<PAGE>
SMITH BARNEY LARGE
CAPITALIZATION GROWTH FUND
- ----------------------
he SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND ("Fund") seeks long-term
growth of capital by investing in equity securities of companies with large
market capitalizations.
T
NASDAQ SYMBOL
- ------------------------------------------------
<TABLE>
<S> <C>
CLASS A SBLCA
CLASS B SBLCB
CLASS C SBLCC
</TABLE>
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS ENDED
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Without Sales Charges*
------------------------------------------------
Class A Class B Class C
<S> <C> <C> <C> <C>
- ----------------------------------------------------
Since Inception+++ 3.37% 3.20% 3.20%
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
With Sales Charges**
------------------------------------------------
Class A Class B Class C
<S> <C> <C> <C> <C>
- ----------------------------------------------------
Since Inception+++ (1.84)% (1.80)% 2.20%
- ----------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
* 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 shares or the applicable
contingent deferred sales charges ("CDSC") with respect
to Class B and C shares.
** Assumes reinvestment of all dividends and capital gain
distributions, if any, at net asset value. In addition,
Class A shares reflect the deduction of the maximum
initial sales charge of 5.00%; and Class B shares
reflect the deduction of a 5.00% CDSC, which applies if
shares are redeemed within one year from initial
purchase. Thereafter, the CDSC declines 1.00% per year
until no CDSC is incurred. Class C shares 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 date for Class A, B and C shares is August 29,
1997.
++ Total return is not annualized as it may not be
representative of the total return for the year.
</TABLE>
FUND HIGHLIGHT
- ------------------------------------------------
THE FUND'S INAUGURAL REPORTING PERIOD WITNESSED SOME OF THE GREATEST STOCK
MARKET VOLATILITY OVER THE PAST TWO YEARS. PRIMARILY AN OUTGROWTH OF ECONOMIC
CONCERNS IN ASIA, THIS HIGHER STOCK MARKET VOLATILITY HAS ACTUALLY CREATED MANY
INTERESTING BUYING OPPORTUNITIES. WE BELIEVE THAT RECENT EVENTS IN ASIA, WHILE
CERTAINLY SERIOUS, WILL BE RESOLVED WHILE REMEMBERING THAT THE VAST MAJORITY OF
OUR INVESTMENTS HAVE SMALL (THOUGH INDEED GROWING) EXPOSURE.
WHAT'S INSIDE
- ------------------------------------------------
<TABLE>
<S> <C>
Shareholder Letter........................... 1
A Conversation with Portfolio Manager
Alan Blake................................... 3
Historical Performance....................... 5
Schedule of Investments...................... 6
Statement of Assets and Liabilities.......... 8
Statement of Operations...................... 9
Statement of Changes in Net Assets........... 10
Notes to Financial Statements................ 11
Financial Highlights......................... 14
Independent Auditors' Report................. 15
</TABLE>
<PAGE>
Shareholder Letter
- ------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] [PHOTO]
HEATH B. ALAN
MCLENDON BLAKE
Chairman Vice President and
Investment Officer
</TABLE>
DEAR SHAREHOLDER:
e are pleased to provide the first annual report for the Smith Barney
Large Capitalization Growth Fund ("Fund") for the period ended November
30, 1997. In this report we have summarized the period's prevailing economic and
market conditions and outlined our portfolio strategy. A detailed summary of the
Fund's performance can be found in the appropriate sections that follow.
W
Performance Update and Strategy
The Fund began operations on August 29, 1997. For the period ended November 30,
1997, the Class A, B and C shares of the Fund generated a total return without
sales charges of 3.37%, 3.20% and 3.20%, respectively. In comparison, the
Standard & Poor's 500 Composite Index ("S&P 500") had a total return of 6.67%
over the same period. (The S&P 500 Index is a capitalization-weighted measure of
500 widely held common stocks.)
The Fund emphasizes a core of large-capitalization growth stocks that share a
number of characteristics. Chief among them are excellent financials (i.e.,
consistent and sustainable earnings growth, significant free cash flow and very
high returns on equity). The second key characteristic centers on the product or
service of a company. We are most interested in companies delivering world-class
products or services in the global marketplace. We also are looking for dominant
companies within growth industries where we perceive the barriers to entry to be
extremely high. Lastly, a third characteristic we look for is a great management
team. Strong management is just as important as is a company's financial
condition or its products or services. We look for these characteristics to
identify companies that represent outstanding long-term investment
opportunities.
Market Overview
The Fund's inaugural reporting period witnessed some of the greatest stock
market volatility over the past two years. Primarily an outgrowth of economic
concerns in Asia, this higher stock market volatility has actually created many
interesting buying opportunities. We believe that recent events in Asia, while
certainly serious, will be resolved while remembering that the vast majority of
our investments have small (though indeed growing) exposure.
Market Outlook
We believe the economic backdrop remains favorable for many large-capitalization
growth stocks. The trends in inflation and interest rates, coupled with the
strong fundamentals currently being generated in our investment universe,
suggest further upside potential. Our holdings are geared to take advantage of
key shifts taking place within the global economy, specifically within the
technology, financial and consumer sectors. The Fund's top holdings as of
November 30, 1997 reflect this orientation.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 1
<PAGE>
- - CONSUMER STOCKS such as Coca-Cola, Wrigley, Gillette and Disney are taking
full advantage of the explosion in consumer demand and growing capitalism that
is emerging worldwide.
- - FINANCIAL STOCKS such as Wells Fargo, Merrill Lynch and Household Financial
stand to benefit from the trend toward greater deregulation in the financial
services industry.
- - TECHNOLOGY STOCKS that are poised to grow as the revolution in technology and
productivity continues apace. Whether through telecommunications (Lucent,
Motorola), computers (Compaq), semiconductors (Intel, Texas Instruments),
software (Microsoft), growth, while volatile, has been explosive. We believe
these world-class franchises are well positioned to continue their
above-average earnings growth in the years to come.
In closing, thank you for investing in the Smith Barney Large Capitalization
Growth Fund. We look forward to continuing to help you pursue your financial
goals.
Sincerely,
<TABLE>
<S> <C>
[SIG] [SIG]
Heath B. McLendon Alan Blake
Chairman Vice President and
Investment Officer
DECEMBER 17, 1997
</TABLE>
Top Ten Holdings* As of November 30, 1997
- ------------------------------------------------
<TABLE>
<C> <S> <C>
1. Coca-Cola Co. 5.7%
----------------------------------------------------
2. The Walt Disney Co. 5.5
----------------------------------------------------
3. Wells Fargo & Co. 4.8
----------------------------------------------------
4. Gillette Co. 4.4
----------------------------------------------------
5. Household International Inc. 3.7
----------------------------------------------------
6. America Online Inc. 3.5
----------------------------------------------------
7. Home Depot Inc. 3.4
----------------------------------------------------
8. Intel Corp. 3.4
----------------------------------------------------
9. Lucent Technologies Inc. 3.4
----------------------------------------------------
10. Wm. Wrigley Jr. Co. 3.3
----------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <S>
* As a percentage of total common stocks.
</TABLE>
- --------------------------------------------------------------------------------
2 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
A Conversation with Portfolio Manager Alan Blake
- ------------------------------------------------
lan Blake is a Managing Director of Smith Barney Inc. and the Portfolio
Manager of the Smith Barney Large Capitalization Growth Fund. Prior to
joining the firm in 1991, he worked for Brown Brothers Harriman where he was a
portfolio manager for high net-worth individuals and institutions. Mr. Blake
holds a B.S. degree in Economics from Lehigh University and an M.S. in Economics
from the State University of New York.
A
The Fund seeks to participate in the domestic and global growth of these
companies by using a portfolio composed primarily of large cap growth stocks. We
recently had an opportunity to speak with Alan about the large-cap growth market
and some of the timely domestic and global trends he has identified since the
Fund's launch.
ALAN, WHY WAS THE SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND INTRODUCED
EARLIER THIS YEAR?
Alan: It's very hard to find stylistically pure funds that are fairly
concentrated and do not use cash as an investment tool. That's why we created
the Fund.
CAN YOU WALK US THROUGH YOUR FUND'S VALUATION PROCESS?
Alan: As noted in our shareholder letter, we look for companies that are world
class, have exceptional management teams and impeccable financials. The
valuation part is pure fundamental work. If a company is growing 20% per year,
its earnings will go up six-fold in ten years. That's just the way the math
works. If a company is earning a dollar now, and its growing 15% per year, it
will have four dollars worth of earnings after ten years. If the acquisition
cost analysis is done correctly, one can ignore all the buy and sell
recommendations Wall Street will make on these stocks over the next five to ten
years. Some years the stock will do better than the company and some years the
company will do better than the stock but, over time, as long as the
fundamentals stay right, stocks and their earnings, at the very least should
track.
AFTER IDENTIFYING AND VALUING YOUR UNIVERSE OF SOLID LARGE-CAP COMPANIES, WHAT'S
THE NEXT STEP?
Alan: After we determine which stocks we want to own in terms of valuation, we
then try to pick out "waves" that are applicable. And we use the term "waves"
instead of themes. A small wave would be baby boomers feathering their nests.
You could step up the ladder and look at middle-sized wave like the aging of the
American population. The world-class drug companies are clearly in there as an
example of riding a middle wave. A larger wave, one of the largest, is the baby
boomers saving. You've all heard this story a hundred times and have seen what
it has meant for the financial services industry. This is a very large wave.
Occasionally, maybe once a decade, you get an even bigger wave. You get what
surfers call the banzai pipeline of waves. And that is what's occurring
worldwide now as we literally drag the Third World into the First World. The
emergence of capitalism worldwide is a huge fundamental change. And though it's
been read about and talked about and you've heard it ad nauseam, I'm not sure
that investors fully understand how crucial it is and, more importantly, how
long it is going to last.
Our search process yields literally 400 to 500 large cap companies that are
going to participate in these waves and become like lightening in a bottle. The
banzai pipeline, in particular, is a huge wave, very timely and important to
focus on.
ALAN, SOUNDS LIKE YOU ARE BOTH A TOP-DOWN AND BOTTOM-UP INVESTOR?
Alan: I am. I spend a lot of time trying to figure out what to pay for the
earnings growth of a company, but I also look at some very big macro issues. One
of the reasons for our past success has been that we've identified some of these
macro themes earlier than a lot of people and have been able to plug our
bottom-up work into those macro themes. The top-down approach looks at the
backdrop for inflation and interest rates and corporate profits. More
importantly, it looks at the themes, the waves, that play through the economy
and the world economy. And then from the bottom up you
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 3
<PAGE>
just try to figure out what to pay for each of these individual companies, and
which ones then plug into the waves you've identified.
ARE MOST INVESTORS AWARE OF THE TRUE GLOBAL NATURE OF MOST LARGE-CAPITALIZATION
U.S. COMPANIES?
Alan: That's a good question. It's an oversight to think that these are purely
domestic companies because they are based in the United States. Many investors
think they need to buy foreign companies if they want international exposure.
The reality is that so much of the growth for so many of these companies comes
from outside the U.S. Coca Cola, for example, derives 80% of its earnings
offshore. Even a lot of the technology companies--the Microsofts and Intels--are
now getting 50% of their earnings from outside the U.S.
WILL YOU BE USING ANY FOREIGN STOCKS IN THIS PORTFOLIO?
Alan: According to the Fund's prospectus up to 10% of the portfolio may be
invested in foreign stocks. However, there are a few caveats. They've got to
meet our criteria with respect to financials, products and management and match
up to the kinds of companies that we're investing in currently. Secondly, and a
little more importantly, we can invest only in companies that have American
Depository Receipts listed on the New York Stock Exchange. Everything we do is
driven by fundamental research; we've got to know that we're going to see
quarterly and annual reports, and all the government filings.
WHAT WOULD GET YOU TO SELL A STOCK?
Alan: If the fundamentals change or if the fundamental reason that we bought
something has changed, we will definitely sell. If stocks become clearly
overvalued we will take some off the table. We are big believers in letting your
winners run and trying to catch that compounding of earnings.
ALAN, ANY FINAL THOUGHTS? WHERE DO YOU THINK THE STOCK MARKET WILL BE AT THE END
OF THIS CENTURY?
Alan: We think the stock market will be substantially higher at the turn of the
century. And we think that one of the best ways to participate in the stock
market is by owning great companies with great managements and impeccable
financials, and owning them over time and over market fluctuations. We're not
market timers or allocators. Just as these companies will be compounding their
earnings over time, we believe in letting investments compound their earnings
over time. We think that's one of the keys to successful portfolio management
and successful investing.
ALAN, THANKS FOR SHARING YOUR THOUGHTS WITH US TODAY.
