<PAGE>
[GRAPHIC]
Smith Barney
Mid Cap
Blend Fund
[GRAPHIC] -------------
ANNUAL REPORT
-------------
November 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Mid Cap Blend Fund
- --------------------------------------------------------------------------------
The Smith Barney Mid Cap Blend Fund seeks long-term growth of capital by
investing, under normal conditions, at least 65% of its total assets in the
equity securities of medium-sized companies with market capitalizations between
$1 billion and $5 billion at the time of investment.
Smith Barney Mid Cap Blend Fund
Average Annual Total Returns
November 30, 1998
Without Sales Charges(1)
------------------------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Since Inception+ ++ 19.56% 19.30% 19.30%
- --------------------------------------------------------------------------------
With Sales Charges(2)
------------------------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Since Inception+ ++ 13.58% 14.30% 17.06%
- --------------------------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC which applies if shares
are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Inception date for Class A, B and L shares is September 1, 1998.
++ Total return is not annualized, as it may not be representative of the
total return for the year.IFC-1
- --------------------------------------------------------------------------------
FUND HIGHLIGHT
- --------------------------------------------------------------------------------
There are a number of ways for mid-cap stocks to be rewarding for investors in
this type of environment. We look for increasing institutional ownership,
greater Wall Street coverage and more merger and acquisition activity to play
key roles in driving mid-cap stock performance going forward. In fact, since the
Fund's inception, we have already seen evidence of these conditions in some of
the portfolio's holdings. Over the past 14 weeks, we have had new "buy"
recommendations on roughly 18 stocks in the Fund's portfolio. Moreover, three of
the companies we own are in the process of being acquired by larger
corporations. We expect these positive trends for mid-cap stocks to continue for
the foreseeable future.
- --------------------------------------------------------------------------------
NASDAQ SYMBOL
- --------------------------------------------------------------------------------
Class A SBMAX
Class B SBMDX
Class L SBMLX
- --------------------------------------------------------------------------------
WHAT'S INSIDE
- --------------------------------------------------------------------------------
Shareholder Letter ........................................... 1
Historical Performance........................................ 4
Schedule of Investments....................................... 5
Statement of Assets and Liabilities........................... 9
Statement of Operations...................................... 10
Statement of Changes in Net Assets........................... 11
Notes to Financial Statements................................ 12
Financial Highlights......................................... 16
Independent Auditors' Report................................. 17
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Letter
- --------------------------------------------------------------------------------
[PHOTO] [PHOTO]
HEATH B. LAWRENCE
MCLENDON WEISSMAN
Chairman Vice President and
Investment Officer
Dear Shareholder:
We are pleased to provide the first annual report for the Smith Barney Mid Cap
Blend Fund ("Fund") for the period ended November 30, 1998. 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. We hope you find this
report to be useful and informative.
A Style Pure Fund
The Smith Barney Mid Cap Blend Fund is a Style Pure Fund. Style Pure Series
mutual funds are Smith Barney Mutual Funds that are the basic building blocks of
asset allocation. Other than maintaining minimal cash or under extraordinary
market conditions, each Style Pure Fund is totally invested 100% of the time
within its designated asset classes and its designated investment style.
Performance Update
Since its inception on September 1, 1998, the Class A, B and L shares of the
Fund generated a total return excluding sales charges of 19.56%, 19.30% and
19.30%, respectively. In comparison, the S&P 400 Midcap Index posted a total
return of 21.09% during the same time period.
Market Update
Since the Fund commenced operations, we have continued to build what we believe
is a portfolio of high quality, well-positioned companies at extremely
attractive valuations. Conceptually, we are trying to take advantage of the
tremendous valuation gap between large- and middle-capitalization companies
without taking on a lot of undue risk. To accomplish this, we have followed an
investment approach that focuses on companies with competitive advantages and
excellent market positions. In our view, many of these companies are leaders in
their respective fields and are poised to leverage and exploit current growth
opportunities. In the companies under consideration, we look for consistency of
growth, good management, positive cash flow and high return on equity ("ROE") as
factors in determining whether or not to invest.
Because large-capitalization stocks have outperformed middle-capitalization
stocks since the beginning of 1994, the relative valuations of
middle-capitalization companies are better than they have been since 1990.
However, the valuation discrepancy between large-caps and mid-caps is now
accompanied by relative earnings momentum that has not existed over the past few
years. To us, this suggests possible near-term outperformance for many mid-cap
stocks. Indeed, over the past two months, mid-cap stocks have begun to
outperform large-cap ones and we expect this trend to continue in the coming
months.
There are a number of ways for mid-cap stocks to be rewarding for investors in
this type of environment. We look for increasing institutional ownership,
greater Wall Street coverage and more merger and acquisition activity to play
key roles in driving mid-cap stock performance going forward. In fact, since the
Fund's inception, we have already seen evidence of these conditions in some of
the portfolio's holdings.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 1
<PAGE>
Over the past 14 weeks, we have had new "buy" recommendations on roughly 18
stocks in the Fund's portfolio. Moreover, three of the companies we own are in
the process of being acquired by larger corporations. We expect these positive
trends for mid-cap stocks to continue for the foreseeable future.
Investment Strategy and Portfolio Update
As its name implies, the Mid Cap Blend Fund blends growth and value investment
styles in an effort to provide our shareholders with consistent returns. (Growth
investing typically focuses on the stocks of companies with rapidly rising
earnings and profitability with the expectation of above-average long-term
growth. Value investing attempts to identify companies that are perhaps growing
more slowly but whose valuation may be below average relative to earnings and/or
assets.) As previously noted, we define mid-cap stocks as having a market
capitalization of $1 billion to $5 billion. The mid-stock universe is quite
large and there are approximately 1,100 companies in this area of the market.
We believe that mid-cap stocks present one of the best trade-offs possible. In a
sense, shareholders are getting the best of both worlds -- potentially less
relative risk than small-cap stocks and potentially more relative value than
large-cap stocks. Moreover, by investing in the Fund, you are participating in
companies that fall slightly below the radar screen of the investment community
yet still have established track records. In fact, we make a conscious effort to
find those companies that are about to be discovered by Wall Street.
We look to strike a partnership with the managements of the companies' stocks we
are considering buying. We find that the more research we conduct on a
particular company, the better chance we have of finding quality companies with
undervalued stock prices.
We plan to be long-term owners of the majority of the companies we own. If we
are buying quality companies that continue to grow, there is really no need to
sell. We generally have only three reasons for selling a stock. The first is
that the fundamentals change. Maybe the company's niche isn't as protected as it
once was, or it is heading in a different direction and diluting the value of
its franchise. A second reason is that a stock, in our opinion, is grossly
overvalued. We will either sell or lighten up positions that begin to reach
extraordinary valuations. Our final reason for selling is that we simply have
found another company that is a far better value for the Fund's portfolio.
As of this writing, the Fund's portfolio is now made up of 71 stocks, which
represents 81% of the net asset value ("NAV"). Roughly 13% of the portfolio is
in mid cap stock index futures and 6% is held temporarily as cash equivalents.
We would expect to see the percentage of Fund's assets held in stock index
futures to be reduced over time as we try to take advantage of short-term price
swings by purchasing our favored stocks at opportune times. We expect that the
number of holdings in the Fund's portfolio will remain at about the current
level over time.
The average capitalization of the stocks held in the Fund's portfolio is $3.4
billion with the top ten names representing about 27.4%. The average P/E for the
portfolio as of December 4, 1998, is approximately 21 versus 24.5 for the S&P
500 Index ("Index"). (A P/E shows the relationship between a stock's price and
the company's earnings for the last four quarters.) As for sector weightings
versus the Index, we are overweighted in commercial services, consumer services,
and technology services and underweighted in process industries and utilities
because these two sectors do not meet our requirements for growth.
New to the Fund's top-ten list during the reporting period were Citrix Systems
(a computer software company). We added to our position in Fred Meyer, Inc. (a
food retailing company) during October because we expect the food retailing
industry to
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
outperform the stock market over the near term. Falling out of the top-ten were
Indy Mac Mortgage Holdings, Inc. (a real estate investment trust) and Lear Corp.
(an automobile parts and equipment company) no longer fit into the investment
strategy.
In closing, thank you for investing in the Smith Barney Mid Cap Blend Fund. We
look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Lawrence Weissman
Heath B. McLendon Lawrence Weissman, CFA
Chairman Vice President and
Investment Officer
December 8, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings+ As of November 30, 1998
- --------------------------------------------------------------------------------
1. Sepracor Inc. 3.9%
- --------------------------------------------------------------------------------
2. Citrix Systems, Inc. 3.6
- --------------------------------------------------------------------------------
3. Ambac Financial Group, Inc. 3.6
- --------------------------------------------------------------------------------
4. Lexmark International Group, Inc. 3.4
- --------------------------------------------------------------------------------
5. Outdoor Systems, Inc. 3.4
- --------------------------------------------------------------------------------
6. Countrywide Credit Industries, Inc. 3.3
- --------------------------------------------------------------------------------
7. FactSet Research Systems Inc. 3.2
- --------------------------------------------------------------------------------
8. Network Associates, Inc. 3.2
- --------------------------------------------------------------------------------
9. Kroll-O'Gara Co. 2.5
- --------------------------------------------------------------------------------
10. Linear Technology Corp. 2.5
- --------------------------------------------------------------------------------
+ As a percentage of total common stock.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance -- Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income
Capital Gain Total
Period Ended of Period of Period Dividends
Distributions Return(1)
- --------------------------------------------------------------------------------
- -----------------------
<S> <C> <C> <C>
<C> <C>
Inception* -- 11/30/98 $11.40 $13.63 $0.00
$0.00 19.56%+
- --------------------------------------------------------------------------------
- -----------------------
</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 Return(1)
- --------------------------------------------------------------------------------
- -----------------------
<S> <C> <C> <C>
<C> <C>
Inception* -- 11/30/98 $11.40 $13.60 $0.00
$0.00 19.30%+
- --------------------------------------------------------------------------------
- -----------------------
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance -- Class L Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
--------------------------
Beginning End Income
Capital Gain Total
Period Ended of Period of Period Dividends
Distributions Return(1)
- --------------------------------------------------------------------------------
- -----------------------
<S> <C> <C> <C>
<C> <C>
Inception* -- 11/30/98 $11.40 $13.60 $0.00
$0.00 19.30%+
- --------------------------------------------------------------------------------
- -----------------------
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Inception* through 11/30/98 19.56% 19.30% 19.30%
- --------------------------------------------------------------------------------
With Sales Charge(2)
------------------------------------------
Class A Class B Class L
- --------------------------------------------------------------------------------
Inception* through 11/30/98 13.58% 14.30% 17.06%
- --------------------------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. Thereafter,
the CDSC declines by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC which applies if shares
are redeemed within the first year of purchase.
* Inception date for Class A, B and L shares is September 1, 1998.
+ Total return is not annualized, as it may not be representative of the
total return for the year. 1998 Annual Report to Shareholders
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
================================================================================
=============
<C> <S>
<C>
COMMON STOCK -- 82.5%
Aerospace/Defense -- 2.5%
100,400 Kroll-O'Gara Co.*
$ 3,112,400
11,100 Sundstrand Corp.
599,400
- --------------------------------------------------------------------------------
- -------------
3,711,800
- --------------------------------------------------------------------------------
- -------------
Automobile Parts & Equipment -- 0.8%
32,000 Lear Corp.*
1,236,000
- --------------------------------------------------------------------------------
- -------------
Automobiles -- 1.2%
43,000 Harley-Davidson, Inc.
1,797,937
- --------------------------------------------------------------------------------
- -------------
Banking -- 1.2%
13,400 Commerce Bancorp, Inc.
639,850
18,800 First Tennessee National Corp.
629,800
25,300 North Fork Bancorporation, Inc.
532,881
- --------------------------------------------------------------------------------
- -------------
1,802,531
- --------------------------------------------------------------------------------
- -------------
Broadcast Media -- 4.3%
38,400 Cablevision Systems, Class A Shares*
1,588,800
20,000 Cox Radio, Inc., Class A Shares*
763,750
82,400 Imax Corp.*
2,245,400
61,900 TCA Cable TV, Inc.
1,764,150
- --------------------------------------------------------------------------------
- -------------
6,362,100
- --------------------------------------------------------------------------------
- -------------
Communications - Equipment -- 3.0%
19,600 ADC Telecommunications, Inc.*
585,550
14,000 Jacor Communications, Inc.*
814,625
69,100 Valassis Communications, Inc.
2,962,662
- --------------------------------------------------------------------------------
- -------------
4,362,837
- --------------------------------------------------------------------------------
- -------------
Computer Hardware -- 2.8%
54,800 Lexmark International Group, Inc., Class A Shares*
4,185,350
- --------------------------------------------------------------------------------
- -------------
Computer Software -- 10.3%
13,300 BMC Software, Inc.*
679,131
52,800 Citrix Systems, Inc.*
4,382,400
36,900 Electronic Arts Inc.*
1,554,412
46,300 Fiserv, Inc.*
2,045,881
28,400 Mercury Interactive Corp.*
1,302,850
76,400 Network Associates, Inc.*
3,886,850
23,500 VERITAS Software Corp.*
1,404,125
- --------------------------------------------------------------------------------
- -------------
15,255,649
- --------------------------------------------------------------------------------
- -------------
Computers - Networking -- 0.4%
16,700 ISS Group, Inc.*
609,550
- --------------------------------------------------------------------------------
- -------------
Electronics - Distribution -- 1.1%
40,000 American Power Conversion Corp.*
1,655,000
- --------------------------------------------------------------------------------
- -------------
Electronics - Instruments -- 1.4%
21,400 AES Corp.
979,050
39,000 Cadence Design Systems, Inc.*
1,096,875
- --------------------------------------------------------------------------------
- -------------
2,075,925
- --------------------------------------------------------------------------------
- -------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
================================================================================
=============
<C> <S>
<C>
Electronics - Semiconductors -- 2.4%
15,000 Etec Systems, Inc.*
$ 493,125
44,400 Linear Technology Corp.
3,110,775
- --------------------------------------------------------------------------------
- -------------
3,603,900
- --------------------------------------------------------------------------------
- -------------
Entertainment -- 0.8%
44,400 Premier Parks Inc.
1,204,350
- --------------------------------------------------------------------------------
- -------------
Financial -- 7.7%
71,600 Ambac Financial Group, Inc.
4,367,600
26,200 Capital One Financial Corp.
2,882,000
52,300 CIT Group, Inc., Class A Shares
1,467,669
29,700 Providian Financial Corp.
2,726,831
- --------------------------------------------------------------------------------
- -------------
11,444,100
- --------------------------------------------------------------------------------
- -------------
Foods -- 2.1%
92,100 Keebler Foods Co.*
3,102,619
- --------------------------------------------------------------------------------
- -------------
Health Care - Drugs -- 6.1%
44,900 ALZA Corp.*
2,346,025
57,900 Sepracor Inc.*
4,805,700
35,900 Watson Pharmaceuticals, Inc.*
1,934,113
- --------------------------------------------------------------------------------
- -------------
9,085,838
- --------------------------------------------------------------------------------
- -------------
Household Furniture & Apparel -- 0.6%
26,600 Bed Bath & Beyond Inc.*
829,587
- --------------------------------------------------------------------------------
- -------------
Household Products -- 0.9%
7,900 McKesson Corp.
562,381
31,600 Whitman Corp.
714,950
- --------------------------------------------------------------------------------
- -------------
1,277,331
- --------------------------------------------------------------------------------
- -------------
Insurance - Life -- 2.3%
96,900 Annuity and Life & Re Holdings, Ltd.
2,458,838
20,000 Nationwide Financial Services, Inc., Class A Shares
962,500
- --------------------------------------------------------------------------------
- -------------
3,421,338
- --------------------------------------------------------------------------------
- -------------
Insurance - Property -- 2.0%
92,100 ACE Ltd.
2,947,200
- --------------------------------------------------------------------------------
- -------------
Manufacturing -- 1.3%
17,400 Danaher Corp.
793,875
14,700 Waters Corp.*
1,133,738
- --------------------------------------------------------------------------------
- -------------
1,927,613
- --------------------------------------------------------------------------------
- -------------
Medical Products and Services -- 0.7%
26,600 Allegiance Corp.
1,072,313
- --------------------------------------------------------------------------------
- -------------
Oil - Domestic -- 0.8%
41,500 Anadarko Petroleum Corp.
1,169,781
- --------------------------------------------------------------------------------
- -------------
Oil & Gas - Drilling & Equipment -- 1.5%
54,500 Diamond Offshore Drilling, Inc.
1,219,438
50,800 Newfield Exploration Co.*
990,600
- --------------------------------------------------------------------------------
- -------------
2,210,038
- --------------------------------------------------------------------------------
- -------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY
VALUE
================================================================================
=============
<C> <S>
<C>
Oil Well Equipment & Service -- 0.3%
19,600 Cooper Cameron Corp.*
$ 477,750
- --------------------------------------------------------------------------------
- -------------
Pharmaceuticals -- 1.8%
40,000 Elan Corp. PLC, Sponsored ADR*
2,725,000
- --------------------------------------------------------------------------------
- -------------
Real Estate Investment Trusts -- 0.4%
61,000 IndyMac Mortgage Holdings, Inc.
587,125
- --------------------------------------------------------------------------------
- -------------
Retail - Apparel -- 0.5%
14,200 Abercrombie & Fitch Co., Class A Shares*
795,200
- --------------------------------------------------------------------------------
- -------------
Retail - Drug Stores -- 1.2%
42,900 Duane Reade Inc.*
1,721,363
- --------------------------------------------------------------------------------
- -------------
Retail - Specialty -- 4.1%
6,500 Amazon.com, Inc.*
1,248,000
38,000 Barnes & Noble, Inc.*
1,258,750
15,400 Best Buy Co., Inc.*
887,425
53,100 Fred Meyer, Inc.*
2,701,462
- --------------------------------------------------------------------------------
- -------------
6,095,637
- --------------------------------------------------------------------------------
- -------------
Savings & Loan -- 2.8%
82,400 Countrywide Credit Industries, Inc.+
4,078,800
- --------------------------------------------------------------------------------
- -------------
Services - Advertising/Marketing -- 3.4%
4,000 eBay Inc.
790,500
154,600 Outdoor Systems, Inc.*
4,174,200
- --------------------------------------------------------------------------------
- -------------
4,964,700
- --------------------------------------------------------------------------------
- -------------
Services - Commercial & Construction -- 0.8%
19,100 Central Parking Corp.
561,063
10,700 Cintas Corp.
588,500
- --------------------------------------------------------------------------------
- -------------
1,149,563
- --------------------------------------------------------------------------------
- -------------
Services - Computer Systems -- 3.2%
97,800 FactSet Research Systems Inc.*
3,973,125
24,600 Keane, Inc.
707,250
- --------------------------------------------------------------------------------
- -------------
4,680,375
- --------------------------------------------------------------------------------
- -------------
Specialized Services -- 1.6%
13,800 CMG Information Services, Inc.*
1,069,500
34,000 Sun International Hotels Ltd.*
1,313,250
- --------------------------------------------------------------------------------
- -------------
2,382,750
- --------------------------------------------------------------------------------
- -------------
Telecommunications - Long Distance -- 1.8%
30,800 L-3 Communications Holdings, Inc.*
1,436,050
6,200 Yahoo! Inc.*
1,190,400
- --------------------------------------------------------------------------------
- -------------
2,626,450
- --------------------------------------------------------------------------------
- -------------
Telephone -- 1.3%
34,500 Century Telephone Enterprises, Inc.
1,966,500
- --------------------------------------------------------------------------------
- -------------
Transportation - Marine -- 1.1%
78,500 Knightsbridge Tankers Ltd.
1,668,125
- --------------------------------------------------------------------------------
- -------------
TOTAL COMMON STOCK
(Cost -- $103,183,127)
122,270,025
================================================================================
=============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY
VALUE
================================================================================
=============
<C> <S>
<C>
REPURCHASE AGREEMENT -- 17.5%
$25,974,000 Morgan Stanley Dean Witter, 5.250% due 12/1/98;
Proceeds at maturity -- $25,977,788;
(Fully collateralized by U.S. Treasury Notes,
4.625% due 11/30/00; Market value -- $26,623,441)
(Cost -- $25,974,000)
$ 25,974,000
================================================================================
=============
TOTAL INVESTMENTS -- 100%
(Cost -- $129,157,127**)
$148,244,025
================================================================================
=============
</TABLE>
* Non-income producing security.
