The Smith Barney Capital Preservation Fund II (the “Fund”), a separate investment fund of Smith Barney Trust II (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 Fund commenced operations on September 24, 2002.
The significant accounting policies consistently followed by the Fund are: (a) security transactions are accounted for on trade date; (b) investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value as determined by or under the direction of the Board of Trustees. Equity securities that are traded primarily on a domestic or foreign exchange are valued at the last sale price on that exchange or, if there were no sales during the day, at the current quoted bid price. Securities listed on the NASDAQ National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price on that day, at the last sale price. Options are generally valued at the mean of the quoted bid and asked prices. Bonds and other fixed income securities (other than short-term obligations) are valued on the basis of valuations furnished by a pricing service, use of which has been approved by the Board of Trustees. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques that take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Short-term obligations (maturing in 60 days or less) are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees. Futures contracts are normally valued at the settlement price on the exchange on which they are traded. Securities for which there are no such valuations are valued using fair value procedures established by and under the general supervision of the Board of Trustees; (c) interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis; (d) dividend income is recorded on the ex-dividend date; foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence; (e) dividends and distributions to shareholders are recorded on the ex-dividend date; (f) gains or losses on the sale of securities are calculated by using the specific identification method; (g) the accounting records are maintained in U.S. dollars.All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation (although the Fund generally does not expect to hold investments denominated in foreign currencies). 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; (h) direct expenses are charged to each class; management fees and general fund expenses are allocated on the basis of relative net assets of each class; (i) the character of income and gains distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. 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 which may differ from generally accepted accounting principles; (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.
Smith Barney Fund Management LLC (“SBFM”), a subsidiary of Citigroup Inc. (“Citigroup”), acts as investment manager to the Fund.The Fund pays SBFM a management fee calculated at an annual rate of 0.75% of the average daily net assets during the Guarantee Period.This fee is calculated daily and paid monthly.The management fee amounted to $2,519,979, for the six months ended April 30, 2004.
Notes to Financial Statements (unaudited) (continued)
Citicorp Trust Bank, fsb. (“CTB”), another subsidiary of Citigroup, acts as the Fund’s transfer agent. PFPC Global Fund Services (“PFPC”) and Primerica Shareholder Services (“PSS”), another subsidiary of Citigroup, act as the Fund’s sub-transfer agent. CTB receives account fees and asset-based fees that vary according to the size and type of account. PFPC and PSS are responsible for shareholder recordkeeping and financial processing for all shareholder accounts and are paid by CTB. For the period ended April 30, 2004, the Fund paid transfer agent fees of $310,740 to CTB and PSS.
Citigroup Global Markets Inc. (“CGM”) (formerly known as Salomon Smith Barney Inc.) and PFS Distributors, Inc. both of which are subsidiaries of Citigroup, act as the Fund’s distributor. Certain other broker-dealers also continue to sell Fund shares to the public as members of the selling group. For the six months ended April 30, 2004, CGM and its affiliates received brokerage commissions of $0 for the Fund’s portfolio agency transactions.
There were maximum initial sales charges of 5.00% and 1.00% for Class A and C shares (effective April 29, 2004, Class L was renamed Class C), respectively. 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 and declines thereafter by 1.00% per year until no CDSC is incurred. Class C shares also have a 1.00% CDSC, which applies if redemption occurs within the first year of purchase. In addition, Class A shares have a 1.00% CDSC, which applies if redemption occurs within the first year of purchase.This CDSC only applies to those purchases of Class A shares which, when combined with current holdings of Class A shares, equal or exceed $1,000,000 in the aggregate.