- --------------------------------------------------------------------------------
4 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDENDS DISTRIBUTIONS RETURNS(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 $ 11.88 $ 12.28 $ 0.00 $ 0.00 3.37%+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class B Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDENDS DISTRIBUTIONS RETURNS(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 $ 11.88 $ 12.26 $ 0.00 $ 0.00 3.20%+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class C Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDENDS DISTRIBUTIONS RETURNS(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 $ 11.88 $ 12.26 $ 0.00 $ 0.00 3.20%+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Historical Performance -- Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
------------------------
BEGINNING END INCOME CAPITAL GAIN TOTAL
PERIOD ENDED OF PERIOD OF PERIOD DIVIDENDS DISTRIBUTIONS RETURNS(1)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 $ 12.66 $ 12.29 $ 0.00 $ 0.00 (2.92)%+
- ------------------------------------------------------------------------------------------------------------
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY,
ANNUALLY.
Average Annual Total Return
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE(1)
--------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* through 11/30/97+ 3.37% 3.20% 3.20% (2.92)%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITH SALES CHARGE(2)
--------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Y
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Inception* through 11/30/97+ (1.84)% (1.80)% 2.20% (2.92)%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(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 SHARES OR THE APPLICABLE CONTINGENT DEFERRED
SALES CHARGES ("CDSC") WITH RESPECT TO CLASS B AND C SHARES.
(2) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF ANY, AT NET ASSET VALUE. IN ADDITION, CLASS
A SHARES REFLECT THE DEDUCTION OF THE MAXIMUM INITIAL SALES CHARGE OF 5.00%; AND CLASS B SHARES REFLECT THE DEDUCTION
OF A 5.00% CDSC, WHICH APPLIES IF SHARES ARE REDEEMED WITHIN ONE YEAR FROM INITIAL PURCHASE. THEREAFTER, THE CDSC
DECLINES BY 1.00% PER YEAR UNTIL NO CDSC IS INCURRED. CLASS C SHARES REFLECT THE DEDUCTION OF A 1.00% CDSC, WHICH
APPLIES IF SHARES ARE REDEEMED WITHIN THE FIRST YEAR OF PURCHASE.
* INCEPTION DATE FOR CLASS A, B AND C SHARES IS AUGUST 29, 1997. INCEPTION DATE FOR CLASS Y SHARES IS OCTOBER 15, 1997.
+ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL RETURN FOR THE YEAR.
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 5
<PAGE>
Schedule of Investments November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS -- 99.2%
CAPITAL GOODS -- 8.7%
180,000 Boeing Co. $ 9,562,500
162,000 General Electric Co. 11,947,500
90,000 Lockheed Martin Corp. 8,780,625
150,000 Thermo Electron Corp. 5,521,875
- ------------------------------------------------------------------------------------------------------------
35,812,500
- ------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 10.6%
245,000 Home Depot Inc. 13,704,687
155,000 McDonald's Corp. 7,517,500
235,000 The Walt Disney Co. 22,310,312
- ------------------------------------------------------------------------------------------------------------
43,532,499
- ------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES -- 19.6%
172,000 Avon Products Inc. 9,943,750
375,000 Coca-Cola Co. 23,437,500
195,000 Gillette Co. 18,000,938
265,000 Pepsico Inc. 9,771,875
80,000 Procter & Gamble Corp. 6,105,000
170,000 Wm. Wrigley Jr. Co. 13,451,250
- ------------------------------------------------------------------------------------------------------------
80,710,313
- ------------------------------------------------------------------------------------------------------------
ENERGY -- 2.3%
115,000 Schlumberger Ltd. 9,465,938
- ------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 21.7%
50,000 American International Group Inc. 5,040,625
40,000 Citicorp 4,797,500
235,000 Fannie Mae 12,410,938
120,000 Household International Inc. 15,120,000
190,000 Merrill Lynch & Co. 13,335,625
240,000 Morgan Stanley Dean Witter Discover 13,035,000
100,000 NationsBank Corp. 6,006,250
64,000 Wells Fargo & Co. 19,664,000
- ------------------------------------------------------------------------------------------------------------
89,409,938
- ------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 11.1%
230,000 Amgen Inc. 11,758,750
110,000 Johnson & Johnson 6,923,125
70,000 Merck & Co., Inc. 6,619,375
175,000 Pfizer Inc. 12,731,250
55,000 Warner-Lambert Co. 7,693,125
- ------------------------------------------------------------------------------------------------------------
45,725,625
- ------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 25.2%
190,000 America Online Inc. 14,345,000
135,000 Compaq Computer Corp. 8,429,062
120,000 Cisco Systems Inc. 10,350,000
180,000 Intel Corp. 13,972,500
175,000 Lucent Technologies Inc. 14,021,875
87,000 Microsoft Corp. 12,310,500
125,000 Motorola Inc. 7,859,375
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Schedule of Investments (continued) November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TECHNOLOGY -- 25.2% (CONTINUED)
270,000 Texas Instruments Inc. $ 13,297,500
270,000 Xilinx Inc. 9,331,875
- ------------------------------------------------------------------------------------------------------------
103,917,687
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost -- $398,603,913) 408,574,500
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
$ 3,243,000 Chase Manhattan Bank, 5.650% due 12/1/97;
Proceeds at maturity -- $3,244,527; (Fully collateralized
by U.S. Treasury Notes, 5.000% due 1/31/99;
Market value -- $3,307,877) (Cost -- $3,243,000) 3,243,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $401,846,913) $ 411,817,500
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 7
<PAGE>
Statement of Assets and Liabilities November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $401,846,913) $ 411,817,500
Cash 217
Receivable for Fund shares sold 2,115,472
Dividends and interest receivable 301,702
- ------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 414,234,891
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 1,276,488
Management fees payable 244,050
Distribution fees payable 57,725
Payable for Fund shares purchased 4,292
Accrued expenses 9,119
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,591,674
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 412,643,217
- ------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 33,621
Capital paid in excess of par value 401,786,930
Undistributed net investment income 501,575
Accumulated net realized gain on security transactions 350,504
Net unrealized appreciation of investments 9,970,587
- ------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 412,643,217
- ------------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING:
Class A 9,041,148
---------------------------------------------------------------------------------------------------------
Class B 14,648,058
---------------------------------------------------------------------------------------------------------
Class C 3,035,986
---------------------------------------------------------------------------------------------------------
Class Y 6,895,750
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $12.28
---------------------------------------------------------------------------------------------------------
Class B* $12.26
---------------------------------------------------------------------------------------------------------
Class C** $12.26
---------------------------------------------------------------------------------------------------------
Class Y (and redemption price) $12.29
---------------------------------------------------------------------------------------------------------
CLASS A MAXIMIUM PUBLIC OFFERING PRICE PER SHARE
(net asset value plus 5.26% of net asset value per share) $12.93
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
* REDEMPTION PRICE IS NAV OF CLASS B SHARES REDUCED BY A 5.00% CDSC IF SHARES ARE REDEEMED WITHIN ONE YEAR FROM INITIAL
PURCHASE (SEE NOTE 3).
** REDEMPTION PRICE IS NAV OF CLASS C SHARES REDUCED BY A 1.00% CDSC IF SHARES ARE REDEEMED WITHIN THE FIRST YEAR OF
PURCHASE.
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Statement of Operations For the Period Ended November 30, 1997(a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 545,911
Dividends 705,480
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,251,391
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 620,766
Distribution fees 551,254
Shareholder and system servicing fees 74,358
Registration fees 17,384
Shareholder communications 10,000
Audit and legal 9,000
Directors' fees 3,000
Custody 1,500
Other 500
- ------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1,287,762
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (36,371)
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 4,833,639
Cost of securities sold 4,483,135
- ------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN 350,504
- ------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period --
End of period 9,970,587
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION 9,970,587
- ------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 10,321,091
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 10,284,720
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(a) FOR THE PERIOD FROM AUGUST 29, 1997 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1997.
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 9
<PAGE>
Statement of Changes in Net Assets For the Period Ended November 30, 1997(a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
OPERATIONS:
Net investment loss $ (36,371)
Net realized gain 350,504
Increase in net unrealized appreciation 9,970,587
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 10,284,720
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gains --
- ------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS --
- ------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares 407,040,618
Net asset value of shares issued for reinvestment of dividends --
Cost of shares reacquired (4,682,121)
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS 402,358,497
- ------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 412,643,217
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------------------------------------
END OF PERIOD* $ 412,643,217
- ------------------------------------------------------------------------------------------------------------
*Includes undistributed net investment income of: $501,575
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(a) FOR THE PERIOD FROM AUGUST 29, 1997 (COMMENCEMENT OF OPERATIONS) TO NOVEMBER 30, 1997.
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Large Capitalization Growth Fund ("Fund") is a separate diversified
investment fund of the Smith Barney Investment Trust ("Trust"). The Trust, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company and consists of
this Fund and two other separate investment funds: Smith Barney Intermediate
Maturity California Municipals Fund and Smith Barney Intermediate Maturity New
York Municipals Fund. The financial statements and financial highlights for the
other funds are presented in separate annual reports.
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 price on such markets;
securities for which no sales price was reported and U.S. government and agency
obligations are valued at the mean between bid and ask price; (c) securities
maturing within 60 days are valued at cost plus accreted discount, or minus
amortized premium, which approximates value; (d) dividend income is recorded on
the ex-dividend date; foreign dividends are recorded on the earlier of the
ex-dividend date or as soon as practical after the Fund determines the existence
of a dividend declaration after exercising reasonable due diligence; interest
income is recorded on the accrual basis; (e) realized gains or losses on the
sale of securities are calculated based on the specific identification method;
(f) direct expenses are charged to each class; management fees and general fund
expenses are allocated on the basis of relative net assets by class; (g)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (h) the accounting records of the Fund 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; (i) 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 November 30,
1997, reclassifications were made to the Fund's capital accounts to reflect
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Accordingly, a portion of net investment loss
amounting to $537,946 was reclassified to paid-in capital. Net investment
income, net realized gains and net assets were not affected by this change; (j)
the Fund intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes; and (k) 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 and Other Transactions
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual Funds
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as invesment manager to the Fund. The Fund pays MMC a management fee
calculated at an annual rate of 0.75% of the average daily net assets. This fee
is calculated daily and paid monthly.
Smith Barney Inc. ("SB"), another subsidiary of SSBH acts as distributor of Fund
shares. For the period ended November 30, 1997, SB received brokerage
commissions of $34,620 and sales charges of approximately $3,023,000 on sales of
the Fund's Class A shares.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 11
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
There is contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from initial purchase and
declines thereafter by 1.00% per year until no CDSC is incurred. Class C shares
have a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. For the period ended November 30, 1997, CDSCs paid to SB were:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C> <C>
- ----------------------------------------------------------
CDSCs $ 1,000 $ 28,000 $ 3,000
- ----------------------------------------------------------
</TABLE>
Pursuant to Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and C shares calculated at an annual rate of 0.25% of the average
daily net assets for each respective class. The Fund also pays a distribution
fee with respect to its Class B and C shares calculated at an annual rate of
0.75% of the average daily net assets of each class, respectively. For the
period ended November 30, 1997, total Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class B Class C
<S> <C> <C> <C> <C>
- ----------------------------------------------------------
Distribution Plan Fees $ 64,109 $ 404,500 $ 82,645
- ----------------------------------------------------------
</TABLE>
All officers and one Director of the Fund are employees of SB.
3. Investments
During the period ended Novmber 30, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------
Purchases $ 403,087,047
- ----------------------------------------------------------
Sales 4,833,639
- ----------------------------------------------------------
</TABLE>
At November 30, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------
Gross unrealized appreciation $ 23,604,630
Gross unrealized depreciation (13,634,043)
- ----------------------------------------------------------
Net unrealized appreciation $ 9,970,587
- ----------------------------------------------------------
</TABLE>
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. Shares of Beneficial Interest
At November 30, 1997, the Fund 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
indentical interest and has the same rights, except that each class bears
certain direct expenses, including those specifically related to the
distribution of its shares.
