UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4757
SMITH BARNEY SECTOR SERIES INC.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Christina T. Sydor, Esq.
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code:
(800) 451-2010
Date of fiscal year end: October 31
Date of reporting period: April 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The SEMI-ANNUAL Report to Stockholders is filed herewith.
SMITH BARNEY
SECTOR SERIES INC.
SMITH BARNEY
BIOTECHNOLOGY FUND
Research Series | Semi-annual Report | April 30, 2003
[SMITH BARNEY MUTUAL FUNDS LOGO]
YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED(R)
YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED.(R) is a registered service mark of
Citigroup Global Markets Inc.
NOT FDIC INSURED o NOT BANK GUARANTEED o MAY LOSE VALUE
[GRAPHIC OMITTED] Research Series
Semi-Annual Report o April 30, 2003
SMITH BARNEY BIOTECHNOLOGY FUND
SMITH BARNEY FUND MANAGEMENT LLC
Smith Barney Fund Management LLC is the investment manager to the Fund.
Citigroup Asset Management Ltd. is the subadviser. The Fund's management team
follows a systematic and rigorous approach designed to provide appropriate
exposure to the market sector.
FUND OBJECTIVE*
The Fund seeks long-term capital appreciation. The Fund normally invests at
least 80% of its assets in securities of companies principally engaged in, but
not limited to, the research, development, application, manufacture and
distribution of various biotechnological and biomedical products, services,
processes and related technologies.
FUND FACTS
FUND INCEPTION
- ----------------------
August 31, 2000
WHAT'S INSIDE
Schedule of Investments ..................................................... 1
Statement of Assets and Liabilities ......................................... 3
Statement of Operations ..................................................... 4
Statements of Changes in Net Assets ......................................... 5
Notes to Financial Statements ............................................... 6
Financial Highlights ........................................................ 10
Additional Shareholder Information .......................................... 12
- ----------
* Since the Fund focuses its investments on companies involved in the
biotechnology industries, an investment in the Fund may involve a greater
degree of risk than an investment in other mutual funds with greater
diversification.
[LOGO OMITTED]
SMITH BARNEY MUTUAL FUNDS
YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED(R)
YOUR SERIOUS MONEY. PROFESSIONALLY MANAGED.(R) is a registered service mark of
Citigroup Global Markets Inc.
Investment Products: Not Fdic Insured o Not Bank Guaranteed o May Lose Value
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2003
SHARES SECURITY VALUE
=============================================================================================
COMMON STOCK -- 84.8%
BIOTECHNOLOGY -- 62.8%
17,295 Alkermes, Inc.* $ 172,604
58,544 Amgen Inc.* 3,589,330
Applera Corp.:
7,063 Applied Biosystems Group 123,814
5,893 Celera Genomics Group* 61,877
13,792 Biogen Inc.* 523,958
4,911 Cell Genesys, Inc.* 43,806
3,355 Charles River Laboratories International, Inc.* 91,088
15,614 Chiron Corp.* 637,520
19,429 Genentech, Inc.* 738,108
34,046 Genzyme Corp.* 1,371,373
17,011 IDEC Pharmaceuticals Corp.* 557,110
13,405 Immunex Corp.* 52,682
2,966 Invitrogen Corp.* 96,988
5,509 Laboratory Corp. of America Holdings* 162,295
12,950 Medarex, Inc.* 54,002
21,740 MedImmune, Inc.* 766,770
10,484 Millennium Pharmaceuticals, Inc.* 115,324
6,844 Monsanto Co. 119,086
11,541 Neurocrine Biosciences, Inc.* 522,230
6,346 Protein Design Labs, Inc.* 63,016
3,675 Techne Corp.* 81,622
7,866 Vertex Pharmaceuticals Inc.* 94,943
43,499 XOMA Ltd.* 216,625
- ---------------------------------------------------------------------------------------------
10,256,171
- ---------------------------------------------------------------------------------------------
HEATHCARE EQUIPMENT AND SUPPLIES -- 1.3%
11,928 Affymetrix, Inc.* 221,264
- ---------------------------------------------------------------------------------------------
MEDICAL LABS AND TESTING SERVICES -- 0.8%
2,065 Quest Diagnostics Inc.* 123,384
- ---------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 19.9%
14,877 Abgenix, Inc.* 141,332
3,029 Celgene Corp.* 80,602
9,079 Cubist Pharmaceuticals, Inc.* 83,799
7,092 CV Therapeutics, Inc.* 141,698
4,842 Enzon, Inc.* 66,432
39,427 Gilead Sciences, Inc.* 1,819,162
8,746 Human Genome Sciences, Inc.* 102,241
23,862 ICOS Corp.* 638,309
4,747 Osi Pharmaceuticals, Inc.* 99,687
1,659 Trimeris Inc.* 73,643
- ---------------------------------------------------------------------------------------------
3,246,905
- ---------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $15,469,620) 13,847,724
=============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
1 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) APRIL 30, 2003
FACE
AMOUNT SECURITY VALUE
=============================================================================================
SHORT-TERM INVESTMENTS -- 15.2%
U.S. TREASURY BILLS -- 15.2%
$2,487,000 U.S. Treasury Bills, 1.087% due 6/5/03 (Cost-- $2,484,370) $ 2,484,370
=============================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $17,953,990**) $16,332,094
=============================================================================================
* NON-INCOME PRODUCING SECURITY.
** AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS SUBSTANTIALLY THE SAME.
SEE NOTES TO FINANCIAL STATEMENTS.
2 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2003
ASSETS:
Investments, at value (Cost-- $15,469,620) $13,847,724
Short-term investments, at value (Cost-- $2,484,370) 2,484,370
Dividends and interest receivable 3,287
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS 16,335,381
- ---------------------------------------------------------------------------------------------
LIABILITIES:
Management fee payable 38,260
Bank overdraft 25,461
Distribution fees payable 10,117
Payable for Fund shares purchased 4,930
Accrued expenses 20,993
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 99,761
- ---------------------------------------------------------------------------------------------
TOTAL NET ASSETS $16,235,620
=============================================================================================
NET ASSETS:
Par value of capital shares $ 3,342
Capital paid in excess of par value 40,312,702
Accumulated net investment loss (157,276)
Accumulated net realized loss from security transactions (22,301,743)
Net unrealized depreciation of investments and foreign currencies (1,621,405)
- ---------------------------------------------------------------------------------------------
TOTAL NET ASSETS $16,235,620
=============================================================================================
SHARES OUTSTANDING:
Class A 928,062
--------------------------------------------------------------------------------------
Class B 1,022,043
--------------------------------------------------------------------------------------
Class L 1,391,986
--------------------------------------------------------------------------------------
NET ASSET VALUE:
Class A (and redemption price) $4.93
--------------------------------------------------------------------------------------
Class B * $4.83
--------------------------------------------------------------------------------------
Class L ** $4.83
--------------------------------------------------------------------------------------
MAXIMUM PUBLIC OFFERING PRICE PER SHARE:
Class A (net asset value plus 5.26% of net asset value per share) $5.19
--------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $4.88
============================================================================================
* REDEMPTION PRICE IS NAV OF CLASS B SHARES REDUCED BY A 5.00% CDSC IF SHARES
ARE REDEEMED LESS THAN ONE YEAR FROM INITIAL 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 (SEE NOTE 2).
SEE NOTES TO FINANCIAL STATEMENTS.
3 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2003
INVESTMENT INCOME:
Dividends $ 2,613
Interest 2,500
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 5,113
- ---------------------------------------------------------------------------------------------
EXPENSES:
Management fee (Note 2) 74,847
Distribution fees (Note 6) 62,689
Shareholder servicing fees (Note 6) 14,842
Custody 11,856
Directors' fees 5,837
Audit and legal 5,340
Registration fees 4,842
Other 5,792
- ---------------------------------------------------------------------------------------------
TOTAL EXPENSES 186,045
Less: Management fee waiver (Note 2) (24,872)
- ---------------------------------------------------------------------------------------------
NET EXPENSES 161,173
- ---------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (156,060)
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 3):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (2,728,133)
Foreign currency transactions 112
- ---------------------------------------------------------------------------------------------
NET REALIZED LOSS (2,728,021)
- ---------------------------------------------------------------------------------------------
Change in Net Unrealized Depreciation From:
Security transactions 4,701,623
Foreign currency transactions 491
- ---------------------------------------------------------------------------------------------
DECREASE IN NET UNREALIZED DEPRECIATION 4,702,114
- ---------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCIES 1,974,093
- ---------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 1,818,033
=============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
4 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED)
AND THE YEAR ENDED OCTOBER 31, 2002
2003 2002
=============================================================================================
OPERATIONS:
Net investment loss $ (156,060) $ (447,925)
Net realized loss (2,728,021) (8,833,953)
(Increase) decrease in net unrealized depreciation 4,702,114 (456,256)
- ---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,818,033 (9,738,134)
- ---------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net proceeds from sale of shares 252,161 4,460,547
Cost of shares reacquired (2,459,842) (6,533,716)
- ---------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS (2,207,681) (2,073,169)
- ---------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS (389,648) (11,811,303)
NET ASSETS:
Beginning of period 16,625,268 28,436,571
- ---------------------------------------------------------------------------------------------
END OF PERIOD* $16,235,620 $16,625,268
=============================================================================================
* Includes accumulated net investment loss of: $(157,276) $(1,328)
=============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS.
