan Corp. 10,507,816
125,200 Freddie Mac 7,762,400
50,000 Hartford Financial Services, Inc. 2,596,875
75,000 IndyMac Mortgage Holdings, Inc. 904,687
48,200 Lincoln National Corp. 4,015,663
77,000 Provident Cos., Inc. 3,301,375
70,800 St. Paul Cos., Inc. 2,079,750
72,000 Transamerica Corp. 4,032,000
108,864 Washington Mutual, Inc.+ 4,572,288
- --------------------------------------------------------------------------------
74,171,489
- --------------------------------------------------------------------------------
Health Care -- 7.6%
83,000 Amgen, Inc.++ 10,675,875
42,800 C.R. Bard, Inc. 2,166,750
68,000 Johnson & Johnson 5,780,000
12,300 Merck & Co, Inc. 1,805,025
82,000 Mylan Laboratories, Inc.+ 2,501,000
196,000 Schering-Plough Corp. 10,682,000
190,500 Tenet Healthcare Corp.++ 3,952,875
- --------------------------------------------------------------------------------
37,563,525
- --------------------------------------------------------------------------------
Technology -- 16.9%
132,000 Automatic Data Processing 5,618,250
103,450 Cisco Systems, Inc.++ 11,453,855
220,000 Compaq Computer Corp. 10,477,500
70,000 Electronic Data Systems Corp. 3,670,625
137,000 EMC Corp.++ 14,915,875
23,000 Intel Corp. 3,241,563
62,400 International Business Machine Corp. 11,434,800
63,926 Lucent Technologies, Inc. 7,195,670
42,600 Sun Microsystems, Inc.++ 4,768,537
88,000 Xerox Corp. 10,912,000
- --------------------------------------------------------------------------------
83,688,675
- --------------------------------------------------------------------------------
Transportation -- 3.2%
132,000 Norfolk Southern Corp. 3,638,250
194,250 Southwest Airlines Co.+ 5,220,469
195,000 US Freightways Corp. 6,800,625
- --------------------------------------------------------------------------------
15,659,344
- --------------------------------------------------------------------------------
Utilities -- 3.2%
35,000 AES Corp.++ 1,179,062
127,100 Enron Corp. 8,388,600
190,000 Williams Cos., Inc. 6,270,000
- --------------------------------------------------------------------------------
15,837,662
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $199,610,731) 379,229,554
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) January 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
U.S. GOVERNMENT OBLIGATIONS -- 9.1%
$ 8,400,000 U.S. Treasury Notes, 5.875% due 7/31/99 $ 8,451,156
1,000,000 U.S. Treasury Notes, 5.625% due 10/31/99 1,007,030
750,000 U.S. Treasury Notes, 7.125% due 2/29/00 769,117
4,400,000 U.S. Treasury Notes, 6.250% due 8/31/00 4,503,488
2,000,000 U.S. Treasury Notes, 6.250 due 10/31/01 2,082,380
3,000,000 U.S. Treasury Notes, 5.875% due 11/30/01 3,098,460
2,978,000 U.S. Treasury Notes, 6.375% due 8/15/02 3,139,765
1,000,000 U.S. Treasury Notes, 5.750% due 8/15/03 1,044,100
3,000,000 U.S. Treasury Notes, 6.500% due 10/15/06 3,326,850
1,000,000 U.S. Treasury Bonds, 7.125% due 2/15/23 1,238,480
13,800,000 U.S. Treasury Bonds, 6.000% due 2/15/26 15,136,944
5,000,000 U.S. Treasury Strip, zero coupon due 11/15/21 1,442,750
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $42,308,032) 45,240,520
================================================================================
CORPORATE BONDS AND NOTES -- 7.8%
Financial Services -- 2.3%
2,000,000 Associates Corp. of North America, Sr. Notes,
5.750% due 11/1/03 2,032,500
2,000,000 Countrywide Home Loan, Medium Term Notes,
6.380% due 10/8/02 2,022,500
1,000,000 First USA Bank, Notes, 6.375% due 10/23/00 1,023,750
2,000,000 Household Netherlands, Notes, 6.200% due 12/1/03 2,052,500
1,000,000 Merrill Lynch & Co. Inc., Notes,
6.000% due 1/15/01 1,010,000