+ A portion of this security has been segregated by the custodian for
futures contract commitments.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
ASSETS:
Investments, at value (Cost -- $103,183,127)
$122,270,025
Repurchase agreement, at value (Cost -- $25,974,000)
25,974,000
Cash
333
Receivable for Fund shares sold
3,884,695
Dividends and interest receivable
100,762
- --------------------------------------------------------------------------------
- ----------------
Total Assets
152,229,815
- --------------------------------------------------------------------------------
- ----------------
LIABILITIES:
Payable to broker - variation margin
618,575
Payable for Fund shares purchased
431,772
Distribution fees payable
104,452
Management fees payable
84,866
Accrued expenses
32,350
- --------------------------------------------------------------------------------
- ----------------
Total Liabilities
1,272,015
- --------------------------------------------------------------------------------
- ----------------
Total Net Assets
$150,957,800
================================================================================
================
NET ASSETS:
Par value of shares of beneficial interest
$ 11,093
Capital paid in excess of par value
130,977,252
Undistributed net investment income
75,601
Accumulated net realized loss on security transactions and futures
contracts (1,832,594)
Net unrealized appreciation of investments and futures contracts
21,726,448
- --------------------------------------------------------------------------------
- ----------------
Total Net Assets
$150,957,800
================================================================================
================
Shares Outstanding:
Class A
2,697,483
---------------------------------------------------------------------------
- ----------------
Class B
5,084,082
---------------------------------------------------------------------------
- ----------------
Class L
3,311,694
---------------------------------------------------------------------------
- ----------------
Net Asset Value:
Class A (and redemption price)
$13.63
---------------------------------------------------------------------------
- ----------------
Class B *
$13.60
---------------------------------------------------------------------------
- ----------------
Class L **
$13.60
---------------------------------------------------------------------------
- ----------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 5.26% of net asset value per share)
$14.35
---------------------------------------------------------------------------
- ----------------
Class L (net asset value plus 1.01% of net asset value per share)
$13.74
================================================================================
================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if
shares are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if
shares are redeemed within one year from initial purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Period Ended November 30, 1998(a)
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C>
INVESTMENT INCOME:
Interest
$ 389,039
Dividends
166,247
- --------------------------------------------------------------------------------
- ---------------
Total Investment Income
555,286
- --------------------------------------------------------------------------------
- ---------------
EXPENSES:
Distribution fees (Note 2)
219,699
Management fees (Note 2)
202,181
Shareholder communications
30,039
Registration fees
21,785
Audit and legal
13,000
Custody
3,413
Shareholder and system servicing fees
3,062
Trustees' fees
2,872
Other
925
- --------------------------------------------------------------------------------
- ---------------
Total Expenses
496,976
- --------------------------------------------------------------------------------
- ---------------
Net Investment Income
58,310
- --------------------------------------------------------------------------------
- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 6):
Realized Loss From:
Security transactions (excluding short-term securities)
(1,569,079)
Futures contracts
(263,515)
- --------------------------------------------------------------------------------
- ---------------
Net Realized Loss
(1,832,594)
- --------------------------------------------------------------------------------
- ---------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period
- --
End of period
21,726,448
- --------------------------------------------------------------------------------
- ---------------
Increase in Net Unrealized Appreciation
21,726,448
- --------------------------------------------------------------------------------
- ---------------
Net Gain on Investments and Futures Contracts
19,893,854
- --------------------------------------------------------------------------------
- ---------------
Increase in Net Assets From Operations
$19,952,164
================================================================================
===============
</TABLE>
(a) For the period from September 1, 1998 (commencement of operations) to
November 30, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets For the Period Ended November 30, 1998(a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $
58,310
Net realized loss
(1,832,594)
Increase in net unrealized appreciation
21,726,448
- --------------------------------------------------------------------------------
- ----
Increase in Net Assets From Operations
19,952,164
- --------------------------------------------------------------------------------
- ----
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains
- --
- --------------------------------------------------------------------------------
- ----
Decrease in Net Assets From Distributions to Shareholders
- --
- --------------------------------------------------------------------------------
- ----
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares
134,103,020
Net asset value of shares issued for reinvestment of dividends
- --
Cost of shares reacquired
(3,097,384)
- --------------------------------------------------------------------------------
- ----
Increase in Net Assets From Fund Share Transactions
131,005,636
- --------------------------------------------------------------------------------
- ----
Increase in Net Assets
150,957,800
NET ASSETS:
Beginning of period
- --
- --------------------------------------------------------------------------------
- ----
End of period*
$150,957,800
================================================================================
====
* Includes accumulated net investment income of:
$75,601
================================================================================
====
</TABLE>
(a) For the period from September 1, 1998 (commencement of operations) to
November 30, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Smith Barney Mid Cap Blend 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 four other separate investment funds: Smith Barney Intermediate Maturity
California Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth Fund and Smith Barney
S&P 500 Index 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 prices on such markets;
securities for which no sales price was reported and U.S. government and agency
obligations are valued at the bid price. Investments in securities for which
market quotations are not available are valued at fair value as determined in
good faith by the Board of Directors; (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 and
interest income is recorded on an accrual basis; (e) gains or losses on the sale
of securities are calculated by using the specific identification method; (f)
direct expenses are charged to 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; (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, 1998, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, undistributed net
investment income of $17,291 was reclassified to paid-in capital. Net investment
income, net realized gains and net assets were not affected by this adjustment;
and (j) 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 Management Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment 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.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date, Salomon Smith Barney Inc. ("SSB") was the Fund's distributor. SSB, as well
as certain other broker-dealers, continues to sell Fund shares to the public as
members of the selling group.
There is a contingent deferred sales charge ("CDSC") of 5.00% on Class B shares,
which applies if redemption occurs within one year from purchase. This CDSC
declines by 1.00% per year until no CDSC is incurred. Class L shares also have a
1.00% CDSC,
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
which applies if redemption occurs within the first year of purchase.
For the period ended November 30, 1998, SSB received sales charges of
approximately $696,000 and $328,000 on sales of the Fund's Class A and Class L
shares, respectively. In addition, CDSCs paid to SSB were approximately:
Class B Class L
===============================================================
CDSCs $10,000 $2,000
===============================================================
Pursuant to a Distribution Plan the Fund pays a service fee with respect to its
Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets of each respective class. The Fund also pays a distribution fee
with respect to Class B and L shares calculated at the annual rate of 0.75% of
the average daily net assets of each class, respectively. For the period ended
November 30, 1998, total Distribution Plan fees were as follows:
Class A Class B Class L
===============================================================
Distribution Plan Fees $16,625 $121,874 $81,200
===============================================================
All officers and one Director of the Fund are employees of SSB.
3. Investments
During the period ended November 30, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
===============================================================
Purchases $118,984,734
- ---------------------------------------------------------------
Sales 14,232,529
===============================================================
At November 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
===============================================================
Gross unrealized appreciation $21,016,486
Gross unrealized depreciation (1,929,588)
- ---------------------------------------------------------------
Net unrealized appreciation $19,086,898
===============================================================
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. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account. The Fund maintains exposure for the risk of any losses in
the investment of amounts received as collateral.
At November 30, 1998, the Fund had no securities on loan.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking-to-market" on a daily basis to reflect
the market value of the contract at the end of each day's
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
trading. Variation margin payments are made or received and recognized as assets
due from or liabilities due to broker, depending upon whether unrealized gains
or losses are incurred. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transactions and the Fund's basis in the contract. The Fund enters into
such contracts to hedge a portion of its portfolio. The Fund bears the market
risk that arises from changes in the value of the financial instruments and
securities indices (futures contracts) and the credit risk should a counterparty
fail to perform under such contracts.
At November 30, 1998, the Fund had the following open futures contracts.
<TABLE>
<CAPTION>
Expiration # of Basis
Market Unrealized
Month/Year Contracts Value
Value Gain
================================================================================
============================
<S> <C> <C> <C>
<C> <C>
Futures Contracts to buy:
MIDCAP 400 Index 12/98 109 $16,421,825
$19,061,375 $2,639,550
================================================================================
============================
</TABLE>
7. Options Contracts
Premiums paid when put or call options are purchased by the Fund represents
investments, which are marked-to-market daily and are included in the schedule
of investments. When a purchased option expires, the Fund will realize a loss in
the amount of the premium paid. When the Fund enters into a closing sales
transaction, the Fund will realize a gain or loss depending on whether the
proceeds from the closing sales transaction are greater or less than the premium
paid for the option. When the Fund exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security which the Fund purchases upon exercise
will be increased by the premium originally paid.
At November 30, 1998, the Fund had no open purchased put or call option
contracts.
When the Fund writes a covered call or put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain.
When the Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised, the cost of
the security sold will be decreased by the premium originally received. When a
put option is exercised, the amount of the premium originally received will
reduce the cost of the security which the Fund purchased upon exercise. When the
written index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
During the period ended November 30, 1998, the Fund did not write any options.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
8. Shares of Beneficial Interest
At November 30, 1998, 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
expenses, including those specifically related to the distribution of its
shares.
At November 30, 1998, total paid-in capital amounted to the following for each
class:
Class A Class B Class L
================================================================================
Total Paid-in Capital $31,793,874 $60,104,422 $39,090,049
================================================================================
Transactions in shares of each class were as follows:
Period Ended
November 30, 1998*
-----------------------------
Shares Amount
================================================================================
Class A
Shares sold 2,860,539 $33,790,943
Shares issued on reinvestment -- --
Shares redeemed (163,056) (1,992,806)
- --------------------------------------------------------------------------------
Net Increase 2,697,483 $31,798,137
================================================================================
Class B
Shares sold 5,137,470 $60,746,323
Shares issued on reinvestment -- --
Shares redeemed (53,388) (634,079)
- --------------------------------------------------------------------------------
Net Increase 5,084,082 $60,112,244
================================================================================
Class L
Shares sold 3,350,388 $39,565,754
Shares issued on reinvestment -- --
Shares redeemed (38,694) (470,499)
- --------------------------------------------------------------------------------
Net Increase 3,311,694 $39,095,255
================================================================================
* For the period from September 1, 1998 (inception date) to November 30, 1998.
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
period ended November 30:
Class A(1) Class B(1) Class L(1)
================================================================================
Net Asset Value, Beginning of Period $11.40 $11.40 $11.40
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.02 0.00* 0.00*
Net realized and unrealized gain 2.21 2.20 2.20
- --------------------------------------------------------------------------------
Total Income From Operations 2.23 2.20 2.20
- --------------------------------------------------------------------------------
Less Distributions From:
Net realized gains -- -- --
- --------------------------------------------------------------------------------
Total Distributions -- -- --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $13.63 $13.60 $13.60
- --------------------------------------------------------------------------------
Total Return++ 19.56% 19.30% 19.30%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $36,760 $69,153 $45,045
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 1.27% 2.01% 2.01%
Net investment income 0.78 0.02 0.03
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 15% 15% 15%
================================================================================
(1) For the period from September 1, 1998 (inception date) to November 30,
1998.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Smith Barney Investment Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Mid Cap Blend Fund ("Fund") of
Smith Barney Investment Trust as of November 30, 1998, the related statements of
operations, changes in net assets and financial highlights for the period from
September 1, 1998 (commencement of operations) to November 30, 1998. 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, 1998, 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
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 the
Fund as of November 30, 1998, the results of its operations, the changes in its
net assets and the financial highlights for the period from September 1, 1998
(commencement of operations) to November 30, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
New York, New York
January 15, 1999
- --------------------------------------------------------------------------------
Smith Barney Mid Cap Blend Fund 17
<PAGE>
Smith Barney
Mid Cap Blend 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.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Lawrence Weissman
Vice President and Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Manager
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of shareholders of Smith
Barney Mid Cap Blend Fund. It is not 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.
SalomonSmithBarney
- ---------------------------
A member of citigroup[LOGO]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Mid Cap Blend Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD01593 1/99
<PAGE>
[GRAPHIC]
Smith Barney
Intermediate
Maturity
California
Municipals Fund
ANNUAL REPORT
November 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Intermediate
Maturity
California
Municipals Fund
[PHOTO] [PHOTO]
HEATH B. JOSEPH P.
MCLENDON DEANE
Chairman Vice President and
Investment Officer
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,
1998. 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, 1998, the Class A shares of the Fund generated a
total return of 6.78%, excluding the effect of any sales charges, that was
roughly in line with the Fund's Lipper Inc. California intermediate-term
municipal bond fund peer group average total return of 6.71% for the same
period. (Lipper is a major independent fund-tracking organization.)
In addition, the Fund paid income dividends totaling $0.39 per Class A share
during the reporting period. Based on a net asset value ("NAV") of $8.85 as of
November 30, 1998, and a current monthly income dividend rate of approximately
$0.0321 per Class A share, this equates to an annualized distribution rate of
4.35%. For a California resident in the combined state and federal income tax
bracket of 42%, the Fund's tax-free yield of 4.35% is equivalent to a taxable
yield of 7.50%. (This figure assumes an investor is in the federal income tax
bracket of 36%.)
Market Update
In general, the bond market has had quite a full plate to deal with for the past
several months. The tremendous economic weakness in Asia combined with a hint of
deflation, default on sovereign Russian debt, the debacle of a large hedge fund,
and finally three very swift drops in short-term rates from the Federal Reserve
Board ("Fed") gave bond managers more than enough events to ponder.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 1
<PAGE>
Municipal bonds generally were less volatile than U.S. Treasuries with record
new issue volume coming into the marketplace. This heavy supply caused
tax-exempt bonds to lag U.S. Treasuries in the rally but has created unusual
relative values in municipal bonds versus taxable bonds. As of November 30,
1998, the yields for long-term municipal bonds were trading on average at 99% of
the yield for comparable U.S. government bonds. In many years of experience in
the financial markets, this is only the second time we have seen such high
attractive relative values for municipal bonds. At today's spreads, municipal
bonds make sense for investors in almost any tax bracket because municipal bonds
normally trade between 80% to 85% of U.S. Treasuries. And while interest rates
are as low as they have been in 30 years, so too is inflation. In our view,
these conditions should be with us for the foreseeable future, providing a
benign backdrop for bonds.
California Economic Highlights
Throughout 1998, California's economy has continued to improve and there are
several reasons why our outlook for the Golden State remains bullish.
California's broad based, well-diversified economy has led to higher employment
and rising personal income levels. Leading growth industries such as high
technology, manufacturing, construction, textiles, computer software and
financial services have helped push the State's unemployment rate to
approximately 6% while enabling personal income levels to rise about 6%. In
turn, these gains have led to higher real estate prices and stronger retail
sales as Californians continue to spend with confidence.
At the present time, one area of concern in California is its reliance on
exports to Asia. Roughly half of all California exports find there way to Asia
and although exports to that region are down, higher exports to Mexico, Canada
and Europe have largely offset these losses.
California has made a substantial commitment to its system of ports and railways
and that should improve links between ports and cities. We believe this
commitment should also help ensure that California remains a leading U.S. area
for import/export activities for the U.S. well into the next century.
Investment Strategy
The Fund's objective seeks to provide California investors with as high a level
of current income exempt from Federal income taxes and California state personal
income taxes as is consistent with the preservation of principal. During the
reporting period, the municipal bond market has put very little premium on risk.
Intermediate- and long-term municipal bonds yield nearly the same, and the
spreads between high-quality issuers and less economically stable ones are at
all-time narrow levels. Our investment strategy during the
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
period has been quite simple: maximize our dividend yield by staying fully
invested in high-quality municipal bonds with an average maturity of
approximately 7 years and stay there until the interest-rate environment
changes. In times of economic uncertainty, if we are going to err with respect
to our investment strategy, we think that it should be on the side of prudence
and conservatism.
The Fund focused on transportation bonds (14.6%), hospital bonds (13.9%) and
housing bonds (13.6%) because we believe they offered good relative values. In
addition, as of November 30, 1998, approximately 97% of the Fund's holdings were
rated investment grade by either Standard & Poor's Ratings Group or Moody's
Investors Services Inc., with about 62% of the Fund's holdings invested in AAA
bonds, the highest possible rating.
Municipal Bond Market Outlook
Over the next few months, we believe that interest rates should go down a bit
more. Moreover, we expect a gradual rise in rates later on in 1999 from the
level set early in the year. And, if interest rates do gradually rise, we
believe our current investment strategy should result in less volatility while
still offering our shareholders reasonable relative values.
In closing, thank you for your investment in the Smith Barney Intermediate
Maturity California Municipals Fund. We look forward to continuing to help you
achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ J.P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
December 17, 1998
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance--Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
================================================================================
=
<S> <C> <C> <C> <C> <C>
11/30/98 $8.66 $8.85 $0.39 $0.00 6.78%
- --------------------------------------------------------------------------------
- -
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 $2.72 $0.01
================================================================================
=
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance--Class L Shares/(2)/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
================================================================================
=
<S> <C> <C> <C> <C> <C>
11/30/98 $8.65 $8.84 $0.37 $0.00 6.57%
- --------------------------------------------------------------------------------
- -
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 $1.53 $0.00
================================================================================
=
</TABLE>
- --------------------------------------------------------------------------------
Historical Performance--Class Y Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Beginning End Income Capital Total
Year Ended of Year of Year Dividends Gains Returns(1)
================================================================================
=
<S> <C> <C> <C> <C> <C>
11/30/98 $8.66 $8.86 $0.40 $0.00 7.09%
- --------------------------------------------------------------------------------
- -
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 $1.32 $0.00
================================================================================
=
</TABLE>
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Average Annual Total Return
- --------------------------------------------------------------------------------
Without Sales Charge/(1)/
-----------------------------------
Class A Class L/(2)/ Class Y
=======================================================================
Year Ended 11/30/98 6.78% 6.57% 7.09%
- -----------------------------------------------------------------------
Five Years Ended 11/30/98 5.67 N/A N/A
- -----------------------------------------------------------------------
Inception* through 11/30/98 6.54 7.92 6.66
=======================================================================
With Sales Charge/(3)/
-----------------------------------
Class A Class L/(2)/ Class Y
=======================================================================
Year Ended 11/30/98 4.61% 4.48% 7.09%
- -----------------------------------------------------------------------
Five Years Ended 11/30/98 5.25 N/A N/A
- -----------------------------------------------------------------------
Inception* through 11/30/98 6.24 7.65 6.66
=======================================================================
- --------------------------------------------------------------------------------
Cumulative Total Return
- --------------------------------------------------------------------------------
Without Sales Charge/(1)/
==========================================================================
Class A (Inception* through 11/30/98) 55.07%
- --------------------------------------------------------------------------
Class L (Inception* through 1/30/98)/(2)/ 36.31
- --------------------------------------------------------------------------
Class Y (Inception* through 11/30/98) 23.17
==========================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class A and L shares reflect the
deduction of the maximum initial sales charges of 2.00% and 1.00%,
respectively. Class L shares also reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within one year from purchase.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
* Inception dates for Class A, L and Y shares are December 31, 1991,
November 8, 1994 and September 8, 1995, respectively.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 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 1998
[LINE GRAPH]
<TABLE>
<CAPTION>
Smith Barney Intermediate Maturity Lehman Brothers 10-Year
Lipper Analytical Services, Inc.
California Municipals Fund Municipal Bond Index
Peer Group Average
<S> <C> <C>
<C>
12/31/91 9,802 10,000
10,000
11/92 10,422 10,767
10,623
11/93 11,537 12,028
11,682
11/94 11,116 11,491
11,246
11/95 12,766 13,623
12,910
11/96 13,411 14,394
13,566
11/97 14,233 15,410
14,307
11/30/98 15,199 16,651
15,261
</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, 1998. 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
(35 funds as of November 30, 1998) 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 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Highlights (unaudited) November 30, 1998
- --------------------------------------------------------------------------------
Portfolio Breakdown
[PIE CHART]
Education 7.5%
General Obligation 4.5%
Hospital 13.9%
Housing 13.6%
Miscellaneous 26.5%
Solid Waste 5.6%
Tax Allocation 5.5%
Transportation 14.6%
Water & Sewer 8.3%
Summary of Municipal Bonds And Short-Term Tax Exempt
Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- -----------------------------------------------------------------------------
Aaa AAA 61.9%
Aa AA 11.6
A A 10.2
Baa BBB 12.9(*)
NR NR 1.3
P-1/VMIG 1 A-1/SP-1 2.1
-----
100.0%
=====
(*) 0.3% of investments were rated by Fitch Investors Services, Inc.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
====================
<S> <C>
<C>
Education -- 7.5%
California Educational Facilities Authority, Revenue
Bonds:
$ 945,000 AAA College of Osteopathic Medicine, CONNIE LEE-Insured,
5.550% due 6/1/06
$1,043,044
320,000 A1* Loyola Marymount University, Series B, 6.300% due
10/1/03 355,600
200,000 A2* Mills College, (Escrowed to Maturity with U.S.
