<PAGE>
SEMI-ANNUAL
REPORT
SMITH BARNEY
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
........................................
MAY 31, 1995
[LOGO OF SMITH BARNEY MUTUAL FUNDS APPEARS HERE]
<PAGE>
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Dear Shareholder:
We are pleased to provide you with the Smith Barney Principal
Return Fund: Zeros Plus Emerging Growth Series 2000 semi-annual
report for the six months ended May 31, 1995. For the most
recent six-month period, the Fund's total return advanced
10.45%. This compared with an increase of 19.23% for the
Standard & Poor's 500 Stock Index, an unmanaged index generally
representative of the U.S. stock market. The Value Line Index,
an unmanaged index which tracks the performance of 1,700 common
stocks and which represents a better measure of performance for
the kinds of securities held in the Fund, advanced 10.61% in the
same six-month period. The price of our Zero-Coupon U.S.
Treasury Notes, due February 15, 2000, increased 12.40% in this
period while emerging growth equities contributed 7.80% towards
the total return of the Fund. It should be pointed out that in
the six months ended November 30, 1994, our emerging growth
equities contributed in excess of 7.00% towards the total return
of the Fund compared with an actual decline of 3.00% for the Value Line
Index. Approximately 60% of the net assets of the Fund is invested in
Zero-Coupon U.S. Treasury Notes maturing in the year 2000. The balance is
invested in emerging growth stocks.
In our November 1994 annual report, we stated that "we have been surprised by
the magnitude of the backup in long-term interest rates during the past 12
months but continue to believe that higher short-term interest rates, combined
with the depressing effects of the Clinton Administration's tax hike, will lead
to a slowdown in the U.S. economy and eventually lead to a return to a more
neutral monetary policy by the Federal Reserve." Since monetary policy
typically operates with a nine-month lag, it was not surprising to see evidence
of an economic slowdown appear in the first quarter of 1995. Many commentators
are openly expressing fears that the current slowdown may intensify into an
outright recession. We strongly disagree with this stance. The dramatic decline
in long-term interest rates over the past nine months should begin to serve as
an economic catalyst later in 1995. Combined with the stimulatory effects on
our export business from the lower value of the U.S. dollar, we believe that
the economy will regain sufficient strength later in the year to prevent a
material hit to corporate profits from the current slowdown.
Following the January receipt of $117 per share for 38.25% of our Chiron shares
in accordance with the Ciba Geigy strategic partnership, we redeployed some of
the proceeds back into the innovative biotechnology company at roughly half
that price. We believe that Chiron has become an even stronger company than be-
fore the deal with its product pipeline. Recent disclosure of positive clinical
results on a drug being co-developed for the treatment of Lou Gehrig's disease
is just one such example.
1
<PAGE>
Two companies which continue to see strong growth from the burgeoning personal
computer (PC) industry include VLSI, a leading supplier of semiconductors used
in a variety of computer and telecommunications applications, and Quantum
Corporation, the leading unit supplier of disc drives sold to PC companies. Two
of our strongest stocks last year, C-COR Electronics and California Microwave,
have declined during this fiscal half year, although their backlogs and
prospects are quite strong. We expect a good recovery in their respective
shares in the coming months.
Subsequent to May 31, the end of our fiscal half year, IBM announced that it
had agreed to acquire Lotus Development, one of our holdings, for $64 a share.
We sold our shares and realized our profits in June, following that announce-
ment. Lotus and Chiron were both under-appreciated by Wall Street yet the value
of their shares was increased to a substantial premium by strategic buyers.
We are quite pleased to report that according to Morningstar, Inc., the Smith
Barney Principal Return Fund: Zeros Plus Emerging Growth Series 2000 was the
number-one performer among 257 balanced funds for the year ended June 30, 1995
and the number-eight performer among 99 balanced funds since inception (August
30, 1991). These rankings are based on the total returns for the life-of-fund
and one-year periods ended June 30, 1995 and include the effect of management
fees and expenses but do not reflect sales charges. 15.94% and 9.10% are the
one-year and life-of-fund average annual total returns, respectively, for the
period ended June 30, 1995, including sales charges. Please remember that past
performance is no guarantee of future results.