1,000,000 Morgan Stanley Dean Witter & Co., Notes,
6.875% due 3/1/07 1,052,500
2,000,000 Pitney Bowes Credit Corp., Notes,
5.650% due 1/15/03 2,032,500
- --------------------------------------------------------------------------------
11,226,250
- --------------------------------------------------------------------------------
Industrial -- 4.5%
2,000,000 Computer Associates International, Sr. Notes,
6.375% due 4/15/05 2,007,500
2,000,000 Fred Meyer Inc., Notes, 7.375% due 3/1/05 2,142,500
2,000,000 IBM Corp., Notes, 5.375% due 2/1/09 2,005,000
1,500,000 Lucent Technologies, Inc., Notes,
7.250% due 7/15/06 1,678,125
2,000,000 Norfolk Southern Corp., Debentures,
7.800% due 5/15/27 2,375,000
2,000,000 Qwest Communications International Inc.,
Sr. Notes, 7.500% due 11/1/08 2,140,000
326,238 Southwest Airlines Co., Series 1994-A3,
8.700% due 7/1/11 362,125
2,000,000 Staples Inc., Sr. Notes, 7.125% due 8/15/07 2,100,000
2,000,000 Tenet Healthcare Corp., Sr. Notes,
8.625% due 12/1/03 2,092,500
2,000,000 Time Warner Inc., Notes, 6.950% due 1/15/28 2,147,500
2,375,000 Tricon Global Restaurants Inc., Sr. Notes,
7.450% due 5/15/05 2,487,812
1,000,000 Xerox Corp., Notes, 5.250% due 12/15/03 995,000
- --------------------------------------------------------------------------------
22,533,062
- --------------------------------------------------------------------------------
Utilities -- 1.0%
2,000,000 HNG Internorth, Inc., Notes, 9.625% due 3/15/06 2,465,000
2,000,000 MCI Worldcom Inc., Notes, 7.750% due 4/1/07 2,265,000
- --------------------------------------------------------------------------------
4,730,000
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS AND NOTES
(Cost -- $37,220,940) 38,489,312
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) January 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
ASSET-BACKED SECURITIES -- 0.5%
$ 318,891 Equity Credit Corp., Home Equity Loan Trust,
Series 1993-3, 5.150% due 9/15/08 $ 314,360
2,000,000 Sears Credit Account Master Trust, Series 95-2A,
8.100% due 6/15/04 2,057,300
125,000 Sears Credit Account Master Trust, Series 95-4,
6.250% due 1/15/03 125,074
- --------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $2,441,976) 2,496,734
================================================================================
MORTGAGE-BACKED SECURITIES -- 4.9%
6,627 Federal Home Loan Mortgage Association,
6.250% due 7/1/02 6,766
17,912 Federal Home Loan Mortgage Association,
8.500% due 12/1/02 18,999
2,000,000 Federal National Mortgage Association,
6.000% due 5/15/08 2,113,480
1,405,726 Federal National Mortgage Association,
6.000% due 2/1/11 1,411,870
4,287,678 Federal National Mortgage Association,
7.000% due 1/1/13 4,390,840
4,837,529 Federal National Mortgage Association,
6.000% due 6/1/13 4,858,670
2,500,000 Federal National Mortgage Association,
6.000% due 2/1/14 2,510,925
76,567 Federal National Mortgage Association,
8.000% due 7/1/24 79,558
8,774,639 Federal National Mortgage Association,
6.500% due 11/1/27 8,856,859
- --------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost -- $24,088,364) 24,247,967
================================================================================
REPURCHASE AGREEMENT -- 1.1%
5,311,000 Goldman, Sachs & Co., 4.710% due 2/1/99;
Proceeds at maturity -- $5,313,085;
(Fully collateralized by U.S. Treasury
Notes, 5.625% to 11.125% due 11/30/99
to 8/15/25; Market value-- $5,435,253)
(Cost-- $5,311,000) 5,311,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $310,981,043*) $495,015,087
================================================================================
++ Non-income producing security.
+ A portion of this security is on loan (Note 7).
