<PAGE>
[GRAPHIC]
SMALL BOX ABOVE FUND NAME SHOWING
A ROUND, EAGLE SYMBOL LAYING ON
THE AMERICAN FLAG.
SEMI- Smith Barney Shearson
ANNUAL LIMITED
REPORT MATURITY
TREASURY
FUND
.......................................
MAY 31, 1994
[LOGO]
<PAGE>
Limited Maturity Treasury Fund
DEAR SHAREHOLDER:
We are pleased to provide you with the Semi-Annual
Report
which includes the portfolio of investments for Smith
Barney
Shearson Limited Maturity Treasury Fund for the six-
month
period ended May 31, 1994. During the past six months the Fund
paid
income distributions of $0.16 per share and a capital gains
distribution of $0.33, which somewhat offset the decline in the
Fund's
net asset value to $7.32 from $8.14 per share but nonetheless
resulted
in a negative total return of 4.29%.
THE ECONOMIC AND INVESTMENT ENVIRONMENT
The economic and investment environment of this fiscal year is
shaping
up to be quite different from that of last year. When we last
reported
to you in November at the close of the Fund's 1993 fiscal year,
the
economy appeared to be growing and interest rates were rebounding
after touching bottom earlier in 1993. Nevertheless, doubt as to
the
sustainability of these changes quite justifiably lingered in the
minds of many investors because
of the uneven growth and false starts the economy had exhibited in previous
months. During the first half of the current fiscal year it became clear
that
the economy's strong growth was both real and sustainable. Historically low
mortgage rates encouraged a record number of homeowners to refinance
existing
mortgages, which increased their disposable income. After a long period of
financial anxiety and stifled spending, this additional money was a welcome
relief and quickly reflected in higher consumer spending. Since consumer
spending accounts for approximately two-thirds of GDP (Gross Domestic
Product,
which is the broadest available measure of aggregate economic activity),
the
growth rate of the economy surged in the fourth quarter of 1993.
After maintaining an accommodative policy and keeping interest rates low to
encourage economic growth, on February 4, 1994 the Federal Reserve signaled
an
important shift in direction and tightened monetary policy for the first
time
since 1989. They subsequently increased the Federal funds rate (an
important
indicator of the direction of short-term interest rates) three more times,
most
recently on May 17, 1994 and also increased the discount rate.
The goal of the Federal Reserve's actions was to control the level of
growth and
avoid rising inflation. The textbook result of an increase in short-term
rates
is slower economic growth and low long-term interest rates. However,
1
<PAGE>
at the time there were many leveraged investments in the marketplace based
on
short-term interest rates staying low. As short-term interest rates rose,
investors met liquidity demands by selling U.S. Treasury securities, which
caused an unintended and unwarranted rise in interest rates across the
maturity
spectrum. It is evident from this table that maturities of two and ten
years
experienced the strongest rise in rates.
INTEREST RATES ON TREASURIES ROSE ACROSS THE MATURITY SPECTRUM IN RESPONSE
TO
FEDERAL RESERVE ACTIVITY
<TABLE>
<CAPTION>
ONE YEAR AGO THE MARKET LOW
CURRENT RATES
6/1/93 10/20/93
5/31/94
<S> <C> <C> <C>
--------------------------------------------------------------------------
- --------
3 month 3.10% 3.10%
4.25%
2 year 4.13 3.81
5.98
5 year 5.26 4.63
6.76
10 year 6.05 5.24
7.15
30 year 6.88 5.82
7.43
</TABLE>
The intermediate-term market continues to be under some real pressure
because it
is more directly impacted by Federal Reserve activity and the movement of
short-term rates.
PORTFOLIO STRATEGY
It's clear to us from the Federal Reserve's actions of the last few months
that
they will continue to raise interest rates as long as they see inflation
building into the economy. The real issue is whether or not the economy
reaches
the equilibrium state of growth with low inflation that the Federal Reserve
is
striving for. Because of this uncertainty we have adopted a neutral
investment
stance and are keeping the Fund's average maturity at three years. Should
we
become very negative on the long-term prospects for the Treasury market, we
would shorten the Fund's average maturity to the one-and-a-half year range;
conversely, we would lengthen the Fund's average maturity to four-and-a-
half to
five years if we become very positive on the prospects for the Treasury
market.
The past six months were a difficult investment environment, but we believe
we
have been successful in meeting our stated investment goals of providing
investors with a high level of current income while attempting to preserve
2
<PAGE>
principal from investments in U.S. Treasury securities. During the next six
months we will endeavor to do the same and look forward to reporting to you
in
the Fund's Annual Report.