We hope to build on this record for the next five years.
Sincerely,
/s/ Heath B. McLendon /s/ Richard A. Freeman
Heath B. McLendon Richard A. Freeman
Chairman of the Board Vice President and
Investment Officer
July 28, 1995
2
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Portfolio Highlights (unaudited) May 31, 1995
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
U.S. Treasury Note and Net Other
Assets and Liabilities 58.4%
Common Stocks 41.6%
</TABLE>
Top Ten Common Stock Holdings
<TABLE>
<CAPTION>
Percentage of
Company Net Assets
-------------------------------------------------------------
<S> <C>
C-COR Electronics, Inc. 6.0%
California Microwave, Inc. 4.6
Tech-Sym Corporation 3.7
VLSI Technology, Inc. 3.5
Chiron Corporation 3.3
Genentech, Inc. 3.1
Vertex Pharmaceuticals, Inc. 3.0
Genzyme Corporation 3.0
Quantum Corporation 2.9
Tyco International Ltd. 2.4
</TABLE>
3
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Portfolio of Investments (unaudited) May 31, 1995
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
--------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 41.6%
Health Care -- 14.1%
47,874 Chiron Corporation+ $ 2,477,479
50,000 Cor Therapeutics, Inc.+ 775,000
45,000 Fischer Imaging Corporation+ 236,250
48,000 Genentech, Inc.+ 2,328,000
60,000 Genzyme Corporation+ 2,220,000
8,505 Genzyme Corporation Tissue Repair 55,283
25,000 IDEC Pharmaceuticals Corporation+ 112,500
145,000 Vertex Pharmaceuticals, Inc.+ 2,283,750
--------------------------------------------------------------
10,488,262
--------------------------------------------------------------
Technology -- 12.7%
46,000 Lotus Development Corporation+ 1,403,000
100,000 Quantum Corporation+ 2,150,000
50,000 Tandem Computers, Inc.+ 662,500
107,000 Tech-Sym Corporation+ 2,755,250
100,000 VLSI Technology, Inc.+ 2,606,250
--------------------------------------------------------------
9,577,000
--------------------------------------------------------------
Telecommunications -- 10.6%
109,500 California Microwave, Inc.+ 3,449,250
177,050 C-COR Electronics, Inc.+ 4,470,513
--------------------------------------------------------------
7,919,763
--------------------------------------------------------------
Capital Goods -- 2.4%
33,000 Tyco International Ltd. 1,786,125
--------------------------------------------------------------
Basic Industries -- 1.8%
53,000 Wellman, Inc. 1,331,625
--------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $20,870,179) 31,102,775
--------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Portfolio of Investments (unaudited) (continued) May 31, 1995
<TABLE>
<CAPTION>
Market Value
Face Value (Note 1)
---------------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY NOTES -- 58.7% (Cost $40,030,280)
$58,000,000 U.S. Treasury Notes-Strips,
Zero Coupon++ due 2/15/00 $43,814,940
---------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $60,900,459*) 100.3% 74,917,715
OTHER ASSETS AND LIABILITIES (Net) (0.3) (260,548)
---------------------------------------------------------------------
NET ASSETS 100.0% $74,657,167
---------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
++ Effective yield is 5.940%.
See Notes to Financial Statements.