At November 30, 1997, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Amount
<S> <C> <C>
- ----------------------------------------------------------
Class A $ 107,824,801
- ----------------------------------------------------------
Class B 174,540,595
- ----------------------------------------------------------
Class C 36,198,926
- ----------------------------------------------------------
Class Y 83,256,229
- ----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
12 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Period Ended
November 30, 1997
---------------------------
Shares Amount
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
CLASS A*
Shares sold 9,177,952 $ 109,524,318
Shares redeemed (136,804) (1,636,918)
- ------------------------------------------------------------------------------------------------------------
Net Increase 9,041,148 $ 107,887,400
- ------------------------------------------------------------------------------------------------------------
CLASS B*
Shares sold 14,785,442 $ 176,582,697
Shares redeemed (137,384) (1,647,374)
- ------------------------------------------------------------------------------------------------------------
Net Increase 14,648,058 $ 174,935,323
- ------------------------------------------------------------------------------------------------------------
CLASS C*
Shares sold 3,136,419 $ 37,509,061
Shares redeemed (100,433) (1,229,516)
- ------------------------------------------------------------------------------------------------------------
Net Increase 3,035,986 $ 36,279,545
- ------------------------------------------------------------------------------------------------------------
CLASS Y**
Shares sold 6,909,847 $ 83,424,542
Shares redeemed (14,097) (168,313)
- ------------------------------------------------------------------------------------------------------------
Net Increase 6,895,750 $ 83,256,229
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
* FOR THE PERIOD FROM AUGUST 29, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
** FOR THE PERIOD FROM OCTOBER 15, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 13
<PAGE>
(This page intentionally left blank.)
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIOD:
<TABLE>
<CAPTION>
Class A(1) Class B(1) Class C(1) Class Y(2)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.88 $11.88 $11.88 $12.66
- ------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (loss) 0.01 (0.01 ) (0.01 ) 0.01
Net realized and unrealized gain (loss) 0.39 0.39 0.39 (0.38 )
- ------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS 0.40 0.38 0.38 (0.37 )
- ------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- -- -- --
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.28 $12.26 $12.26 $12.29
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN++ 3.37 % 3.20 % 3.20 % (2.92 )%
- ------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $ 111,063 $ 179,598 $ 37,224 $ 84,758
- ------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS+:
Expenses 1.15 % 1.90 % 1.90 % 0.82 %
Net investment income 0.38 (0.37 ) (0.38 ) 0.54
- ------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 1 % 1 % 1 % 1 %
- ------------------------------------------------------------------------------------------------------------
AVERAGE COMMISSIONS PER SHARE
PAID ON EQUITY TRANSACTIONS $0.06 $0.06 $0.06 $0.06
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) FOR THE PERIOD FROM AUGUST 29, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
(2) FOR THE PERIOD FROM OCTOBER 15, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
</TABLE>
- --------------------------------------------------------------------------------
14 1997 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of
Smith Barney Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Large Capitalization Growth Fund
("Fund") of Smith Barney Investment Trust as of November 30, 1997, and the
related statement of operations, statement of changes in net assets and
financial highlights for the period from August 29, 1997 (commencement of
operations) to November 30, 1997. 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 audit.
We conducted our audit 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 November 30, 1997, by
correspondence with the custodian. As to securities purchased but not 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 audit provides 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 Capitalization Growth Fund of Smith Barney Investment Trust as of
November 30, 1997, and the results of its operations, the changes in its net
assets and financial highlights for the period from August 29, 1997 to November
30, 1997, in conformity with generally accepted accounting principles.
[LOGO]
New York, New York
January 15, 1998
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 15
<PAGE>
SMITH BARNEY
LARGE CAPITALIZATION
GROWTH FUND
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, CHAIRMAN
Cornelius C. Rose, Jr.
Officers
Heath B. McLendon
CHIEF EXECUTIVE OFFICER
Lewis E. Daidone
SENIOR VICE PRESIDENT
AND TREASURER
Alan Blake
VICE PRESIDENT AND
INVESTMENT OFFICER
Thomas M. Reynolds
CONTROLLER
Christina T. Sydor
SECRETARY
Investment Adviser and Administrator
Mutual Management Corp.
Distributor
Smith Barney Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney Large
Capitalization Growth Fund. It is not authorized for distribution to prospective
investors unless accompanied by a current Prospectus for the Fund, which
contains information concerning the Fund's investment policies and expenses as
well as other pertinent information.
[LOGO]
Smith Barney
Large Capitalization
Growth Fund
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD01380 1/98
<PAGE>
================================================================================
ANNUAL REPORT
================================================================================
1997
1997
1997
1997
1997
Smith Barney
Intermediate
Maturity
New York
Municipals
Fund
--------------------------------------------
November 30, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
===========================================================
Smith Barney Intermediate Maturity New York Municipals Fund
===========================================================
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Intermediate
Maturity New York Municipals Fund ("Fund") for the year ended November 30, 1997.
In this report, we summarize the period's prevailing economic and market
conditions and outline the Fund's investment strategy. A detailed summary of the
Fund's performance and current holdings can be found in the appropriate sections
that follow.
Fund's Performance and Investment Strategy
For the year ended November 30, 1997, the Class A shares of the Fund generated a
total return of 6.23% and outperformed its Lipper Analytical Services Inc.
intermediate-term municipals peer group average total return of 5.66% for the
same period. (Lipper is a major independent fund-tracking organization.)
In addition, the Fund paid income dividends totaling $0.41 per Class A share
during the year. Based on a net asset value ("NAV") of $8.57 and a current
monthly income dividend of roughly $0.034 per Class A share, this equates to an
annualized distribution rate of 4.76%. For a New York resident in the combined
state and federal income tax bracket of 35.98%, the Fund's tax-free yield of
4.76% is equivalent to a taxable yield of 7.44%. (This figure assumes an
investor is in the federal income tax bracket of 31%.)
During the reporting period, we have maintained our emphasis on higher-quality
municipal bonds because we believe lower-rated issues offer little advantage for
the extra risks taken. As of November 30, 1997, 95.7% of the Fund's holdings
were rated investment grade with 37.8% of these investments rated triple-A, the
highest rating. (Investment-grade bonds are those rated Aaa, Aa, A and Baa by
Moody's Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's
Ratings Services, or have an equivalent rating by any nationally recognized
statistical rating organization, or determined by the manager to be of
equivalent quality.)
As an intermediate-term municipal bond fund, the weighted average maturity of
the Fund's securities will normally not exceed ten years. As of November 30,
1997, the Fund's weighted average maturity was approximately 8.9 years compared
to 7.8 years as of November 30, 1996. Also at the end of the
1
<PAGE>
reporting period, the Fund's assets were allocated among the following types of
municipal bond issues: transportation bonds (15.8%), education bonds (15.3%),
and general obligation bonds (13.5%).
We continue to follow an investment strategy that emphasizes high-quality
issues, good call protection and broad sector diversification. Generally, we
focus on the coupon, maturity and call features of the Fund's holdings rather
than the specific purpose for which the bond is being issued. Moreover, we
continue to slightly extend the average life of the Fund's holdings to take
advantage of the higher income stream for longer-term issues. In our opinion,
intermediate-term municipal bonds offer an attractive alternative for investors
seeking to minimize price volatility while still capturing a substantial portion
of the income generated by long-term municipal issues.
New York Economic Highlights
After lagging most of the country, New York state finally appears to be emerging
from a prolonged recession. Improved job and economic growth, particularly in
the financial services industry, has boosted tax revenues. In addition, the
higher tax revenues, coupled with government spending restraints, led to a state
budget surplus for the fiscal year ended March 31, 1997. Although New York state
bonds are still in the bottom tier of state credit ratings, the Empire state's
brightening economic picture helped lead to a rating upgrade from A- to A from
Standard & Poor's in August.
However, any further improvements to the state's credit worthiness may be
hampered if the administration and legislature choose to repeat their record of
notoriously late budget agreements. In addition, New York, along with many other
states, faces many formidable challenges as it continues to implement welfare
reform.
Market Update and Outlook
Interest rates continued to decline overall during the course of the reporting
period. However, bond markets did experience volatility as investors responded
to a conflicting combination of low inflation and falling unemployment. The
persistent strength of the U.S. economy has heightened fears among many
investors that the Federal Reserve ("Fed") would raise short-term interest
rates. (The federal-funds rate is the interest rate banks charge each other for
overnight loans and a closely watched indicator of the direction of interest
rates.) The Fed did raise the federal funds rate by 0.25% in March 1997 but has
since chosen to remain on the sidelines. Although it did not take action, the
Fed indicated a bias toward tightening monetary policy at each of its meetings
in May, July, August, September and November.
2
<PAGE>
Although it is unclear when higher inflationary pressures will emerge, we
believe that the collapse of the Asian financial markets in October will tend to
dampen price increases in the U.S. and possibly delay any shift in Fed monetary
policy.
In our view, all of these developments have benefited the municipal bond market.
A healthy economy has enabled many municipalities, including New York, to
maintain, or even upgrade their credit ratings, while a relatively low rate of
inflation has delivered historically high real yields (i.e., the yield after
taking into account the effects of inflation). Moreover, tax-free municipal
bonds currently offer an attractive yield compared to the benchmark 30-year U.S.
Treasury bond. For example, at the close of the reporting period, high-grade
municipal bonds provided nearly 86% of the yield of similar maturity U.S.
Treasurys, one of the highest comparative rates in the past five years.
In closing, thank you for your investment in the Smith Barney Intermediate
Maturity New York Municipals Fund. We look forward to continuing to help you
pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman Vice President and
Investment Officer
December 30, 1997
3
<PAGE>
================================================================================
Historical Performance -- Class A Shares
================================================================================
<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>
11/30/97 $8.47 $8.57 $0.41 $0.00 6.23%
- ---------------------------------------------------------------------------------------------
11/30/96 8.48 8.47 0.41 0.00 4.85
- ---------------------------------------------------------------------------------------------
11/30/95 7.80 8.48 0.41 0.00 14.31
- ---------------------------------------------------------------------------------------------
11/30/94 8.54 7.80 0.40 0.02 (3.97)
- ---------------------------------------------------------------------------------------------
11/30/93 8.18 8.54 0.40 0.02 9.76
- ---------------------------------------------------------------------------------------------
Inception* - 11/30/92 7.90 8.18 0.38 0.00 8.59+
=============================================================================================
Total $2.41 $0.04
=============================================================================================
================================================================================
Historical Performance -- Class C Shares
================================================================================
<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>
11/30/97 $8.47 $8.57 $0.39 $0.00 6.00%
- ---------------------------------------------------------------------------------------------
11/30/96 8.48 8.47 0.39 0.00 4.64
- ---------------------------------------------------------------------------------------------
Inception* - 11/30/95 7.87 8.48 0.38 0.00 13.01+
=============================================================================================
Total $1.16 $0.00
=============================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
================================================================================
Average Annual Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
--------------------------
Class A Class C
============================================================================
<S> <C> <C>
Year Ended 11/30/97 6.23% 6.00%
- ----------------------------------------------------------------------------
Five Years Ended 11/30/97 6.06 N/A
- ----------------------------------------------------------------------------
Inception* through 11/30/97 6.57 7.83
============================================================================
<CAPTION>
With Sales Charge(2)
--------------------------
Class A Class C
============================================================================
<S> <C> <C>
Year Ended 11/30/97 4.14% 5.00%
- ----------------------------------------------------------------------------
Five Years Ended 11/30/97 5.62 N/A
- ----------------------------------------------------------------------------
Inception* through 11/30/97 6.21 7.83
============================================================================
</TABLE>
4
<PAGE>
================================================================================
Cumulative Total Return
================================================================================
<TABLE>
<CAPTION>
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 11/30/97) 45.73%
- --------------------------------------------------------------------------------
Class C (Inception* through 11/30/97) 25.36
================================================================================
</TABLE>
(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 shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 2.00% and Class C shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within one
year from initial purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A and C shares are December 31, 1991 and December
5, 1994, respectively.
5
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
Smith Barney Intermediate Maturity New York Municipals Fund
vs. Lehman Brothers 10 Year Municipal Bond Index
and Lipper Analytical Services, Inc. Peer Group Average+
- --------------------------------------------------------------------------------
December 1991 -- November 1997
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Smith Barney Intermediate Lehman Brothers 10 Year
Maturity New York Municipals Municipal Bond Fund Index Lipper Peer Group Average
---------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
12/31/91 $ 9,802 $10,000 $10,000
11/92 $10,644 $10,767 $10,685
11/93 $11,683 $12,028 $11,625
11/94 $11,219 $11,491 $11,230
11/95 $12,824 $13,623 $12,796
11/96 $13,447 $14,394 $13,383
11/30/97 $14,284 $15,410 $14,134
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on December 31, 1991, assuming deduction of the maximum 2.00%
sales charge at the time of investment and reinvestment of dividends and
capital gains, if any, at net asset value through November 30, 1997. The
Lehman Brothers 10 Year Municipal Bond Index is a broad-based index
comprised of approximately 5,200 bonds totaling approximately $63 billion
in market capitalization. The bonds are all municipal bonds with an average
maturity of 9.8 years, an average yield of 4.93% and a duration of 7.08
years. The index is unmanaged and is not subject to the same management and
trading expenses of a mutual fund. The Lipper Analytical Services, Inc.