5 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Smith Barney Biotechnology Fund ("Fund"), a separate investment fund of the
Smith Barney Sector Series Inc. ("Series"), a Maryland corporation, is
registered under the Investment Company of 1940, as amended, as a
non-diversified, open-end management investment company. The Series consists of
three other separate investment funds: Smith Barney Financial Services Fund,
Smith Barney Health Sciences Fund ("Health Sciences Fund") and Smith Barney
Technology Fund. As of May 9, 2003, the Fund merged into the Health Sciences
Fund. The financial statements and financial highlights for the other funds are
presented in separate shareholder reports.
The significant accounting policies followed by the Fund are: (a) security
transactions are accounted for on trade date; (b) securities traded in national
securities markets are valued at the closing prices in the primary exchange on
which they are traded; securities listed or traded on certain foreign exchanges
or other markets whose operations are similar to the U.S. over-the-counter
market (including securities listed on exchanges where the primary market is
believed to be over-the-counter) and securities for which no sale was reported
on that date are valued at the mean between the bid and asked prices; 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. Securities which are listed
or traded on more than one exchange or market are valued at the quotations on
the exchange or market determined to be the primary market for such securities;
(c) securities for which market quotations are not available will be valued in
good faith at fair market value by or under the direction of the Board of
Directors; (d) securities maturing within 60 days are valued at cost plus
accreted discount, or minus amortized premium, which approximates value; (e) 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; (f)
interest income, adjusted for amortization of premium and accretion of discount,
is recorded on an accrual basis; (g) dividend income is recorded on the
ex-dividend date; foreign dividends are 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; (h) dividends and
distributions to shareholders are recorded on the ex-dividend date; the Fund
distributes dividends and capital gains, if any, annually; (i) gains or losses
on the sale of securities are calculated by using the specific identification
method; (j) direct expenses are charged to each class; management fees and
general Fund expenses are allocated on the basis of relative net assets; (k) the
Fund intends to comply with the requirements 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; (l) the character of income and gains to be
distributed in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America; and
(m) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
In addition, the Fund may enter into forward exchange contracts in order to
hedge against foreign currency risk. These contracts are marked-to-market daily,
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
6 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. MANAGEMENT AGREEMENT AND OTHER TRANSACTIONS
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as investment manager to the Fund. The
management fee is calculated at an annual rate of 0.95% of the average daily net
assets. This fee is calculated daily and paid monthly. SBFM has delegated the
daily management of the Fund to Citigroup Asset Management Ltd. ("CAM Ltd."), an
affiliate of SBFM. For services provided to the Fund, SBFM pays CAM Ltd. a
subadvisory fee computed at an annual rate of 0.65% of the Fund's average daily
net assets. For the six months ended April 30, 2003, SBFM waived a portion of
its management fee amounting to $24,872.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Global Fund Services ("PFPC") acts 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 is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and is paid
by CTB. For the six months ended April 30, 2003, the Fund paid transfer agent
fees of $7,874 to CTB.
Citigroup Global Markets Inc. ("CGM"), formerly known as Salomon Smith Barney
Inc., another indirect wholly-owned subsidiary of Citigroup, acts as the Fund's
distributor. In addition, CGM and certain other broker-dealers continue to sell
Fund shares to the public as members of the selling group. For the six months
ended April 30, 2003, CGM did not receive any brokerage commissions.
There are maximum initial sales charges of 5.00% and 1.00% for Class A and L
shares, 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
initial purchase and declines thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, 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. These purchases do not incur an initial sales
charge.
For the six months ended April 30, 2003, CGM received sales charges of
approximately $3,000 and $1,000 on sales of the Fund's Class A and L shares,
respectively. In addition, for the six months ended April 30, 2003, CDSCs paid
to CGM were approximately $20,000 for Class B shares.