5
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Statement of Assets and Liabilities (unaudited) May 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $60,900,459)(Note 1)
See accompanying schedule $74,917,715
Cash 95,076
Receivable for investment securities sold 78,567
Unamortized organization costs (Note 5) 32,486
Dividends receivable 3,710
------------------------------------------------------------------------
Total Assets 75,127,554
------------------------------------------------------------------------
LIABILITIES:
Notes payable (Note 6) $300,077
Payable for Fund shares redeemed 81,757
Investment advisory fee payable (Note 2) 25,242
Shareholder servicing fee payable (Note 2) 15,225
Administration fee payable (Note 2) 12,621
Transfer agent fees payable (Note 2) 8,800
Custodian fees payable (Note 2) 4,000
Accrued expenses and other payables 22,665
------------------------------------------------------------------------
Total Liabilities 470,387
------------------------------------------------------------------------
NET ASSETS $74,657,167
------------------------------------------------------------------------
NET ASSETS consist of:
Undistributed net investment income $ 1,000,659
Accumulated net realized gain on investments sold 645,079
Unrealized appreciation of investments 14,017,256
Par value 8,576
Paid-in capital in excess of par value 58,985,597
------------------------------------------------------------------------
Total Net Assets $74,657,167
------------------------------------------------------------------------
NET ASSET VALUE and redemption price per share
($74,657,167 / 8,576,060 shares of beneficial interest
outstanding) $8.71
------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Statement of Operations (unaudited)
For the six months ended May 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $1,645,106
Dividends 13,490
-----------------------------------------------------------------------------
Total Investment Income 1,658,596
-----------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) $147,332
Shareholder servicing fee (Note 2) 92,083
Administration fee (Note 2) 73,666
Transfer agent fees (Note 2) 50,916
Legal and audit fees 16,396
Custodian fees (Note 2) 11,565
Amortization of organization costs (Note 5) 12,742
Trustees' fees and expenses (Note 2) 5,110
Other 19,180
-----------------------------------------------------------------------------
Total expenses before interest expense 428,990
Interest expense (Note 6) 13,341
-----------------------------------------------------------------------------
Total Expenses 442,331
-----------------------------------------------------------------------------
NET INVESTMENT INCOME 1,216,265
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(Notes 1 and 3):
Net realized gain on investments sold during the period 2,103,994
Net unrealized appreciation of investments during the
period 3,980,105
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 6,084,099
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,300,364
-----------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year
5/31/95 Ended
(unaudited) 11/30/94
<S> <C> <C>
Net investment income $ 1,216,265 $ 2,726,548
Net realized gain/(loss) on investments sold during
the period 2,103,994 (952,291)
Net unrealized appreciation/(depreciation) of
investments during the period 3,980,105 (2,235,398)
-------------------------------------------------------------------------------
Net increase/(decrease) in net assets resulting
from operations 7,300,364 (461,141)
Distributions to shareholders from:
Net investment income (2,464,055) (3,638,777)
Net realized gain on investments -- (5,302,121)
Net decrease in net assets from Fund share
transactions (Note 4) (4,930,255) (12,712,032)
-------------------------------------------------------------------------------
Net decrease in net assets (93,946) (22,114,071)
NET ASSETS:
Beginning of period 74,751,113 96,865,184
-------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $1,000,659 and $2,248,449,
respectively) $74,657,167 $74,751,113
-------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Financial Highlights
For a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Period
5/31/95 Ended Ended Ended Ended
(unaudited) 11/30/94 11/30/93++ 11/30/92++ 11/30/91*
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 8.15 $ 9.00 $ 8.16 $ 7.57 $ 7.60
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14 0.27 0.26 0.26 0.07
Net realized and
unrealized gain/ (loss)
on investments 0.69 (0.28) 0.96 0.43 (0.10)
-------------------------------------------------------------------------------------
Total from investment
operations 0.83 (0.01) 1.22 0.69 (0.03)
-------------------------------------------------------------------------------------
Less distributions:
Distributions from net
investment income (0.27) (0.34) (0.29) (0.10) --
Distributions from net
realized
capital gains -- (0.50) (0.09) -- --
-------------------------------------------------------------------------------------
Total distributions (0.27) (0.84) (0.38) (0.10) 0.00
-------------------------------------------------------------------------------------
Net Asset Value, end of
period $ 8.71 $ 8.15 $ 9.00 $ 8.16 $ 7.57
-------------------------------------------------------------------------------------
Total return+++ 10.45% (0.20)% 15.72% 9.15% (0.39)%
-------------------------------------------------------------------------------------
Ratios/supplemental
data:
Net assets, end of
period (in 000's) $74,657 $74,751 $96,865 $125,327 $157,425
Ratio of operating
expenses to average net
assets 1.16%+** 1.15% 1.10% 1.15%+ 1.18%**
Ratio of net investment
income to average net
assets 3.30%** 3.27% 3.12% 3.31% 3.56%**
Portfolio turnover rate 2% 1% 0% 0% 2%
-------------------------------------------------------------------------------------
</TABLE>
*The Fund commenced operations on August 30, 1991.