("Lipper") Peer Group Average is an average of the Fund's peer group of
mutual funds (24 funds as of November 30, 1997) investing in intermediate
maturity New York tax-exempt bonds. The performance of the Fund's other
classes may be greater or less than the Class A 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.
6
<PAGE>
================================================================================
Portfolio Highlights (unaudited) November 30, 1997
================================================================================
Industry Breakdown
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Water & Sewer 5.1%
Education 15.3%
General Obligations 13.5%
Government Facilities 7.9%
Hospitals 9.7%
Industrial Development 6.3%
Other 12.2%
Pollution Control 6.4%
Transportation 15.8%
Finance 7.8%
</TABLE>
Summary of Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments*
- --------------------------------------------------------------------------------
<S> <C> <C>
Aaa AAA 37.8%
Aa AA 13.4
A A 27.8
Baa BBB 16.7
B B 0.1
NR NR 4.2
-----
100.0%
=====
</TABLE>
* 20.5% of total investments were rated by Fitch Investor Services Inc.:
18.4% were A rated and 2.1% were BBB rated.
7
<PAGE>
================================================================================
Schedule of Investments November 30, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================
<S> <C> <C> <C>
Education -- 15.3%
$ 400,000 AAA Albany City School District, Series B, MBIA-Insured,
6.000% due 12/15/00 $ 422,500
200,000 AAA Canandaigua City School District, AMBAC-Insured,
6.400% due 6/1/99 207,250
200,000 AAA Central Square Central School District, FGIC-Insured,
6.500% due 6/15/99 207,750
1,000,000 A++ City University of New York COP, John Jay College,
6.000% due 8/15/06 1,082,500
2,000,000 AAA New York Educational Construction Fund, Series A,
MBIA-Insured, 6.500% due 4/1/04 (a) 2,232,500
New York State Dormitory Authority, Revenue Bonds:
1,000,000 BBB+ City University System Construction, Series 1,
5.250% due 7/1/17 971,250
500,000 AAA College and University Educational Loan,
MBIA-Insured, 6.200% due 7/1/01 (b) 531,250
1,000,000 A- State University Educational Facilities,
5.000% due 5/15/10 993,750
1,000,000 A1* Teresian House Project, LOC Fleet Bank,
5.250% due 7/1/17 988,750
100,000 AAA Wappingers Central School District, AMBAC-Insured,
6.250% due 12/1/99 104,375
- --------------------------------------------------------------------------------------------
7,741,875
- --------------------------------------------------------------------------------------------
Finance -- 7.8%
City of Troy, Municipal Assistance Corp., MBIA-Insured:
1,080,000 AAA Series A, 5.000% due 1/15/08 1,104,300
1,990,000 AAA Series B, zero coupon bond to yield
5.950% due 1/15/19 646,750
1,300,000 AA New York City Transitional Finance Authority Revenue,
Series A, 5.000% due 8/15/13 1,291,875
900,000 AAA New York State Local Government Assistance Corp.,
Series A, AMBAC-Insured, 5.125% due 4/1/11 905,625
- --------------------------------------------------------------------------------------------
3,948,550
- --------------------------------------------------------------------------------------------
General Obligation -- 13.5%
Buffalo GO:
100,000 AAA FGIC-Insured, 5.800% due 2/1/00 103,750
205,000 AAA Series A, MBIA-Insured, 5.900% due 4/1/01 216,788
385,000 AAA Series B, MBIA-Insured, 5.900% due 4/1/01 407,138
250,000 AAA Erie County Public Improvement Project, GO,
FGIC-Insured, 5.500% due 1/15/00 256,875
495,000 Baa* Jamestown GO, Series A, 7.000% due 3/15/00 521,606
1,000,000 AA Monroe County Public Improvement Project GO,
Series A, 6.000% due 3/1/18 1,110,000
1,000,000 AAA Nassau County GO, Combined Sewer District, Series E,
MBIA-Insured, 5.400% due 5/1/10 1,046,250
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
================================================================================
Schedule of Investments (continued) November 30, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================
<S> <C> <C> <C>
General Obligation -- 13.5% (continued)
New York City GO:
$ 2,000,000 A-++ Series A, 7.000% due 8/1/04 (a) $ 2,262,500
500,000 A-++ Series B, 6.250% due 10/1/01 533,125
Oyster Bay GO, FGIC-Insured:
200,000 AAA Series B, 6.400% due 2/1/99 205,500
150,000 AAA Series C, 6.300% due 10/1/99 156,188
- --------------------------------------------------------------------------------------------
6,819,720
- --------------------------------------------------------------------------------------------
Government Facilities -- 7.9%
New York State Urban Development, Correctional
Facilities: Series 3:
1,230,000 A++ 6.700% due 1/1/99 1,263,062
595,000 A++ 6.800% due 1/1/00 624,006
1,900,000 A++ Series A, 6.500% due 1/1/09 2,128,000
- --------------------------------------------------------------------------------------------
4,015,068
- --------------------------------------------------------------------------------------------
Hospitals -- 9.7%
70,000 B1* Monroe County IDA, Genesee Hospital, Series A,
6.500% due 11/1/99 71,488
New York State Dormitory Authority, Revenue Bonds:
1,000,000 AAA Beth Israel Medical Center, Series A, MBIA-Insured,
5.125% due 11/1/16 982,500
240,000 AA Genesee Valley, Series B, FHA-Insured, 6.300%
due 8/1/02 261,300
1,000,000 A++ Mental Health Services, 6.000% due 2/15/12 1,078,750
500,000 BBB++ Nyack Hospital, Series A, 6.250% due 7/1/13 534,375
New York State Medical Care Facilities, Revenue Bonds:
725,000 A- Health Services Facility, 6.100% due 2/15/02 769,406
Methodist Hospital, FHA-Insured:
250,000 BBB+ Secured Hospital, Series 1991A, 6.625% due 8/15/98 253,927
515,000 AA Series A, 6.000% due 8/15/02 549,119
370,000 AA Series C, 5.900% due 8/15/02 388,963
- --------------------------------------------------------------------------------------------
4,889,828
- --------------------------------------------------------------------------------------------
Housing: Multi-Family -- 3.0%
1,000,000 AA New York State Housing Corp., (Battery Park
City Project), 6.000% due 11/1/03 1,071,250
425,000 Aa* North Tonawanda Housing Development Corp.,
Mortgage Revenue, Bishop Gibbons, Series B,
FHA-Insured, 6.350% due 12/15/02 453,156
- --------------------------------------------------------------------------------------------
1,524,406
- --------------------------------------------------------------------------------------------
Industrial Development -- 6.3%
535,000 A Amherst Industrial Development Agency Lease Revenue,
Multi-Surface Rink Complex, Series A, LOC Keybank,
5.050% due 10/1/05 537,675
500,000 BBB++ New York City IDA, Civil Facilities Revenue,
(YMCA Greater NY Project), 6.000% due 8/1/07 530,625
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
================================================================================
Schedule of Investments (continued) November 30, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================
<S> <C> <C> <C>
Industrial Development -- 6.3% (continued)
Westchester County IDA:
$ 1,000,000 AAA Resource Recovery Revenue, (Westchester Resco Co.
Project), AMBAC-Insured, 6.000% due 7/1/09 (b) $ 1,090,000
985,000 NR Revenue Bonds, (AGR Realty Company Project),
5.750% due 1/1/02 1,014,550
- --------------------------------------------------------------------------------------------
3,172,850
- --------------------------------------------------------------------------------------------
Life Care Systems -- 2.8%
750,000 AA New York State Dormitory Authority Revenue, Hebrew
Home for the Aged, FHA-Insured, 5.625% due 2/1/17 787,500
610,000 AA Oswego County, Industrial Development Agency, Civic
Facility Revenue, (Seneca Hill Project), Series A,
FHA-Insured, 5.550% due 8/1/22 613,050
- --------------------------------------------------------------------------------------------
1,400,550
- --------------------------------------------------------------------------------------------
Miscellaneous -- 4.0%
500,000 A Capital District Youth Center Lease Revenue,
LOC Key Bank, 6.000% due 2/1/17 516,250
300,000 A++ New York State COP, 6.900% due 3/1/98 302,181
New York State Municipal Bond Bank Agency, Special
Program Revenue:
925,000 BBB+ Buffalo, Series A, 6.500% due 3/15/00 963,156
250,000 A+ Rochester, Series A, 6.300% due 3/15/00 259,375
- --------------------------------------------------------------------------------------------
2,040,962
- --------------------------------------------------------------------------------------------
Pollution Control -- 6.4%
New York State Environmental Facilities Corp., PCR:
105,000 Baa1* Resource Recovery Revenue, (Huntington Project),
7.375% due 10/1/99 (b) 109,331
500,000 AAA Series A, 5.950% due 3/15/02 533,750
1,000,000 AAA Series E, MBIA-Insured, 5.000% due 6/15/12 992,500
245,000 Baa* North Country Development Authority, Solid Waste
Management Systems Revenue,
Series A, 6.500% due 7/1/01 258,475
Oneida-Herkimer Solid Waste Management Authority:
530,000 Baa* 5.900% due 4/1/98 532,157
800,000 Baa* 6.300% due 4/1/01 829,000
- --------------------------------------------------------------------------------------------
3,255,213
- --------------------------------------------------------------------------------------------
Pre-Refunded -- 0.6%
295,000 AAA North Country, Development Authority, Solid Waste
Management Systems Revenue, Series A,
(Call 7/1/99 @ 102), 6.500% due 7/1/01 (c) 311,963
- --------------------------------------------------------------------------------------------
Public Facilities -- 1.3%
600,000 AAA Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Refunding,
Series K, FGIC-Insured, 6.000% due 7/1/01 640,500
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
================================================================================
Schedule of Investments (continued) November 30, 1997
================================================================================
<TABLE>
<CAPTION>
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================
<S> <C> <C> <C>
Transportation -- 15.8%
Guam Transportation Authority Revenue, Series A:
$ 560,000 BBB 5.700% due 10/1/01 $ 577,500
300,000 BBB 5.900% due 10/1/02 312,750
Metropolitan Transportation Authority, New York
Service Contract, Transit Facilities, Series 5:
735,000 BBB+ 6.100% due 7/1/98 744,415
200,000 BBB+ 6.250% due 7/1/99 206,500
1,000,000 BBB+ New York State Thruway Authority, Service Contract,
Local Highway and Bridges, 6.000% due 4/1/02 1,057,500
600,000 AAA Niagara Falls Bridge Commission Toll Revenue,
Series B, FGIC-Insured, 5.250% due 10/1/15 617,250
2,000,000 AAA Niagara Frontier Transportation Authority, Greater
Buffalo International Airport, Series B,
AMBAC-Insured, 5.750% due 4/1/04 (b) 2,117,500
1,000,000 NR Port Authority of New York & New Jersey, Revenue
Bonds, 6.750% due 10/1/11 (b) 1,088,750
670,000 A Syracuse COP, Hancock International Airport,
6.300% due 1/1/02 (b) 720,250
500,000 AAA Triborough Bridge & Tunnel Authority, Special
Obligation Refunding, Series A, MBIA-Insured,
6.100% due 1/1/00 520,000
- --------------------------------------------------------------------------------------------
7,962,415
- --------------------------------------------------------------------------------------------
Utilities -- 0.5%
250,000 Aa2* New York State Power Authority and General Purpose
Revenue, Series Z, 5.850% due 1/1/00 258,750
- --------------------------------------------------------------------------------------------
Water & Sewer -- 5.1%
1,390,000 AAA Suffolk County Southwest Sewer District GO,
MBIA-Insured, 6.000% due 2/1/07 1,529,000
1,000,000 AAA Suffolk County Water Authority, Waterworks Revenue,
MBIA-Insured, 5.100% due 6/1/09 1,027,500
- --------------------------------------------------------------------------------------------
2,556,500
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $48,221,470**) $50,539,150
============================================================================================
</TABLE>
(a) Security segregated by Custodian for open purchase commitment.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Bonds are escrowed with U.S. government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for new
ratings.
++ Fitch Investor Services Inc. rating.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 and 13 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
11
<PAGE>
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's") and those identified by a double dagger (++) are rated
by Fitch Investor Services, Inc. ("Fitch"). The definitions of the applicable
rating symbols are set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differ from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "B," where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba -- Bonds that are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B -- Bonds that are rated "B" generally lack characteristics of
desirable investments. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
12
<PAGE>
================================================================================
Bond Ratings (continued)
================================================================================
Fitch -- Ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standings within the major ratings categories.
A -- Bonds which are rated "A" are considered to be investment grade
and of high quality. The obligor's ability to pay interest and/or
dividends and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and
circumstances than debt or preferred securities with higher
ratings.