All officers and one Director of the Series are employees of Citigroup or its
affiliates.
3. INVESTMENTS
During the six months ended April 30, 2003, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
securities, but excluding short-term securities) were as follows:
================================================================================
Purchases $1,907,993
- --------------------------------------------------------------------------------
Sales 6,212,518
================================================================================
At April 30, 2003, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 746,468
Gross unrealized depreciation (2,368,364)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(1,621,896)
================================================================================
7 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. REPURCHASE AGREEMENTS
The Fund purchases (and its custodian takes possession of) U.S. government
securities from 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.
At April 30, 2003, the Fund did not have any repurchase agreements outstanding.
5. CONCENTRATION OF RISK
The Fund normally invests at least 80% of its assets in biotechnology related
investments. As a result of this concentration policy, the Fund's investment may
be subject to greater risk and market fluctuation than a fund that invests in
securities representing a broader range of investment alternatives.
6. CLASS SPECIFIC EXPENSES
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to
Class A, B and L shares calculated at an annual rate of 0.25% of the average
daily assets of each respective class. The Fund also pays a distribution fee
with respect to 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 six months
ended April 30, 2003, total Distribution Plan fees incurred, which are accrued
daily and paid monthly, were as follows:
CLASS A CLASS B CLASS L
================================================================================
Distribution Plan Fees $5,366 $24,398 $32,925
================================================================================
For the six months ended April 30, 2003, total Shareholder Servicing fees were
as follows:
CLASS A CLASS B CLASS L
================================================================================
Shareholder Servicing Fees $4,048 $4,595 $6,199
================================================================================
7. CAPITAL SHARES
At April 30, 2003, the Fund had 400 million shares of capital stock 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 in the
Fund and has the same rights, except that each class bears certain expenses
specifically related to the distribution of its shares.
Transactions in shares of each class were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
==================================================================================================
CLASS A
Shares sold 24,216 $106,790 423,275 $1,993,470
Shares reacquired (104,478) (464,078) (420,496) (2,260,800)
- --------------------------------------------------------------------------------------------------
Net Increase (Decrease) (80,262) $(357,288) 2,779 $(267,330)
==================================================================================================
8 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
Notes to Financial Statements (unaudited) (continued)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
===================================================================================================
CLASS B
Shares sold 18,796 $ 83,104 186,576 $ 1,120,984
Shares reacquired (193,382) (834,531) (291,729) (1,497,102)
- ---------------------------------------------------------------------------------------------------
Net Decrease (174,586) $ (751,427) (105,153) $ (376,118)
===================================================================================================
CLASS L
Shares sold 14,264 $ 62,267 233,275 $ 1,346,093
Shares reacquired (266,484) (1,161,233) (534,242) (2,775,814)
- ---------------------------------------------------------------------------------------------------
Net Decrease (252,220) $(1,098,966) (300,967) $(1,429,721)
===================================================================================================
8. SUBSEQUENT EVENT
On January 29, 2003, the Board of Directors of the Series, on behalf of the
Fund, approved a proposed reorganization pursuant to which the Health Sciences
Fund, a separate investment fund of the Series, would acquire the assets and
assume the stated liabilities of the Fund in exchange for shares of the Health
Sciences Fund. This reorganization will allow the Fund's shareholders to
maintain an investment in a fund with the same investment objective and
substantially similar investment policies. On May 7, 2003, the shareholders of
the Fund approved the reorganization of the Fund into the Health Sciences Fund.
The effective date of the reorganization was May 9, 2003.
9 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31, UNLESS OTHERWISE NOTED:
CLASS A SHARES 2003(1)(2) 2002(2) 2001 2000(2)(3)
==========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $4.37 $6.73 $9.88 $11.40
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss(4) (0.03) (0.08) (0.10) (0.04)
Net realized and unrealized gain (loss) 0.59 (2.28) (3.05) (1.48)
- --------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.56 (2.36) (3.15) (1.52)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $4.93 $4.37 $6.73 $ 9.88
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 12.81%++ (35.07)% (31.88)% (13.33)%++
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $4,573 $4,407 $6,769 $8,486
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4)(5) 1.50%+ 1.48% 1.50% 1.52%+
Net investment loss (1.43)+ (1.41) (1.40) (0.78)+
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 12% 91% 74% 1%
==========================================================================================================================
(1) FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(3) FOR THE PERIOD FROM AUGUST 31, 2000 (INCEPTION DATE) TO OCTOBER 31, 2000.