**Annualized.
+The operating expense ratio excludes interest expense. The operating expense
ratio including interest expense for the six months ended May 31, 1995 and
the year ended November 30, 1992 would have been 1.20% and 1.16%, respective-
ly.
++The per share amounts have been calculated using the monthly average shares
method, which more appropriately presents per share data for this year since
use of the undistributed net investment income method did not accord with re-
sults of operations.
+++Total return represents aggregate total return for the periods indicated.
See Notes to Financial Statements.
9
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
Smith Barney Principal Return Fund (the "Trust") was organized on October 18,
1988, under the laws of the Commonwealth of Massachusetts as a "Massachusetts
business trust." The Trust is a diversified, open-end management investment
company registered with the Securities and Exchange Commission under the In-
vestment Company Act of 1940, as amended. The Trust consists of four series,
the Zeros and Appreciation Series 1996, which commenced operations on January
16, 1989, the Zeros and Appreciation Series 1998 which commenced operations on
January 25, 1991, the Zeros Plus Emerging Growth Series 2000 which commenced
operations on August 30, 1991 and the Security and Growth Fund, which commenced
operations on March 30, 1995. The Zeros Plus Emerging Growth Series 2000 (the
"Fund") expects to terminate operations on February 28, 2000. The following is
a summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements.
Portfolio valuation: Listed securities traded on a national securities exchange
are valued at the last reported sales price; securities traded in the over-the-
counter market and listed securities for which no sale was reported are valued
at the bid price or, in the absence of a recent bid price, at the bid equiva-
lent as obtained from one or more of the major market makers in the securities.
Investments in U.S. government securities (other than short-term securities)
are valued at the quoted bid price in the over-the-counter market. Short-term
investments that mature in 60 days or less are valued at amortized cost when-
ever the Board of Trustees determines that amortized cost reflects the fair
value of those investments. Investments in securities for which market quota-
tions are not available are valued at fair value as determined in good faith by
the Board of Trustees.
Repurchase agreements: The Fund may engage in repurchase agreement transac-
tions. Under the terms of a typical repurchase agreement, the Fund takes pos-
session of an underlying debt obligation subject to an obligation of the seller
to repurchase, and the Fund to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral held
by the Fund is at least equal at all times to the total amount of the repur-
chase obligations, including interest. In the event of counterparty default,
the Fund has the right to use the collateral to offset losses incurred. There
is potential loss to the Fund in the event that the
10
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Notes to Financial Statements (unaudited) (continued)
Fund is delayed or prevented from exercising its rights to dispose of the col-
lateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert its
rights. The Fund's investment adviser, acting under the supervision of the
Trust's Board of Trustees, reviews the value of the collateral and the credit-
worthiness of those banks and dealers with which the Fund enters into repur-
chase agreements to evaluate potential risks.
Securities transactions and investment income: Securities transactions are re-
corded as of the trade date. Realized gains and losses from securities transac-
tions are recorded on the identified cost basis. Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the accrual basis (primar-
ily from accretion of U.S. Treasury Notes).