BBB -- Bonds which are rated "BBB" are considered to be investment
grade and of satisfactory credit quality. The obligor's ability to
pay interest or dividends and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these securities
and, therefore, impair timely payment. The likelihood that the
ratings of these bonds or preferred will fall below investment
grade is higher than for securities with higher ratings.
NR -- Indicates that the bond is not rated by Standard & Poor's, Moody's
or Fitch.
================================================================================
Security Descriptions
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
COP -- Certificate of Participation
EDA -- Economic Development Authority
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
13
<PAGE>
================================================================================
Statement of Assets and Liabilities November 30, 1997
================================================================================
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $48,221,470) $50,539,150
Interest receivable 782,024
Receivable for Fund shares sold 92,992
Receivable for securities sold 75,000
Receivable from investment adviser 13,054
- --------------------------------------------------------------------------------------------
Total Assets 51,502,220
- --------------------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 287,053
Payable for Fund shares purchased 74,417
Dividends payable 61,559
Distribution fees payable 1,435
Accrued expenses 36,108
- --------------------------------------------------------------------------------------------
Total Liabilities 460,572
- --------------------------------------------------------------------------------------------
Total Net Assets $51,041,648
============================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 5,954
Capital paid in excess of par value 50,225,777
Overdistributed net investment income (13,572)
Accumulated net realized loss from security transactions (1,494,191)
Net unrealized appreciation of investments 2,317,680
- --------------------------------------------------------------------------------------------
Total Net Assets $51,041,648
============================================================================================
Shares Outstanding:
Class A 5,687,917
-----------------------------------------------------------------------------------------
Class C 266,313
-----------------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $8.57
-----------------------------------------------------------------------------------------
Class C* $8.57
-----------------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per share) $8.74
============================================================================================
</TABLE>
* Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
14
<PAGE>
================================================================================
Statement of Operations For the Year Ended November 30, 1997
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $2,760,571
- --------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 149,822
Administration fees (Note 2) 99,881
Distribution fees (Note 2) 78,201
Trustees' fees 32,700
Shareholder and system servicing fees 32,000
Shareholder communications 30,000
Registration fees 30,000
Audit and legal 27,000
Pricing service fees 9,600
Custody 3,160
Amortization of deferred organization costs 1,003
Other 4,059
- --------------------------------------------------------------------------------------------
Total Expenses 497,426
Less: Investment advisory and administration fee waivers (Note 2) (157,157)
- --------------------------------------------------------------------------------------------
Net Expenses 340,269
- --------------------------------------------------------------------------------------------
Net Investment Income 2,420,302
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 25,729,114
Cost of securities sold 25,360,235
- --------------------------------------------------------------------------------------------
Net Realized Gain 368,879
- --------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 2,071,461
End of year 2,317,680
- --------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 246,219
- --------------------------------------------------------------------------------------------
Net Gain on Investments 615,098
- --------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $3,035,400
============================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
================================================================================
Statements of Changes in Net Assets For the Years Ended November 30,
================================================================================
<TABLE>
<CAPTION>
1997 1996
===================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,420,302 $ 2,502,414
Net realized gain (loss) 368,879 (75,989)
Increase (decrease) in net unrealized appreciation 246,219 (60,433)
- ---------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 3,035,400 2,365,992
- ---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (2,440,417) (2,496,331)
- ---------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (2,440,417) (2,496,331)
- ---------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 6,793,709 4,707,959
Net asset value of shares issued
for reinvestment of dividends 1,673,162 1,697,310
Cost of shares reacquired (8,566,882) (8,689,089)
- ---------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (100,011) (2,283,820)
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 494,972 (2,414,159)
NET ASSETS:
Beginning of year 50,546,676 52,960,835
- ---------------------------------------------------------------------------------------------------
End of year* $ 51,041,648 $ 50,546,676
===================================================================================================
* Includes undistributed (overdistributed) net investment income of: $(13,572) $6,543
===================================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Intermediate Maturity New York Municipals Fund ("Fund") is a
separate non-diversified investment fund of the Smith Barney Investment Trust
("Trust"). The Trust, a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company and consists of this Fund and two other separate investment funds: Smith
Barney Intermediate Maturity California Municipals Fund and Smith Barney Large
Capitalization Growth Fund. The financial statements and financial highlights
for the other funds are presented in separate annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at the mean between the quoted bid and ask prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount, or
minus amortized premium, which approximates value; (d) gains or losses on the
sale of securities are calculated by using the specific identification method;
(e) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on the accrual basis; market discount is
recognized upon the disposition of the security; (f) direct expenses are charged
to the Fund and each class; investment advisory fees and general fund expenses
are allocated on the basis of relative net assets by class; (g) dividends and
distributions to shareholders are recorded on the ex-dividend date; (h) the Fund
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; and (i) 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.
In addition, organization costs have been deferred and have been amortized
on a straight line basis over a five year period, beginning with the
commencement of the Fund's operations in December 1991. Therefore, as of
November 30, 1997, the amortization of the deferred organization costs had been
completed.
17
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
2. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER TRANSACTIONS
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc.
("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC an advisory
fee calculated at an annual rate of 0.30% of the average daily net assets. This
fee is calculated daily and paid monthly. For the year ended November 30, 1997,
MMC waived $90,299 of its investment advisory fee.
MMC also acts as the Fund's administrator for which the Fund pays a fee
calculated at the annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly. For the year ended November 30, 1997, MMC
waived $66,858 of its administration fee.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor
of Fund shares. For the year ended November 30, 1997, SB received sales charges
of approximately $46,000 on purchases of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 1.00% on Class C
shares, which applies if redemption occurs within one year from initial
purchase. For the year ended November 30, 1997, CDSCs paid to SB were
approximately:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
CDSCs $1,000 $1,000
================================================================================
</TABLE>
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to its Class A and C shares, calculated at the annual rate of 0.15% of the
average daily net assets for each respective class. In addition, the Fund pays a
distribution fee with respect to its Class C shares calculated at the annual
rate of 0.20% of the average daily net assets. For the year ended November 30,
1997, total Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Distribution Plan Fees $72,443 $5,758
================================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
18
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
3. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. FUND CONCENTRATION
Since the Fund invests primarily in obligations of issuers within New York,
it is subject to possible concentration risk, associated with economic,
political or legal developments or industrial or regional matters specifically
affecting New York.
5. INVESTMENTS
For the year ended November 30, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $26,111,731
- --------------------------------------------------------------------------------
Sales 25,729,114
================================================================================
</TABLE>
At November 30, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $2,317,680
Gross unrealized depreciation --
- --------------------------------------------------------------------------------
Net unrealized appreciation $2,317,680
================================================================================
</TABLE>
6. CAPITAL LOSS CARRYFORWARD
At November 30, 1997, the Fund had, for Federal income tax purposes,
approximately $1,492,000 of loss carryforwards available to offset any future
capital gains. To the extent that these carryforward losses are used to offset
capital gains, it is probable that the gains so offset will not be distributed.
The amount and year of the expiration for each carryforward loss is indicated
below:
<TABLE>
<CAPTION>
2002 2003 2004
================================================================================
<S> <C> <C> <C>
Carryforward Amounts $1,079,000 $337,000 $76,000
================================================================================
</TABLE>
19
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
7. SHARES OF BENEFICIAL INTEREST
As of November 30, 1997, the Fund 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.
At November 30, 1997, total paid-in capital amounted to the following for
each class:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Total Paid-in Capital $47,985,125 $2,246,606
================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, 1997 November 30, 1996
--------------------------- ----------------------------
Shares Amount Shares Amount
============================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 643,354 $ 5,438,395 452,026 $ 3,806,875
Shares issued on reinvestment 190,347 1,608,270 198,862 1,660,796
Shares redeemed (973,016) (8,214,846) (1,024,421) (8,544,418)
- --------------------------------------------------------------------------------------------
Net Decrease (139,315) $(1,168,181) (373,533) $(3,076,747)
============================================================================================
Class C
Shares sold 159,656 $ 1,355,314 107,515 $ 901,084
Shares issued on reinvestment 7,671 64,892 4,379 36,514
Shares redeemed (41,737) (352,036) (17,498) (144,671)
- --------------------------------------------------------------------------------------------
Net Increase 125,590 $ 1,068,170 94,396 $ 792,927
============================================================================================
</TABLE>
20
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1997 1996 1995 1994 1993
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $8.47 $8.48 $7.80 $8.54 $8.18
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (1) 0.41 0.41 0.41 0.40 0.40
Net realized and
unrealized gain (loss) 0.10 (0.01) 0.68 (0.72) 0.38
- -------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.51 0.40 1.09 (0.32) 0.78
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.41) (0.41) (0.41) (0.40) (0.40)
Net realized gains -- -- -- (0.02) (0.02)
- -------------------------------------------------------------------------------------------------------
Total Distributions (0.41) (0.41) (0.41) (0.42) (0.42)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.57 $8.47 $8.48 $7.80 $8.54
- -------------------------------------------------------------------------------------------------------
Total Return 6.23% 4.85% 14.31% (3.97)% 9.76%
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $48,759 $49,355 $52,568 $62,090 $67,230
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.67% 0.66% 0.65% 0.65% 0.65%
Net investment income 4.83 4.86 5.01 4.77 4.59
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 67% -- 68% 22%
=======================================================================================================
</TABLE>
(1) The investment adviser has waived all or part of its fees for the five
years ended November 30, 1997. If such fees were not waived, the per share
effect on net investment income and the expense ratios would have been as
follows:
<TABLE>
<CAPTION>
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
--------------------------------- --------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.03 $0.04 $0.03 $0.03 $0.04 0.98% 1.08% 0.97% 0.98% 1.10%
</TABLE>
21
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1997 1996 1995(1)
==================================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $8.47 $8.48 $7.87
- ----------------------------------------------------------------------------------
Income From Operations:
Net investment income (2) 0.39 0.39 0.38
Net realized and unrealized gain (loss) 0.10 (0.01) 0.61
- ----------------------------------------------------------------------------------
Total Income From Operations 0.49 0.38 0.99
- ----------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) (0.39) (0.38)
- ----------------------------------------------------------------------------------
Total Distributions (0.39) (0.39) (0.38)
- ----------------------------------------------------------------------------------
Net Asset Value, End of Year $8.57 $8.47 $8.48
- ----------------------------------------------------------------------------------
Total Return 6.00% 4.64% 13.01%++
- ----------------------------------------------------------------------------------
Net Assets, End of Year (000s) $2,283 $1,192 $393
- ----------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (2) 0.89% 0.88% 0.86%+
Net investment income 4.61 4.64 4.74+
- ----------------------------------------------------------------------------------
Portfolio Turnover Rate 52% 67% --
==================================================================================
</TABLE>
(1) For the period from December 5, 1994 (inception date) to November 30, 1995.
(2) The investment adviser has waived all or part of its fees for the two years
ended November 30, 1997 and the period ended November 30, 1995. If such
fees were not waived, the per share effect on net investment income and
expense ratios would have been as follows:
<TABLE>
<CAPTION>
Per Share Decreases to Expense Ratios
Net Investment Income Without Fee Waivers
---------------------- ----------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Class C $0.03 $0.02 $0.03 1.20% 1.30% 1.19%+
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Trustees
of Smith Barney Investment Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Smith Barney Intermediate Maturity New
York Municipals Fund ("Fund") of Smith Barney Investment Trust as of November
30, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and financial highlights for each of the years in the three-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 each of the years in the two-year period
ended November 30, 1994 were audited by other auditors whose report thereon,
dated January 18, 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
November 30, 1997, by correspondence with the custodian. As to securities sold
but not 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 the
Smith Barney Intermediate Maturity New York Municipals Fund of Smith Barney
Investment Trust as of November 30, 1997, and 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 financial highlights for each of the years in the
three-year period then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
New York, New York
January 15, 1998
23
<PAGE>
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year
ended November 30, 1997:
-- 99.89% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
24
<PAGE>
Smith Barney SMITH BARNEY
Intermediate ------------
Maturity New York A Member of TravelersGroup[LOGO]
Municipals Fund
Trustees Investment Adviser and
Herbert Barg Administrator
Alfred J. Bianchetti Mutual Management Corp.
Martin Brody
Dwight B. Crane Distributor
Burt N. Dorsett Smith Barney Inc.
Elliot S. Jaffe
Stephen E. Kaufman Custodian
Joseph J. McCann PNC Bank, N.A.
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr. Shareholder
Servicing Agent
James J. Crisona, Emeritus First Data Investor Services Group, Inc.
P.O. Box 9134
Officers Boston, MA 02205-9134
Heath B. McLendon
Chief Executive Officer
This report is submitted for the general
Lewis E. Daidone information of the shareholders of Smith
Senior Vice President Barney Intermediate Maturity New York
and Treasurer Municipals Fund. It is not authorized
for distribution to prospective
Peter M. Coffey investors unless accompanied or preceded
Vice President and by a current Prospectus for the Fund,
Investment Officer which contains information concerning
the Fund's investment policies and
Thomas M. Reynolds expenses as well as other pertinent
Controller information.