For the six months ended April 30, 2004, CGM received sales charges of approximately $0 and $0 on sales of the Fund’s Class A and C shares, respectively. In addition, for the six months ended April 30, 2004, CDSCs paid to CGM were approximately:
| | Class A | Class B | Class C |
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|
|
|
| | | | |
| CDSCs | $0 | $1,121,000 | $0 |
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|
Pursuant to a Distribution Plan, the Fund pays a distribution fee with respect to Class A, B and C shares calculated at the annual rate of 0.25%, 1.00% and 1.00% of the average daily net assets of each class, respectively. For the six months ended April 30, 2004, total Distribution Plan fees were:
| | Class A | Class B | Class C |
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|
|
|
| | | | |
| Distribution Plan Fees | $63,093 | $2,732,697 | $374,905 |
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All officers and one Trustee of the Trust are employees of Citigroup or its affiliates.
3. Investments
During the six months ended April 30, 2004, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows:
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|
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| Purchases | $ | 59,334,617 |
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|
| Sales | $ | 215,757,045 |
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At April 30, 2004, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows:
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|
|
| Gross unrealized appreciation | $ | 15,886,700 | |
| Gross unrealized depreciation | | (2,135,337 | ) |
|
|
|
|
| Net unrealized appreciation | $ | 13,751,363 | |
|
|
|
|
13 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
4. 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 the 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) and the credit risk should a coun-terparty fail to perform under such contracts.
Futures contracts which were open at April 30, 2004, are as follows:
| | Number of | Expiration | Book | Market | Unrealized |
Contracts | Contracts | Date | Value | Value | Gain/(Loss) |
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|
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|
|
|
| | | | | | |
| S & P Index Futures (Buy) | 68 | June 2004 | $19,312,194 | $18,803,700 | $(508,494) |
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|
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, 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 April 30, 2004, the Fund held no purchased call options or purchased put options.
When a 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 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 proceeds of the security sold will be increased 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 purchases upon exercise.When written index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally paid.The Fund enters into options for hedging purposes.The risk in writing a covered call option is that the Fund gives up the opportunity to participate in any increase in the price of the underlying security beyond the exercise price.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.
No written covered call/put option transactions occurred during the six months ended April 30, 2004.
14 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
6. 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 (plus accrued interest) of the collateral in amounts at least equal to the repurchase price.
7.The Guarantee
Provided that all dividends and distributions received from the Fund have been reinvested and no shares have been redeemed by a shareholder, the Fund guarantees that on the Guarantee Maturity Date, as described in the prospectus, each shareholder will be entitled to redeem his or her shares for an amount no less than the value of that shareholder’s account as of the close of business on November 1, 2002, less certain expenses.The Fund’s guarantee is backed by an unconditional and irrevocable financial guarantee from Ambac Assurance Corporation (the “Guarantor”) pursuant to a financial guarantee insurance policy issued by the Guarantor for the benefit of the shareholders of the Fund.The Fund will pay to the Guarantor a fee equal to 0.75% of the average daily net assets of the Fund during the Guarantee Period for providing the financial guarantee insurance policy.The guarantee fees amounted to $2,519,979 for the six months ended April 30, 2004. Please see the prospectus for more information relating to the guarantee arrangement.
8. Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions.The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Translation of foreign currency includes net exchange gains and losses resulting from the disposition of foreign currency and the difference between the amount of investment income, expenses and foreign withholding taxes recorded and the actual amount received or paid.
9. Shares of Beneficial Interest
At April 30, 2004, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 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 specifically related to the distribution of its shares.