government
securities), 6.500% due 9/1/02(b)
219,750
500,000 AA University of Southern California, 5.300% due 10/1/04
540,625
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
346,631
- --------------------------------------------------------------------------------
- --------------------
2,505,650
- --------------------------------------------------------------------------------
- --------------------
General Obligation -- 4.5%
200,000 A+ California State GO, 6.000% due 9/1/03
220,000
1,250,000 AAA California State GO, Veteran's Bonds, FSA-Insured,
4.950% due 12/1/08(c)
1,295,312
- --------------------------------------------------------------------------------
- --------------------
1,515,312
- --------------------------------------------------------------------------------
- --------------------
Hospital -- 13.9%
255,000 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
282,412
California Health Facilities Financing Authority:
200,000 AAA Adventist Health System/West Agency, Series B,
MBIA-Insured, 6.150% due 3/1/99
201,526
1,000,000 AAA Mills-Peninsula, CONNIE LEE-Insured, 5.300% due 1/15/05
1,072,500
200,000 AA- Sisters of Providence, 6.200% due 10/1/03
218,500
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(b)
440,000
700,000 A-1+ Sutter Health, Series B, 3.000% due 3/1/20(d)
700,000
1,200,000 AA California Statewide Community Development, COP,
St. Joseph's Health, (Pre-Refunded -- Escrowed with
U.S. government securities to 7/1/04 Call @ 102),
5.875% due 7/1/05(b)
1,344,000
250,000 A Riverside County Asset Leasing Corp., Leasehold Revenue,
Riverside County Hospital, (Project A), 6.000% due
6/1/04 272,500
108,000 BBB-++ Valley Health Systems, COP, (Refunding Project),
6.250% due 5/15/99
108,692
- --------------------------------------------------------------------------------
- --------------------
4,640,130
- --------------------------------------------------------------------------------
- --------------------
Housing -- 13.6%
1,250,000 AAA ABAG Financing Authority, Multi-Family Housing Revenue,
Series A, FNMA-Insured, 5.700% mandatory
put 11/1/06(c)
1,328,125
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
==================
<S> <C> <C>
<C>
Housing -- 13.6% (continued)
California, Home Mortgage Revenue:
$ 265,000 Aa2* Series B-1, FHA-Insured, 5.900% due 8/1/04(c)
$ 280,900
700,000 Aa2* Series E-1, FHA-Insured, 5.900% due 2/1/05(c)
749,000
700,000 Aa2* Series E-1, FHA-Insured, 5.900% due 8/1/05(c)
752,500
5,000 Aa2* Single-Family Housing Revenue, Series A,
10.000% due 2/1/02
5,002
390,000 AAA City of Santa Rosa Mortgage Revenue Refunding,
(Marlow Apartments Project), Series A, FHA-Insured,
5.600% due 9/1/05
409,013
750,000 AAA Riverside County, Multi-Family Housing Revenue, Series B,
FNMA-Collateralized, 5.625% mandatory put 7/1/09(c)
795,937
230,000 AAA San Luis Obispo HFA, Multi-Family Housing Revenue,
(Parkwood Apartments Project), Series A,
FNMA-Collateralized, 5.500% due 8/1/03
239,775
- --------------------------------------------------------------------------------
- ------------------
4,560,252
- --------------------------------------------------------------------------------
- ------------------
Miscellaneous -- 26.5%
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
1,181,250
140,000 Aaa* Montclair Redevelopment Agency, Residential Mortgage
Revenue, (Escrowed to Maturity with U.S. government
securities), 7.750% due 10/1/11
168,700
1,250,000 AAA Oakland State Building Authority, Lease Revenue, Series
A,
AMBAC-Insured, 4.250% due 4/1/07
1,275,000
1,000,000 AAA Roseville Community Facilities District No.1, Special Tax
Revenue, FSA-Insured, 4.625% due 9/1/10
1,030,000
Sacramento County COP, Public Facilities,
(Gas to Energy Project), MBIA Insured:
850,000 AAA 4.250% due 12/1/09
848,937
650,000 AAA 4.375% due 12/1/10
651,625
1,000,000 AAA San Diego COP, Central Jail Refunding, AMBAC-Insured,
4.800% due 10/1/08
1,048,750
San Francisco Downtown Parking, Series R:
450,000 A3* 6.000% due 4/1/02
482,625
280,000 A3* 6.150% due 4/1/03
306,250
Santa Barbara COP, (Harbor Refunding Project):
270,000 A* 6.400% due 10/1/02
295,988
285,000 A* 6.500% due 10/1/03
318,130
1,000,000 Aaa* Tulare County COP, MBIA-Insured, 5.000% due 8/15/10
1,058,750
205,000 AAA Upland COP, (Police Building Refunding Project),
AMBAC-Insured, 6.200% due 8/1/02
222,938
- --------------------------------------------------------------------------------
- ------------------
8,888,943
- --------------------------------------------------------------------------------
- ------------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
===============
<S> <C> <C>
<C>
Solid Waste -- 5.6%
Kings County Waste Management, Solid Waste Revenue Bonds:
$ 400,000 BBB+ 6.500% due 10/1/03(c)
$ 442,000
310,000 BBB+ 6.600% due 10/1/04(c)
348,750
1,000,000 Baa1* South Napa Solid Waste Management Authority,
6.000% due 2/15/04(c)
1,080,000
- --------------------------------------------------------------------------------
- ---------------
1,870,750
- --------------------------------------------------------------------------------
- ---------------
Tax Allocation -- 5.5%
1,000,000 Baa* Hawthorne Community Redevelopment Agency,
Tax Allocation, (Redevelopment Project Area 2),
6.200% due 9/1/05
1,118,750
665,000 BBB+ Paramount Redevelopment Agency, Tax Allocation,
Refunding, (Redevelopment Project Area No. 1),
5.800% due 8/1/03
724,019
- --------------------------------------------------------------------------------
- ---------------
1,842,769
- --------------------------------------------------------------------------------
- ---------------
Transportation -- 14.6%
500,000 A1* Los Angeles County Transportation Commission, COP,
Series B, 6.200% due 7/1/03
551,250
1,000,000 AAA Orange County Local Transportation Authority,
Sales Tax Revenue, Series A, MBIA-Insured,
5.500% due 2/15/09
1,106,250
Palm Springs Financing Authority, Airport Revenue,
Palm Springs Regional Airport, MBIA-Insured:
200,000 AAA 5.400% due 1/1/03(c)
212,750
400,000 AAA 5.500% due 1/1/04(c)
427,500
350,000 A1* Sacramento Regional Transportation, COP, Series A,
6.400% due 3/1/03
385,438
240,000 AAA San Francisco Airport Improvement Corp., Lease Revenue,
(Escrowed to Maturity with U.S. government securities),
8.000% due 7/1/13
301,200
San Jose, Airport Revenue:
500,000 AAA MBIA-Insured, 5.750% due 3/1/03
540,625
800,000 AAA Series 93, FGIC-Insured, 5.400% due 3/1/04(c)
859,000
450,000 BBB+ Southern California Rapid Transit Authority, District A2,
Special Benefit Assessment, 6.100% due 9/1/03
490,500
- --------------------------------------------------------------------------------
- ---------------
4,874,513
- --------------------------------------------------------------------------------
- ---------------
Water and Sewer -- 8.3%
1,000,000 AAA El Dorado Public Agency Financing Authority, FGIC-
Insured,
5.200% due 2/15/07
1,085,000
1,000,000 AAA Modesto Irrigation District Financing Authority Revenue,
MBIA-Insured, 5.350% due 10/1/06
1,095,000
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
===============
<S> <C> <C>
<C>
Water and Sewer -- 8.3% (continued)
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
$ 273,125
280,000 AAA Pre-Refunded -- Escrowed with U.S. government
securities to 9/1/02 Call @ 102, 6.375% due 9/1/03
311,850
- --------------------------------------------------------------------------------
- ---------------
2,764,975
- --------------------------------------------------------------------------------
- ---------------
TOTAL INVESTMENTS -- 100%
(Cost -- $31,187,330**)
$33,463,294
================================================================================
===============
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service with the exception of
those identified by an asterisk (*) or a double dagger (++), which are
rated by Moody's Investor Service, Inc. and Fitch Investor Services, Inc.,
respectively.
(b) 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.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(**) Aggregate cost for Federal income tax purpose is substantially the same.
See pages 12 and 13 for definition of ratings and certain security descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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 Investor Service, Inc. ("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 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 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 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 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.
Fitch Investor Services, Inc. ("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 rated "A" are considered to be investment grade and of high
credit 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 securities with higher ratings.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond Ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
BBB -- Bonds 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
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.
- --------------------------------------------------------------------------------
Short-Term Securities Ratings (unaudited)
- --------------------------------------------------------------------------------
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 (unaudited)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $31,187,330) $33,463,294
Interest receivable 479,233
Receivable for Fund shares sold 35,481
- -------------------------------------------------------------------------------
Total Assets 33,978,008
- -------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 40,879
Investment advisory fees payable 15,853
Administration fees payable 10,434
Distribution fees payable 1,634
Accrued expenses 34,512
- --------------------------------------------------------------------------------
Total Liabilities 103,312
- --------------------------------------------------------------------------------
Total Net Assets $33,874,696
===============================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 3,830
Capital paid in excess of par value 32,517,861
Undistributed net investment income 2,885
Accumulated net realized loss from security transactions (925,844)
Net unrealized appreciation of investments 2,275,964
- --------------------------------------------------------------------------------
Total Net Assets $33,874,696
================================================================================
Shares Outstanding:
Class A 3,199,336
Class L 595,249
Class Y 35,275
Net Asset Value:
Class A (and redemption price) $8.85
Class L(*) $8.84
Class Y (and redemption price) $8.86
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $9.03
Class L (net asset value plus 1.01% of net asset value per share) $8.93
================================================================================
(*) Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase (See Note 3).
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended November 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 1,622,065
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 94,197
Administration fees (Note 3) 62,798
Distribution fees (Note 3) 55,537
Audit and legal 27,401
Shareholder communications 22,769
Shareholder and system servicing fees 21,931
Trustees' fees 13,536
Registration fees 13,153
Pricing service fees 7,166
Custody 1,822
Other 1,403
- --------------------------------------------------------------------------------
Total Expenses 321,713
Less: Investment advisory and administration fee waivers (Note 3) (77,396)
- --------------------------------------------------------------------------------
Net Expenses 244,317
- --------------------------------------------------------------------------------
Net Investment Income 1,377,748
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceed from sales 2,421,618
Cost of securities sold 2,381,013
- --------------------------------------------------------------------------------
Net Realized Gain 40,605
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 1,649,690
End of year 2,275,964
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 626,274
- --------------------------------------------------------------------------------
Net Gain on Investments 666,879
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 2,044,627
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended November 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998
1997
================================================================================
=============
OPERATIONS:
<S> <C>
<C>
Net investment income $ 1,377,748
$ 1,293,429
Net realized gain from security transactions 40,605
19,713
Increase in net unrealized appreciation of investments 626,274
350,069
- --------------------------------------------------------------------------------
- -------------
Increase in Net Assets From Operations 2,044,627
1,663,211
- --------------------------------------------------------------------------------
- -------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 4):
Net investment income (1,369,680)
(1,299,901)
- --------------------------------------------------------------------------------
- -------------
Decrease in Net Assets From
Distributions to Shareholders (1,369,680)
(1,299,901)
- --------------------------------------------------------------------------------
- -------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 7,542,952
5,448,545
Net asset value of shares issued for
reinvestment of dividends 948,174
918,801
Cost of shares reacquired (4,632,497)
(4,807,692)
- --------------------------------------------------------------------------------
- -------------
Increase in Net Assets From
Fund Share Transactions 3,858,629
1,559,654
- --------------------------------------------------------------------------------
- -------------
Increase in Net Assets 4,533,576
1,922,964
NET ASSETS:
Beginning of year 29,341,120
27,418,156
- --------------------------------------------------------------------------------
- -------------
End of year(*) $33,874,696
$29,341,120
================================================================================
=============
(*) Includes undistributed (overdistributed)
net investment income of: $2,885
$(5,183)
================================================================================
=============
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<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 four other separate investment funds:
Smith Barney Intermediate Maturity New York Municipals Fund, Smith Barney Large
Capitalization Growth Fund, Smith Barney Mid Cap Blend Fund and Smith Barney S&P
500 Index 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.
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.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investment Advisory Agreement, Administration
Agreement and Other Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), acts as investment adviser to the Fund. The Fund pays
MMC an investment 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, 1998, MMC waived investment advisory fees of
$46,438.
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, 1998, MMC
waived administration fees of $30,958.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group.
On June 12, 1998,the Portfolio's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"),which applies if redemption
occurs within the first year of purchase.
For the year ended November 30,1998 SSB received sales charges of $73,000 and
$12,000 on sales of the Fund's Class A and L shares,respectively. In
addition,CDSCs paid to SSB for Class L shares were approximately $1,000.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A and L 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 L shares calculated at the annual rate of 0.20%. For
the year ended November 30, 1998, total Distribution Plan fees were:
Class A Class L
==========================================================================
Distribution Plan Fees $39,973 $15,564
==========================================================================
All officers and one Trustee of the Fund are employees of SSB.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<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, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
==============================================================
Purchases $7,126,867
- --------------------------------------------------------------
Sales 2,421,618
==============================================================
At November 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
===============================================================
Gross unrealized appreciation $2,295,170
Gross unrealized depreciation (19,206)
- ---------------------------------------------------------------
Net unrealized appreciation $2,275,964
===============================================================
6. Capital Loss Carryforwards
At November 30, 1998, the Fund had for Federal tax purposes approximately
$926,000 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:
11/30/02 11/30/03
=========================================================================
Capital Loss Carryforwards $657,000 $269,000
=========================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Shares of Beneficial Interest
At November 30, 1998, 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. Effective June 12, 1998, the Fund adopted the renaming of existing Class
C shares as Class L shares.
At November 30, 1998, total paid-in capital amounted to the following for each
class.
Class A Class L Class Y
===========================================================================
Total Paid-in Capital $27,173,226 $5,095,117 $253,348
===========================================================================
Transactions in shares of each class were as follows:
Year Ended Year Ended
November 30, 1998 November 30, 1997
----------------------- -----------------------
Shares Amount Shares Amount
============================================================================
Class A
Shares sold 571,108 $ 5,019,763 474,080 $ 4,054,918
Shares issued on
reinvestment 91,477 800,601 94,422 805,955
Shares redeemed (424,495) (3,722,275) (477,346) (4,081,984)
- ----------------------------------------------------------------------------
Net Increase 238,090 $ 2,098,089 91,156 $ 778,889
============================================================================
Class L+
Shares sold 288,836 $ 2,523,189 162,920 $ 1,393,627
Shares issued on
reinvestment 15,296 133,771 12,138 103,598
Shares redeemed (104,394) (910,222) (84,783) (725,708)
- ----------------------------------------------------------------------------
Net Increase 199,738 $ 1,746,738 90,275 $ 771,517
============================================================================
Class Y
Shares sold -- -- -- --
Shares issued on
reinvestment 1,575 $ 13,802 1,598 $ 9,248
Shares redeemed -- -- -- --
- ----------------------------------------------------------------------------
Net Increase 1,575 $ 13,802 1,598 $ 9,248
============================================================================
+ On June 12, 1998, Class C shares were renamed Class L shares.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class A Shares 1998 1997
1996 1995 1994
================================================================================
=====================================
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $8.66 $8.55
$8.53 $7.80 $8.50
- --------------------------------------------------------------------------------
- -------------------------------------
Income (Loss) From Operations:
Net investment income (1) 0.39 0.40
0.40 0.40 0.39
Net realized and unrealized gain (loss) 0.19 0.11
0.02 0.73 (0.69)
- --------------------------------------------------------------------------------
- -------------------------------------
Total Income (Loss) From Operations 0.58 0.51
0.42 1.13 (0.30)
- --------------------------------------------------------------------------------
- -------------------------------------
Less Distributions From:
Net investment income (0.39) (0.40)
(0.40) (0.40) (0.39)
Net realized gains -- --
- -- -- (0.01)
- --------------------------------------------------------------------------------
- -------------------------------------
Total Distributions (0.39) (0.40)
(0.40) (0.40) (0.40)
- --------------------------------------------------------------------------------
- -------------------------------------
Net Asset Value, End of Year $8.85 $8.66
$8.55 $8.53 $7.80
- --------------------------------------------------------------------------------
- -------------------------------------
Total Return 6.78% 6.13%
5.05% 14.84% (3.65)%
- --------------------------------------------------------------------------------
- -------------------------------------
Net Assets, End of Year (000s) $28,303 $25,630
$24,537 $26,211 $25,359
- --------------------------------------------------------------------------------
- -------------------------------------
Ratios to Average Net Assets:
Expenses (1) 0.75% 0.75%
0.77% 0.75% 0.75%
Net investment income 4.45 4.65
4.69 4.89 4.73
- --------------------------------------------------------------------------------
- -------------------------------------
Portfolio Turnover Rate 8% 9%
15% 8% 39%
================================================================================
=====================================
</TABLE>
(1) The investment adviser and administrator waived all or part of their fees
for each of the five years ended November 30, 1998. 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
------------------------------- ---------------------------
- -
1998 1997 1996 1995 1994 1998 1997 1996 1995
1994
----- ----- ----- ----- ----- ---- ---- ---- ---- ---
- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.02 $0.03 $0.07 $0.03 $0.04 1.00% 1.12% 1.54% 1.16%
1.24%
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class L Shares(1) 1998 1997 1996
1995 1994(2)
================================================================================
=========================
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $8.65 $8.54 $8.52
$7.80 $7.76
- --------------------------------------------------------------------------------
- -------------------------
Income From Operations:
Net investment income (3) 0.37 0.38 0.38
0.38 0.01
Net realized and unrealized gain 0.19 0.11 0.02
0.72 0.05(*)
- --------------------------------------------------------------------------------
- -------------------------
Total Income From Operations 0.56 0.49 0.40
1.10 0.06
- --------------------------------------------------------------------------------
- -------------------------
Less Distributions From:
Net investment income (0.37) (0.38) (0.38)
(0.38) (0.02)
- --------------------------------------------------------------------------------
- -------------------------
Total Distributions (0.37) (0.38) (0.38)
(0.38) (0.02)
- --------------------------------------------------------------------------------
- -------------------------
Net Asset Value, End of Year $8.84 $8.65 $8.54
$8.52 $7.80
- --------------------------------------------------------------------------------
- -------------------------
Total Return 6.57% 5.92% 4.84%
14.36% 0.72%++
- --------------------------------------------------------------------------------
- -------------------------
Net Assets, End of Year (000s) $5,260 $3,419 $2,607
$2,254 $45
- --------------------------------------------------------------------------------
- -------------------------
Ratios to Average Net Assets:
Expenses (3) 0.97% 0.96% 0.98%
0.98% 0.95%+
Net investment income 4.22 4.44 4.48
4.54 4.53+
- --------------------------------------------------------------------------------
- -------------------------
Portfolio Turnover Rate 8% 9% 15%
8% 39%
================================================================================
=========================
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the period from November 8, 1994 (inception date) to November 30, 1994.
(3) The investment adviser and administrator waived all or part of their fees
for each of the four years ended November 30, 1998 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
-------------------------------- ---------------------
- -------
1998 1997 1996 1995 1994 1998 1997 1996
1995 1994
---- ---- ---- ---- ---- ---- ---- ---- ---
- - ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Class L $0.02 $0.03 $0.07 $0.03 $0.00(*) 1.21% 1.33% 1.75%
1.39% 1.44%+
</TABLE>
(*) 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 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class Y Shares 1998 1997 1996
1995(1)
================================================================================
====
<S> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $8.66 $8.56 $8.54
$8.39
- --------------------------------------------------------------------------------
- ----
Income From Operations:
Net investment income (2) 0.41 0.41 0.41
0.09
Net realized and unrealized gain 0.19 0.11 0.02
0.15
- --------------------------------------------------------------------------------
- ----
Total Income From Operations 0.60 0.52 0.43
0.24
- --------------------------------------------------------------------------------
- ----
Less Distributions From:
Net investment income (0.40) (0.42) (0.41)
(0.09)
- --------------------------------------------------------------------------------
- ----
Total Distributions (0.40) (0.42) (0.41)
(0.09)
- --------------------------------------------------------------------------------
- ----
Net Asset Value, End of Year $8.86 $8.66 $8.56
$8.54
- --------------------------------------------------------------------------------
- ----
Total Return 7.09% 6.20% 5.22%
2.92%++
- --------------------------------------------------------------------------------
- ----
Net Assets, End of Year (000s) $312 $292 $274
$261
- --------------------------------------------------------------------------------
- ----
Ratios to Average Net Assets:
Expenses (2) 0.57% 0.56% 0.59%
0.58%+
Net investment income 4.62 4.84 4.87
4.74+
- --------------------------------------------------------------------------------
- ----
Portfolio Turnover Rate 8% 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 each of the three years ended November 30, 1998 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
----------------------------- ---------------------------
- --
1998 1997 1996 1995 1998 1997 1996
1995
---- ---- ---- ---- ---- ---- ---- --
- --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class Y $0.02 $0.03 $0.07 $0.03 0.82% 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.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 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,
1998, 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 four-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended 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, 1998, 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, 1998, 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
four-year period then ended, in conformity with generally accepted accounting
principles.
KPMG LLP
New York, New York
January 15, 1999
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
November 30, 1998:
--100% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On February 6, 1998 a special meeting of shareholders of the Trust was held
for the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares
Voted Percentage
Name of Directors For Shares Voted Against
Shares Voted
================================================================================
====================
<S> <C> <C> <C>
<C>
Herbert Barg 22,978,059.782 97.961% 478,327.074
2.039%
Alfred J. Bianchetti 22,968,583.475 97.920 487,803.381
2.080
Martin Brody 22,972,548.241 97.937 483,838.615
2.063
Dwight B. Crane 23,013,405.483 98.111 442,981.373
1.889
Burt N. Dorsett 23,007,677.873 98.087 448,708.983
1.913
Elliot S. Jaffe 22,981,247.160 97.974 475,139.696
2.026
Stephen E. Kaufman 22,999,681.445 98.053 456,705.411
1.947
Joseph J. McCann 23,011,195.450 98.102 445,191.406
1.898
Heath B. McLendon 23,010,138.021 98.098 446,248.835
1.902
Cornelius C. Rose, Jr. 23,006,201.971 98.081 450,184.885
1.919
================================================================================
====================
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates
the elimination of the policy; and "R" indicates the reclassification of the
policy from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Directors).
========================================================================
"E" Ability to Pledge Assets Approved
- ------------------------------------------------------------------------
"M" Underwriting of Securities Approved
- ------------------------------------------------------------------------
"M" Lending by the Fund Approved
- ------------------------------------------------------------------------
"M" Real Estate Approved
- ------------------------------------------------------------------------
"R" Margin and the Short Sales of Securities Approved
- ------------------------------------------------------------------------
"E" Purchases of Certain Securities Approved
- ------------------------------------------------------------------------
"R" Investments in Oil, Gas and Mineral Exploration Approved
- ------------------------------------------------------------------------
"R" Options Approved
- ------------------------------------------------------------------------
"M" Industry Concentration Approved
- ------------------------------------------------------------------------
"M" Borrowing Approved
========================================================================
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (continued)
- --------------------------------------------------------------------------------
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all proposals.
<TABLE>
<CAPTION>
Percentage Percentage
Percentage
Shares Voted of Shares Shares Voted of Shares Shares of
Shares
For Voted Against Voted Abstaining
Abstained
================================================================================
====
<S> <C> <C> <C> <C> <C>
1,574,087.901 88.256% 78,648.951 4.410% 130,812.843
7.334%
================================================================================
====
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity California Municipals Fund 27
<PAGE>
[This page intentionally left blank]
<PAGE>
SalomonSmithBarney
- ---------------------------
A member of citigroup[LOGO]
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.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser and
Administrator
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Intermediate Maturity California Municipals Fund. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Fund, which contains information
concerning the Fund's investment policies and expenses as well as other
pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Intermediate Maturity
California Municipals Fund
388 Greenwich Street
New York, New York 10013
www.smithbarney.com
FD0310 1/99
<PAGE>
[GRAPHIC]
Smith Barney
Intermediate
Maturity New York
Municipals Fund
ANNUAL REPORT
November 30, 1998
[LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.(R)
<PAGE>
Smith Barney
Intermediate
Maturity New York
Municipals Fund
[PHOTO] [PHOTO]
HEATH B. PETER M.
MCLENDON COFFEY
Chairman Vice President and
Investment Officer
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, 1998.
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, 1998, the Class A shares of the Fund generated a
total return of 7.01% and outperformed its Lipper Analytical Services Inc.
intermediate-term municipals peer group average total return of 6.56% for the
same period. (Lipper is an 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 $8.76 and a
current monthly income dividend rate of $0.033 per Class A share, this equates
to an annualized distribution rate of 4.52%. For a New York resident in the
combined state and federal income tax bracket of 40.6%, the Fund's tax-free
yield of 4.52% is equivalent to a taxable yield of 7.61%. (This figure assumes
an investor is in the federal income tax bracket of 36%.) For performance
information on the Fund's Class L shares, please turn to pages five and six.
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, 1998, 96.7% of the Fund's holdings were rated investment grade
with 45.8% of these investments rated triple-A, the highest rating.
As an intermediate-term municipal bond fund, the weighted average maturity of
the Fund's securities will normally not exceed ten years. In keeping with our
generally positive outlook, we have maintained a well-diversified, laddered
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 1
<PAGE>
maturity structure in the Fund and an average weighted maturity of approximately
9.3 years as of November 30, 1998.
The Fund's investment objective is to provide New York investors with as high a
level of current income exempt from federal income taxes and New York State and
New York City personal income tax as is consistent with the preservation of
capital.