Christina T. Sydor Smith Barney
Secretary Intermediate Maturity
New York
Municipals Fund
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0311 1/98
<PAGE>
================================================================================
ANNUAL REPORT
================================================================================
1997
1997
1997
1997
1997
Smith Barney
Intermediate
Maturity
California
Municipals Fund
---------------------------------------------
November 30, 1997
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
=============================================================
Smith Barney Intermediate Maturity California Municipals Fund
=============================================================
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Intermediate
Maturity California Municipals Fund ("Fund") for the year ended November 30,
1997. In this report, we summarize the period's prevailing economic and market
conditions and outline the Fund's investment strategy. A detailed summary of the
Fund's performance and current holdings can be found in the appropriate sections
that follow.
Fund's Performance Update
For the year ended November 30, 1997, the Class A shares of the Fund generated a
total return of 6.13% and outperformed the Fund's Lipper Analytical Services
Inc. ("Lipper") intermediate-term municipals peer group average total return of
5.37% for the same period. (Lipper is a major independent fund-tracking
organization.)
In addition, the Fund paid income dividends totaling $0.40 per Class A share
during the reporting period. Based on a net asset value ("NAV") of $8.66 as of
November 30, 1997, and a current monthly income dividend of approximately
$0.0332 for Class A shares, this equates to an annualized distribution rate of
4.60%. For a California resident in the combined state and federal income tax
bracket of 42%, the Fund's tax-free yield of 4.60% is equivalent to a taxable
yield of 7.93%. (This figure assumes an investor is in the federal income tax
bracket of 31%.)
Market Update and Portfolio Strategy
The municipal bond market is in the midst of a powerful rally that began in
early spring. Yet municipal bonds have not rallied quite as much as government
bonds because this fall has seen a prolific issuance of refunding issues. All of
this simply means that municipals are very attractive on an after-tax basis
compared to government bonds at this time. We have therefore been fully invested
with an emphasis on high-quality issues because of the little yield pick-up
available from lower-rated issues. We tend to be value-oriented investors and
quality in our view is coming at a small premium over Baa and lower-rated
credits.
The powerful rally in municipals has created some very interesting investment
opportunities. The long maturities in our marketplace are priced almost even
with intermediate maturities that are shorter. If we can maintain our coupon
income yet take much less interest rate risk, we are delighted to do so. As long
1
<PAGE>
as the yield curve stays this "flat," we will continue to maintain a high grade
profile, and also seek to lessen our interest rate volatility in today's lower
interest-rate environment. We have been waiting for this market opportunity for
a while and our patience is consistent with one of our key investment strategy
trademarks: discipline. This discipline includes providing dividend income while
maintaining a conservative maturity structure.
Fund's Investment Strategy
During the past year, the Fund focused on housing bonds (approximately 17%),
hospital bonds (roughly 16%) and transportation bonds (about 13%) because we
believe they offered good relative values. At the end of November, the Fund's
weighted average maturity was approximately 7 years. In addition, at November
30, 1997, approximately 94% of the Fund's holdings were rated investment grade
by either Standard & Poor's Corporation or Moody's Investors Services Inc., with
about 48% of the Fund's holdings invested in AAA bonds, the highest possible
rating. (Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's
Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings
Services, or have an equivalent rating by any nationally recognized statistical
rating organization, or determined by the manager to be of equivalent quality.)
California Economic Highlights
Throughout 1997, California's economic expansion rolled on. The cornerstone to
this expansion has been strong job growth. Over the past several years
California has been able to replace nearly all of the jobs it lost in the
recession of the early 1990's. More importantly, these job gains have occurred
over a broad range of industries that include high-tech manufacturing,
entertainment and international trade. This employment diversification should
enable the Golden State's economy to be less reliant on a narrower group of
industries, (as it was in the late 1980s), and more resilient against any
possible future economic downturns. Moreover, we believe this flexibility should
allow California to be more economically competitive both on a national and
international level throughout 1998.
Municipal Bond Market Outlook
The fundamental outlook for bonds is quite good. The U.S. economy continues to
produce healthy results without fanning the flames of inflation. And while
inflation remains extremely low, with economic uncertainty prevalent in
Southeast Asia, we expect it to stay that way for the next several quarters.
Federal Reserve Board monetary policy appears to be on hold for the moment, and
tax-exempt bonds are in decent supply and are attractively priced. All of those
factors should add up to an investor-friendly climate with respect to municipal
bonds over the next quarter or two. While we remain committed to
2
<PAGE>
our conservative investment strategy, discipline will be the main determinant of
your Fund's maturity structure.
In closing, thank you for your investment in the Smith Barney Intermediate
Maturity California Municipals Fund. We look forward to continuing to help you
pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
December 23, 1997
3
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Historical Performance -- Class A Shares
===========================================================================================================
Net Asset Value
---------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
===========================================================================================================
<S> <C> <C> <C> <C> <C>
11/30/97 $8.55 $8.66 $0.40 $0.00 6.13%
- -----------------------------------------------------------------------------------------------------------
11/30/96 8.53 8.55 0.40 0.00 5.05
- -----------------------------------------------------------------------------------------------------------
11/30/95 7.80 8.53 0.40 0.00 14.84
- -----------------------------------------------------------------------------------------------------------
11/30/94 8.50 7.80 0.39 0.01 (3.65)
- -----------------------------------------------------------------------------------------------------------
11/30/93 8.04 8.50 0.39 0.00 10.70
===========================================================================================================
Inception*-11/30/92 7.90 8.04 0.35 0.00 6.33+
===========================================================================================================
Total $2.33 $0.01
===========================================================================================================
<CAPTION>
===========================================================================================================
Historical Performance -- Class C Shares
===========================================================================================================
Net Asset Value
---------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
===========================================================================================================
<S> <C> <C> <C> <C> <C>
11/30/97 $8.54 $8.65 $0.38 $0.00 5.92%
- -----------------------------------------------------------------------------------------------------------
11/30/96 8.52 8.54 0.38 0.00 4.84
- -----------------------------------------------------------------------------------------------------------
11/30/95 7.80 8.52 0.38 0.00 14.36
- -----------------------------------------------------------------------------------------------------------
Inception*-11/30/94 7.76 7.80 0.02 0.00 0.72+
===========================================================================================================
Total $1.16 $0.00
===========================================================================================================
<CAPTION>
===========================================================================================================
Historical Performance -- Class Y Shares
===========================================================================================================
Net Asset Value
---------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
============================================================================================================
<S> <C> <C> <C> <C> <C>
11/30/97 $8.56 $8.66 $0.42 $0.00 6.20%
- ------------------------------------------------------------------------------------------------------------
11/30/96 8.54 8.56 0.41 0.00 5.22
- -----------------------------------------------------------------------------------------------------------
Inception*-11/30/95 8.39 8.54 0.09 0.00 2.92+
============================================================================================================
Total $0.92 $0.00
============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
4
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
================================================================================
Without Sales Charge(1)
--------------------------------------------
Class A Class C Class Y
================================================================================
<S> <C> <C> <C>
Year Ended 11/30/97 6.13% 5.92% 6.20%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/97 6.43 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 11/30/97 6.50 8.36 6.47
================================================================================
<CAPTION>
With Sales Charge(2)
--------------------------------------------
Class A Class C Class Y
================================================================================
<S> <C> <C> <C>
Year Ended 11/30/97 4.07% 4.92% 6.20%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/97 6.01 N/A N/A
- --------------------------------------------------------------------------------
Inception* through 11/30/97 6.14 8.36 6.47
================================================================================
</TABLE>
<TABLE>
<CAPTION>
================================================================================
Cumulative Total Return
================================================================================
Without Sales Charge(1)
================================================================================
<S> <C>
Class A (Inception* through 11/30/97) 45.21%
- --------------------------------------------------------------------------------
Class C (Inception* through 11/30/97) 27.90
- --------------------------------------------------------------------------------
Class Y (Inception* through 11/30/97) 15.01
================================================================================
</TABLE>
(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 shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A shares reflect the deduction
of the maximum initial sales charge of 2.00% and Class C shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within one
year from initial purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, C and Y shares are December 31, 1991, November
8, 1994 and September 8, 1995, respectively.
5
<PAGE>
================================================================================
Historical Performance (unaudited)
================================================================================
Growth of $10,000 Invested in Class A Shares of the
Smith Barney Intermediate Maturity California Municipals Fund
vs. Lehman Brothers 10-Year Municipal Bond Index
and Lipper Analytical Services, Inc. Peer Group Average+
- --------------------------------------------------------------------------------
December 1991 -- November 1997
[THE FOLLOWING DATA WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
SB Intermediate Maturity Lehman Bros. 10 Year Lipper Peer Group
California Municipals Fund Municipal Bond Index Average
-------------------------- -------------------- -----------------
<S> <C> <C> <C>
12/31/91 $ 9,802 $10,000 $10,000
11/92 $10,422 $10,767 $10,621
11/93 $11,537 $12,028 $11,671
11/94 $11,116 $11,491 $11,240
11/95 $12,767 $13,623 $12,848
11/96 $13,412 $14,394 $13,490
11/30/97 $14,233 $15,410 $14,223
</TABLE>
+ Hypothetical illustration of $10,000 invested in Class A shares at
inception on December 31, 1991, assuming deduction of the maximum 2.00%
sales charge at the time of investment and reinvestment of dividends and
capital gains, if any, at net asset value through November 30, 1997. The
Lehman Brothers 10-Year Municipal Bond Index ("Index") is a broad-based
index which includes about 5,200 bonds totaling approximately $63 billion
in market capitalization. The Lipper Analytical Services, Inc. Peer Group
Average is composed of an average of the Fund's peer group of mutual funds
(36 funds as of November 30, 1997) investing in intermediate maturity
California tax-exempt bonds. 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 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.
6
<PAGE>
================================================================================
Portfolio Highlights (unaudited) November 30, 1997
================================================================================
Portfolio Breakdown
[THE FOLLOWING DATA WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<S> <C>
Housing 16.8%
Hospital 15.7%
Transportation 13.3%
Water & Sewer 9.7%
Education 8.8%
Tax Allocation 6.4%
Solid Wast 6.6%
General Obligation 0.8%
Miscellaneous 21.9%
</TABLE>
Summary of Municipal Bonds And Short-Term Tax Exempt
Investments by Combined Ratings
<TABLE>
<CAPTION>
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
<S> <C> <C>
Aaa AAA 47.9%
Aa AA 14.8
A A 16.5
Baa BBB 14.4*
NR NR 5.3
P-1/VMIG 1 A-1/SP-1 1.1
-----
100.0%
=====
</TABLE>
* 0.8% of investments were rated by Fitch Investors Services, Inc.