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities January 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $310,981,043) $495,015,087
Cash 116
Collateral for securities on loan (Note 7) 29,832,270
Interest receivable 1,729,473
Receivable for Fund shares sold 1,599,228
Dividends receivable 201,549
- --------------------------------------------------------------------------------
Total Assets 528,377,723
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 7) 29,832,270
Payable for securities purchased 1,998,460
Payable for Fund shares purchased 383,331
Investment advisory fees payable 208,269
Administration fees payable 75,735
Distribution fees payable 35,818
Accrued expenses 150,084
- --------------------------------------------------------------------------------
Total Liabilities 32,683,967
- --------------------------------------------------------------------------------
Total Net Assets $495,693,756
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 19,101
Capital paid in excess of par value 297,754,663
Accumulated net realized gain from security transactions 13,885,948
Net unrealized appreciation of investments 184,034,044
- --------------------------------------------------------------------------------
Total Net Assets $495,693,756
================================================================================
Shares Outstanding:
Class A 10,873,407
------------------------------------------------------------------------------
Class B 7,634,263
------------------------------------------------------------------------------
Class L 593,713
------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 25.94
------------------------------------------------------------------------------
Class B * $ 25.96
------------------------------------------------------------------------------
Class L ** $ 26.03
------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset
value per share) $ 27.31
------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset
value per share) $ 26.29
================================================================================
* 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.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended January 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 7,059,410
Dividends 3,247,753
Less: Foreign withholding tax (37,758)
- --------------------------------------------------------------------------------
Total Investment Income 10,269,405
- --------------------------------------------------------------------------------
EXPENSES:
Distribution fees (Note 2) 2,418,788
Investment advisory fees (Note 2) 2,323,338
Administration fees (Note 2) 844,850
Shareholder and system servicing fees 470,091
Shareholder communications 120,266
Registration fees 100,606
Audit and legal 48,161
Trustees' fees 21,101
Custody 18,357
Other 18,961
- --------------------------------------------------------------------------------
Total Expenses 6,384,519
- --------------------------------------------------------------------------------
Net Investment Income 3,884,886
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 149,249,401
Cost of securities sold 128,879,546
- --------------------------------------------------------------------------------
Net Realized Gain 20,369,855
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 94,867,519
End of year 184,034,044
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 89,166,525
- --------------------------------------------------------------------------------
Net Gain on Investments 109,536,380
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 113,421,266
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended January 31,
- --------------------------------------------------------------------------------
1999 1998
================================================================================
OPERATIONS:
Net investment income $ 3,884,886 $ 7,359,457
Net realized gain 20,369,855 27,912,262
Increase in net unrealized appreciation 89,166,525 30,386,758
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 113,421,266 65,658,477
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,895,688) (8,605,756)
Net realized gains (9,770,057) (34,146,580)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (13,665,745) (42,752,336)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 107,012,876 59,780,975
Net asset value of shares issued for
reinvestment of dividends 12,933,222 40,529,174
Cost of shares reacquired (105,542,323) (126,493,481)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 14,403,775 (26,183,332)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 114,159,296 (3,277,191)
NET ASSETS:
Beginning of year 381,534,460 384,811,651
- --------------------------------------------------------------------------------
End of year* $ 495,693,756 $ 381,534,460
================================================================================
* Includes undistributed net investment
income of: -- $ 21,900
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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. The financial
statements and financial highlights for the other fund are presented in a
separate 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 for which market quotations are not available will be valued in
good faith at fair value by or under the direction of the Board of Trustees; (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; 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; (f)
interest income is recorded on an accrual basis including the amortization of
premium and the accretion of discount, where applicable; (g) gains and losses on
the sale of securities are calculated by using the specific identification
method; (h) dividends and distributions to shareholders are recorded on the
ex-dividend date; (i) 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; (j) direct expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets; (k)
the Fund intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; (l) 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, 1999, 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 (m) 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.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSBC Fund Management Inc. ("SSBC"), formerly known as Mutual Management Corp., a
subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), acts as investment
adviser to the Fund. The Fund pays SSBC an investment advisory fee calculated at
an annual rate of 0.55% of the average daily net assets. This fee is calculated
daily and paid monthly.
SSBC 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.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date, Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group. For the year
ended January 31, 1999, SSB 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 year ended January 31, 1999, SSB received sales charges of $263,000 and
$50,000 on sales of the Fund's Class A and Class L shares, respectively.
In addition, CDSCs paid to SSB were:
Class B Class L
================================================================================
CDSC $115,000 $4,000
================================================================================
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 year ended
January 31, 1999, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $601,399 $1,723,843 $93,546
================================================================================
All officers and one Trustee of the Trust are employees of SSB.