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. As of November 30,
1998, the Fund's assets were diversified over the following sectors: education
bonds (20.5%), hospital bonds (15.9%) and transportation bonds (13.2%).
New York Economic Highlights
Economic recovery continued in New York State, driven mostly by a booming
downstate economy. Employment in New York City grew at its fastest pace in
decades accompanied by real gains in wages. The service sector, especially
financial services and tourism industries, continues to fuel the economic
expansion in New York. In addition, the tremendous success of Wall Street in
recent years has helped revive a previously floundering real estate market and
has also led to higher spending in the adjacent suburbs. As a result of the
increased economic activity, New York City generated a record budget surplus of
$2.1 billion in fiscal year 1998.
Nonetheless, the Empire State may soon be feeling the effects of the spreading
global deflationary pressures. A number of prominent Wall Street firms have
already reported diminished earnings and downsizing as a direct result of recent
market turmoil. Although we expect New York City to experience declining
revenues, it should not result in budget shortfalls as in previous market
downturns because New York City officials have already begun to lower their
financial forecasts. Because so much of the New York City's financial health,
and therefore the entire State, rests on the success of Wall Street, its near-
term prospects should be closely tied to the resolution of current market
unrest. However, despite the fact that the State's fortunes are closely tied to
one industry, we continue to be somewhat optimistic on New York's financial
future.
Market Update
Municipal bond yields remained relatively flat during the reporting period as an
unusually heavy new issuance volume outpaced the demand for tax-exempt
investments. Low inflation, declining interest rates and a healthy U.S. economy
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
helped to fill state and local coffers and encouraged many of these issuers to
take advantage of historically low interest rates.
In contrast, U.S. Treasury bond yields fell dramatically over the course of the
Fund's fiscal year as many investors sought shelter from troubled overseas
markets. More than a year after the Asian crisis first broke, key Asian
economies, including Japan, have yet to deliver the necessary reforms to restore
investor confidence in the region. Moreover, the sudden collapse of Russia's
currency last summer cast a pall over other developing economies as fears of a
similar crisis in Brazil began to surface. As a result of this shift in investor
sentiment, long-term U.S. Treasury bonds fell roughly 1% in the past year.
Because foreign investors, who do not benefit from tax-free bonds, were large
buyers of these U.S. Treasury bonds, the precipitous drop in their yields was
not followed in the municipal bond market. Under more typical market conditions,
municipal bonds generally yield roughly 85% of similar-maturity U.S. Treasury
securities. However, during the period, long-term municipal bonds yielded as
much as 100% of U.S. Treasury bonds. (As of November 30, 1998, 10-year municipal
bonds yielded approximately 93% of 10-year U.S. Treasury securities.)
In order to help keep the U.S. economy moving, the Federal Reserve Board ("Fed")
lowered short-term interest rates by 0.75% in a series of actions over the
course of several weeks. Fed chairman Alan Greenspan cited a spreading credit
crunch as the major reason for monetary policy change. Growing uncertainties in
the world's financial markets caused many creditors to avoid any perception of
risk and many high-quality companies suddenly encountered difficulty in securing
financing. The latest actions taken by the Fed helped calm concerned investors
and provided more liquidity in the banking system.
Municipal Bond Market Outlook
We believe that the lack of inflationary pressures and a healthy but slowing
U.S. economy should continue to provide favorable conditions for municipal
bonds. Moreover, ongoing global weakness and falling commodity prices should
help to offset any upward wage pressures. In addition, the introduction of the
Euro could somewhat weaken U.S. Treasury security prices and bring them closer
to their historical norm relative to other fixed income investments. However, we
also expect that the heavy municipal bond issuance volume will likely continue
in the coming year to meet the demand for infrastructure improvements. We remain
positive on the prospects for municipal bonds and believe the Fund is well
positioned for the coming months.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 3
<PAGE>
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, 1998
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance--Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
11/30/98 $8.57 $8.76 $0.40 $0.00 7.01%
- --------------------------------------------------------------------------------
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 $2.81 $0.04
================================================================================
- --------------------------------------------------------------------------------
Historical Performance--Class L Shares/(2)/
- --------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns(1)
================================================================================
11/30/98 $8.57 $8.76 $0.38 $0.00 6.79%
- --------------------------------------------------------------------------------
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 $1.54 $0.00
================================================================================
It is the Fund's policy to distribute dividends monthly and capital gains, if
any, annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns
- --------------------------------------------------------------------------------
Without Sales Charge(1)
------------------------
Class A Class L(2)
================================================================================
Year Ended 11/30/98 7.01% 6.79%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/98 5.52 N/A
- --------------------------------------------------------------------------------
Inception* through 11/30/98 6.63 7.57
================================================================================
With Sales Charge(3)
------------------------
Class A Class L(2)
================================================================================
Year Ended 11/30/98 4.93% 4.68%
- --------------------------------------------------------------------------------
Five Years Ended 11/30/98 5.11 N/A
- --------------------------------------------------------------------------------
Inception* through 11/30/98 6.32 7.30
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Cumulative Total Returns
- --------------------------------------------------------------------------------
Without Sales Charge(1)
================================================================================
Class A (Inception* through 11/30/98) 55.95
- --------------------------------------------------------------------------------
Class L (Inception* through 11/30/98)(2) 33.86
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to
Class L shares.
(2) On June 12, 1998, Class C shares were renamed Class L shares.
(3) 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 L shares reflect the
deduction of a 1.00% CDSC, which applies if shares are redeemed within one
year from initial purchase.
* Inception dates for Class A and L shares are December 31, 1991 and
December 5, 1994, respectively.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<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 1998
[LINE CHART]
Smith Barney Lehman Brothers
Intermediate Maturity 10 Year Municipal Lipper Peer
New York Municipals Fund Bond Index Group Average
- --------------------------------------------------------------------------------
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
11/97 14,284 15,410 14,134
11/30/98 15,285 16,660 15,054
- --------------------------------------------------------------------------------
+ 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, 1998. 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 (20 funds as of November 30, 1998)
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.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Highlights (unaudited) November 30, 1998
- --------------------------------------------------------------------------------
Industry Breakdown
[PIE CHART]
Education 20.5%
General Obligation 13.0%
Government Facilities 6.1%
Hospitals 15.9%
Industrial Development 6.9%
Other 11.5%
Pollution Control 4.3%
Transportation 13.2%
Finance 3.2%
Water & Sewer 5.4%
Summary of Investments by Combined Ratings
Standard & Percentage of
Moody's and/or Poor's Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 45.8%
Aa AA 16.5
A A 15.5
Baa BBB 18.9
NR NR 3.3
-----
100.0%
=====
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
================
<C> <C> <S>
<C>
Education -- 20.5%
$ 400,000 AAA Albany City School District, Series B, MBIA-Insured,
6.000% due 12/15/00
$ 420,500
200,000 AAA Canandaigua City School District, AMBAC-Insured,
6.400% due 6/1/99 (b)
203,212
200,000 AAA Central Square Central School District, FGIC-Insured,
6.500% due 6/15/99
203,480
1,000,000 Baa1* City University of New York COP, John Jay College,
6.000% due 8/15/06
1,113,750
860,000 Aaa* Huntington Union Free School District, FGIC-Insured,
5.500% due 7/15/11
950,300
Nassau County Industrial Development Agency,
Civic Facility Revenue, Refunded,
(Hofstra University Project), MBIA-Insured:
1,250,000 AAA 5.250% due 7/1/13
1,332,812
1,000,000 AAA 5.250% due 7/1/14
1,060,000
2,000,000 AAA New York Educational Construction Fund, Series A,
MBIA-Insured, 6.500% due 4/1/04 (b)
2,245,000
New York State Dormitory Authority, Revenue Bonds:
500,000 AAA College and University Educational Loan, MBIA-Insured,
6.200% due 7/1/01 (c)
529,375
940,000 Aaa* New York Law School, AMBAC-Insured,
5.200% due 7/1/08
1,015,200
630,000 Aaa* Nyack Union Free School District, FGIC-Insured,
5.250% due 12/15/15
674,100
1,100,000 AA Saint Thomas Aquinas, 5.000% due 7/1/14
1,100,000
1,000,000 A- State University Educational Facilities,
5.000% due 5/15/10
1,037,500
100,000 AAA Wappingers Central School District, AMBAC-Insured,
6.250% due 12/1/99
103,320
- --------------------------------------------------------------------------------
- ----------------
11,988,549
- --------------------------------------------------------------------------------
- ----------------
Finance -- 3.2%
City of Troy Municipal Assistance Corp., MBIA-Insured:
1,080,000 AAA Series A, 5.000% due 1/15/08
1,140,750
1,990,000 AAA Series B, zero coupon bond to yield
5.945% due 1/15/19
718,887
- --------------------------------------------------------------------------------
- ----------------
1,859,637
- --------------------------------------------------------------------------------
- ----------------
General Obligation -- 13.0%
Buffalo GO:
100,000 AAA FGIC-Insured, 5.800% due 2/1/00
102,750
205,000 AAA Series A, MBIA-Insured, 5.900% due 4/1/01
215,506
385,000 AAA Series B, MBIA-Insured, 5.900% due 4/1/01
404,731
250,000 AAA Erie County Public Improvement Project GO, FGIC-Insured,
5.500% due 1/15/00
255,625
495,000 Baa* Jamestown GO, Series A, 7.000% due 3/15/00
515,419
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
================
<C> <C> <S>
<C>
General Obligation -- 13.0% (continued)
$1,000,000 AA Monroe County Public Improvement Project GO, Series A,
6.000% due 3/1/18
$1,160,000
1,000,000 AAA Nassau County GO, Combined Sewer District, Series E,
MBIA-Insured, 5.400% due 5/1/10
1,087,500
New York City GO:
2,000,000 A- Series A, 7.000% due 8/1/04 (b)
2,277,500
325,000 A- Series B, 6.250% due 10/1/01
346,531
175,000 A- Series B, (Escrowed to maturity with U.S. government
securities), 6.250% due 10/1/01 (d)
187,031
435,000 AAA Niagara County GO, Environmental Infrastructure,
Series A, MBIA-Insured, 5.250% due 8/15/13
465,994
Oyster Bay GO:
425,000 A1* 5.000% due 2/1/14
441,469
150,000 AAA FGIC-Insured, Series C, 6.300% due 10/1/99
154,072
- --------------------------------------------------------------------------------
- ----------------
7,614,128
- --------------------------------------------------------------------------------
- ----------------
Government Facilities -- 6.1%
735,000 AA New York State Dormitory Authority, Revenue Bonds,
Court Facilities, Westchester County,
5.250% due 8/1/17
755,212
New York State Urban Development, Correctional
Facilities:
595,000 BBB+ Series 3, 6.800% due 1/1/00
614,611
1,900,000 BBB+ Series A, 6.500% due 1/1/09
2,204,000
- --------------------------------------------------------------------------------
- ----------------
3,573,823
- --------------------------------------------------------------------------------
- ----------------
Hospitals -- 15.9%
5,000 B1* Monroe County IDA, Genesee Hospital, Series A,
6.500% due 11/1/99
5,061
New York State Dormitory Authority, Revenue Bonds:
190,000 AA Genessee Valley, Series B, FHA-Insured,
6.300% due 8/1/02
205,913
1,500,000 AA Good Samaritan Hospital, 5.500% due 7/1/10
1,631,250
885,000 AAA Long Beach Medical Center, MBIA/FHA-Insured,
5.550% due 8/1/15
930,356
1,000,000 A- Mental Health Services, 6.000% due 2/15/12
1,126,250
685,000 AAA Municipal Health Facilities Improvement Project,
Series 1, 5.000% due 1/15/17
686,713
1,000,000 AA New York and Presbyterian Hospital, 5.500% due 8/1/11
1,101,250
500,000 Baa2* Nyack Hospital, Series A, 6.250% due 7/1/13
543,125
1,000,000 AAA Presbyterian Hospital, Series A, AMBAC/FHA-Insured,
Series A, 5.500% due 2/15/02
1,095,000
New York State Medical Care Facilities, Revenue Bonds:
725,000 A- Health Services Facility, 6.100% due 2/15/02
772,125
Methodist Hospital, FHA-Insured:
390,000 AA Series A, 6.000% due 8/15/02
416,325
270,000 AA Series C, 5.900% due 8/15/02
280,125
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
================
<C> <C> <S>
<C>
Hospitals -- 15.9% (continued)
$ 500,000 BBB Port Jervis IDA, Franciscan Health Partnership,
5.200% due 11/1/08
$ 515,000
- --------------------------------------------------------------------------------
- ----------------
9,308,493
- --------------------------------------------------------------------------------
- ----------------
Housing: Multi-Family -- 2.6%
1,000,000 AA New York State Housing Corp., (Battery Park City
Project),
6.000% due 11/1/03
1,077,500
425,000 Aa* North Tonawanda Housing Development Corp.,
Mortgage Revenue, Bishop Gibbons, Series B,
FHA-Insured, 6.350% due 12/15/02
453,156
- --------------------------------------------------------------------------------
- ----------------
1,530,656
- --------------------------------------------------------------------------------
- ----------------
Industrial Development -- 6.9%
535,000 A Amherst Industrial Development Agency, Lease Revenue,
Multi-Surface Rink Complex, Series A, LOC Keybank,
5.050% due 10/1/05
548,375
500,000 Baa3* New York City IDA, Civil Facilities Revenue,
(YMCA Greater NY Project), 6.000% due 8/1/07
549,375
1,000,000 A Syracuse Industrial Development Agency,
Civic Facilities Revenue, (Crouse Health Inc. Project),
5.000% due 1/1/10
1,003,750
Westchester County IDA:
1,000,000 AAA Resource Recovery Revenue, (Westchester Resco Co.
Project), AMBAC-Insured, 6.000% due 7/1/09 (c)
1,132,500
790,000 NR Revenue Bonds, (AGR Realty Co. Project),
5.750% due 1/1/02
812,713
- --------------------------------------------------------------------------------
- ----------------
4,046,713
- --------------------------------------------------------------------------------
- ----------------
Life Care Systems -- 2.5%
750,000 AA New York State Dormitory Authority Revenue,
Hebrew Home for the Aged, FHA-Insured,
5.625% due 2/1/17
802,500
610,000 AA Oswego County Industrial Development Agency,
Civic Facility Revenue, (Seneca Hill Project), Series
A,
FHA-Insured, 5.550% due 8/1/22
632,113
- --------------------------------------------------------------------------------
- ----------------
1,434,613
- --------------------------------------------------------------------------------
- ----------------
Miscellaneous -- 3.0%
500,000 A Capital District Youth Center Lease Revenue,
LOC Key Bank, 6.000% due 2/1/17
525,625
New York State Municipal Bond Bank Agency,
Special Program Revenue:
925,000 BBB+ Buffalo, Series A, 6.500% due 3/15/00
953,906
250,000 AAA Rochester, Series A, 6.300% due 3/15/00
259,375
- --------------------------------------------------------------------------------
- ----------------
1,738,906
- --------------------------------------------------------------------------------
- ----------------
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
================
<C> <C> <S>
<C>
Pollution Control -- 4.3%
$ 750,000 A3(*) Essex County Industrial Development Agency,
Pollution Control Revenue, 5.700% due 7/1/16
$ 795,000
New York State Environmental Facilities Corp., PCR:
55,000 Baa1(*) Resource Recovery Revenue, (Huntington Project),
7.375% due 10/1/99 (c)
56,297
500,000 AAA Series A, 5.950% due 3/15/02
534,375
245,000 Baa3(*) North Country Development Authority,
Solid Waste Management Systems Revenue,
Series A, 6.500% due 7/1/01
254,685
800,000 Baa3(*) Oneida-Herkimer Solid Waste Management Authority,
6.300% due 4/1/01
848,000
- --------------------------------------------------------------------------------
- ----------------
2,488,357
- --------------------------------------------------------------------------------
- ----------------
Pre-Refunded(d) -- 1.0%
240,000 AAA New York, Series D, (Call 2/1/02 @ 101.5),
7.700% due 2/1/11
272,100
295,000 Baa3(*) North Country Development Authority,
Solid Waste Management Systems Revenue, Series A,
(Call 7/1/99 @ 102), 6.500% due 7/1/01
306,747
- --------------------------------------------------------------------------------
- ----------------
578,847
- --------------------------------------------------------------------------------
- ----------------
Public Facilities -- 1.1%
600,000 AAA Puerto Rico Public Buildings Authority, Public Education
and Health Facilities Refunding, Series K, FGIC-
Insured,
6.000% due 7/1/01
636,000
- --------------------------------------------------------------------------------
- ----------------
Transportation -- 13.2%
560,000 BBB Guam Transportation Authority Revenue, Series A,
5.700% due 10/1/01
581,000
670,000 AAA Islip Airport Improvement, Series B, FSA-Insured,
5.000% due 1/15/12 (c)
685,075
200,000 BBB+ Metropolitan Transportation Authority, New York
Service Contract, Transit Facilities, Series 5,
6.250% due 7/1/99
203,458
1,000,000 BBB+ New York State Thruway Authority, Service Contract,
Local Highway and Bridges, 6.000% due 4/1/02
1,061,250
600,000 AAA Niagara Falls Bridge Commission Toll Revenue,
Series B, FGIC-Insured, 5.250% due 10/1/15
638,250
2,000,000 AAA Niagara Frontier Transportation Authority,
Greater Buffalo International Airport, Series B,
AMBAC-Insured, 5.750% due 4/1/04 (c)
2,160,000
1,000,000 NR Port Authority of New York & New Jersey, Revenue Bonds,
6.750% due 10/1/11 (c)
1,122,500
670,000 Baa1* Syracuse COP, Hancock International Airport,
6.300% due 1/1/02 (c)
712,713
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(a) SECURITY
VALUE
================================================================================
================
<C> <C> <S>
<C>
Transportation -- 13.2% (continued)
$ 500,000 AAA Triborough Bridge & Tunnel Authority, Special Obligation
Refunding, Series A, MBIA-Insured, 6.100% due 1/1/00
$ 514,045
- --------------------------------------------------------------------------------
- ----------------
7,678,291
- --------------------------------------------------------------------------------
- ----------------
Utilities -- 1.3%
500,000 AAA Long Island Power Authority, Electric System Revenue,
MBIA-Insured, 5.125% due 4/1/12
521,875
250,000 AAA New York State Power Authority Revenue & General
Purpose, Series Z, (Escrowed to maturity with
U.S. government securities), 5.850% due 1/1/00
256,688
- --------------------------------------------------------------------------------
- ----------------
778,563
- --------------------------------------------------------------------------------
- ----------------
Water & Sewer -- 5.4%
500,000 AAA New York City Municipal Water Financing Authority,
Water and Sewer System Revenue, FGIC-Insured,
3.300% due 6/15/24 (e)
500,000
1,390,000 AAA Suffolk County Southwest Sewer District GO,
MBIA-Insured, 6.000% due 2/1/07
1,568,963
1,000,000 AAA Suffolk County Water Authority, Waterworks Revenue,
MBIA-Insured, 5.100% due 6/1/09
1,070,000
- --------------------------------------------------------------------------------
- ----------------
3,138,963
- --------------------------------------------------------------------------------
- ----------------
TOTAL INVESTMENTS -- 100%
(Cost-- $55,162,955**)
$58,394,539
================================================================================
================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) are rated by Moody's Investors Service Inc.
(b) Security segregated by Custodian for open purchase commitment.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Pre-Refunded bonds escrowed with U.S. government securities and bonds
escrowed to maturity with U.S. government securities are considered by the
investment adviser to be triple-A rated even if the issuer has not applied
for new ratings.
(e) Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definition of ratings and certain security
descriptions.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Bond ratings (unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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 Investors Service Inc. ("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 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 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 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 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 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 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.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Bond ratings (unaudited) (continued)
- --------------------------------------------------------------------------------
Fitch IBCA, Inc. ("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 (unaudited)
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $55,162,955) $ 58,394,539
Cash 71,998
Interest receivable 934,350
Receivable for Fund shares sold 309,790
- --------------------------------------------------------------------------------
Total Assets 59,710,677
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 757,938
Investment advisory fees payable 20,288
Administrative fees payable 9,107
Distribution fees payable 1,811
Accrued expenses 50,678
- --------------------------------------------------------------------------------
Total Liabilities 839,822
- --------------------------------------------------------------------------------
Total Net Assets $ 58,870,855
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 6,722
Capital paid in excess of par value 56,906,866
Overdistributed net investment income
(5,345)
Accumulated net realized loss from security transactions
(1,268,972)
Net unrealized appreciation of investments 3,231,584
- --------------------------------------------------------------------------------
Total Net Assets $ 58,870,855
================================================================================
Shares Outstanding:
Class A 6,237,245
------------------------------------------------------------------------------
Class L 485,012
------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $8.76
------------------------------------------------------------------------------
Class L* $8.76
------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class A (net asset value plus 2.04% of net asset value per share) $8.94
------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $8.85
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
* Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended November 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,830,892
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 161,443
Administration fees (Note 2) 107,628
Distribution fees (Note 2) 86,388
Shareholder and system servicing fees 31,628
Audit and legal 25,140
Shareholder communications 20,167
Registration fees 19,321
Trustees' fees 14,883
Pricing service fees 9,652
Custody 3,175
Other 3,707
- --------------------------------------------------------------------------------
Total Expenses 483,132
Less: Investment advisory and administration fee waivers (Note 2)
(105,299)
- --------------------------------------------------------------------------------
Net Expenses 377,833
- --------------------------------------------------------------------------------
Net Investment Income 2,453,059
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS (NOTE 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 28,364,419
Cost of securities sold 28,139,200
- --------------------------------------------------------------------------------
Net Realized Gain 225,219
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 2,317,680
End of year 3,231,584
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 913,904
- --------------------------------------------------------------------------------
Net Gain on Investments 1,139,123
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,592,182
================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended November 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998
1997
================================================================================
========
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,453,059 $
2,420,302
Net realized gain 225,219
368,879
Increase in net unrealized appreciation 913,904
246,219
- --------------------------------------------------------------------------------
- --------
Increase in Net Assets From Operations 3,592,182
3,035,400
- --------------------------------------------------------------------------------
- --------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 3):
Net investment income (2,444,832)
(2,440,417)
In excess of net investment income (2,540)
- --
- --------------------------------------------------------------------------------
- --------
Decrease in Net Assets From
Distributions to Shareholders (2,447,372)
(2,440,417)
- --------------------------------------------------------------------------------
- --------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 14,963,416
6,793,709
Net asset value of shares issued
for reinvestment of dividends 1,698,753
1,673,162
Cost of shares reacquired (9,977,772)
(8,566,882)
- --------------------------------------------------------------------------------
- --------
Increase (Decrease) in Net Assets From
Fund Share Transactions 6,684,397
(100,011)
- --------------------------------------------------------------------------------
- --------
Increase in Net Assets 7,829,207
494,972
NET ASSETS:
Beginning of year 51,041,648
50,546,676
- --------------------------------------------------------------------------------
- --------
End of year* $ 58,870,855 $
51,041,648
================================================================================
========
* Includes overdistributed net investment income of: $ (5,345) $
(13,572)
================================================================================
========
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<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 four other separate investment funds:Smith
Barney Intermediate Maturity California Municipals Fund, Smith Barney Large
Capitalization Growth Fund, Smith Barney S&P 500 Index Fund and Smith Barney Mid
Cap Blend 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; (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; (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, 1998,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Accordingly, for a portion of overdistributed net
investment income amounting to $2,540 was reclassified to paid-in capital. Net
investment income, net realized gains and net assets were not affected by this
change; and (j) 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.