Sincerely,
Heath B. McLendon James E. Conroy
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
JULY 18, 1994
3
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- ------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
VALUE
FACE VALUE (NOTE
1)
<C> <S> <C>
--------------------------------------------------------------------------
- ----
U.S. TREASURY SECURITIES -- 97.7%
U.S. TREASURY NOTES:
$25,500,000 4.750% due 2/15/97
$24,546,300
150,000 6.000% due 12/31/97
147,624
1,300,000 4.750% due 8/31/98
1,210,170
4,000,000 4.750% due 10/31/98
3,711,480
15,000,000 5.875% due 2/15/04
13,675,800
--------------------------------------------------------------------------
- ----
TOTAL INVESTMENTS (Cost $45,848,445*) 97.7%
43,291,374
OTHER ASSETS AND LIABILITIES (NET) 2.3
1,001,329
--------------------------------------------------------------------------
- ----
NET ASSETS 100.0%
$44,292,703
--------------------------------------------------------------------------
- ----
<FN>
*Aggregate cost for Federal tax purposes.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MAY 31,
1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$45,848,445) (Note 1)
See accompanying schedule $43,291,374
Cash 482,623
Interest receivable 648,626
Receivable for Fund shares sold 47,760
Unamortized organization costs (Note 6) 31,109
- ------------------------------------------------------------------------
TOTAL ASSETS 44,501,492
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LIABILITIES:
Dividends payable $113,509
Investment advisory fee payable (Note
2) 27,195
Accrued shareholder reports expense 19,500
Administration fee payable (Note 2) 15,969
Distribution fee payable (Note 3) 5,727
Transfer agent fees payable (Note 2) 3,100
Custodian fees payable (Note 2) 2,506
Accrued expenses and other payables 21,283
- ------------------------------------------------------------------------
TOTAL LIABILITIES 208,789
- ------------------------------------------------------------------------
NET ASSETS $44,292,703
- ------------------------------------------------------------------------
NET ASSETS consist of:
Undistributed net investment income $ 707
Accumulated net realized loss on
investments sold (1,259,316)
Unrealized depreciation of investments (2,557,071)
Par value 6,054
Paid-in capital in excess of par value 48,102,329
- ------------------------------------------------------------------------
TOTAL NET ASSETS $44,292,703
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NET ASSET VALUE per share
($44,292,703 DIVIDED BY 6,053,501 shares of
beneficial interest outstanding)+ $7.32
- ------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE ($7.32 DIVIDED BY
0.9875)
(based on sales charge of 1.25% of the offering
price at May 31, 1994) $7.41
- ------------------------------------------------------------------------
<FN>
+Redemption price per share is equal to Net Asset Value less any
applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------
FOR THE SIX MONTHS ENDED MAY 31,
1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
1,255,594
- ---------------------------------------------------------------------------
- --------
EXPENSES:
Investment advisory fee (Note 2) $ 86,048
Administration fee (Note 2) 49,170
Distribution fee (Note 3) 36,878
Shareholder reports expense 22,586
Transfer agent fees (Note 2) 19,770
Registration and filing fees 14,000
Custodian fees (Note 2) 8,297
Amortization of organization costs (Note 6) 6,021
Trustees' fees and expenses (Note 2) 2,288
Other 15,456
Fees waived by investment adviser and
administrator (Note 2) (39,055)
- ---------------------------------------------------------------------------
- --------
TOTAL EXPENSES
221,459
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- --------
NET INVESTMENT INCOME
1,034,135
- ---------------------------------------------------------------------------
- --------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTES 1 AND 4):
Net realized loss on investments sold during the
period
(1,287,271)
Net unrealized depreciation of investments
during the period
(1,913,415)
- ---------------------------------------------------------------------------
- --------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(3,200,686)
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- --------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
$(2,166,551)
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- --------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR
5/31/94
ENDED
(UNAUDITED)
11/30/93
<S> <C>
<C>
Net investment income $ 1,034,135
$ 2,242,976
Ne realized gain/(loss) on investments during the
period (1,287,271)
2,172,569
Net unrealized depreciation of investments during the
period (1,913,415)
(217,200)
- ---------------------------------------------------------------------------
- ----------
Net increase/(decrease) in net assets resulting from
operations (2,166,551)
4,198,345
Distributions to shareholders from:
Net investment income (1,034,135)
(2,242,269)
Net realized gain on investments (2,144,614)
(518,134)
Net increase/(decrease) in net assets from Fund share
transactions (Note 5) (2,387,978)
5,620,932
- ---------------------------------------------------------------------------
- ----------
Net increase/(decrease) in net assets (7,733,278)
7,058,874
NET ASSETS:
Beginning of period 52,025,981
44,967,107
- ---------------------------------------------------------------------------
- ----------
End of period (including undistributed net investment
income of $707 at May 31, 1994 and November 30,
1993) $44,292,703
$52,025,981
- ---------------------------------------------------------------------------
- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEAR PERIOD
5/31/94 ENDED ENDED
(UNAUDITED) 11/30/93 11/30/92*