3. Investments
During the year ended January 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $162,340,191
- --------------------------------------------------------------------------------
Sales 149,249,401
================================================================================
At January 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 187,577,087
Gross unrealized depreciation (3,543,043)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 184,034,044
================================================================================
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
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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. 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 January 31, 1999, 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 January 31, 1999, 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 year ended January 31, 1999, the Fund did not write any call or put
options.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (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 January 31, 1999, the Fund had loaned common stocks having a value of
$29,040,257 and holds the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank Brussels Lambert, 4.843% due 2/1/99 $13,655,722
Bank of Montreal, 4.812% due 2/1/99 2,769,793
Deutsche Bank, 4.843% due 2/1/99 10,059,831
Societe Generale, 4.750% due 2/1/99 3,346,924
- --------------------------------------------------------------------------------
Total $29,832,270
================================================================================
Interest income earned by the Fund from securities loaned for the year ended
January 31, 1999 was $53,556.
8. Shares of Beneficial Interest
At January 31, 1999, the Trust had an unlimited number of shares of beneficial
interest authorized with a par value of $0.001 per share. The Fund has the
ability to issue multiple classes of shares. Each share of a class represents an
identical interest and has the same rights, except that each class bears certain
direct expenses, 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 January 31, 1999, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $186,667,041 $98,646,911 $12,459,812
================================================================================
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
Year Ended Year Ended
January 31, 1999 January 31, 1998
---------------------- ----------------------
Shares Amount Shares Amount
================================================================================
Class A
Shares sold 2,805,213 $(64,000,378) 1,563,683 $(31,928,326)
Shares issued on
reinvestment 345,011 7,960,380 1,069,265 21,700,037
Shares reaquired (2,099,048) (47,939,818) (2,007,566) (40,819,586)
- --------------------------------------------------------------------------------
Net Increase 1,051,176 $(24,020,940) 625,382 $(12,808,777)
================================================================================
Class B
Shares sold 1,490,823 $(34,432,215) 1,152,327 $(23,614,622)
Shares issued on
reinvestment 201,924 4,688,797 891,901 18,139,669
Shares reaquired (2,401,577) (54,426,551) (4,134,755) (83,754,507)
- --------------------------------------------------------------------------------
Net Decrease (708,830) $(15,305,539) (2,090,527) $(42,000,216)
================================================================================
Class L+
Shares sold 364,743 $ (8,580,283) 203,584 $ (4,187,186)
Shares issued on
reinvestment 12,059 280,988 32,848 670,182
Shares reaquired (129,984) (2,962,207) (95,115) (1,919,388)
- --------------------------------------------------------------------------------
Net Increase 246,818 $ (5,899,064) 141,317 $ (2,937,980)
================================================================================
Class Y++
Shares sold -- $ -- 2,360 $ (50,841)
Shares issued on
reinvestment 131 3,057 948 19,286
Shares reaquired (10,819) (213,747) -- --
- --------------------------------------------------------------------------------
Net Increase
(Decrease) (10,688) $ (210,690) 3,308 $ (70,127)
================================================================================
+ On June 12, 1998, Class C shares were renamed Class L shares.
++ As of January 31, 1999, all Class Y shares were fully redeemed.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended January 31:
Class A Shares 1999(1) 1998 1997 1996 1995
================================================================================
Net Asset Value,
Beginning of Year $ 20.57 $ 19.36 $ 19.00 $ 15.91 $ 17.72
- --------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment
income 0.29 0.48 0.57 0.61 0.57
Net realized and
unrealized gain (loss) 5.87 3.27 1.71 3.52 (1.25)
- --------------------------------------------------------------------------------
Total Income (Loss)
From Operations 6.16 3.75 2.28 4.13 (0.68)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment
income (0.26) (0.55) (0.60) (0.52) (0.47)
Net realized gains (0.53) (1.99) (1.32) (0.52) (0.66)
- --------------------------------------------------------------------------------
Total Distributions (0.79) (2.54) (1.92) (1.04) (1.13)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Year $ 25.94 $ 20.57 $ 19.36 $ 19.00 $ 15.91
- --------------------------------------------------------------------------------
Total Return 30.47% 19.89% 12.41% 26.47% (3.82)%
- --------------------------------------------------------------------------------
Net Assets, End
of Year (000s) $282,060 $202,026 $178,072 $175,007 $159,247
- --------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 1.19% 1.19% 1.28% 1.21% 1.33%
Net investment
income 1.23 2.34 2.98 3.10 2.89
- --------------------------------------------------------------------------------
Portfolio Turnover
Rate 36% 62% 68% 81% 103%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended January 31:
Class B Shares 1999(1) 1998 1997 1996 1995
================================================================================
Net Asset Value,
Beginning of Year $20.63 $19.42 $19.05 $15.97 $17.79