Dividends and distributions to shareholders: Dividends from net investment in-
come of the Fund and distributions of net realized capital gains of the Fund,
if any, will be distributed annually after the close of the fiscal year in
which they are earned. In addition, in order to avoid the application of a
4.00% nondeductible excise tax on certain undistributed amounts of ordinary in-
come and capital gains, the Fund may make an additional distribution of any un-
distributed ordinary income or capital gains shortly before December 31st of
each year, and expects to pay any other dividends and distributions as are nec-
essary to avoid the application of this tax. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These differ-
ences are primarily due to differing treatments of income and gains on various
investment securities held by the Fund, timing differences and differing char-
acterization of distributions made by the Fund as a whole.
Federal income taxes: It is the Fund's policy to comply with the requirements
of the Internal Revenue Code of 1986, as amended, applicable to regulated in-
vestment companies and to distribute substantially all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is required.
11
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Notes to Financial Statements (unaudited) (continued)
2. Investment Advisory Fee, Administration Fee and Other Transactions
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with Smith Barney Mutual Funds Management Inc. (formerly known as
Smith Barney Advisers, Inc.) ("SBMFM"). SBMFM is a wholly owned subsidiary of
Smith Barney Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary
of Travelers Group Inc. Under the Advisory Agreement, the Fund pays a monthly
fee at the annual rate of 0.40% of the value of its average daily net assets.
The Trust has also entered into an administration agreement (the "Administra-
tion Agreement") with SBMFM. Under the Administration Agreement, the Fund pays
a monthly fee at the annual rate of 0.20% of the value of its average daily net
assets.
The Fund and SBMFM have also entered into a sub-administration agreement (the
"Sub-Administration Agreement") with The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Under the Sub-Administration Agreement, SBMFM pays Boston Advisors
a portion of its administration fee at a rate agreed upon from time to time be-
tween SBMFM and Boston Advisors.
Smith Barney Inc. ("Smith Barney") serves as shareholder servicing agent and is
paid an annual fee at the rate of 0.25% of the value of the Fund's average
daily net assets for certain activities not provided by the Fund's transfer
agent.
No officer, director or employee of Smith Barney or any of its affiliates re-
ceives any compensation from the Trust for serving as a Trustee or officer of
the Trust. The Trust pays each Trustee who is not an officer, director or em-
ployee of Smith Barney or any of its affiliates $2,000 per annum plus $500 per
meeting attended and reimburses each Trustee for travel and out-of-pocket ex-
penses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary of
Mellon, serves as the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, serves as the Trust's transfer agent.
12
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Notes to Financial Statements (unaudited) (continued)
3. Securities Transactions
Cost of purchases and proceeds from sales of securities, excluding U.S. govern-
ment securities and short-term investments, aggregated $1,128,867 and
$4,764,710, respectively, for the six months ended May 31, 1995. There were no
purchases of U.S. government securities for the six months ended May 31, 1995.
Proceeds from sales of long-term U.S. government securities aggregated
$4,190,370 for the six months ended May 31, 1995.
At May 31, 1995, aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost was $15,358,991, and aggregate
gross unrealized depreciation for all securities in which there was an excess
of tax cost over value was $1,341,735.
4. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest of the
Fund with a par value of $.001 per share. The Fund, the Zeros and Appreciation
Series 1996, the Zeros and Appreciation Series 1998 and the Security and Growth
Fund each constitutes a sub-trust under the Master Trust Agreement. Changes in
shares of beneficial interest of the Fund were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
5/31/95 11/30/94
Shares Amount Shares Amount
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Issued as reinvestment of
dividends 297,516 $ 2,418,809 1,066,066 $ 8,852,528
Redeemed (890,492) (7,349,064) (2,662,785) (21,564,560)
---------------------------------------------------------------------------
Net decrease (592,976) $(4,930,255) (1,596,719) $(12,712,032)
---------------------------------------------------------------------------
</TABLE>
Shares of the Fund are not currently being offered for sale to new investors,
although the Fund, upon at least 30 days' notice to shareholders, may commence
a continuous offering if the Trust's Board of Trustees determines it to be in
the best interests of the Fund and its shareholders.