<S> <C>
<C> <C>
Net Asset Value, beginning of period $
8.14 $ 7.88 $ 7.90
- ---------------------------------------------------------------------------
- ----------
Income from investment operations:
Net investment income+
0.16 0.38 0.37
Net realized and unrealized gain/(loss) on investments
(0.49) 0.35 (0.02)
- ---------------------------------------------------------------------------
- ----------
Total from investment operations
(0.33) 0.73 0.35
Less distributions:
Dividends from net investment income
(0.16) (0.38) (0.37)
Distributions from net realized capital gains
(0.33) (0.09) --
- ---------------------------------------------------------------------------
- ----------
Total distributions
(0.49) (0.47) (0.37)
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- ----------
Net Asset Value, end of period $
7.32 $ 8.14 $ 7.88
- ---------------------------------------------------------------------------
- ----------
Total return++
(4.29)% 9.49% 4.54%
- ---------------------------------------------------------------------------
- ----------
Ratios/supplemental data:
Net assets, end of period (in 000's)
$44,293 $52,026 $44,967
Ratio of operating expenses to average net assets+++
0.90%** 0.79% 0.65%**
Ratio of net investment income to average net assets
4.21%** 4.58% 4.96%**
Portfolio turnover rate
95% 104% 188%
- ---------------------------------------------------------------------------
- ----------
<FN>
* The Fund commenced operations on December 31, 1991.
** Annualized
+ Net investment income per share before waiver of fees by investment
adviser
and administrator for the six months ended May 31, 1994 and year ended
November 30, 1993 and waiver of fees the investment adviser, sub-
investment
adviser and/or administrator and custodian for the period ended
November 30,
1992 were $0.16, $0.36 and $0.33, respectively.
++ Total return represents aggregate total return for the periods
indicated and
does not reflect any applicable sales charges.
+++ Annualized operating expense ratios before waiver of fees by
investment
adviser and administrator for the six months ended May 31, 1994, and
the year
ended November 30, 1993 and waiver of fees by investment adviser
and/or
sub-investment adviser, administrator and custodian for the period
ended
November 30, 1992 were 1.06%, 1.04% and 1.19%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson Income Trust (the "Trust") was organized as a
"Massachusetts business trust" under the laws of the Commonwealth of
Massachusetts on October 17, 1991. The Trust is registered with the
Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended
(the "1940 Act"), as an open-end management investment company. The Trust
consists of the following four funds: Smith Barney Shearson Limited
Maturity
Treasury Fund (the "Fund"), Smith Barney Shearson Limited Maturity
Municipals
Fund, Smith Barney Shearson Intermediate Maturity California Municipals
Fund and
Smith Barney Shearson Intermediate Maturity New York Municipals Fund. The
following is a summary of significant accounting policies consistently
followed
by the Fund in the preparation of its financial statements.
PORTFOLIO VALUATION: Securities are valued at market value or, in the
absence of
market value, at fair value as determined by or under the direction of the
Board
of Trustees. Short-term investments that mature within 60 days or less are
valued at amortized cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-
issued or
delayed delivery basis may be settled a month or more after the trade date.
Interest income is recorded on the accrual basis. Realized gains and losses
from
securities sold are recorded on the identified cost basis.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund
to
declare dividends from net investment income daily and to pay such
dividends
monthly. Distributions from net realized capital gains, if any, are
declared and
paid annually, after the end of the calendar year in which earned. In
addition,
in order to avoid the application of a 4% nondeductible excise tax on
certain
undistributed amounts of ordinary income and capital gains, the Fund may
make an
additional distribution shortly before December 31 in each year of any
undistributed ordinary income or capital gains and expects to make any
other
distributions as are necessary to avoid 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 differences are primarily due to
9
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
differing treatments of income and gains on various investment securities
held
by the Fund, timing differences and differing characterization of
distributions
made by the Fund.
FEDERAL INCOME TAXES: The Trust intends that the Fund separately qualify as
a
regulated investment company, if such qualification is in the best interest
of
its shareholders, by complying with the requirements of the Internal
Revenue
Code of 1986, as amended, applicable to regulated investment companies and
by
distributing substantially all of its earnings to its shareholders.
Therefore,
no Federal income tax provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND
OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Management
Corp., which is controlled by Smith Barney Holdings Inc. ("Holdings").
Holdings
is a wholly owned subsidiary of The Travelers Inc. Under the Advisory
Agreement,
the Fund pays a monthly fee at the annual rate of 0.35% of the value of its
average daily net assets.
Prior to April 20, 1994, the Fund was a party to an administration
agreement
with The Boston Company Advisors, Inc. ("Boston Advisors"), an indirect
wholly
owned subsidiary of Mellon Bank Corporation ("Mellon"). Under this
agreement,
the Fund paid a monthly fee at the annual rate of 0.20% of the value of its
average daily net assets.