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Mutual Management Corp. ("MMC"), a subsidiary of Salomon Smith Barney Holdings
Inc. ("SSBH"), acts as investment 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, 1998, MMC waived $63,179 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, 1998, MMC
waived $42,120 of its administration fee.
On October 8, 1998, CFBDS, Inc., became the Fund's distributor. Prior to that
date, Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as a member of the selling group.
On June 12, 1998, the Portfolio's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
For the year ended November 30, 1998, SSB received sales charges of $86,000 and
$19,000 on sales of the Fund's Class A and Class L shares, respectively. In
addition, CDSCs paid to SSB were approximately:
Class A Class L
================================================================================
CDSCs $3,000 $4,000
================================================================================
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A and L 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 L shares calculated at the annual
rate of 0.20% of the average daily net assets. For the year ended November 30,
1998, total Distribution Plan fees incurred were:
Class A Class L
================================================================================
Distribution Plan Fees $76,471 $9,917
================================================================================
All officers and one Trustee of the Fund are employees of SSB.
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<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, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $34,624,664
- --------------------------------------------------------------------------------
Sales 28,364,419
================================================================================
At November 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $3,237,404
Gross unrealized depreciation (5,820)
- --------------------------------------------------------------------------------
Net unrealized appreciation $3,231,584
================================================================================
6. Capital Loss Carryforward
At November 30, 1998, the Fund had, for Federal income tax purposes,
approximately $1,269,000 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:
2002 2003 2004
================================================================================
Carryforward Amounts $856,000 $337,000 $76,000
================================================================================
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. Shares of Beneficial Interest
As of November 30, 1998, 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. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At November 30, 1998, total paid-in capital amounted to the following for each
class:
Class A Class L
================================================================================
Total Paid-in Capital $52,762,424 $4,151,164
================================================================================
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended
Year Ended
November 30, 1998
November 30, 1997
-------------------------------- -------------
- ------------------
Shares Amount Shares
Amount
================================================================================
==================
<S> <C> <C> <C>
<C>
Class A
Shares sold 1,430,450 $ 12,454,137 643,354
$ 5,438,395
Shares issued on reinvestment 183,973 1,597,366 190,347
1,608,270
Shares redeemed (1,065,095) (9,271,847) (973,016)
(8,214,846)
- --------------------------------------------------------------------------------
- ------------------
Net Increase (Decrease) 549,328 $ 4,779,656 (139,315)
$ (1,168,181)
================================================================================
==================
Class L*
Shares sold 288,386 $ 2,509,279 159,656
$ 1,355,314
Shares issued on reinvestment 11,668 101,387 7,671
64,892
Shares redeemed (81,355) (705,925) (41,737)
(352,036)
- --------------------------------------------------------------------------------
- ------------------
Net Increase 218,699 $ 1,904,741 125,590
$ 1,068,170
================================================================================
==================
</TABLE>
*On June 12, 1998, Class C shares were renamed as Class L shares.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class A Shares 1998 1997 1996
1995 1994
================================================================================
=====================
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $ 8.57 $ 8.47 $ 8.48
$ 7.80 $ 8.54
- --------------------------------------------------------------------------------
- ---------------------
Income (Loss) From Operations:
Net investment income (1) 0.40 0.41 0.41
0.41 0.40
Net realized and unrealized gain (loss) 0.19 0.10 (0.01)
0.68 (0.72)
- --------------------------------------------------------------------------------
- ---------------------
Total Income (Loss) From Operations 0.59 0.51 0.40
1.09 (0.32)
- --------------------------------------------------------------------------------
- ---------------------
Less Distributions From:
Net investment income (0.40) (0.41) (0.41)
(0.41) (0.40)
Net realized gains -- -- --
- -- (0.02)
- --------------------------------------------------------------------------------
- ---------------------
Total Distributions (0.40) (0.41) (0.41)
(0.41) (0.42)
- --------------------------------------------------------------------------------
- ---------------------
Net Asset Value, End of Year $ 8.76 $ 8.57 $ 8.47
$ 8.48 $ 7.80
- --------------------------------------------------------------------------------
- ---------------------
Total Return 7.01% 6.23% 4.85%
14.31% (3.97)%
- --------------------------------------------------------------------------------
- ---------------------
Net Assets, End of Year (000s) $54,624 $48,759 $49,355
$52,568 $62,090
- --------------------------------------------------------------------------------
- ---------------------
Ratios to Average Net Assets:
Expenses (1) 0.70% 0.67% 0.66%
0.65% 0.65%
Net investment income 4.59 4.83 4.86
5.01 4.77
- --------------------------------------------------------------------------------
- ---------------------
Portfolio Turnover Rate 53% 52% 67%
- -- 68%
================================================================================
=====================
</TABLE>
(1) The investment adviser has waived all or part of its fees for the five years
ended November 30, 1998. 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
---------------------------- -----------------------------
- -
1998 1997 1996 1995 1994 1998 1997 1996 1995
1994
---- ---- ---- ---- ---- ---- ---- ---- ---- ---
- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.02 $0.03 $0.04 $0.03 $0.03 0.89% 0.98% 1.08% 0.97%
0.98%
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended November 30:
<TABLE>
<CAPTION>
Class L Shares (1) 1998 1997 1996
1995(2)
================================================================================
======
<S> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $ 8.57 $ 8.47 $ 8.48 $
7.87
- --------------------------------------------------------------------------------
- ------
Income (Loss) From Operations:
Net investment income (3) 0.38 0.39 0.39
0.38
Net realized and unrealized gain (loss) 0.19 0.10 (0.01)
0.61
- --------------------------------------------------------------------------------
- ------
Total Income From Operations 0.57 0.49 0.38
0.99
- --------------------------------------------------------------------------------
- ------
Less Distributions From:
Net investment income (0.38) (0.39) (0.39)
(0.38)
- --------------------------------------------------------------------------------
- ------
Total Distributions (0.38) (0.39) (0.39)
(0.38)
- --------------------------------------------------------------------------------
- ------
Net Asset Value, End of Year $ 8.76 $ 8.57 $ 8.47 $
8.48
- --------------------------------------------------------------------------------
- ------
Total Return 6.79% 6.00% 4.64%
13.01%++
- --------------------------------------------------------------------------------
- ------
Net Assets, End of Year (000s) $4,247 $2,283 $1,192 $
393
- --------------------------------------------------------------------------------
- ------
Ratios to Average Net Assets:
Expenses (3) 0.89% 0.89% 0.88%
0.86%+
Net investment income 4.38 4.61 4.64
4.74+
- --------------------------------------------------------------------------------
- ------
Portfolio Turnover Rate 53% 52% 67%
- --
================================================================================
======
</TABLE>
(1) On June 12, 1998, Class C shares were renamed Class L shares.
(2) For the period from December 5, 1994 (inception date) to November 30, 1995.
(3) The investment adviser has waived all or part of its fees forthe three years
ended November 30, 1998 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
---------------------------- -----------------------------
- ---
1998 1997 1996 1995 1998 1997 1996 1995
------ ----- ------ ------- ------- ----- ------ ------
- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class L $0.01 $0.03 $0.02 $0.03 1.09% 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.
- --------------------------------------------------------------------------------
24 1998 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 Intermediate Maturity New York
Municipals Fund ("Fund") of Smith Barney Investment Trust as of November 30,
1998, 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 four-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended 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, 1998, by correspondence with the custodian. As to securities
purchased but not yet received, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Intermediate Maturity New York Municipals Fund of Smith Barney
Investment Trust as of November 30, 1998, 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
four-year period then ended, in conformity with generally accepted accounting
principles.
KPMG LLP
New York, New York
January 15, 1999
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited)
- --------------------------------------------------------------------------------
On February 6, 1998, a special meeting of shareholders of the Trust was held
for the purpose of voting on the following matters:
1. To elect Trustees of the Trust; and
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
Shares Voted Percentage Shares Voted
Percentage
Name of Trustees For Shares Voted Against
Shares Voted
================================================================================
=========
<S> <C> <C> <C> <C>
Herbert Barg 22,978,059.782 97.961% 478,327.074
2.039%
Alfred J. Bianchetti 22,968,583.475 97.920 487,803.381
2.080
Martin Brody 22,972,548.241 97.937 483,838.615
2.063
Dwight B. Crane 23,013,405.483 98.111 442,981.373
1.889
Burt N. Dorsett 23,007,677.873 98.087 448,708.983
1.913
Elliot S. Jaffe 22,981,247.160 97.974 475,139.696
2.026
Stephen E. Kaufman 22,999,681.445 98.053 456,705.411
1.947
Joseph J. McCann 23,011,195.450 98.102 445,191.406
1.898
Heath B. McLendon 23,010,138.021 98.098 446,248.835
1.902
Cornelius C. Rose, Jr 23,006,201.971 98.081 450,184.885
1.919
================================================================================
=========
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart illustrates that all
proposals were approved by shareholders.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to non-
fundamental (which can be changed by a vote of the Board of Trustees).
<TABLE>
<S> <C>
================================================================================
=========
M Industry Concentration
Approved
- --------------------------------------------------------------------------------
- ---------
M Borrowing
Approved
- --------------------------------------------------------------------------------
- ---------
E Ability to Pledge Assets
Approved
- --------------------------------------------------------------------------------
- ---------
M Lending by the Fund
Approved
- --------------------------------------------------------------------------------
- ---------
M Underwriting of Securities
Approved
- --------------------------------------------------------------------------------
- ---------
R Margin and the Short Sales of Securities
Approved
- --------------------------------------------------------------------------------
- ---------
M Real Estate
Approved
- --------------------------------------------------------------------------------
- ---------
R Investments in Oil, Gas and Mineral Exploration
Approved
- --------------------------------------------------------------------------------
- ---------
E Limiting Investments to Certain Enumerated Instruments
Approved
- --------------------------------------------------------------------------------
- ---------
R Purchase or Sale of Puts, Calls, and Combinations Thereof
Approved
================================================================================
=========
</TABLE>
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information (unaudited) (continued)
- --------------------------------------------------------------------------------
The information below reports the lowest percentage of shares voting for the
proposals, the highest percentage of shares voting against and abstaining by
shareholders of the Trust on all proposals.
<TABLE>
<CAPTION>
Percentage Percentage
Percentage
Shares Voted of Shares Shares Voted of Shares Shares of
Shares
For Voted Against Voted Abstaining
Abstained
================================================================================
======
<S> <C> <C> <C> <C> <C>
2,701,751.905 87.002% 52,776.990 1.700% 350,854.417
11.298%
================================================================================
======
</TABLE>
- --------------------------------------------------------------------------------
Smith Barney Intermediate Maturity New York Municipals Fund 27
<PAGE>
- --------------------------------------------------------------------------------
Tax Information (unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
November 30, 1998:
. 99.98% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
- --------------------------------------------------------------------------------
28 1998 Annual Report to Shareholders
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup[LOGO]
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.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Peter M. Coffey
Vice President and
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser and
Administrator
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNC Bank, N.A.
Shareholder
Servicing Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney Intermediate Maturity New York Municipals Fund. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Fund, which contains information
concerning the Fund's investment policies and expenses as well as other
pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
Intermediate Maturity
New York Municipals Fund
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD0311 1/99
[GRAPHIC OMITTED]
Smith Barney
S&P 500
Index Fund
--------------------
ANNUAL REPORT
--------------------
November 30, 1998
- ------------------------------------
[GRAPHIC OMITTED]
- ------------------------------------
<PAGE>
Smith Barney
S&P 500
Index Fund
[PHOTO OMITTED] [PHOTO OMITTED] [PHOTO OMITTED]
HEATH B. SANDIP A. JOHN
McLENDON BHAGAT, CFA LAU
Chairman Vice President and Investment Officer
Investment Officer
Dear Shareholder:
We are pleased to provide the annual report of the Smith Barney S&P 500 Index*
Fund ("Fund") for the year ended November 30, 1998. In this report we summarize
the period's prevailing economic and market conditions. A detailed summary of
performance and current holdings in the Fund can be found in the appropriate
sections that follow.
Investment Objective and Performance Update
The Fund seeks to provide investment results that, before expenses, correspond
to the price and yield performance of the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index"), which is representative of the U.S. stock market.
(The S&P 500 Index is a broad-based measurement of changes in stock market
conditions based on the average performance of 500 widely held common stocks.)
The S&P 500 Index Fund is designed to provide reliable exposure to the large cap
segment of the U.S. market through a broadly diversified portfolio structure.
The Fund matches the composition of the S&P 500 and owns the constituent index
stocks at the appropriate index weight. The Fund, therefore, remains neutral
relative to the benchmark in terms of economic sectors, market capitalization
and growth and value styles of investing.
The Fund performed in line with the S&P 500 Index after taking into
- ----------
* Standard & Poor's, "S&P(R)" and "S&P 500(R)" are trademarks of Standard &
Poor's, a division of the McGraw Hill Companies, Inc. and have been licensed for
use by the Fund. The Fund is not sponsored, endorsed or promoted by Standard &
Poor's, and Standard & Poor's makes no representation regarding the advisability
of investing in the Fund.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 1
<PAGE>
account trading costs related to the launch of the Fund and the impact of fees
and expenses. Since its inception date on January 5, 1998 through the fiscal
year ended November 30, 1998, the Fund had a total return of 19.80% compared
with the 20.99% for the S&P 500 Index over the same period.
Financial Markets Overview
The performance of the U.S. stock market in 1998 proves yet again that interest
rate changes and liquidity flows may have a more dominant influence on stock
prices than most other factors. In a year where corporate earnings growth was
close to zero, most measures of the U.S. stock market have risen by over 20%.
Declining interest rates, which fell from 5.9% to 5.1% during 1998, have
triggered a significant expansion in the market's P/E multiples. The upward
pressure on stock prices has been further amplified by strong money flows as
yields on alternative investments have dwindled.
A notable aspect of the stock market performance in calendar year 1998 has been
the divergent trends in returns across different investment styles and market
segments. While the S&P 500 Index rose by about 22% in 1998, the Russell 2000
index representative of smaller companies returned roughly a negative 9%.
This remarkable spread in relative performance between different capitalizations
and investment styles can best be understood in the context of business cycle
investing and the still unfolding global economic crisis. A common perception is
that the U.S. economy is in the later stages of a muted economic cycle. As
overall corporate earnings growth becomes scarce, investors are more willing to
reward stable growth companies with higher valuations. The flight to quality
precipitated by global turmoil during the reporting period has worked against
riskier asset classes such as small-cap stocks. The combination of meager
overall corporate earnings growth and the flight to quality syndrome has worked
in favor of large-cap stocks and against small-cap stocks.
We would like to take this opportunity to encourage you to visit our new
Internet Web site at www.smithbarney.com after you review this annual report.
- --------------------------------------------------------------------------------
2 1998 Annual Report to Shareholders
<PAGE>
In closing, thank you for investing in the Smith Barney S&P 500 Index Fund. We
look forward to helping you pursue your investment goals as we begin the next
century.
Sincerely,
/s/ Heath B. McLendon /s/ Sandip A. Bhagat
Heath B. McLendon Sandip A. Bhagat, CFA
Chairman Vice President
and Investment Officer
/s/ John Lau
John Lau
Investment Officer
January 5, 1999
- --------------------------------------------------------------------------------
Some Risks to Remember about the Smith Barney
S&P 500 Index Fund
Please note that the net asset value of the Fund's shares will fluctuate and
these shares may be worth more or less than their original cost upon redemption.
There can be no assurances given that the Fund will achieve its investment
objective. Moreover, the investment performance of the S&P 500 Index does not
factor in sales charges, brokerage commissions, management fees and other fund
costs assumed by the Fund. Therefore, the Fund cannot exactly replicate the
performance of the S&P 500 Index.
Moreover, when the stock market goes down, as defined by the S&P 500 Index, the
Fund's net asset value will decline as well. Since the Fund tries to mirror,
before expenses, the performance of the S&P 500 Index, the investment management
team will usually not try and judge the merits of any one particular security,
and the poor performance of any one single security will not necessarily mean
the security will be removed from the Fund.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 3
<PAGE>
- --------------------------------------------------------------------------------
Historical Performance--Class A Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividend Distribution Return+
================================================================================
Inception*-11/30/98 $10.00 $11.98 $0.00 $0.00 19.80%++
================================================================================
- --------------------------------------------------------------------------------
Historical Performance--Class D Shares
- --------------------------------------------------------------------------------
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividend Distribution Return+
================================================================================
Inception*-11/30/98 $11.00 $11.99 $0.00 $0.00 9.00%++
================================================================================
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
- --------------------------------------------------------------------------------
Average Annual Total Returns+
- --------------------------------------------------------------------------------
Class A Class D
================================================================================
Inception* through 11/30/98++ 19.80% 9.00%
================================================================================
* Inception Dates for Class A and D shares are January 5, 1998 and August 4,
1998, respectively.