15 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
Transactions in shares of each class were as follows:
| | Six Months Ended | Year Ended |
| | April 30, 2004 | October 31, 2003 |
| |
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|
| | | | | | | | | |
| | Shares | Amount | Shares | Amount |
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|
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|
| | | | | | | | | |
| Class A | | | | | | | | | | |
| Shares sold | — | | | — | | 205,301 | | $ | 2,339,824 | |
| Shares issued to shareholders from reinvestment of distributions | 35,555 | | $ | 414,922 | | 18,220 | | | 206,426 | |
| Shares repurchased | (1,242,638 | ) | | (14,644,699 | ) | (1,747,177 | ) | | (20,257,127 | ) |
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|
|
|
|
|
|
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| Net Decrease | (1,207,083 | ) | $ | (14,229,777 | ) | (1,523,656 | ) | $ | (17,710,877 | ) |
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|
| Class B | | | | | | | | | | |
| Shares sold | — | | | — | | — | | | — | |
| Shares issued to shareholders from reinvestment of distributions | 33,053 | | $ | 385,397 | | 148,496 | | $ | 1,680,585 | |
| Shares repurchased | (8,054,510 | ) | | (94,926,501 | ) | (8,285,930 | ) | | (95,512,467 | ) |
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|
|
|
|
|
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| Net Decrease | (8,021,457 | ) | $ | (94,541,104 | ) | (8,137,434 | ) | $ | (93,831,882 | ) |
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| Class C** | | | | | | | | | | |
| Shares sold | — | | | — | | 85,325 | | $ | 970,725 | |
| Shares issued to shareholders from reinvestment of distributions | 4,713 | | $ | 54,960 | | 26,088 | | | 295,255 | |
| Shares repurchased | (2,302,266 | ) | | (27,074,454 | ) | (3,077,884 | ) | | (35,487,587 | ) |
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| Net Decrease | (2,297,553 | ) | $ | (27,019,494 | ) | (2,966,471 | ) | $ | (34,221,607 | ) |
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** Effective April 29, 2004 Class L shares were redesignated as Class C shares.
10.Trustee Retirement Plan
The Trustees of the Fund have adopted a Retirement Plan for all Trustees who are not “interested persons” of the Fund, within the meaning of the 1940 Act. Under the Plan, all Trustees are required to retire from the Board as of the last day of the calendar year in which the applicable Trustee attains age 75 (certain Trustees who had already attained age 75 when the Plan was adopted were required to retire effective December 31, 2003).Trustees may retire under the Plan before attaining the mandatory retirement age.Trustees who have served as Trustee of the Trust or any of the investment companies associated with Citigroup for at least ten years when they retire are eligible to receive the maximum retirement benefit under the Plan. The maximum retirement benefit is an amount equal to five times the amount of retainer and regular meeting fees payable to a Trustee during the calendar year ending on or immediately prior to the applicable Trustee’s retirement.Amounts under the Plan may be paid in installments or in a lump sum (discounted to present value). Benefits under the Plan are unfunded. Two former Trustees are currently receiving payments under the Plan. In addition, two other former Trustees elected to receive a lump sum payment under the Plan during this period.The Fund’s allocable share of the expenses of the Plan for the six months ended April 30, 2004 and the related liability at April 30, 2004 was not material.
11. Additional Information
The Fund has received the following information from Citigroup Asset Management (“CAM”), the Citigroup business unit which includes the Fund’s Investment Manager and other investment advisory companies, all of which are indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an affiliate, into the transfer agent business in the period 1997-1999. As CAM currently understands the facts, at the time CAM decided to enter the transfer agent business, CAM sub-contracted for a period of five years certain of the transfer agency services to a third party and also concluded a revenue guarantee agreement with this sub-contractor providing that the sub-contractor would guarantee certain benefits to CAM or its affiliates (the “Revenue Guarantee Agreement”). In connection with the subsequent purchase of the sub-contractor’s business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee Agreement was amended eliminating those benefits in exchange for arrangements that included a onetime payment from the sub-contractor.
16 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
The Boards of CAM-managed funds (the “Boards”) were not informed of the Revenue Guarantee Agreement with the subcontractor at the time the Boards considered and approved the transfer agent agreements. Nor were the Boards informed of the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds approximately $17 million (plus interest) that CAM and its affiliates received from the Revenue Guarantee Agreement and its amendment. CAM also plans an independent review to verify that the transfer agency fees charged by CAM were fairly priced as compared to competitive alternatives. CAM is instituting new procedures and making changes designed to ensure no similar arrangements are entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other regulators with respect to this matter, as well as the U.S.Attorney who is investigating the matter. CAM is cooperating with governmental authorities on this matter, the ultimate outcome of which is not yet determinable.