As of the close of business on April 20, 1994, Smith, Barney Advisers, Inc.
("SBA"), which is controlled by Holdings, succeeded Boston Advisors as the
Fund's administrator. The new administration agreement contains
substantially
the same terms and conditions, including the level of fees, as the
predecessor
agreement.
As of the close of business on April 20, 1994, the Fund also entered into a
sub-administration agreement (the "Sub-Administration Agreement") with
Boston
Advisors. Under the Sub-Administration Agreement, Boston Advisors is paid a
portion of the fee paid by the Fund to SBA at a rate agreed upon from time
to
time between SBA and Boston Advisors.
10
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
From time to time, Greenwich Street Advisors and the Fund's administrator
may
voluntarily waive a portion or all of their respective fees otherwise
payable to
them. For the six months ended May 31, 1994, Greenwich Street Advisors and
Boston Advisors, the Fund's prior administrator voluntarily waived fees of
$24,853 and $14,202, respectively.
For the six months ended May 31, 1994, Smith Barney Inc. ("Smith Barney")
received $44,622 from investors representing commissions (sales charges) on
sales of Fund shares.
A contingent deferred sales charge is generally payable by a shareholder in
connection with the redemption of shares within one year after the date of
purchase. For the six months ended May 31, 1994, Smith Barney received from
shareholders $25,228 in contingent deferred sales charges.
No officer, director or employee of Smith Barney or of any parent or
subsidiary
of Smith Barney receives 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 employee of Smith Barney or any of its affiliates
$4,000
per annum plus $500 per meeting attended and reimburses each such Trustee
for
travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of
Mellon, serves as the Trust's custodian. The Shareholder Services Group,
Inc., a
subsidiary of First Data Corporation, serves as the Trust's transfer agent.
3. DISTRIBUTION PLAN
The Trust has adopted a plan of distribution (the "Plan") under Rule 12b-1
of
the 1940 Act. Under the Plan, the Fund pays an annual fee computed daily
and
payable monthly of 0.15% of its average daily net assets to Smith Barney
for
activities primarily intended to result in the sale of its shares.
Under its terms, the Plan shall remain in effect from year to year,
provided
that such continuance is approved annually by vote of the Trust's Board of
11
<PAGE>
Smith Barney Shearson
Limited Maturity Treasury Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Trustees, including a majority of those Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest
in
the operation of the Plan.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of U.S. government securities,
excluding short-term investments, for the six months ended May 31, 1994,
were
$45,943,984 and $50,760,102, respectively.
At May 31, 1994, the aggregate gross unrealized depreciation for all
securities
in which there was an excess of tax cost over value was $2,557,071. There
was no
aggregate gross unrealized appreciation for all securities in which there
was an
excess of value over tax cost.
5. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest
with a
$.001 par value. Changes in shares of beneficial interest in the Fund were
as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
5/31/94
11/30/93
Shares Amount
Shares Amount
<S> <C> <C> <C>
<C>
- ---------------------------------------------------------------------------
- ----------
Sold 714,386 $ 5,557,300
2,881,661 $ 23,543,768
Issued as reinvestment of dividends 369,977 2,870,823
303,092 2,449,289
Redeemed (1,419,553) (10,816,101)
(2,500,147) (20,372,125)
- ---------------------------------------------------------------------------
- ----------
Net increase/(decrease) (335,190) $ (2,387,978)
684,606 $ 5,620,932
- ---------------------------------------------------------------------------
- ----------
</TABLE>
6. ORGANIZATION COSTS
The Fund bears all cost 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 basis over a period of five years from commencement of
operations of the Fund. In the event that any of the initial shares of the
Fund
are redeemed during such amortization period, the Fund will be reimbursed
for
any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
12
<PAGE>
LIMITED
MATURITY
TREASURY
FUND
TRUSTEES
Burt N. Dorsett
Elliot S. Jaffe
Harry W. Knight
Heath B. McLendon
Cornelius C. Rose
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
James E. Conroy
VICE PRESIDENT AND
INVESTMENT OFFICER
Lewis E. Daidone
TREASURER
Christina T. Sydor
SECRETARY
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND. IT IS NOT AUTHORIZED
FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED OR PRECEDED BY AN
EFFECTIVE PROSPECTUS FOR THE FUND, WHICH CONTAINS INFORMATION CONCERNING
THE
FUND'S INVESTMENT POLICIES, FEES AND EXPENSES AS WELL AS OTHER PERTINENT
INFORMATION.
[LOGO]
SMITH BARNEY SHEARSON
MUTUAL FUNDS
Two World Trade Center
New York, New York 10048
Fund 162
FD2232 G4