7
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments November 30, 1997
============================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Education -- 8.8%
California Educational Facilities Authority, Revenue Bonds:
$ 945,000 AAA College of Osteopathic Medicine,
CONNIE LEE-Insured, 5.550% due 6/1/06 $ 1,000,519
320,000 A1* Loyola Marymount University, Series B,
6.300% due 10/1/03 351,200
200,000 A2* Mills College, (Escrowed to Maturity with
U.S. government securities), 6.500% due 9/1/02(a) 218,750
500,000 AA University of Southern California, 5.300% due 10/1/04 526,875
285,000 AAA Kern High School District, Series C, MBIA-Insured,
(Escrowed to Maturity with U.S. government securities),
8.750% due 8/1/03 348,769
- ------------------------------------------------------------------------------------------------------------
2,446,113
- ------------------------------------------------------------------------------------------------------------
General Obligation -- 0.8%
200,000 A+ California State GO, 6.000% due 9/1/03 216,750
- ------------------------------------------------------------------------------------------------------------
Hospital -- 15.7%
305,000 AAA Arlington Community Hospital Corp.,
Parkview Community Hospital, First Mortgage Revenue,
(Escrowed to Maturity with U.S. government securities),
8.000% due 6/1/04 338,550
California Health Facilities Financing Authority:
200,000 AAA Adventist Health System/West Agency, Series B,
MBIA-Insured, 6.150% due 3/1/99 205,250
1,000,000 AAA Mills-Peninsula, CONNIE LEE-Insured,
5.300% due 1/15/05 1,042,500
200,000 AA- Sisters of Providence, 6.200% due 10/1/03 218,250
400,000 NR St. Elizabeth's Hospital Project, (Pre-Refunded--
Escrowed with U.S. government securities to
11/5/02 Call @ 102), 5.900% due 11/15/03(a) 434,500
California Statewide Community Development, COP,
St. Joseph's Health:
1,200,000 AA Pre-Refunded -- Escrowed with U.S. government
securities to 7/1/04 Call @ 102,
5.875% due 7/1/05(a) 1,314,000
300,000 A-1+ 3.750% due 7/1/24(b) 300,000
250,000 A Riverside County Asset Leasing Corp., Leasehold Revenue,
Riverside County Hospital, (Project A),
6.000% due 6/1/04 266,250
213,000 BBB-++ Valley Health Systems COP, (Refunding Project),
6.250% due 5/15/99 215,929
- ------------------------------------------------------------------------------------------------------------
4,335,229
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) November 30, 1997
============================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Housing -- 16.8%
$ 1,250,000 AAA ABAG Financing Authority, Multi-Family Housing Revenue,
Series A, FNMA-Insured, 5.700% mandatory put 11/1/06(c) $ 1,312,500
California, Home Mortgage Revenue:
280,000 Aa2* Series B-1, FHA-Insured, 5.900% due 8/1/04(c) 296,800
700,000 Aa2* Series E-1, FHA-Insured, 5.900% due 2/1/05(c) 752,500
700,000 Aa2* Series E-1, FHA-Insured, 5.900% due 8/1/05(c) 755,125
5,000 Aa2* Single-Family Housing Revenue, Series A,
10.000% due 2/1/02 5,013
440,000 AAA City of Santa Rosa Mortgage Revenue Refunding,
(Marlow Apartments Project), FHA-Insured,
5.600% due 9/1/05 456,500
750,000 AAA Riverside County, Multi-Family Housing Revenue,
Series B, FNMA-Collateralized,
5.625% mandatory put 7/1/09(c) 781,875
270,000 AAA San Luis Obispo HFA, Multi-Family Housing Revenue,
(Parkwood Apartments Project), Series A,
FNMA-Collateralized, 5.500% due 8/1/03 280,125
- ------------------------------------------------------------------------------------------------------------
4,640,438
- ------------------------------------------------------------------------------------------------------------
Miscellaneous -- 21.9%
400,000 BBB Fresno Joint Powers Financing Authority, Series A,
5.750% due 9/2/98 401,960
480,000 A+ Irvine Ranch Water District, Joint Powers Agency,
Local Pool Revenue, Issue II, 7.800% due 8/15/01 492,826
1,080,000 AAA Los Angeles County Community Facilities District No. 3,
Special Tax Revenue, Series A, FSA-Insured,
5.250% due 9/1/07 1,129,950
145,000 Aaa* Montclair Redevelopment Agency, Residential Mortgage
Revenue, (Escrowed to Maturity with U.S. government
securities), 7.750% due 10/1/11 171,825
Sacramento County Special Tax Revenue,
Community Facilities, District No. 1:
370,000 NR 5.500% due 9/1/06 377,863
635,000 NR 5.600% due 9/1/07 650,081
1,000,000 AAA San Diego COP, Central Jail Refunding, AMBAC-Insured,
4.800% due 10/1/08 1,003,750
San Francisco Downtown Parking, Series R:
450,000 A* 6.000% due 4/1/02 480,375
280,000 A* 6.150% due 4/1/03 304,150
Santa Barbara COP, (Harbor Refunding Project):
270,000 A* 6.400% due 10/1/02 290,250
285,000 A* 6.500% due 10/1/03 311,006
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) November 30, 1997
============================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Miscellaneous -- 21.9% (continued)
$ 235,000 AA- Simi Valley Community Development Agency COP,
Simi Valley Business Center, Guaranty Agreement
New England Mutual Life, 6.050% mandatory put 10/1/99 $ 242,050
205,000 AAA Upland COP, (Police Building Refunding Project),
AMBAC-Insured, 6.200% due 8/1/02 221,656
- ------------------------------------------------------------------------------------------------------------
6,077,742
- ------------------------------------------------------------------------------------------------------------
Solid Waste -- 6.6%
Kings County Waste Management,
Solid Waste Revenue Bonds:
400,000 BBB+ 6.500% due 10/1/03(c) 433,000
310,000 BBB+ 6.600% due 10/1/04 339,062
1,000,000 Baa1* South Napa Solid Waste Management Authority,
6.000% due 2/15/04(c) 1,051,250
- ------------------------------------------------------------------------------------------------------------
1,823,312
- ------------------------------------------------------------------------------------------------------------
Tax Allocation -- 6.4%
1,000,000 Baa* Hawthorne Community Redevelopment Agency,
Tax Allocation, (Redevelopment Project Area 2),
6.200% due 9/1/05(d) 1,073,750
665,000 A- Paramount Redevelopment Agency, Tax Allocation
Refunding, (Redevelopment Project Area No.1),
5.800% due 8/1/03 707,394
- ------------------------------------------------------------------------------------------------------------
1,781,144
- ------------------------------------------------------------------------------------------------------------
Transportation -- 13.3%
500,000 A1* Los Angeles County Transportation Commission, COP,
Series B, 6.200% due 7/1/03 541,875
Palm Springs Financing Authority, Airport Revenue,
Palm Springs Regional Airport, MBIA-Insured:
200,000 AAA 5.400% due 1/1/03(c) 210,000
400,000 AAA 5.500% due 1/1/04(c) 423,500
350,000 A1* Sacramento Regional Transportation, COP, Series A,
6.400% due 3/1/03 378,000
240,000 AAA San Francisco Airport Improvement Corp., Lease Revenue,
(Escrowed to Maturity with U.S. government securities),
8.000% due 7/1/13 291,300
San Jose, Airport Revenue:
500,000 AAA MBIA-Insured, 5.750% due 3/1/03 533,750
800,000 AAA Series 93, FGIC-Insured, 5.400% due 3/1/04(c) 839,000
450,000 BBB+ Southern California Rapid Transit Authority, District A2,
Special Benefit Assessment, 6.100% due 9/1/03 477,000
- ------------------------------------------------------------------------------------------------------------
3,694,425
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Schedule of Investments (continued) November 30, 1997
============================================================================================================
FACE
AMOUNT RATING SECURITY VALUE
============================================================================================================
<S> <C> <C> <C>
Water & Sewer -- 9.7%
$ 1,000,000 AAA El Dorado Public Agency Financing Authority,
FGIC-Insured, 5.200% due 2/15/07 $ 1,045,000
1,000,000 AAA Modesto Irrigation District Financing Authority Revenue,
MBIA-Insured, 5.350% due 10/1/06 1,065,000
Mojave Water District, California Improvement District,
(Morongo Basin):
250,000 AAA Escrowed to Maturity with U.S. government securities,
6.250% due 9/1/02 271,250
280,000 AAA Pre-Refunded -- Escrowed with U.S. government
securities to 9/1/02 Call @ 102, 6.375% due 9/1/03 309,750
- ------------------------------------------------------------------------------------------------------------
2,691,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $26,056,463**) $27,706,153
============================================================================================================
</TABLE>
(a) Pre-Refunded bonds escrowed with U.S. government securities and bonds
escrowed to maturity with U.S. government securities are considered by the
investment advisor to be triple-A rated even if issuer has not applied for
new ratings.
(b) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Security segregated by Custodian for open purchase commitments.
++ Fitch Investors Services, Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 12 and 13 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
11
<PAGE>
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Rating Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's -- Ratings from "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standings within the major
rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest rated issue only in a small
degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Baa," where 1 is the highest and 3 the lowest ranking within its
generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds that are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or Moody's.
12
<PAGE>
================================================================================
Short-Term Securities Ratings
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong; those
issues determined to possess overwhelming safety characteristics are
denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
================================================================================
Security Descriptions
================================================================================
ABAG -- Association of Bay Area
Governments
AIG -- American International
Guaranty
AMBAC -- American Municipal Bond
Assurance Corporation
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance
Company
CONNIE LEE -- College Construction Loan
Insurance Association
COP -- Certificate of Participation
EDA -- Economic Development
Authority
FLAIRS -- Floating Adjustable Interest
Rate Securities
FGIC -- Financial Guaranty Insurance
Company
FHA -- Federal Housing
Administration
FHLMC -- Federal Home Loan Mortgage
Corporation
FNMA -- Federal National Mortgage
Association
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment
Contract
GNMA -- Government National
Mortgage Association
GO -- General Obligation
HFA -- Housing Finance Authority
IDA -- Industrial Development
Authority
IDB -- Industrial Development Board
IDR -- Industrial Development
Revenue
INFLOS -- Inverse Floaters
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors
Assurance Corporation
MVRICS -- Municipal Variable Rate
Inverse Coupon Security
PCFA Pollution Control Financing
Authority
PCR -- Pollution Control Revenue
RIBS -- Residual Interest Bonds
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
13
<PAGE>
================================================================================
Statement of Assets and Liabilities November 30, 1997
================================================================================
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $26,056,463) $27,706,153
Receivable for Fund shares sold 1,380,000
Interest receivable 427,559
Receivable from investment advisor 2,019
- --------------------------------------------------------------------------------
Total Assets 29,515,731
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased 75,434
Payable to bank 32,795
Dividends payable 30,151
Distribution fees payable 968
Accrued expenses 35,263
- --------------------------------------------------------------------------------
Total Liabilities 174,611
- --------------------------------------------------------------------------------
Total Net Assets $29,341,120
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 3,390
Capital paid in excess of par value 28,659,672
Overdistributed net investment income (5,183)
Accumulated net realized loss from security transactions (966,449)
Net unrealized appreciation of investments 1,649,690
- --------------------------------------------------------------------------------
Total Net Assets $29,341,120
================================================================================
Shares Outstanding:
Class A 2,961,246
- --------------------------------------------------------------------------------
Class C 395,511
- --------------------------------------------------------------------------------
Class Y 33,700
- --------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $8.66
- --------------------------------------------------------------------------------
Class C* $8.65
- --------------------------------------------------------------------------------
Class Y (and redemption price) $8.66
- --------------------------------------------------------------------------------
Class A Maximum Public Offering Price Per Share
(net asset value plus 2.04% of net asset value per share) $8.84
================================================================================
</TABLE>
* Redemption price is NAV of Class C shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
14
<PAGE>
================================================================================
Statement of Operations For the Year Ended November 30, 1997
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,507,125
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 83,365
Administration fees (Note 3) 55,576
Distribution fees (Note 3) 46,747
Audit and legal 28,750
Registration fees 25,000
Shareholder communications 24,000
Trustees' fees 22,000
Shareholder and system servicing fees 20,800
Pricing service fees 7,200
Custody 1,600
Amortization of deferred organization costs 1,004
Other 2,799
- --------------------------------------------------------------------------------
Total Expenses 318,841
Less: Investment advisory and administration fee waivers (Note 3) (105,145)
- --------------------------------------------------------------------------------
Net Expenses 213,696
- --------------------------------------------------------------------------------
Net Investment Income 1,293,429
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security
Transactions (excluding short-term securities):
Proceeds from sales 2,458,211
Cost of securities sold 2,438,498
- --------------------------------------------------------------------------------
Net Realized Gain 19,713
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 1,299,621
End of year 1,649,690
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 350,069
- --------------------------------------------------------------------------------
Net Gain on Investments 369,782
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $1,663,211
================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
================================================================================
Statements of Changes in Net Assets For the Years Ended November 30,
===============================================================================
<TABLE>
<CAPTION>
1997 1996
===============================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,293,429 $ 1,292,655
Net realized gain 19,713 21,872
Increase in net unrealized appreciation 350,069 11,418
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 1,663,211 1,325,945
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 4):
Net investment income (1,299,901) (1,291,366)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,299,901) (1,291,366)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 5,448,545 4,206,393
Net asset value of shares issued for
reinvestment of dividends 918,801 913,647
Cost of shares reacquired (4,807,692) (6,462,164)
- -------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Fund Share Transactions 1,559,654 (1,342,124)
- -------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 1,922,964 (1,307,545)
NET ASSETS:
Beginning of year 27,418,156 28,725,701
- -------------------------------------------------------------------------------
End of year* $ 29,341,120 $ 27,418,156
===============================================================================
* Includes undistributed (overdistributed) net
investment income of: $(5,183) $1,289
===============================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Intermediate Maturity California Municipals Fund ("Fund") is a
separate, non-diversified, investment fund of the Smith Barney Investment Trust
("Trust"). The Trust, a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company and consists of this Fund and two other separate investment funds: Smith
Barney Intermediate Maturity New York Municipals Fund and Smith Barney Large
Capitalization Growth Fund. The financial statements and financial highlights
for the other funds are presented in separate annual reports.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on the trade date; (b) securities
are valued at the mean between the quoted bid and asked prices provided by an
independent pricing service that are based on transactions in municipal
obligations, quotations from municipal bond dealers, market transactions in
comparable securities and various relationships between securities; (c)
securities maturing within 60 days are valued at cost plus accreted discount, or
minus amortized premium, which approximates value; (d) gains or losses on the
sale of securities are calculated by using the specific identification method;
(e) interest income, adjusted for amortization of premium and accretion of
original issue discount, is recorded on the accrual basis; market discount is
recognized upon the disposition of the security; (f) direct expenses are charged
to the Fund and each class; management fees and general fund expenses are
allocated on the basis of relative net assets; (g) dividends and distributions
to shareholders are recorded on the ex-dividend date; (h) the Fund intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; and (i) 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.