12. Legal Matters
Class action lawsuits have been filed against Citigroup Global Markets Inc. (the “Distributor”) and a number of its affiliates, including Smith Barney Fund Management LLC and Salomon Brothers Asset Management Inc (the “Advisers”), substantially all of the mutual funds managed by the Advisers (the “Funds”), and directors or trustees of the Funds.The complaints allege, among other things, that the Distributor created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Advisers caused the Funds to pay excessive brokerage commissions to the Distributor for steering clients towards proprietary funds.The complaints also allege that the defendants breached their fiduciary duty to the Funds by improperly charging Rule 12b-1 fees and by drawing on Fund assets to make undisclosed payments of soft dollars and excessive brokerage commissions. The complaints seek injunctive relief and compensatory and punitive damages, rescission of the Funds’ contracts with the Advisers, recovery of all fees paid to the Advisers pursuant to such contracts and an award of attorneys’ fees and litigation expenses. Citigroup Asset Management believes that the suits are without merit and intends to defend the cases vigorously.
Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed against the defendants in the future. Neither Citigroup Asset Management nor the Funds believe that any of the pending actions will have a material adverse effect on the Funds or the ability of the Distributor or the Advisers to perform under their respective contracts with the Funds.
17 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Financial Highlights
For a share of each class of Capital Stock:
| | Six Months Ended | | | For the Period September 24, 2002 |
| | April 30, 2004 | Year Ended | (Commencement of Operations) to |
Class A Shares | (unaudited) | October 31, 2003 | October 31, 2002 |
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Net Asset Value, Beginning of Period | $ | 11.68 | | $ | 11.40 | | $ | 11.40 | |
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| Income From Operations: | | | | | | |
| Net investment income(1) | | 0.040 | | | 0.097 | | | 0.006 | |
| Net realized and unrealized gain | | 0.046 | | | 0.213 | | | 0.004 | |
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| Total Income From Operations | | 0.086 | | | 0.310 | | | 0.010 | |
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| Less Distributions From: | | | | | | | | | |
| Net investment income | (0.096 | ) | (0.030 | ) | (0.010 | ) |
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| Net Asset Value, End of Period | $ | 11.67 | | $ | 11.68 | | $ | 11.40 | |
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| Total Return | | 0.73 | %** | | 2.73 | % | | 0.09 | %** |
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| Net Assets, End of Period (000s) | $ | 44,438 | | $ | 58,594 | | $ | 74,552 | |
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| Ratios to Average Net Assets: | | | | | | | | | |
| Expenses | | 1.95 | %* | | 1.94 | % | | 0.68 | %* |
| Net investment income | | 0.68 | %* | | 0.83 | % | | 0.76 | %* |
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| Portfolio Turnover Rate | | 9 | % | | 114 | % | | — | |
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| | | | | | | | | | |
| Note: If Agents of the Fund had not voluntarily waived a portion of their fees and assumed Fund expenses for the periods indicated the net investment income (loss) per share and the ratios would have been as follows: |
| Net investment income per share(1) | $ | 0.040 | | $ | 0.097 | | $ | 0.002 | |
| Ratios: | | | | | | | | |
| Expenses to average net assets | 1.95 | %* | | 1.94 | % | | 1.24 | %* |
| Net investment income to average net assets | 0.68 | %* | | 0.83 | % | | 0.20 | %* |
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*
| Annualized.
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**
| Not Annualized.
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(1)
| The per share amounts were computed using a monthly average number of shares outstanding during the period.
|
See Notes to Financial Statements.