13
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Notes to Financial Statements (unaudited) (continued)
5. Organization Costs
The Fund bears all costs in connection with its organization including the fees
and expenses of registering and qualifying its shares for distribution under
Federal and state securities regulations. All such costs are being amortized on
the straight-line method over a period of five years from the commencement of
operations of the Fund. In the event that any of the initial shares of the Fund
owned by Smith Barney are redeemed during such amortization period, the Fund
will be reimbursed for any unamortized costs in the same proportion as the num-
ber of shares redeemed bears to the number of initial shares outstanding at the
time of redemption.
6. Notes Payable
The Fund and several affiliated entities participate in a $50 million line of
credit provided by Bank of America under an Amended and Restated Line of Credit
Agreement (the "Agreement") dated April 30, 1992 and renewed effective May 31,
1994, primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities. Under this Agreement the Fund may borrow up to the lesser of $25
million or 25% of its net assets. However, pursuant to the Fund's prospectus
the Fund may borrow up to 33 1/3% of its total assets. Under the terms of the
Agreement, as amended, the Fund and the other affiliated entities are charged
an aggregate commitment fee of $100,000 which is allocated equally among each
of the participants. The Agreement requires, among other provisions, each par-
ticipating fund to maintain a ratio of net assets (not including funds borrowed
pursuant to the Agreement) to aggregate amount of indebtedness pursuant to the
Agreement of no less than 5 to 1. During the six months ended May 31, 1995, the
Fund had an average outstanding daily balance of $415,385 with interest rates
ranging from 5.6875% to 7.1250%. Interest expense totalled $13,341 for the six
months ended May 31, 1995. At May 31, 1995, the Fund had outstanding borrowings
of $300,077 under this Agreement.
14
<PAGE>
Smith Barney
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Participants
Distributor Counsel
Smith Barney Inc. Willkie Farr & Gallagher
388 Greenwich Street 153 East 53rd Street
New York, New York 10013 New York, New York 10022
Investment Adviser Transfer Agent
Smith Barney Mutual Funds The Shareholder Services Group, Inc.
Management Inc. Exchange Place
388 Greenwich Street Boston, Massachusetts 02109
New York, New York 10013
Administrator Custodian
Smith Barney Mutual Funds Boston Safe Deposit and
Management Inc. Trust Company
388 Greenwich Street One Boston Place
New York, New York 10013 Boston, Massachusetts 02108
Sub-Administrator
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
15
<PAGE>
Smith Barney Principal Return Fund
Zeros Plus Emerging Growth Series 2000
EDGAR DESCRIPTIONS
Description of Pie Charts in Shareholder Report
Portfolio Allocation Breakdown
Pie chart depicting the allocation of the Principal Return Fund (Zeros Plus
Emerging Growth Series 2000) investment securities held at May 31, 1995 by
Portfolio Allocation classification. The pie is broken in pieces representing
Portfolio Allocation the following percentages:
Portfolio Allocation Percentage
U.S. Treasury Notes and Net Other
Assets and Liabilities 58.4%
Common Stocks 41.6%
<PAGE>
Principal Return Fund
Zeros Plus Emerging Growth Series 2000
Trustees
Paul R. Ades
Herbert Barg
Alger B. Chapman
Dwight B. Crane
Frank Hubbard
Allan R. Johnson
Heath B. McLendon
Ken Miller
John F. White
Officers
Heath B. McLendon
Chairman of the Board
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President and Treasurer
Richard A. Freeman
Vice President and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
[RECYCLED PAPER LOGO APPEARS HERE]
[LOGO OF SMITH BARNEY APPEARS HERE]
This report is submitted for the general information of the shareholders of
Smith Barney Principal Return Fund: Zeros Plus Emerging Growth Series 2000. It
is not a prospectus, circular or representation intended for use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
Fund 141
FD 2228 7/95