In addition, organization costs have been deferred and are being amortized
on a straight line basis over a five-year period, beginning with the
commencement of the Fund's operations in December 1991. Therefore, at November
30, 1997, the amortization of the deferred organization costs had been
completed.
17
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
2. PORTFOLIO CONCENTRATION
Since the Fund invests primarily in obligations of issuers within
California, it is subject to possible concentration risks associated with
economic, political, or legal developments or industrial or regional matters
specifically affecting California.
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION
AGREEMENT AND OTHER TRANSACTIONS
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc.
("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC an advisory
fee calculated at an annual rate of 0.30% of the average daily net assets. This
fee is calculated daily and paid monthly. For the year ended November 30, 1997,
MMC waived $63,087 of its investment advisory fees.
MMC also acts as the Fund's administrator for which the Fund pays a fee
calculated at the annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly. For the year ended November 30, 1997, MMC
waived $42,058 of its administration fees.
Smith Barney Inc. ("SB"), another subsidiary of SSBH, acts as distributor
of Fund shares. For the year ended November 30, 1997, SB received sales charges
of approximately $37,000 on sales of the Fund's Class A shares.
There is a contingent deferred sales charge ("CDSC") of 1.00% on Class C
shares, which applies if redemption occurs within one year from initial
purchase. For the year ended November 30, 1997, CDSCs paid to SB for Class C
shares were approximately $1,000.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect
to its Class A and C shares, calculated at the annual rate of 0.15% of the
average daily net assets for each class. In addition, the Fund pays a
distribution fee with respect to its Class C shares calculated at the annual
rate of 0.20%.
For the year ended November 30, 1997, total Distribution Plan fees were:
<TABLE>
<CAPTION>
Class A Class C
================================================================================
<S> <C> <C>
Distribution Plan Fees $37,151 $ 9,596
================================================================================
</TABLE>
All officers and one Trustee of the Fund are employees of SB.
18
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
4. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
5. INVESTMENTS
During the year ended November 30, 1997, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $3,062,500
- --------------------------------------------------------------------------------
Sales 2,458,211
================================================================================
</TABLE>
At November 30, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $1,649,690
Gross unrealized depreciation --
- --------------------------------------------------------------------------------
Net unrealized appreciation $1,649,690
================================================================================
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
At November 30, 1997, the Fund had for Federal tax purposes approximately
$966,000 of capital loss carryforwards available, subject to certain
limitations, to offset future capital gains. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed.
The amount and year of expiration for each carryforward loss is indicated
below:
<TABLE>
<CAPTION>
11/30/01 11/30/02 11/30/03
================================================================================
<S> <C> <C> <C>
Capital Loss Carryforwards $2,000 $695,000 $269,000
================================================================================
</TABLE>
7. SHARES OF BENEFICIAL INTEREST
At November 30, 1997, the Fund 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
19
<PAGE>
================================================================================
Notes to Financial Statements (continued)
================================================================================
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.
At November 30, 1997, total paid-in capital amounted to the following for
each class:
<TABLE>
<CAPTION>
Class A Class C Class Y
================================================================================
<S> <C> <C> <C>
Total Paid-in Capital $25,075,137 $3,348,379 $239,546
================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, 1997 November 30, 1996
--------------------- ----------------------
Shares Amount Shares Amount
==================================================================================
<S> <C> <C> <C> <C>
Class A
Shares sold 474,080 $ 4,054,918 411,844 $ 3,492,374
Shares issued on
reinvestment 94,422 805,955 96,895 816,607
Shares redeemed (477,346) (4,081,984) (710,606) (6,007,948)
- ----------------------------------------------------------------------------------
Net Increase (Decrease) 91,156 $ 778,889 (201,867) $(1,698,967)
==================================================================================
Class C
Shares sold 162,920 $ 1,393,627 84,737 $ 714,019
Shares issued on
reinvestment 12,138 103,598 10,006 84,206
Shares redeemed (84,783) (725,708) (53,891) (454,216)
- ----------------------------------------------------------------------------------
Net Increase 90,275 $ 771,517 40,852 $ 344,009
==================================================================================
Class Y
Shares sold -- -- -- --
Shares issued on
reinvestment 1,598 $ 9,248 1,521 $ 12,834
Shares redeemed -- -- -- --
- ----------------------------------------------------------------------------------
Net Increase 1,598 $ 9,248 1,521 $ 12,834
==================================================================================
</TABLE>
20
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class A Shares 1997 1996 1995 1994 1993
============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $8.55 $8.53 $7.80 $8.50 $8.04
- ------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (1) 0.40 0.40 0.40 0.39 0.39
Net realized and
unrealized gain (loss) 0.11 0.02 0.73 (0.69) 0.46
- ------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.51 0.42 1.13 (0.30) 0.85
- ------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.40) (0.40) (0.40) (0.39) (0.39)
Net realized gains -- -- -- (0.01) --
- ------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (0.40) (0.40) (0.40) (0.39)
- ------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.66 $8.55 $8.53 $7.80 $8.50
- ------------------------------------------------------------------------------------------------------------
Total Return 6.13% 5.05% 14.84% (3.65)% 10.70%
- ------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $25,630 $24,537 $26,211 $25,359 $32,514
- ------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.75% 0.77% 0.75% 0.75% 0.72%
Net investment income 4.65 4.69 4.89 4.73 4.45
- ------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 15% 8% 39% 16%
============================================================================================================
</TABLE>
(1) The investment adviser and administrator waived all or part of their fees
for the five years ended November 30, 1997. In addition, the investment
adviser reimbursed the Fund for $75,189 in expenses for the year ended
November 30, 1996. If such fees were not waived and expenses were not
reimbursed, the per share effect on net investment income and the expense
ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Reimbursements
------------------------------------- -------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
----- ----- ----- ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.03 $0.07 $0.03 $0.04 $0.07 1.12% 1.54% 1.16% 1.24% 1.49%
</TABLE>
21
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class C Shares 1997 1996 1995 1994(1)
===========================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $8.54 $8.52 $7.80 $7.76
- -------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.38 0.38 0.38 0.01
Net realized and unrealized gain 0.11 0.02 0.72 0.05**
- -------------------------------------------------------------------------------------------
Total Income From Operations 0.49 0.40 1.10 0.06
- -------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.38) (0.38) (0.38) (0.02)
- -------------------------------------------------------------------------------------------
Total Distributions (0.38) (0.38) (0.38) (0.02)
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Year $8.65 $8.54 $8.52 $7.80
- -------------------------------------------------------------------------------------------
Total Return 5.92% 4.84% 14.36% 0.72%++
- -------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $3,419 $2,607 $2,254 $45
- -------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (3) 0.96% 0.98% 0.98% 0.95%+
Net investment income 4.44 4.48 4.54 4.53+
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 15% 8% 39%
===========================================================================================
</TABLE>
(1) For the period from November 8, 1994 (inception date) to November 30, 1994.
(2) The investment adviser and administrator waived all or part of their fees
for the three years ended November 30, 1997 and the period ended November
30, 1994. In addition, the investment adviser reimbursed the Fund for
$75,189 in expenses for the year ended November 30, 1996. If such fees were
not waived and expenses were not reimbursed, the per share effect on net
investment income and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases to Without Fee Waivers
Net Investment Income and Reimbursements
------------------------------ ------------------------------
1997 1996 1995 1994 1997 1996 1995 1994
----- ----- ----- ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class C $0.03 $0.07 $0.03 $0.00* 1.33% 1.75% 1.39% 1.44%+
</TABLE>
* Amount represents less than $0.01 per share.
** The amount in this caption for each share outstanding throughout the period
may not accord with the change in aggregate gains and losses in the
portfolio securities for the period because of the timing of purchases and
withdrawals of shares in relation to the fluctuating market values of the
portfolio.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22
<PAGE>
================================================================================
Financial Highlights (continued)
================================================================================
For a share of each class of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Class Y Shares 1997 1996 1995(1)
===============================================================================
<S> <C> <C> <C>
Net Asset Value, Beginning of Year $8.56 $8.54 $8.39
- -------------------------------------------------------------------------------
Income From Operations:
Net investment income (2) 0.41 0.41 0.09
Net realized and unrealized gain 0.11 0.02 0.15
- -------------------------------------------------------------------------------
Total Income From Operations 0.52 0.43 0.24
- -------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.42) (0.41) (0.09)
- -------------------------------------------------------------------------------
Total Distributions (0.42) (0.41) (0.09)
- -------------------------------------------------------------------------------
Net Asset Value, End of Year $8.66 $8.56 $8.54
- -------------------------------------------------------------------------------
Total Return 6.20% 5.22% 2.92%++
- -------------------------------------------------------------------------------
Net Assets, End of Year (000s) $292 $274 $261
- -------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (2) 0.56% 0.59% 0.58%+
Net investment income 4.84 4.87 4.74+
- -------------------------------------------------------------------------------
Portfolio Turnover Rate 9% 15% 8%
===============================================================================
</TABLE>
(1) For the period from September 8, 1995 (inception date) to November 30,
1995.
(2) The investment adviser and administrator waived all or part of their fees
for the two years ended November 30, 1997 and the period ended November 30,
1995. In addition, the investment adviser reimbursed the Fund for $75,189
in expenses for the year ended November 30, 1996. If such fees were not
waived and expenses were not reimbursed, the per share effect on net
investment income and the expense ratios would have been as follows:
<TABLE>
<CAPTION>
Expense Ratios
Per Share Decrease to Without Fee Waivers
Net Investment Income and Reimbursements
------------------------- ---------------------------
1997 1996 1995 1997 1996 1995
----- ----- ----- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C>
Class Y $0.03 $0.07 $0.03 0.94% 1.36% 0.99%+
</TABLE>
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
================================================================================
Tax Information (unaudited)
================================================================================
For Federal tax purposes, the Fund hereby designates for the fiscal year
ended November 30, 1997:
-- 100% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
23
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
The Shareholders and Board of Trustees of
Smith Barney Investment Trust:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Smith Barney Intermediate Maturity
California Municipals Fund of Smith Barney Investment Trust as of November 30,
1997, the related statement of operations for the year then ended and the
statements of changes in net assets for the two-year period then ended and
financial highlights for each of the years in the three-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 each of the years in the two-year period ended November 30, 1994
were audited by other auditors whose report thereon, dated January 25, 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
November 30, 1997, by correspondence with the custodian. 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 the
Smith Barney Intermediate Maturity California Municipals Fund of Smith Barney
Investment Trust as of November 30, 1997, the results of its operations for the
year then ended, the changes in its net assets for the two-year period then
ended and financial highlights for each of the years in the three-year period
then ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
January 15, 1998
24
<PAGE>
Smith Barney SMITH BARNEY
Intermediate ------------
Maturity
California A Member of TraverlersGroup[LOGO]
Municipals
Fund Investment Adviser and
Administrator
Mutual Management Corp.
Trustees
Herbert Barg Distributor
Alfred J. Bianchetti Smith Barney Inc.
Martin Brody
Dwight B. Crane Custodian
Burt N. Dorsett PNC Bank, N.A.
Elliot S. Jaffe
Stephen E. Kaufman Shareholder
Joseph J. McCann Servicing Agent
Heath B. McLendon, Chairman First Data Investor Services Group, Inc.
Cornelius C. Rose, Jr. P.O. Box 9134
Boston, MA 02205-9134
James J. Crisona, Emeritus
Officers This report is submitted for the general
Heath B. McLendon information of the shareholders of Smith
President and Barney Intermediate Maturity California
Chief Executive Officer Municipals Fund. It is not authorized for
distribution to prospective investors
Lewis E. Daidone unless accompanied or preceded by a
Senior Vice President current Prospectus for the Fund, which
and Treasurer contains information concerning the
Fund's investment policies and expenses
Joseph P. Deane as well as other pertinent information.
Vice President and
Investment Officer
Smith Barney
Thomas M. Reynolds Intermediate Maturity
Controller California
Municipals Fund
Christina T. Sydor 388 Greenwich Street
Secretary New York, New York 10013
www.smithbarney.com
FD0310 1/98