18 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Financial Highlights (continued)
For a share of each class of Capital Stock:
| | Six Months Ended | | | | For the Period September 24, 2002 |
| | April 30, 2004 | Year Ended | (Commencement of Operations) to |
Class B Shares | (unaudited) | October 31, 2003 | October 31, 2002 |
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Net Asset Value, Beginning of Period | $ | 11.60 | | $ | 11.40 | | $ | 11.40 | |
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| Income From Operations: | | | | | | | |
| Net investment income (loss)(1) | | (0.004 | ) | | 0.010 | | | 0.004 | |
| Net realized and unrealized gain | | 0.033 | | | 0.218 | | | 0.002 | |
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| Total Income From Operations | | 0.029 | | | 0.228 | | | 0.006 | |
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| Less Distributions From: | | | | | | | | | |
| Net investment income | | (0.009 | ) | | (0.028 | ) | | (0.006 | ) |
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| Net Asset Value, End of Period | $ | 11.62 | | $ | 11.60 | | $ | 11.40 | |
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| Total Return | | 0.25 | %** | | 2.01 | % | | 0.05 | %** |
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| Net Assets, End of Period (000s) | $ | 498,805 | | $ | 590,590 | | $ | 673,367 | |
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| Ratios to Average Net Assets: | | | | | | | | | |
| Expenses | | 2.70 | %* | | 2.69 | % | | 0.97 | %* |
| Net investment income (loss) | | (0.08 | )%* | | 0.09 | % | | 0.41 | %* |
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| Portfolio Turnover Rate | | 9 | % | | 114 | % | | — | |
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| | | | | | | | | | |
| Note: If Agents of the Fund had not voluntarily waived a portion of their fees and assumed Fund expenses for the periods indicated the net investment income (loss) per share and the ratios would have been as follows: |
| Net investment (loss) per share(1) | $ | (0.004 | ) | $ | 0.010 | | | ($0.001 | ) |
| Ratios: | | | | | | | | | |
| Expenses to average net assets | | 2.70 | %* | | 2.69 | % | | 1.53 | %* |
| Net investment income (loss) to average | | | | | | | | | |
| net assets | | (0.08 | )%* | | 0.09 | % | | (0.15 | )%* |
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*
| Annualized.
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**
| Not Annualized.
|
(1)
| The per share amounts were computed using a monthly average number of shares outstanding during the period.
|
See Notes to Financial Statements.
19 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
Financial Highlights (continued)
For a share of each class of Capital Stock:
| | Six Months Ended | | | For the Period September 24, 2002 |
| | April 30, 2004 | Year Ended | (Commencement of Operations) to |
Class C Shares† | (unaudited) | October 31, 2003 | October 31, 2002 |
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Net Asset Value, Beginning of Period | $ | 11.60 | | $ | 11.40 | | $ | 11.40 | |
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| Income From Operations: | | | | | | | |
| Net investment income (loss)(1) | | (0.004 | ) | | 0.010 | | | 0.004 | |
| Net realized and unrealized gain | | 0.043 | | | 0.217 | | | 0.002 | |
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| Total Income From Operations | | 0.039 | | | 0.227 | | | 0.006 | |
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| Less Distributions From: | | | | | | | | | |
| Net investment income | | (0.009 | ) | (0.027 | ) | | (0.006 | ) |
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| Net Asset Value, End of Period | $ | 11.63 | | $ | 11.60 | | $ | 11.40 | |
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| Total Return | | 0.33 | %** | | 2.00 | % | | 0.05 | %** |
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| Net Assets, End of Period (000s) | $ | 63,435 | | $ | 89,922 | | $ | 122,213 | |
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| Ratios to Average Net Assets: | | | | | | | | | |
| Expenses | | 2.70 | %* | | 2.69 | % | | 0.97 | %* |
| Net investment income (loss) | | (0.07 | )%* | | 0.09 | % | | 0.41 | %* |
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| Portfolio Turnover Rate | | 9 | % | | 114 | % | | — | |
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| | | | | | | | | | |
| Note: If Agents of the Fund had not voluntarily waived a portion of their fees and assumed Fund expenses for the periods indicated the net investment income (loss) per share and the ratios would have been as follows: |
| Net investment income (loss) per share(1) | $ | (0.004 | ) | $ | 0.010 | | | ($0.001 | ) |
| Ratios: | | | | | | | | | |
| Expenses to average net assets | | 2.70 | %* | | 2.69 | % | | 1.53 | %* |
| Net investment income (loss) to average | | | | | | | | | |
| net assets | | (0.07 | )%* | | 0.09 | % | | (0.15 | )%* |
|
|
|
|
|
|
|
*
| Annualized.