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
- --------------------------------------------------------------------------------
4 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK-94.8%
Auto & Transportation-2.5%
1,013 AMR Corp.+ $ 66,795
2,627 Burlington Northern Santa Fe Corp. 89,318
428 Cooper Tire & Rubber Co. 8,373
1,213 CSX Corp. 50,567
218 Cummins Engine Co., Inc. 8,093
918 Dana Corp. 35,802
846 Delta Air Lines, Inc. 45,420
394 Eaton Corp. 26,915
817 FDX Corp.+ 53,003
198 Fleetwood Enterprises, Inc. 6,670
6,737 Ford Motor Co. 372,219
3,640 General Motors Corp. 254,800
988 Genuine Parts Co. 32,542
877 Goodyear Tire & Rubber Co. 49,770
666 ITT Industries, Inc. 23,976
471 Johnson Controls Inc. 27,259
377 Navistar International Corp. 9,755
2,108 Norfolk Southern Corp. 64,030
429 Paccar, Inc. 19,519
416 Ryder Systems, Inc. 11,882
331 Snap-on, Inc. 11,254
1,862 Southwest Airlines Co. 40,033
335 The Timken Corp. 6,449
1,413 Union Pacific Resources 15,808
518 USA Group, Inc. 26,936
- --------------------------------------------------------------------------------
1,357,188
- --------------------------------------------------------------------------------
Consumer Discretionary-14.6%
302 Alberto Culver Co., Class B Shares 7,739
1,369 Albertsons Inc. 78,118
399 American Greetings Corp., Class A Shares 16,883
1,522 American Stores Co. 51,082
857 Autozone, Inc.+ 25,817
1,465 Avon Products, Inc. 59,516
561 Brunswick Corp. 12,342
3,977 CBS Corp. 118,564
4,758 Cendant Corp. 90,402
561 Circuit City Stores 20,301
1,382 Clear Channel Communications Inc. 64,609
577 Clorox Co. 64,083
1,647 Colgate Palmolive Co. 141,024
2,052 Comcast Corp., Class A Shares 99,779
609 Consolidated Stores Corp.+ 13,094
1,208 Costco Cos., Inc. 75,802
2,164 CVS Corp. 106,848
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Discretionary-14.6% (continued)
789 Darden Restaurants, Inc. $ 12,476
2,437 Dayton-Hudson Corp. 109,665
450 Deluxe Corp. 15,638
617 Dillard, Inc., Class A Shares 21,209
1,034 Dollar General Corp. 24,622
520 Dow Jones & Co., Inc. 24,862
943 Dun & Bradstreet Corp. 28,467
1,798 Eastman Kodak Co. 130,467
1,179 Federated Department Stores, Inc. 49,150
860 Fred Meyer, Inc.+ 43,752
399 Fruit of the Loom Inc.+ 5,885
1,585 Gannett Co. 102,332
2,188 Gap, Inc. 160,955
6,253 Gillette Co. 287,247
211 The Great Atlantic & Pacific Tea Co., Inc. 5,763
399 Harcourt General, Inc. 20,648
554 Harrah's Entertainment, Inc. 8,622
727 Hasbro, Inc. 25,490
2,392 HBO & Co. 59,651
1,444 Hilton Hotels Corp. 31,407
8,174 Home Depot, Inc. 406,656
756 Ikon Office Solutions Inc. 7,371
592 International Flavors & Fragrances, Inc. 24,790
757 The Interpublic Group of Cos., Inc. 52,044
1,406 J.C. Penney Corp. 77,330
216 Jostens Inc. 5,062
2,753 KMart Corp. 41,983
3,042 Kimberly Clark Corp. 160,085
403 King World Productions, Inc. 10,982
443 Knight Ridder, Inc. 22,787
879 Kohl's Corp.+ 43,236
1,423 Kroger Co. 75,508
1,265 Limited Inc. 36,606
370 Liz Claiborne, Inc. 12,534
638 Loews Corp. 63,800
217 Longs Drugs Stores Corp. 7,730
1,397 Marriott International Inc., Class A Shares 41,037
1,630 Mattel, Inc. 56,337
1,286 May Department Stores Co. 77,562
504 Maytag Corp. 27,279
3,812 McDonald's Corp. 267,078
550 McGraw Hill, Inc. 49,225
3,392 MediaOne Group, Inc. 137,376
300 Meredith Corp. 11,644
998 Mirage Resorts, Inc.+ 14,845
511 Moore Corp. Ltd. 5,589
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
6 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Discretionary-14.6% (continued)
235 National Service Industries, Inc. $ 9,077
1,053 The New York Times Co., Class A Shares 32,709
909 Newell Co. 40,223
1,606 Nike Inc., Class B Shares 64,240
834 Nordstrom, Inc. 31,067
948 Omnicom Group, Inc. 50,659
347 Pep Boys - Manny, Moe & Jack & Co. 4,901
244 Polaroid Corp. 5,185
7,459 Procter & Gamble Corp. 653,595
300 Reebok International Ltd. 4,781
1,435 Rite Aid Corp. 66,548
769 RR Donnelley & Sons Co. 32,634
840 Rubbermaid Inc. 27,772
197 Russell Corp. 4,691
2,182 Sears Roebuck & Co. 103,509
1,424 Service Corp. 53,222
101 Spring Industries Inc. 3,933
1,597 Staples, Inc.+ 55,795
670 Supervalu Inc. 17,294
560 Tandy Corp. 25,235
2,908 Tele-Communications, Inc., Class A Shares+ 122,863
3,333 Time Warner, Inc. 352,465
482 Times Mirror Corp., Class A Shares 28,257
1,757 TJX Cos., Inc. 45,023
1,460 Toys `R' Us, Inc.+ 28,835
679 Tribune Co. 43,541
849 Tricon Global Resturants, Inc.+ 38,683
315 Tupperware Corp. 5,493
3,561 Unilever NV 275,310
2,788 U.S. West Media Group, Inc. 173,553
735 Venator Group, Inc. 5,788
677 VF Corp. 33,215
1,992 Viacom Inc., Class B Shares+ 132,593
2,767 Walgreen Co. 148,553
12,440 Wal-Mart Stores, Inc. 936,888
11,404 Walt Disney Co. 367,066
716 Wendy's International, Inc. 14,320
423 Whirlpool Corp. 23,688
820 Winn-Dixie Stores Inc. 33,056
- --------------------------------------------------------------------------------
8,047,047
- --------------------------------------------------------------------------------
Consumer Staples-7.0%
204 Adolph Coors Co., Class B Shares 10,149
2,684 Anheuser-Busch Co., Inc. 162,717
3,342 Archer-Daniels-Midland Co. 61,409
1,602 Bestfoods 93,116
385 Brown-Forman Corp., Class B Shares 28,009
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 7
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Consumer Staples-7.0% (continued)
2,502 Campbell Soup Co. $ 142,927
13,714 Coca-Cola Co. 960,837
2,248 Coca-Cola Enterprises 85,002
2,713 Conagra Inc. 85,290
954 Fortune Brands, Inc. 32,496
859 General Mills, Inc. 64,855
794 Hershey Foods Corp. 53,396
2,015 HJ Heinz & Co. 117,499
2,267 Kellogg Co. 83,029
1,955 Loews Corp. 82,599
8,193 PepsiCo, Inc. 316,967
13,534 Philip Morris Cos., Inc. 757,058
1,349 Pioneer Hi-Bred International, Inc. 40,386
759 Quaker Oats Corp. 46,584
1,732 Ralston-Purina Group 60,295
1,810 RJR Nabisco Holdings Corp. 52,151
2,700 Safeway, Inc.+ 142,594
2,597 Sara Lee Corp. 151,600
1,930 Seagram Co., Ltd. 66,223
1,872 Sysco Corp. 50,427
1,027 UST, Inc. 35,688
649 William Wrigley Jr. Co. 57,193
- --------------------------------------------------------------------------------
3,840,496
- --------------------------------------------------------------------------------
Finance-15.5%
4,610 Allstate Corp. 187,858
2,542 American Express Co. 254,359
1,410 American General Corp. 99,317
5,843 American International Group, Inc. 549,242
937 Aon Corp. 53,995
1,924 Associates First Capital Corp. 149,832
1,634 Bank of Boston Corp. 68,015
4,158 Bank of New York, Inc. 142,411
6,511 Bank One Corp. 334,096
9,667 BankAmerica Corp. 630,167
537 Bankers Trust Corp. 46,719
1,595 BB&T Corp. 58,915
626 Bear Stearns Cos., Inc. 26,292
368 Capital One Financial Corp. 40,480
1,487 Charles Schwab Corp. 83,830
4,768 Chase Manhattan Corp. 302,470
924 Chubb Corp. 64,738
1,178 CIGNA Corp. 91,663
928 Cincinnati Financial Corp. 36,250
12,718 Citigroup Inc. 638,285
866 Comerica, Inc. 55,857
1,741 Conseco, Inc. 57,671
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
8 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Finance-15.5% (continued)
614 Countrywide Credit Industries, Inc. $ 30,393
827 Equifax, Inc. 34,321
5,772 Fannie Mae 419,913
3,779 Federal Home Loan Mortgage Corp. 228,629
1,491 Fifth Third Bancorp 98,965
5,390 First Union Corp. 327,443
3,154 Fleet Financial Group, Inc. 131,482
1,407 Franklin Resources, Inc. 60,149
420 General Re Corp. 98,070
322 Golden West Financial Corp. 30,489
565 H & R Block, Inc. 25,390
1,297 Hartford Financial Services, Inc. 71,578
2,737 Household International, Inc. 107,085
1,173 Huntington Bancshares Inc. 34,750
982 J.P. Morgan & Co., Inc. 104,951
592 Jefferson Pilot Corp. 40,404
2,453 Keycorp 75,276
663 Lehman Brothers Holdings, Inc. 33,109
559 Lincoln National Corp. 46,781
1,423 Marsh & McLennan Cos., Inc. 82,801
554 MBIA, Inc. 35,871
4,187 MBNA Corp. 94,993
1,450 Mellon Bank Corp. 91,259
841 Mercantile Bancorp, Inc. 37,057
1,939 Merrill Lynch & Co. Inc. 145,425
625 MGIC Investment Corp. 27,461
3,261 Morgan Stanley Dean Witter & Co. 227,455
1,835 National City Corp. 123,404
619 Northern Trust Corp. 49,984
907 Paycheck, Inc. 45,123
1,675 PNC Bank Corp. 86,367
403 Progressive Corp. 59,795
754 Provident Cos., Inc. 28,982
530 Providian Financial Corp. 48,661
1,192 Regions Financial Corp. 46,190
600 Republic New York Corp. 28,050
788 SAFECO Corp. 33,835
930 SLM Holding Corp. 40,920
1,311 St. Paul Cos. 46,213
901 State Street Corp. 61,831
970 Summit Bancorp 40,558
1,152 SunAmerica Inc. 91,296
1,161 Suntrust Banks Inc. 81,052
1,457 Synovus Financial Corp. 32,145
785 Torchmark Corp. 29,830
348 Transamerica Corp. 36,975
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 9
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Finance-15.5% (continued)
706 Union Planters Corp. $ 33,623
768 UNUM Corp. 41,376
4,140 U.S. Bancorp 152,404
1,148 Wachovia Corp. 100,235
41 Waddell & Reed Financial, Class A Shares 982
177 Waddell & Reed Financial, Class B Shares 4,139
3,303 Washington Mutual, Inc. 127,991
9,003 Wells Fargo & Co. 324,108
- --------------------------------------------------------------------------------
8,510,031
- --------------------------------------------------------------------------------
Health Care-11.8%
8,569 Abbott Labs, Inc. 411,312
801 AETNA, Inc. 61,927
360 Allergan, Inc. 21,915
480 Alza Corp.+ 25,080
7,321 American Home Products Corp. 389,843
1,414 Amgen, Inc.+ 106,404
314 Bausch & Lomb, Inc. 17,427
1,590 Baxter International, Inc. 101,064
1,375 Becton Dickinson & Co. 58,438
621 Biomet, Inc. 23,753
1,093 Boston Scientific Corp.+ 54,104
5,536 Bristol-Myers Squibb & Co. 678,506
1,113 Cardinal Health, Inc. 76,380
3,600 Columbia/HCA Healthcare Corp. 88,650
313 C.R. Bard, Inc. 14,339
6,128 Eli Lilly & Co. 549,605
837 Guidant Corp. 71,825
610 HCR Manor Care, Inc.+ 19,368
2,368 HealthSouth Corp.+ 31,820
934 Humana, Inc. 18,505
7,482 Johnson & Johnson 607,912
404 Mallinckrodt, Inc. 13,054
2,614 Medtronic, Inc. 176,935
6,626 Merck & Co., Inc. 1,026,202
7,271 Pfizer, Inc. 811,625
2,831 Pharmacia & Upjohn, Inc. 147,389
4,085 Schering Plough Corp. 434,542
469 St. Jude Medical, Inc. 13,630
1,714 Tenet Healthcare Corp.+ 50,670
1,085 United Healthcare Corp. 48,961
4,570 Warner-Lambert Co. 345,035
- --------------------------------------------------------------------------------
6,496,220
- --------------------------------------------------------------------------------
Integrated Oil-5.7%
508 Amerada Hess Corp. 28,194
5,309 Amoco Corp. 312,899
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
10 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Integrated Oil-5.7% (continued)
425 Ashland, Inc. $ 20,666
1,788 Atlantic Richfield Co. 118,902
3,638 Chevron Corp. 304,228
13,568 Exxon Corp. 1,018,448
264 Kerr McGee Corp. 10,428
4,347 Mobil Oil Corp. 374,657
1,967 Occidental Petroleum Corp. 39,832
259 Pennzoil Co. 9,615
1,441 Phillips Petroleum Co. 60,522
11,934 Royal Dutch Petroleum Co. 560,898
521 Sunoco, Inc. 17,649
2,983 Texaco, Inc. 171,709
1,338 Unocal Corp. 45,325
1,711 USX Marathon Group, Inc. 48,549
- --------------------------------------------------------------------------------
3,142,521
- --------------------------------------------------------------------------------
Materials & Processing-3.8%
1,281 Air Products and Chemicals, Inc. 48,838
1,262 Alcan Aluminium Ltd. 33,601
1,102 Allegheny Teledyne, Inc. 22,660
1,038 Aluminum Co. of America 76,942
635 Armco, Inc.+ 2,500
225 Armstrong World Industries, Inc. 14,991
218 Asarco, Inc. 4,224
654 Avery Dennison Corp. 31,351
168 Ball Corp. 7,182
2,084 Barrick Gold Corp. 41,680
1,325 Battle Mountain Gold Corp. 6,211
292 Bemis, Inc. 11,041
746 Bethlehem Steel Corp. 6,154
520 Black & Decker Corp. 28,178
310 Boise Cascade Corp. 9,823
525 Champion International Corp. 21,820
1,296 Corning, Inc. 52,002
699 Crown Cork & Seal Co., Inc. 23,591
523 Cyprus Amax Minerals Co. 5,949
1,247 Dow Chemical Corp. 121,427
6,295 E.I. du Pont de Nemours & Co. 369,831
443 Eastman Chemical Co. 25,666
722 Ecolab, Inc. 22,337
815 Engelhard Corp. 15,740
194 FMC Corp. 11,276
1,227 Fort James Corp. 48,006
984 Freeport-McMoRan Copper & Gold, Inc. 12,854
514 Georgia Pacific Corp. 29,170
334 Great Lakes Chemical Corp. 13,339
531 Hercules, Inc. 17,457
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 11
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Materials & Processing-3.8% (continued)
1,192 Homestake Mining Co. $ 12,814
941 INCO Ltd. 10,880
1,706 International Paper Co. 74,104
612 Louisiana Pacific Corp. 10,404
1,899 Masco Corp. 54,834
583 Mead Corp. 17,672
3,340 Monsanto Co. 151,344
717 Morton International Inc. 21,107
374 Nalco Chemical Co. 12,506
934 Newmont Mining Corp. 18,563
494 Nucor Corp. 20,748
298 Owens Corning 11,119
871 Owens - Illinois, Inc.+ 27,981
325 Phelps Dodge Corp. 18,423
1,378 Placer Dome, Inc. 20,067
155 Potlatch Corp. 5,861
988 PPG Industries, Inc. 60,453
879 Praxair, Inc. 33,567
400 Reynolds Metals Co. 21,950
986 Rohm & Haas Co. 34,448
461 Sealed Air Corp.+ 20,342
970 Sherwin-Williams Co. 27,524
566 Sigma Aldrich Corp. 18,183
497 Stanley Works 15,190
307 Temple-Inland, Inc. 16,482
942 Tenneco, Inc. 33,559
389 Union Camp Corp. 25,163
758 Union Carbide Corp. 33,920
483 USX-U.S. Steel Group, Inc. 11,803
570 Westvaco Corp. 16,031
1,112 Weyerhaeuser Co. 55,739
620 Willamette Industries, Inc. 21,661
526 Worthington Industries, Inc. 6,411
523 W. R. Grace & Co.+ 8,630
- --------------------------------------------------------------------------------
2,085,324
- --------------------------------------------------------------------------------
Other Energy-0.7%
665 Anadarko Petroleum Corp. 18,745
554 Apache Corp. 12,742
1,774 Baker Hughes, Inc. 32,486
992 Burlington Resources Inc. 35,340
2,448 Halliburton Co. 71,910
268 Helmerich & Payne, Inc. 4,623
329 McDermott International, Inc. 8,821
46 NACCO Industries, Inc. 4,005
579 Oryx Energy Co. 7,997
487 Rowan Cos., Inc. 4,779
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
12 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Other Energy-0.7% (continued)
3,030 Schlumberger Ltd. $ 135,403
1,373 Union Pacific Corp. 66,762
- --------------------------------------------------------------------------------
403,613
- --------------------------------------------------------------------------------
Producer Durables-7.3%
161 Aeroquip-Vickers, Inc. 5,856
0 3,128 Allied Signal, Inc.
137,632
1,218 AMP, Inc. 58,921
414 The B.F. Goodrich Co. 15,706
5,621 Boeing Co. 228,353
135 Briggs & Stratton Corp. 6,809
973 Browning Ferris Industries, Inc. 28,703
404 Case Corp. 9,797
2,025 Caterpillar Inc. 100,111
335 Centex Corp. 11,955
211 Cincinnati Milacron, Inc. 4,273
649 Cooper Industries Inc. 31,882
375 Crane Co. 12,117
1,356 Deere & Co. 47,375
1,248 Dover Corp. 44,460
264 EG&G, Inc. 7,376
2,454 Emerson Electric Co. 159,510
437 Fluor Corp. 18,709
236 Foster Wheeler Corp. 4,042
702 General Dynanics Corp. 40,760
18,100 General Electric Co. 1,638,050
252 Harnischfeger Industries, Inc. 2,520
702 Honeywell, Inc. 56,116
1,392 Illinois Tool Works, Inc. 88,479
920 Ingersoll-Rand Co. 43,068
218 Kaufman & Broad Home Corp. 5,491
1,811 Laidlaw, Inc. 17,997
1,090 Lockheed Martin Corp. 113,088
241 Millipore Corp. 6,778
2,250 Minnesota Mining & Manufacturing Co. 180,703
383 Northrop Grumman Corp. 31,119
686 Pall Corp. 15,949
618 Parker-Hannifin Corp. 21,476
231 Pulte Corp. 5,876
466 Raychem Corp. 15,873
1,881 Raytheon Co., Class B Shares 104,160
1,063 Rockwell International Corp. 52,021
584 Smurfit-Stone Container Corp. 8,214
914 Textron Inc. 71,006
931 Thermo Electron Corp. 15,711
311 Thomas & Betts Corp. 13,470
680 TRW, Inc. 37,442
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 13
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Producer Durables-7.3% (continued)
3,586 Tyco International Ltd. $ 236,004
1,268 United Technolgies Corp. 135,914
542 W.W. Grainger, Inc. 22,899
3,176 Waste Management, Inc. 136,171
542 W.W. Grainger, Inc. 22,899
- --------------------------------------------------------------------------------
4,049,942
- --------------------------------------------------------------------------------
Technology-15.8%
376 Adobe Systems, Inc. 16,826
801 Advanced Micro Devices, Inc.+ 22,178
487 Andrew Corp.+ 7,792
749 Apple Computer, Inc.+ 723,921
2,034 Applied Materials, Inc. 78,817
1,201 Ascend Communications, Inc.+ 67,481
265 Autodesk, Inc. 9,639
1,676 Automatic Data Processing, Inc. 129,052
1,142 BMC Software, Inc. 58,313
911 Cabletron Systems, Inc.+ 12,754
404 Ceridian Corp. 26,285
8,652 Cisco Systems, Inc.+ 652,145
9,297 Compaq Computer Corp. 302,139
3,127 Computer Associates International, Inc. 138,370
880 Computer Sciences Corp. 50,270
276 Data General Corp.+ 5,002
7,044 Dell Computer Corp.+ 428,363
2,736 Electronic Data Systems Corp. 106,704
2,779 EMC Corp. 201,478
2,479 First Data Corp. 66,158
870 Gateway 2000, Inc.+ 48,829
840 General Instrument Corp.+ 23,625
439 Harris Corp. 16,655
5,784 Hewlett-Packard Co. 362,946
925 IMS Health, Inc. 61,397
9,348 Intel Corp. 1,006,078
5,190 International Business Machine Corp. 856,350
480 KLA-Tencor Corp.+ 16,350
780 LSI Logic Corp.+ 12,090
7,316 Lucent Technologies, Inc. 629,633
1,182 Micron Technology, Inc. 48,831
13,711 Microsoft Corp.+ 1,672,742
3,325 Motorola, Inc. 206,150
902 National Semiconductor Corp.+ 12,966
3,628 Northern Telecom Ltd. 169,382
1,976 Novell, Inc.+ 32,728
5,417 Oracle Systems Corp.+ 185,532
1,508 Parametric Technology, Inc.+ 25,636
1,276 Peoplesoft, Inc.+ 26,238
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Technology-15.8% (continued)
274 Perkin-Elmer Corp. $ 25,550
1,526 Pitney Bowes, Inc. 85,456
427 Scientific-Atlanta Corp. 8,273
1,346 Seagate Technology, Inc.+ 39,707
151 Shared Medical Systems Corp. 7,909
1,065 Silicon Graphics, Inc.+ 13,046
2,109 Sun Microsystems, Inc.+ 156,198
269 Tektronix, Inc. 7,213
1,078 Tellabs, Inc.+ 58,279
2,172 Texas Instruments, Inc. 165,887
1,992 3Com Corp.+ 77,066
1,424 UNISYS Corp. 40,584
1,827 Xerox Corp. 196,403
- --------------------------------------------------------------------------------
8,699,416
- --------------------------------------------------------------------------------
Utilities-10.1%
979 AES Corp.+ 44,789
3,197 Airtouch Communications, Inc., Class A Shares+ 182,828
1,524 ALLTEL Corp. 80,772
763 Ameren Corp. 31,426
1,058 American Electric Power, Inc. 49,065
10,049 American Telephone Telegraph Corp. 626,178
6,135 Ameritech Corp. 332,057
822 Baltimore Gas & Electric Co. 25,225
8,639 Bell Atlantic Corp. 480,544
5,471 Bellsouth Corp. 477,345
839 Carolina Power & Light Co. 38,909
1,190 Central & Southwest Corp. 32,725
883 Cinergy Corp. 30,519
1,177 Coastal Corp. 41,048
461 Columbia Energy Group 26,162
1,303 Consolidated Edison, Inc. 66,209
533 Consolidated Natural Gas Co. 28,949
1,096 Dominion Resources, Inc. 50,621
809 DTE Energy Co. 35,293
2,011 Duke Energy Corp. 125,813
122 Eastern Enterprises 4,949
1,974 Edison International 54,285
1,837 Enron Corp. 96,557
1,377 Entergy Corp. 40,363
1,316 FirstEnergy Corp. 40,714
1,010 FPL Group, Inc. 61,862
947 Frontier Corp. 28,528
711 GPU, Inc. 31,151
5,365 GTE Corp. 332,630
1,643 Houston Industries, Inc. 51,960
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 15
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments (continued) November 30, 1998
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Utilities-10.1% (continued)
9,879 MCI Worldcom, Inc.+ $ 582,861
616 New Century Energies, Inc. 29,607
1,595 Nextel Communications, Inc.+ 34,292
1,035 Niagara Mohawk Power Co. 15,913
268 NICOR, Inc. 11,273
843 Northern States Power Co. 22,919
172 ONEOK, Inc. 5,988
1,661 PacifiCorp 31,144
1,243 Peco Energy Co. 49,875
835 Pennsylvania Power & Light 22,806
195 Peoples Energy Corp. 7,349
2,122 PG&E Corp. 65,649
1,291 Public Service Enterprise Group, Inc. 50,349
10,888 SBC Communications, Inc. 521,944
1,337 Sempra Energy 33,509
619 Sonat Inc. 18,377
3,881 Southern Co. 114,489
2,395 Sprint Corp. FON Group 174,236
1,198 Sprint Corp. PCS Group+ 19,160
1,560 Texas Utilities Co. 69,517
1,202 Unicom Corp. 45,300
2,365 Williams Cos., Inc. 68,207
- --------------------------------------------------------------------------------
5,544,240
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost--$48,510,928) 52,176,038
================================================================================
FACE
AMOUNT DESCRIPTION VALUE
================================================================================
U.S. TREASURY BILLS--0.4%
$ 240,000 U.S. Treasury Bills, due 12/17/98 239,539
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.8%
2,644,000 Chase Manhattan Bank, 5.150% due 12/1/98,
Proceeds at maturity--$2,644,378; (Fully collateralized
by U.S. Treasury Bonds, 6.625% due 3/31/02;
Market value--$2,698,594) 2,644,000
================================================================================
TOTAL INVESTMENTS - 100%
(Cost--$51,394,467*) $ 55,059,577
================================================================================
+ Non-income producing security
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities November 30, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost--$51,394,467) $55,059,577
Receivable for Fund shares sold 1,977,592
Receivable for securities sold 210,725
Dividends and interest receivable 72,811
Receivable from administrator 190,594
- --------------------------------------------------------------------------------
Total Assets 57,511,299
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares redeemed 169,566
Payable for securities purchased 140,460
Payable to broker - variation margin 125,215
Distribution fees payable 3,100
Accrued expenses 76,000
- --------------------------------------------------------------------------------
Total Liabilities 514,341
- --------------------------------------------------------------------------------
Total Net Assets $56,996,958
================================================================================
NET ASSETS
Par value of capital shares $ 4,759
Capital paid in excess of par value 53,001,568
Undistributed net investment income 259,754
Accumulated net realized gain on investments and
futures contracts 83,845
Net unrealized appreciation of investments and
futures contracts 3,647,032
- --------------------------------------------------------------------------------
Total Net Assets $56,996,958
================================================================================
Shares Outstanding:
Class A 4,608,002
------------------------------------------------------------------------------
Class D 150,961
------------------------------------------------------------------------------
Net Asset Value:
Class A (and redemption price) $ 11.98
------------------------------------------------------------------------------
Class D (and redemption price) $ 11.99
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 17
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Period Ended November 30, 1998(a)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 342,154
Interest 56,846
- --------------------------------------------------------------------------------
Total Investment Income 399,000
- --------------------------------------------------------------------------------
EXPENSES:
Custody 87,500
Distribution fees (Note 2) 47,919
Registration fees 47,200
Audit and legal 39,700
Investment advisory fees (Note 2) 36,394
Shareholder communications 30,600
Administration fees (Note 2) 24,263
Shareholder and system servicing fees 18,000
Trustees' fees 10,600
Other 2,029
- --------------------------------------------------------------------------------
Total Expenses 344,205
Less: Administration fee waiver and expense
reimbursement (Note 2) (201,783)
- --------------------------------------------------------------------------------
Net Expenses 142,422
- --------------------------------------------------------------------------------
Net Investment Income 256,578
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 6):
Realized Gain (Loss) From:
Security Transactions (excluding short-term securities) 134,950
Futures Contracts (51,105)
- --------------------------------------------------------------------------------
Net Realized Gain 83,845
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Futures Contracts:
Beginning of period --
End of period 3,647,032
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 3,647,032
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 3,730,877
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 3,987,455
================================================================================
(a) For the period from January 5, 1998 (commencement of operations) to November
30, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
For the Period Ended November 30, 1998(a)
================================================================================
OPERATIONS:
Net investment income $ 256,578
Net realized gain 83,845
Increase in net unrealized appreciation 3,647,032
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 3,987,455
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders --
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 74,919,867
Cost of shares reacquired (21,910,364)
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 53,009,503
- --------------------------------------------------------------------------------
Increase in Net Assets 56,996,958
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------------
End of period* $ 56,996,958
================================================================================
* Includes undistributed net investment income of: $ 259,754
================================================================================
(a) For the period from January 5, 1998 (commencement of operations) to November
30, 1998.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney S&P 500 Index Fund ("Fund") is a separate 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 a
diversified, open-end management investment company. The Trust consists of this
Fund and four other funds: the Smith Barney Intermediate Maturity California
Municipals Fund, the Smith Barney Intermediate Maturity New York Municipals
Fund, Smith Barney Large Capitalization Growth Fund and Smith Barney Mid Cap
Blend 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
a national securities exchange are valued at the last sale price on that
exchange or, if there were no sales, at the current quoted bid price;
over-the-counter securities and listed securities are valued at the bid price at
the close of business on each day; U.S. government securities are valued at the
quoted bid price in the over-the-counter market; investment in securities for
which market quotations are not available are valued at fair value as determined
by the Board of Trustees; (c) securities for which market quotations are not
available will be valued in good faith at fair value by or under the direction
of the Board of Trustees; (d) securities maturing within 60 days are valued at
cost plus accreted discount, or minus amortized premium, which approximates
value; (e) interest income is recorded on an accrual basis and dividend income
is recorded on the ex-dividend date; (f) 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. Purchases and
sales of securities, and income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income or expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (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
- --------------------------------------------------------------------------------
20 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
November 30, 1998 reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Accordingly, a portion of
accumulated net investment loss amounting to $3,176 has been reclassified to
paid-in capital. Net investment income, net realized gains and net assets were
not affected by this adjustment; (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,
Administration Agreement and Other Transactions
Travelers Investment Management Company, ("TIMCO"), a wholly owned subsidiary of
Citigroup Inc., acts as investment adviser to the Fund. The Fund pays TIMCO an
advisory fee calculated at an annual rate of 0.15% of the average daily net
assets. This fee is calculated daily and paid monthly.