- --------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment
income 0.11 0.33 0.43 0.49 0.39
Net realized and
unrealized gain
(loss) 5.89 3.27 1.71 3.53 (1.20)
- --------------------------------------------------------------------------------
Total Income (Loss)
From Operations 6.00 3.60 2.14 4.02 (0.81)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment
income (0.14) (0.40) (0.45) (0.42) (0.35)
Net realized gains (0.53) (1.99) (1.32) (0.52) (0.66)
- --------------------------------------------------------------------------------
Total Distributions (0.67) (2.39) (1.77) (0.94) (1.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Year $25.96 $20.63 $19.42 $19.05 $15.97
- --------------------------------------------------------------------------------
Total Return 29.50% 18.95% 11.60% 25.58% (4.54)%
- --------------------------------------------------------------------------------
Net Assets,
End of Year (000s) $198,181 $172,115 $202,597 $226,360 $216,035
- --------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 1.94% 1.95% 2.03% 1.94% 2.00%
Net investment
income 0.49 1.62 2.23 2.37 2.21
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 36% 62% 68% 81% 103%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended January 31:
Class L Shares(1) 1999(2) 1998 1997 1996 1995(3)
================================================================================
Net Asset Value,
Beginning of Year $20.68 $19.46 $19.08 $15.97 $17.79
- --------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment
income 0.11 0.34 0.44 0.45 0.38
Net realized and
unrealized gain
(loss) 5.91 3.27 1.71 3.60 (1.19)
- --------------------------------------------------------------------------------
Total Income (Loss)
From Operations 6.02 3.61 2.15 4.05 (0.81)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment
income (0.14) (0.40) (0.45) (0.42) (0.35)
Net realized gains (0.53) (1.99) (1.32) (0.52) (0.66)
- --------------------------------------------------------------------------------
Total Distributions (0.67) (2.39) (1.77) (0.94) (1.01)
- --------------------------------------------------------------------------------
Net Asset Value,
End of Year $26.03 $20.68 $19.46 $19.08 $15.97
- --------------------------------------------------------------------------------
Total Return 29.53% 18.97% 11.65% 25.77% (4.54)%
- --------------------------------------------------------------------------------
Net Assets,
End of Year (000s) $15,453 $7,173 $4,000 $3,396 $1,972
- --------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses 1.92% 1.93% 2.01% 1.94% 1.98%
Net investment
income 0.46 1.54 2.25 2.31 2.24
- --------------------------------------------------------------------------------
Portfolio Turnover
Rate 36% 62% 68% 81% 103%
================================================================================
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) On November 7, 1994, the former Class D shares were renamed Class C
shares.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of
Smith Barney Equity Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Concert Social Awareness Fund of Smith Barney
Equity Funds as of January 31, 1999, the related statement of operations for the
year then ended, the statements of changes in net assets for each of the years
in the two-year period then ended and the financial highlights for each of the
years in the four-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the year
ended January 31, 1995 were audited by other auditors whose report thereon,
dated March 22, 1995, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
January 31, 1999, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Concert Social Awareness Fund of Smith Barney Equity Funds as of January 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year period then ended in
the conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
March 8, 1999
- --------------------------------------------------------------------------------
24 1999 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 for all Funds; 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:
Shares Voted Percentage of Shares Voted Percentage of
Name of Trustees For Shares Voted Against Shares Voted
================================================================================
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
================================================================================
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.*
Percentage
Shares Voted Percentage of Shares Voted Percentage of Shares of Shares
For Shares Voted Against Shares Voted Abstained Abstained
================================================================================
8,474,248.789 87.652% 290,975.914 3.010% 902,818.435 9.338%
================================================================================
* Broker non-votes constituted less than one percent of voted shares.
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
January 31, 1999:
o A corporate dividends received deduction of 78.94%.
o Total long-term capital gain distributions paid of $9,770,057.
A total of 25.75% of the ordinary dividends paid by the Fund from net investment
income are derived from Federal obligations and may be exempt from taxation at
the state level.
- --------------------------------------------------------------------------------
Concert Social Awareness Fund 25
<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
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Adviser
SSBC Fund Management Inc.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of 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.
SALOMON SMITH BARNEY
- ---------------------------------------------
A member of citigroup [LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney, Inc.
Concert Social Awareness Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
[UNION LABEL] 341
[RECYCLE LOGO] Because we care about the environment, this annual report has
been printed with soy-based inks on 20% post-consumer recycled
paper, deinked using a non-chlorine bleach process.
FD0912 3/99