|
**
| Not Annualized.
|
(1)
| The per share amounts were computed using a monthly average number of shares outstanding during the period.
|
†
| Effective April 29, 2004, Class L shares were redesignated as Class C shares.
|
See Notes to Financial Statements.
20 Smith Barney Capital Preservation Fund II | 2004 Semi-Annual Report
SMITH BARNEY
CAPITAL PRESERVATION FUND II
| | TRUSTEES | INVESTMENT MANAGER |
| | Elliott J. Berv | Smith Barney Fund Management LLC |
| | Donald M. Carlton | |
| | A. Benton Cocanougher | DISTRIBUTOR |
| | Mark T. Finn | Citigroup Global Markets Inc. |
| | R. Jay Gerken, CFA, Chairman* | PFS Distributors, Inc. |
| | Stephen Randolph Gross | |
| | Diana R. Harrington | CUSTODIAN |
| | Susan B. Kerley | State Street Bank |
| | Alan G. Merten | &Trust Company |
| | R. Richardson Pettit | |
| | | TRANSFER AGENT |
| | OFFICERS | Citicorp Trust Bank, fsb. |
| | R. Jay Gerken, CFA* | 125 Broad Street, 11th Floor |
| | President and | New York, New York 10004 |
| | Chief Executive Officer | |
| | | SUB-TRANSFER AGENT |
| | Andrew B. Shoup* | PFPC Global Fund Services |
| | Senior Vice President and | P.O. Box 9699 |
| | Chief Administrative Officer | Providence, Rhode Island |
| | | 02940-9699 |
| | Frances M. Guggino* | |
| | Controller | Primerica Shareholder Services |
| | | P.O. Box 9662 |
| | Robert I. Frenkel* | Providence, Rhode Island |
| | Secretary and Chief Legal Officer | 02940-9662 |
| | | |
| | * Affiliated Person of | |
| | Investment Manager | |
Smith Barney Trust II
Smith Barney Capital Preservation
Fund II The fund is a separate investment fund of Smith Barney Trust II,
a Massachusetts business trust. | This report is submitted for the general information of
shareholders of Smith Barney Trust II—Smith Barney
Capital Preservation Fund II. SMITH BARNEY CAPITAL PRESERVATION FUND II
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004 |
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A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by telephoning the Fund (toll-free) at 1-800-451-2010
and by visiting the SEC’s web site at www.sec.gov. | ©2004 Citigroup Global Markets Inc.
Member NASD, SIPC FD02774 6/04 04-6818 |
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-
3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act")) are effective as of a date within 90 days of the
filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b)
under the 1940 Act and 15d-15(b) under the Securities Exchange
Act of 1934
(b) There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under
the 1940 Act) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in
the case of an annual report) that have materially affected,
or are likely to materially affect the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a)(2) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302
of the Sarbanes-Oxley Act of 2002
(b) Furnished.
Exhibit 99.906CERT Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
SMITH BARNEY CAPITAL PRESERVATION FUND II
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
SMITH BARNEY CAPITAL PRESERVATION FUND II
Date: June 25, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
SMITH BARNEY CAPITAL PRESERVATION FUND II
Date: June 25, 2004
By: /s/ ANDREW B. SHOUP
Chief Administrative Officer of
SMITH BARNEY CAPITAL PRESERVATION FUND II
Date: June 25, 2004