Mutual Management Corp. ("MMC"), another subsidiary of Citigroup Inc., acts as
administrator to the Fund. The Fund pays MMC an administration fee calculated at
an annual rate of 0.10% of the average daily net assets. This fee is calculated
daily and paid monthly. For the period ended November 30, 1998, MMC waived all
of its administration fees and agreed to reimburse expenses of $177,520 to the
Fund.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB") was the Fund's distributor. SSB, as
well as certain other broker-dealers, continue to sell Fund shares to the
public as members of that selling group.
Pursuant to a Distribution Plan, the Fund pays SSB a service fee calculated at
an annual rate of 0.20% of the average daily net assets for Class A shares.
All officers and one Trustee of the Trust are employees of SSB.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 21
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investments
During the period ended November 30, 1998, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $49,561,276
- --------------------------------------------------------------------------------
Sales 1,185,298
================================================================================
At November 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 5,313,467
Gross unrealized depreciation (1,648,357)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 3,665,110
================================================================================
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. Option Contracts
Premiums paid when put or call options are purchased by the Fund represent
investments, which are marked-to-market daily. When a purchased option expires,
the Fund will realize a loss in the amount of the premium paid. When the Fund
enters into a closing sales transaction, the Fund will realize a gain or loss
depending on whether the proceeds from the closing sales transaction are greater
or less than the premium paid for the option. When the Fund exercises a put
option, they will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When the Fund exercises a call option, the cost of the security
which the Fund purchases upon exercise will be increased by the premium
originally paid.
At November 30, 1998, the Fund held no purchased call or put options.
- --------------------------------------------------------------------------------
22 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
When the Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
option is exercised the cost of the security sold will be decreased by the
premium originally received. When a written put option is exercised, the amount
of the premium originally received will reduce the cost of the security which
the Fund purchased upon exercise. When written index options are exercised,
settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
call option is that the Fund gives up the opportunity to participate in any
increase in the price of the underlying security beyond the exercise price. The
risk in writing a put option is that the Fund is exposed to the risk of loss if
the market price of the underlying security declines.
During the period ended November 30, 1998, the Fund did not write any call or
put options.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. Securities equal to the initial margin amount are segregated by the
custodian in the name of the broker. Additional securities are also segregated
up to the current market value of the futures contracts. During the period the
futures contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contract at the end of each day's trading. Variation
margin payments are received or made and recognized as assets due from or
liabilities due to broker, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contract. The Fund enters into such
contracts to hedge a portion of its portfolio. The Fund bears the market risk
that arises from changes in the value of the financial instruments and
securities indices (futures contracts).
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 23
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At November 30, 1998, the Fund had the following open futures contracts:
# of Basis Market Unrealized
Contracts to Buy Contracts Expiration Value Value Loss
================================================================================
S&P 500 Emini future 79 12/98 $4,609,953 $4,591,875 $(18,078)
================================================================================
7. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded as
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin depending on the type of securities
loaned. The custodian establishes and maintains the collateral in a segregated
account. The Fund maintains exposure for the risk of any losses in the
investment of amounts received as collateral.
At November 30, 1998, the Fund had no securities on loan.
8. Shares of Beneficial Interest
At November 30, 1998, 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.
Transactions in shares of the Fund were as follows:
Period Ended
November 30, 1998
================================================================================
Class A(1)
Shares sold 6,596,036
Shares redeemed (1,988,034)
- --------------------------------------------------------------------------------
Net Increase 4,608,002
================================================================================
Class D(2)
Shares sold 175,689
Shares redeemed (24,728)
- --------------------------------------------------------------------------------
Net Increase 150,961
================================================================================
(1) For the period from January 5, 1998 (inception date) to November 30, 1998.
(2) For the period from August 4, 1998 (inception date) to November 30, 1998.
- --------------------------------------------------------------------------------
24 1998 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
period ended November 30:
Class A(1) Class D(2)
================================================================================
Net Asset Value, Beginning of Period $ 10.00 $ 11.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (3) 0.05 0.03
Net realized and unrealized gain 1.93 0.96
- --------------------------------------------------------------------------------
Total Income From Operations 1.98 0.99
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- --
- --------------------------------------------------------------------------------
Total Distributions -- --
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 11.98 $ 11.99
- --------------------------------------------------------------------------------
Total Return++ 19.80% 9.00%
- --------------------------------------------------------------------------------
Net Assets, End of Period (000s) $ 55,187 $ 1,810
- --------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses (3)(4) 0.59% 0.36%
Net investment income 1.05 1.33
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 4% 4%
================================================================================
(1) For the period from January 5, 1998 (commencement of operations) to
November 30, 1998.
(2) For the period from August 4, 1998 (inception date) to November 30, 1998.
(3) The administrator agreed to waive all of its administrative fees for the
period ended November 30, 1998, and agreed to reimburse expenses of
$177,520. If these expenses were not reimbursed, the per share effect on
net investment income and the expense ratio would have been as follows:
Per Share Decreases to Expense Ratios
Net Investment Income Without Reimbursement
--------------------- ---------------------
Class A Class D Class A Class D
------- ------- ------- -------
$0.04 $0.02 1.42%+ 1.18%+
(4) As a result of voluntary expense limitations, the ratio of expenses to
average net assets will not exceed 0.60%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- --------------------------------------------------------------------------------
Smith Barney S&P 500 Index Fund 25
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees of
Smith Barney S&P 500 Index Fund
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Smith Barney S&P 500 Index Fund of the
Smith Barney Investment Trust as of November 30, 1998, the related statement of
operations, the statement of changes in net assets and financial highlights for
the period from January 5, 1998 (commencement of operations) to November 30,
1998. 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, 1998, by correspondence with the custodian. As to securities
purchased or sold but not yet received or 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
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 S&P 500 Index Fund of the Smith Barney Investment Trust as of
November 30, 1998, and the results of its operations, the changes in its net
assets and financial highlights for the period from January 5, 1998 to November
30, 1998, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
January 15, 1998
- --------------------------------------------------------------------------------
26 1998 Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<PAGE>
(This page intentionally left blank.)
<PAGE>
SALOMON SMITH BARNEY
--------------------
A member of citigroup[LOGO]
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.
James J. Crisona, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
Lewis E. Daidone
Senior Vice President
and Treasurer
Sandip A. Bhagat
Vice President and
Investment Officer
John Lau
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser
Travelers Investment
Management Co.
Administrator
Mutual Management Corp.
Distributor
CFBDS, Inc.
Custodian
PNCBank, N.A.
Shareholder
Service Agent
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is submitted for the general information of the shareholders of
Smith Barney S&P 500 Index Fund. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Fund, which contains information concerning the Fund's investment policies
and expenses as well as other pertinent information.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
Smith Barney
S&P 500 Index Fund
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com
FD1580 1/99
<PAGE>
SMITH BARNEY
LARGE CAPITALIZATION
GROWTH FUND
- -----------------------------
A N N U A L R E P O R T
- -----------------------------
NOVEMBER 30, 1998
[LOGO] SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE
EVERY DAY.-Registered Trademark-
<PAGE>
SMITH BARNEY LARGE
CAPITALIZATION GROWTH FUND
- ----------------------
The SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND ("Fund") seeks long-term
growth of capital by investing at least 65% of its assets in equity securities
of companies with large market capitalizations.
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND
AVERAGE ANNUAL TOTAL RETURNS ENDED
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
WITHOUT SALES CHARGES(1)
------------------------------------------------
CLASS A CLASS B CLASS L(2)
<S> <C> <C> <C> <C>
- ----------------------------------------------------
One-Year 42.12% 41.02% 41.02%
- ----------------------------------------------------
Since Inception++ 35.87 34.85 34.85
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITH SALES CHARGES(3)
------------------------------------------------
CLASS A CLASS B CLASS L(2)
<S> <C> <C> <C> <C>
- ----------------------------------------------------
One-Year 34.97% 36.02% 38.65%
- ----------------------------------------------------
Since Inception++ 30.38 31.89 33.78
- ----------------------------------------------------
</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 and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect
to Class B and L shares.
(2) On June 12, 1998, Class C shares were renamed Class L
shares.
(3) Assumes reinvestment of all dividends and capital gain
distributions, if any, at net asset value. In addition,
Class A and L shares reflect the deduction of the
maximum initial sales charges of 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a
5.00% CDSC, which applies if shares are redeemed within
one year from purchase. Thereafter, the CDSC declines
by 1.00% per year until no CDSC is incurred. Class L
shares also reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within the first
year of purchase.
All figures represent past performance and are not a
guarantee of future results. Investment returns and
principal value will fluctuate, and redemption value
may be more or less than the original cost.
++ Inception date for Class A, B and L shares is August
29, 1997.
</TABLE>
FUND HIGHLIGHT
- ------------------------------------------------
THE MARKET VOLATILITY THAT WE HIGHLIGHTED IN OUR LAST REPORT HAS CONTINUED.
INVESTORS ARE STILL TRYING TO UNDERSTAND THE RAMIFICATIONS OF THE ASIAN ECONOMIC
CRISIS, THE PROBLEMS IN WASHINGTON, D.C. AND MOST IMPORTANTLY, THE PROFIT
PICTURE FOR U.S. COMPANIES. AS NOTED PREVIOUSLY, IT IS THE PROFIT PICTURE THAT
SHOULD BE THE MOST IMPORTANT FACTOR FOR LARGE-CAPITALIZATION GROWTH STOCKS. IN
AN ENVIRONMENT WHERE THERE ARE LEGITIMATE CONCERNS ABOUT THE 1999 PROFIT
OUTLOOK, WE WANT TO STAY FOCUSED ON COMPANIES THAT CAN DELIVER EARNINGS.
NASDAQ SYMBOL
- ------------------------------------------------
<TABLE>
<S> <C>
CLASS A SBLGX
CLASS B SBLBX
CLASS L SLCCX
</TABLE>
WHAT'S INSIDE
- ------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER LETTER........................... 1
HISTORICAL PERFORMANCE....................... 3
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND
AT A GLANCE.................................. 5
SCHEDULE OF INVESTMENTS...................... 6
STATEMENT OF ASSETS AND LIABILITIES.......... 8
STATEMENT OF OPERATIONS...................... 9
STATEMENTS OF CHANGES IN NET ASSETS.......... 10
NOTES TO FINANCIAL STATEMENTS................ 11
FINANCIAL HIGHLIGHTS......................... 14
INDEPENDENT AUDITORS' REPORT................. 16
TAX INFORMATION.............................. 17
ADDITIONAL SHAREHOLDER INFORMATION........... 18
</TABLE>
<PAGE>
SHAREHOLDER LETTER
- ------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] [PHOTO]
HEATH B. ALAN
MCLENDON BLAKE
Chairman Vice President and
Investment Officer
</TABLE>
DEAR SHAREHOLDER:
We are pleased to provide the annual report for the Smith Barney Large
Capitalization Growth Fund ("Fund") for the year ended November 30, 1998. 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.
A STYLE PURE FUND
The Smith Barney Large Capitalization Growth Fund is a Style Pure Fund. Style
Pure Series mutual funds are Smith Barney Mutual Funds that are the basic
building blocks of asset allocation. Other than maintaining minimal cash or
under extraordinary market conditions, each Style Pure Series Fund is totally
invested 100% of the time within its designated asset class and its designated
investment style.
PERFORMANCE UPDATE AND STRATEGY
For the year ended November 30, 1998, we are proud to report that the Class A, B
and L shares of the Fund generated a total return, without sales charges, of
42.12%, 41.02% and 41.02%, respectively.
In comparison, the Standard & Poor's 500 Composite Index ("S&P 500") had a total
return of 23.68% over the same period. (The S&P 500 is a market
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 strong 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 are also 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 strong
management team. Strong management is just as important as 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 AND OUTLOOK
The market volatility that we highlighted in our last report has continued.
Investors are still trying to understand the ramifications of the Asian economic
crisis, the problems in Washington, D.C. and most importantly, the profit
picture for U.S. companies. As noted previously, it is the profit picture that
should be the most important factor for large-capitalization growth stocks. In
an environment where there are legitimate concerns about the 1999 profit
outlook, we want to stay focused on companies that can deliver earnings. It is
also a hallmark of the Fund to own companies with strong balance sheets. The
reason for this became apparent during the August-through-September correction,
when a number of the companies we owned used their superior balance sheets to
either raise dividends, buy back shares, or more importantly, make strategic
acquisitions.
We believe current positive economic conditions will remain in place. Very low
inflation, low interest rates and a muddled corporate profit outlook suggest to
us that large-capitalization growth stocks delivering unit
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 1
<PAGE>
growth will be able to deliver competitive returns moving forward. Moreover, our
emphasis in the Fund continues to be in the same three areas--consumer,
financial and technology industries.
As growth in worldwide consumer demand continues (albeit with fits and starts),
global franchise leaders such as Coca-Cola, McDonalds, Johnson & Johnson and
Procter & Gamble should remain well positioned to continue their long strings of
posting solid earnings growth. In our view, financial services stocks such as
Wells Fargo, AIG and General Re may continue to benefit from the growth of
wealth worldwide.
Lastly, technology company stocks that are leaders in telecommunications,
software, semiconductor and networking continue to experience high levels of
growth within their respective markets. We also remain focused on companies such
as Lucent, Cisco, Intel and Microsoft that are truly world-class franchises.
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, 1998
</TABLE>
TOP TEN HOLDINGS* AS OF NOVEMBER 30, 1998
- ------------------------------------------------
<TABLE>
<C> <S> <C>
1. AMERICA ONLINE, INC. 5.8%
----------------------------------------------------
2. TEXAS INSTRUMENTS INC. 5.4
----------------------------------------------------
3. COCA-COLA CO. 5.3
----------------------------------------------------
4. INTEL CORP. 5.3
----------------------------------------------------
5. WELLS FARGO & CO. 4.5
----------------------------------------------------
6. MERRILL LYNCH & CO., INC. 3.9
----------------------------------------------------
7. WM. WRIGLEY JR. CO. 3.7
----------------------------------------------------
8. MORGAN STANLEY DEAN WITTER 3.6
----------------------------------------------------
9. THE WALT DISNEY CO. 3.5
----------------------------------------------------
10. GENERAL ELECTRIC CO. 3.3
----------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <S>
* As a percentage of total common stock.
</TABLE>
- --------------------------------------------------------------------------------
2 1998 ANNUAL REPORT TO SHAREHOLDERS
<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>
- -------------------------------------------------------------------------------------------------------
11/30/98 $12.28 $ 17.41 $0.02 $0.01 42.12%
- -------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 11.88 12.28 0.00 0.00 3.37+
- -------------------------------------------------------------------------------------------------------
TOTAL $0.02 $0.01
- -------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE -- CLASS B 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>
- ---------------------------------------------------------------------------------------------------------
11/30/98 $12.26 $ 17.26 $0.01 $0.01 41.02%
- ---------------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 11.88 12.26 0.00 0.00 3.20+
- ---------------------------------------------------------------------------------------------------------
TOTAL $0.01 $0.01
- ---------------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE -- CLASS L SHARES(2)
- --------------------------------------------------------------------------------
<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>
- -----------------------------------------------------------------------------------------------------
11/30/98 $12.26 $ 17.26 $0.01 $0.01 41.02%
- -----------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 11.88 12.26 0.00 0.00 3.20+
- -----------------------------------------------------------------------------------------------------
TOTAL $0.01 $0.01
- -----------------------------------------------------------------------------------------------------
</TABLE>
HISTORICAL PERFORMANCE -- CLASS Y 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>
- -----------------------------------------------------------------------------------------------------
11/30/98 $12.29 $ 17.49 $0.02 $0.01 42.61%
- -----------------------------------------------------------------------------------------------------
Inception* -- 11/30/97 12.66 12.29 0.00 0.00 (2.92)+
- -----------------------------------------------------------------------------------------------------
TOTAL $0.02 $0.01
- -----------------------------------------------------------------------------------------------------
</TABLE>
IT IS THE FUND'S POLICY TO DISTRIBUTE DIVIDENDS AND CAPITAL GAINS, IF ANY,
ANNUALLY.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 3
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE(1)
---------------------------------------
CLASS
CLASS A CLASS B L(2) CLASS Y
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Year Ended 11/30/98 42.12% 41.02% 41.02% 42.61%
- ----------------------------------------------------------------------------
Inception* through 11/30/98 35.87 34.85 34.85 33.49
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
WITH SALES CHARGE(3)
---------------------------------------
CLASS
CLASS A CLASS B L(2) CLASS Y
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Year Ended 11/30/98 34.97% 36.02% 38.65% 42.61%
- ----------------------------------------------------------------------------
Inception* through 11/30/98 30.38 31.89 33.78 33.49
- ----------------------------------------------------------------------------
</TABLE>
CUMULATIVE TOTAL RETURN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WITHOUT SALES CHARGE(1)
<S> <C>
- ----------------------------------------------------------------------------------------------------------
Class A (Inception* through 11/30/98) 46.90%
- ----------------------------------------------------------------------------------------------------------
Class B (Inception* through 11/30/98) 45.53
- ----------------------------------------------------------------------------------------------------------
Class L (Inception* through 11/30/98)(2) 45.53
- ----------------------------------------------------------------------------------------------------------
Class Y (Inception* through 11/30/98) 38.44
- ----------------------------------------------------------------------------------------------------------
</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 AND L SHARES OR THE APPLICABLE CONTINGENT
DEFERRED SALES CHARGES ("CDSC") WITH RESPECT TO CLASS B AND L SHARES.
(2) ON JUNE 12, 1998, CLASS C SHARES WERE RENAMED CLASS L SHARES.
(3) ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS, IF ANY, AT NET ASSET VALUE. IN ADDITION, CLASS
A AND L SHARES REFLECT THE DEDUCTION OF THE MAXIMUM INITIAL SALES CHARGES OF 5.00% AND 1.00%, RESPECTIVELY; CLASS B
SHARES REFLECT THE DEDUCTION OF A 5.00% CDSC, WHICH APPLIES IF SHARES ARE REDEEMED WITHIN ONE YEAR FROM PURCHASE.
THEREAFTER, THE CDSC DECLINES BY 1.00% PER YEAR UNTIL NO CDSC IS INCURRED. CLASS L 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 L 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>
- --------------------------------------------------------------------------------
4 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND AT A GLANCE (UNAUDITED)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN CLASS A, B AND L SHARES OF THE
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND VS. STANDARD & POOR'S 500 INDEX+
- --------------------------------------------------------------------------------
AUGUST 1997 -- NOVEMBER 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMITH BARNEY LARGE SMITH BARNEY LARGE SMITH BARNEY LARGE
CAPITALIZATION GROWTH CAPITALIZATION GROWTH CAPITALIZATION GROWTH STANDARD & POOR'S
FUND-CLASS A FUND-CLASS B FUND-CLASS L 500 INDEX
<S> <C> <C> <C> <C>
8/29/97 $9,496 $10,000 $10,000 $10,000
9/97 $9,768 $9,786 $10,183 $10,547
10/97 $9,425 $9,420 $9,817 $10,195
11/97 $9,816 $9,820 10,216.7 $10,667
12/97 $10,016 $10,014 $10,409 $10,850
1/98 $10,256 $10,259 $10,651 $10,970
2/98 $11,178 $11,228 $11,611 $11,760
3/98 $11,603 $11,667 $12,045 $12,363
4/98 $12,388 $12,485 $12,855 $12,489
5/98 $12,043 $12,114 $12,488 $12,274
6/98 $12,877 $12,974 $13,339 $12,772
7/98 $13,133 $13,235 $13,598 $12,637
8/98 $10,649 $10,730 $11,018 $10,811
9/98 $11,242 $11,345 $11,628 $11,504
10/98 $12,476 $12,627 $12,897 $12,438
11/30/98 $13,950 $14,153 $14,407 $13,367
</TABLE>
+ The above chart represents a hypothetical illustration of $10,000 invested in
Class A, B and L shares at inception on August 29, 1997, assuming deduction of
the maximum 5.00% sales charge at the time of investment for Class A shares,
the deduction of the maximum 5.00% CDSC for Class B shares and the deduction
of the 1.00% CDSC for Class L shares at the time of investment and
reinvestment of dividends and capital gains, if any, through November 30,
1998. The Standard & Poor's 500 Index is composed of widely held common stocks
listed on the New York Stock Exchange, American Stock Exchange and
over-the-counter market. Figures for the index include reinvestment of
dividends. The 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
class may be greater or less than the Class A, B and L shares' performance
indicated on this chart, depending on whether greater or lesser sales charges
and fees were incurred by shareholders investing in other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
INDUSTRY DIVERSIFICATION OF COMMON STOCK*
- ----------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Financial Services 23.9%
Telecommunications 6.9%
Healthcare 13.5%
Capital Goods 4.4%
Consumer Services 9.3%
Consumer Goods 20.1%
Semiconductors 13.5%
Consumer Durables 3.2%
Software/PC's 5.2%
</TABLE>
* As a percentage of total common stock.
INVESTMENT BREAKDOWN
- ----------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Cash Equivalent 0.6%
Common Stock 99.4%
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 5
<PAGE>
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCK -- 99.4%
CAPITAL GOODS -- 4.4%
467,000 General Electric Co. $42,263,500
310,000 Schlumberger Ltd. 13,853,125
- ------------------------------------------------------------------------------------------------------------
56,116,625
- ------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 3.2%
815,000 Home Depot Inc. 40,546,250
- ------------------------------------------------------------------------------------------------------------
CONSUMER GOODS -- 20.0%
880,000 Avon Products Inc. 35,750,000
960,000 Coca-Cola Co. 67,260,000
905,000 Gillete Co. 41,573,438
237,000 McDonald's Corp. 16,604,813
495,000 PepsiCo, Inc. 19,150,312
310,000 Procter & Gamble Corp. 27,163,750
540,000 Wm. Wrigley Jr. Co. 47,587,500
- ------------------------------------------------------------------------------------------------------------
255,089,813
- ------------------------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 9.2%
840,000 America Online, Inc.+ 73,552,500
1,375,000 The Walt Disney Co. 44,257,813
- ------------------------------------------------------------------------------------------------------------
117,810,313
- ------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 23.7%
252,500 American International Group Inc. 23,735,000
205,000 BankAmerica Corp. 13,363,438
465,000 Fannie Mae 33,828,750
168,000 General Re Corp. 39,228,000
1,025,000 Household International Inc. 40,103,125
665,000 Merrill Lynch & Co., Inc. 49,875,000
655,000 Morgan Stanley Dean Witter 45,686,250
1,600,000 Wells Fargo & Co. 57,600,000
- ------------------------------------------------------------------------------------------------------------
303,419,563
- ------------------------------------------------------------------------------------------------------------
HEALTHCARE -- 13.4%
485,000 Amgen Inc.+ 36,496,250
455,000 Eli Lilly & Co. 40,807,812
325,000 Johnson & Johnson 26,406,250
100,000 Merck & Co., Inc. 15,487,500
205,000 Pfizer Inc. 22,883,125
380,000 Warner-Lambert Co. 28,690,000
- ------------------------------------------------------------------------------------------------------------
170,770,937
- ------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 13.4%
625,000 Intel Corp. 67,265,625
900,000 Texas Instruments Inc. 68,737,500
695,000 Xilinx, Inc.+ 35,271,250
- ------------------------------------------------------------------------------------------------------------
171,274,375
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
6 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SOFTWARE/PC'S -- 5.2%
1,140,000 Compaq Computer Corp. $ 37,050,000
245,000 Microsoft Corp.+ 29,890,000
- ------------------------------------------------------------------------------------------------------------
66,940,000
- ------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 6.9%
320,000 Cisco Systems Inc.+ 24,120,000
425,000 Lucent Technologies Inc. 36,576,562
435,000 Motorola Inc. 26,970,000
- ------------------------------------------------------------------------------------------------------------
87,666,562
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $1,018,084,590) 1,269,634,438
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT SECURITY VALUE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.6%
$8,099,000 Morgan Stanley Dean Witter, 5.250% due 12/1/98;
Proceeds at maturity -- $8,100,181; (Fully collateralized
by U.S. Treasury Notes, 4.625% due 11/30/00; Market
value -- $8,309,370) (Cost -- $8,099,000) 8,099,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $1,026,183,590*) $ 1,277,733,438
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
+ NON-INCOME PRODUCING SECURITY.
* AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost --
$1,026,183,590) $1,277,733,438
Cash 331
Receivable for Fund shares sold 17,078,216
Dividends and interest
receivable 674,899
- ------------------------------------------------------------
TOTAL ASSETS 1,295,486,884
- ------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 10,986,800
Payable for Fund shares
purchased 718,011
Management fees payable 769,694
Distribution fees payable 274,487
Accrued expenses 313,732
- ------------------------------------------------------------
TOTAL LIABILITIES 13,062,724
- ------------------------------------------------------------
TOTAL NET ASSETS $1,282,424,160
- ------------------------------------------------------------
NET ASSETS:
Par value of shares of
beneficial interest $ 74,025
Capital paid in excess of par
value 1,017,532,484
Accumulated net realized gain
from security transactions 13,267,803
Net unrealized appreciation of
investments 251,549,848
- ------------------------------------------------------------
TOTAL NET ASSETS $1,282,424,160
- ------------------------------------------------------------
SHARES OUTSTANDING:
Class A 18,644,636
---------------------------------------------------------
Class B 36,868,728
---------------------------------------------------------
Class L 10,875,243
---------------------------------------------------------
Class Y 7,636,528
---------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $17.41
---------------------------------------------------------
Class B* $17.26
---------------------------------------------------------
Class L** $17.26
---------------------------------------------------------
Class Y (and redemption price) $17.49
---------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER
SHARE:
Class A (net asset value plus
5.26% of net asset value per
share) $18.33
---------------------------------------------------------
Class L (net asset value plus
1.01% of net asset value per
share) $17.43
- ------------------------------------------------------------
</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
PURCHASE (SEE NOTE 2).
** REDEMPTION PRICE IS NAV OF CLASS L SHARES REDUCED BY A 1.00% CDSC IF SHARES ARE REDEEMED WITHIN THE FIRST YEAR OF
PURCHASE.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
8 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 5,816,020
Interest 208,309
- -----------------------------------------------------------------
TOTAL INVESTMENT INCOME 6,024,329
- -----------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 5,558,989
Distribution fees (Note 2) 4,855,196
Shareholder and system servicing fees 645,587
Registration fees 399,156
Shareholder communications 158,647
Trustees' fees 69,252
Audit and legal 38,000
Custody 28,185
Other 8,900
- -----------------------------------------------------------------
TOTAL EXPENSES 11,761,912
- -----------------------------------------------------------------
NET INVESTMENT LOSS (5,737,583)
- -----------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE
3):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 102,162,734
Cost of securities sold 83,157,348
- -----------------------------------------------------------------
NET REALIZED GAIN 19,005,386
- -----------------------------------------------------------------
Change in Net Unrealized Appreciation of
Investments:
Beginning of year 9,970,587
End of year 251,549,848
- -----------------------------------------------------------------
INCREASE IN NET UNREALIZED APPRECIATION 241,579,261
- -----------------------------------------------------------------
NET GAIN ON INVESTMENTS 260,584,647
- -----------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $254,847,064
- -----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 9
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED NOVEMBER 30,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997(A)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss $ (5,737,583) $ (36,371)
Net realized gain 19,005,386 350,504
Increase in net unrealized appreciation 241,579,261 9,970,587
- -----------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS 254,847,064 10,284,720
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (501,086) --
Net realized gains (347,287) --
- -----------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS TO SHAREHOLDERS (848,373) --
- -----------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares 735,324,746 407,040,618
Net asset value of shares issued for
reinvestment of dividends 634,590 --
Cost of shares reacquired (120,177,084) (4,682,121)
- -----------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 615,782,252 402,358,497
- -----------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS 869,780,943 412,643,217
NET ASSETS:
Beginning of year 412,643,217 --
- -----------------------------------------------------------------------------------------------
END OF YEAR* $1,282,424,160 $ 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 1998 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 four other separate investment funds: Smith Barney Intermediate
Maturity California Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Mid Cap Blend Fund and Smith Barney S&P 500 Index
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,
1998, reclassifications were made to the Fund's capital accounts to reflect
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Net investment income, net realized gains and net
assets were not affected by this change; (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"), 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.
On October 8, 1998, CFBDS, Inc. became the Fund's distributor. Prior to that
date Salomon Smith Barney Inc. ("SSB"), another subsidiary of SSBH, was the
Fund's distributor. SSB, as well as certain other broker-dealers, continues to
sell Fund shares to the public as members of the selling group.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On June 12, 1998, the Portfolio's existing Class C shares were renamed Class L
shares. Effective June 15, 1998, Class L shares are being sold at net asset
value plus a maximum initial sales charge of 1.00%. Class L shares also have a
1.00% contingent deferred sales charge ("CDSC"), which applies if redemption
occurs within the first year of purchase.
There is also a CDSC of 5.00% on Class B shares, which applies if redemption
occurs within one year from purchase and declines thereafter by 1.00% per year
until no CDSC is incurred.
For the year ended November 30, 1998, SSB received brokerage commissions of
$25,080 and sales charges of $2,915,000 and $825,000 on sales of the Fund's
Class A and Class L shares, respectively. In addition, CDSCs paid to SSB were
approximately:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS L
- ----------------------------------------------------------
<S> <C> <C> <C>
CDSCs $ 23,000 $ 547,000 $ 45,000
- ----------------------------------------------------------
</TABLE>
Pursuant to the Distribution Plan, the Fund pays a service fee with respect to
its Class A, B and L 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 L shares calculated at an annual rate of
0.75% of the average daily net assets of each class, respectively. For the year
ended November 30, 1998, total Distribution Plan fees incurred were:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS L
- ----------------------------------------------------------
<S> <C> <C> <C>
Distribution Plan Fees $489,693 $3,522,540 $842,963
- ----------------------------------------------------------
</TABLE>
All officers and one Trustee of the Fund are employees of SSB.
3. INVESTMENTS
During the year ended November 30, 1998, 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 $702,638,025
- ----------------------------------------
Sales 102,162,734
- ----------------------------------------
</TABLE>
At November 30, 1998, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<S> <C>
- --------------------------------------------------
Gross unrealized appreciation $257,632,252
Gross unrealized depreciation (6,082,404)
- --------------------------------------------------
Net unrealized appreciation $251,549,848
- --------------------------------------------------
</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, 1998, 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. Effective June 12, 1998, the Fund adopted the
renaming of existing Class C shares as Class L shares.
At November 30, 1998, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
AMOUNT
- ---------------------------------------------
<S> <C>
Class A $254,700,659
- ---------------------------------------------
Class B 512,509,426
- ---------------------------------------------
Class L 156,893,302
- ---------------------------------------------
Class Y 93,503,122
- ---------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
12 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, 1998 NOVEMBER 30, 1997(1)(2)
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 13,771,364 $209,717,045 9,177,952 $109,524,318
Shares issued on reinvestment 21,312 266,404 -- --
Shares redeemed (4,189,188) (63,108,524) (136,804) (1,636,918)
- ------------------------------------------------------------------------------------------
Net Increase 9,603,488 $146,874,925 9,041,148 $107,887,400
- ------------------------------------------------------------------------------------------
CLASS B
Shares sold 25,048,618 $379,750,655 14,785,442 $176,582,697
Shares issued on reinvestment 24,425 304,576 -- --
Shares redeemed (2,852,373) (42,088,247) (137,384) (1,647,374)
- ------------------------------------------------------------------------------------------
Net Increase 22,220,670 $337,966,984 14,648,058 $174,935,323
- ------------------------------------------------------------------------------------------
CLASS L(3)
Shares sold 8,853,448 $135,608,815 3,136,419 $ 37,509,061
Shares issued on reinvestment 5,102 63,610 -- --
Shares redeemed (1,019,293) (14,978,593) (100,433) (1,229,516)
- ------------------------------------------------------------------------------------------
Net Increase 7,839,257 $120,693,832 3,035,986 $ 36,279,545
- ------------------------------------------------------------------------------------------
CLASS Y
Shares sold 740,914 $ 10,248,231 6,909,847 $ 83,424,542
Shares redeemed (136) (1,720) (14,097) (168,313)
- ------------------------------------------------------------------------------------------
Net Increase 740,778 $ 10,246,511 6,895,750 $ 83,256,229
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) FOR CLASS A, B AND L SHARES, TRANSACTIONS ARE FOR THE PERIOD FROM AUGUST 29, 1997 (INCEPTION DATE) TO NOVEMBER 30,
1997.
(2) FOR CLASS Y SHARES, TRANSACTIONS ARE FOR THE PERIOD FROM OCTOBER 15, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
(3) ON JUNE 12, 1998, CLASS C SHARES WERE RENAMED CLASS L SHARES.
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 13
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED NOVEMBER 30:
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------- -----------------------
1998 1997(1) 1998(2) 1997(1)
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $12.28 $11.88 $12.26 $11.88
- --------------------------------------------------------------------------------------
INCOME FROM OPERATIONS:
Net investment income (loss) (0.04) 0.01 (0.17) (0.01)
Net realized and unrealized gain 5.20 0.39 5.19 0.39
- --------------------------------------------------------------------------------------
Total Income From Operations 5.16 0.40 5.02 0.38
- --------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.02) -- (0.01) --
Net realized gains (0.01) -- (0.01) --
- --------------------------------------------------------------------------------------
Total Distributions (0.03) -- (0.02) --
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $17.41 $12.28 $17.26 $12.26
- --------------------------------------------------------------------------------------
TOTAL RETURN 42.12% 3.37%++ 41.02% 3.20%++
- --------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $ 324,664 $ 111,063 $ 636,464 $ 179,598
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.19% 1.15%+ 1.95% 1.90%+
Net investment income (loss) (0.38) 0.38+ (1.14) (0.37)+
- --------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14% % 1 14% % 1
- --------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) FOR THE PERIOD FROM AUGUST 29, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES METHOD, RATHER THAN THE UNDISTRIBUTED NET
INVESTMENT INCOME METHOD, BECAUSE IT MORE ACCURATELY REFLECTS THE PER SHARE DATA FOR THE PERIOD.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
</TABLE>
- --------------------------------------------------------------------------------
14 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR ENDED NOVEMBER 30:
<TABLE>
<CAPTION>
CLASS L(1) CLASS Y
-------------------- -----------------------
1998(2) 1997(3) 1998 1997(4)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $12.26 $11.88 $12.29 $12.66
- -----------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (loss) (0.17) (0.01) (0.00)* 0.01
Net realized and unrealized gain
(loss) 5.19 0.39 5.23 (0.38)
- -----------------------------------------------------------------------------------
Total Income (Loss) From Operations 5.02 0.38 5.23 (0.37)
- -----------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.01) -- (0.02) --
Net realized gains (0.01) -- (0.01) --
- -----------------------------------------------------------------------------------
Total Distributions (0.02) -- (0.03) --
- -----------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $17.26 $12.26 $17.49 $12.29
- -----------------------------------------------------------------------------------
TOTAL RETURN 41.02% 3.20%++ 42.61% (2.92)%++
- -----------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000S) $ 187,741 $ 37,224 $ 133,556 $ 84,758
- -----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 1.96% 1.90%+ 0.83% 0.82%+
Net investment income (loss) (1.14) (0.38)+ (0.02) 0.54+
- -----------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 14% 1% 14% % 1
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S>
(1) ON JUNE 12, 1998, CLASS C SHARES WERE RENAMED CLASS L SHARES.
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES METHOD, RATHER THAN THE UNDISTRIBUTED NET
INVESTMENT INCOME METHOD, BECAUSE IT MORE ACCURATELY REFLECTS THE PER SHARE DATA FOR THE PERIOD.
(3) FOR THE PERIOD FROM AUGUST 29, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
(4) FOR THE PERIOD FROM OCTOBER 15, 1997 (INCEPTION DATE) TO NOVEMBER 30, 1997.
* AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE.
++ TOTAL RETURN IS NOT ANNUALIZED, AS IT MAY NOT BE REPRESENTATIVE OF THE TOTAL RETURN FOR THE YEAR.
+ ANNUALIZED.
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 15
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS 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 of
the Smith Barney Investment Trust as of November 30, 1998, the related statement
of operations for the year then ended and statements of changes in net assets
and financial highlights for the year then ended and 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 audits.
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, 1998, by correspondence with the custodian. As to securities
purchased but not yet received we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney Large Capitalization Growth Fund of Smith Barney Investment Trust as of
November 30, 1998, the results of its operations for the year then ended and the
changes in its net assets and financial highlights for the year then ended and
for the period from August 29, 1997 (commencement of operations) to November 30,
1997, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
January 15, 1999
- --------------------------------------------------------------------------------
16 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
100% of ordinary income distribution is designated as qualifying for the
dividends received deduction available to corporate shareholders.
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 17
<PAGE>
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
On February 6, 1998, a special meeting of shareholders of the Trust was held for
the purpose of voting on the following matters:
1. To elect Trustees of the Trust;
2. To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
SHARES VOTED PERCENTAGE OF SHARES VOTED PERCENTAGE OF
NAME OF TRUSTEES FOR SHARES VOTED AGAINST SHARES VOTED
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Herbert Barg 22,978,059.782 97.961% 478,327.074 2.039%
Alfred J. Bianchetti 22,968,583.475 97.920 487,803.381 2.080
Martin Brody 22,972,548.241 97.937 483,838.615 2.063
Dwight B. Crane 23,013,405.483 98.111 442,981.373 1.889
Burt N. Dorsett 23,007,677.873 98.087 448,708.983 1.913
Elliot S. Jaffe 22,981,247.160 97.974 475,139.696 2.026
Stephen E. Kaufman 22,999,681.445 98.053 456,705.411 1.947
Joseph J. McCann 23,011,195.450 98.102 445,191.406 1.898
Heath B. McLendon 23,010,138.021 98.098 446,248.835 1.902
Cornelius C. Rose, Jr. 23,006,201.971 98.081 450,184.885 1.919
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Proposal 2 requested that shareholders approve certain changes to the
fundamental policies of the Fund in order to modernize them in view of certain
regulatory, business or industry developments that have occurred since original
adoption of these policies by the Fund. The following chart demonstrates that
all proposals were approved by shareholders for the Fund.
Please note that "M" indicates a modification of the policy; "E" indicates the
elimination of the policy; and "R" indicates the reclassification of the policy
from fundamental (which would require shareholder approval to change) to
non-fundamental (which can be changed by a vote of the Board of Trustees).
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
"M" Diversification Approved
- -----------------------------------------------------------------------------
"M" Industry Concentration Approved
- -----------------------------------------------------------------------------
"M" Borrowing Approved
- -----------------------------------------------------------------------------
"E" Ability to Pledge Assets Approved
- -----------------------------------------------------------------------------
"M" Lending Approved
- -----------------------------------------------------------------------------
"M" Underwriting of Securities Approved
- -----------------------------------------------------------------------------
"R" Margin and Short-Sales Approved
- -----------------------------------------------------------------------------
"M" Real Estate Approved
- -----------------------------------------------------------------------------
"E" Certain Securities Approved
- -----------------------------------------------------------------------------
"R" Investments in Oil, Gas and Mineral Exploration Approved
- -----------------------------------------------------------------------------
"R" Options Approved
- -----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
18 1998 ANNUAL REPORT TO SHAREHOLDERS
<PAGE>
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
The information below reports the lowest percentage of shares voting for the
proposals and the highest percentage of shares voting against and abstaining by
shareholders of the Fund on all of the items in Proposal 2.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE
SHARES VOTED OF SHARES SHARES VOTED OF SHARES SHARES OF SHARES
FOR VOTED AGAINST VOTED ABSTAINING ABSTAINED
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
16,966,910.092 91.537% 294,785.761 1.590% 1,273,879.996 6.873%
- --------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SMITH BARNEY LARGE CAPITALIZATION GROWTH FUND 19
<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.
James J. Crisona, EMERITUS
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
CFBDS, Inc.
CUSTODIAN
PNC Bank, N.A.
SHAREHOLDER SERVICING AGENT
First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, MA 02205-9134
This report is for the information of shareholders of Smith Barney Investment
Trust--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]
SALOMON SMITH BARNEY IS A SERVICE MARK OF SALOMON SMITH BARNEY, INC.
SMITH BARNEY
LARGE CAPITALIZATION
GROWTH FUND
Smith Barney Mutual Funds
388 Greenwich Street
New York, New York 10013
WWW.SMITHBARNEY.COM
FD01380 1/99
<PAGE>
(This page intentionally left blank.)