(4) THE MANAGER WAIVED A PORTION OF ITS FEES FOR THE SIX MONTHS ENDED APRIL 30,
2003, THE YEARS ENDED OCTOBER 31, 2002 AND 2001, AND THE PERIOD ENDED
OCTOBER 31, 2000. IF SUCH FEES WERE NOT WAIVED, THE PER SHARE INCREASES TO
NET INVESTMENT LOSS AND THE ACTUAL EXPENSE RATIOS WOULD HAVE BEEN AS
FOLLOWS:
Per Share Increases to Expense Ratios
Net Investment Loss Without Fee Waiver
---------------------------------- ---------------------------------
2003 2002 2001 2000 2003 2002 2001 2000
------- ------ ------ ------ ------ ------ ------ ------
Class A Shares $0.01 $0.03 $0.04 $0.00* 1.82%+ 1.98% 1.98% 3.08%+
(5) AS A RESULT OF A VOLUNTARY EXPENSE LIMITATION, THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS WILL NOT EXCEED 1.50% FOR CLASS A SHARES.
* 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.
10 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31, UNLESS OTHERWISE NOTED:
CLASS B SHARES 2003(1)(2) 2002(2) 2001 2000(2)(3)
==========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $4.30 $6.67 $9.86 $11.40
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss(4) (0.05) (0.12) (0.16) (0.05)
Net realized and unrealized gain (loss) 0.58 (2.25) (3.03) (1.49)
- --------------------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.53 (2.37) (3.19) (1.54)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $4.83 $4.30 $6.67 $ 9.86
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 12.33%++ (35.53)% (32.35)% (13.51)%++
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000S) $4,938 $5,147 $8,687 $11,705
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses(4)(5) 2.25%+ 2.24% 2.25% 2.28%+
Net investment loss (2.19)+ (2.17) (2.15) (1.51)+
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TURNOVER RATE 12% 91% 74% 1%
==========================================================================================================================
(1) FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(3) FOR THE PERIOD FROM AUGUST 31, 2000 (INCEPTION DATE) TO OCTOBER 31, 2000.
(4) THE MANAGER WAIVED A PORTION OF ITS FEES FOR THE SIX MONTHS ENDED APRIL 30,
2003, THE YEARS ENDED OCTOBER 31, 2002 AND 2001, AND THE PERIOD ENDED
OCTOBER 31, 2000. IF SUCH FEES WERE NOT WAIVED, THE PER SHARE INCREASES TO
NET INVESTMENT LOSS AND THE ACTUAL EXPENSE RATIOS WOULD HAVE BEEN AS
FOLLOWS:
Per Share Increases to Expense Ratios
Net Investment Loss Without Fee Waiver
---------------------------------- ---------------------------------
2003 2002 2001 2000 2003 2002 2001 2000
------- ------ ------ ------ ------ ------ ------ ------
Class B Shares $0.01 $0.03 $0.03 $0.00* 2.56%+ 2.77% 2.74% 3.84%+
(5) AS A RESULT OF A VOLUNTARY EXPENSE LIMITATION, THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS WILL NOT EXCEED 2.25% FOR CLASS B SHARES.
* 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.
11 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
ENDED OCTOBER 31, UNLESS OTHERWISE NOTED:
CLASS L SHARES 2003(1)(2) 2002(2) 2001 2000(2)(3)
==========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $4.30 $6.67 $9.86 $11.40
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS:
Net investment loss(4) (0.05) (0.12) (0.16) (0.06)
Net realized and unrealized gain (loss) 0.58 (2.25) (3.03) (1.48)
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Total Income (Loss) From Operations 0.53 (2.37) (3.19) (1.54)
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NET ASSET VALUE, END OF PERIOD $4.83 $4.30 $6.67 $ 9.86
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TOTAL RETURN 12.33%++ (35.53)% (32.35)% (13.51)%++
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NET ASSETS, END OF PERIOD (000S) $6,725 $7,071 $12,980 $15,763
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RATIOS TO AVERAGE NET ASSETS:
Expenses(4)(5) 2.25%+ 2.24% 2.25% 2.28%+
Net investment loss (2.18)+ (2.17) (2.15) (1.51)+
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PORTFOLIO TURNOVER RATE 12% 91% 74% 1%
==========================================================================================================================
(1) FOR THE SIX MONTHS ENDED APRIL 30, 2003 (UNAUDITED).
(2) PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD.
(3) FOR THE PERIOD FROM AUGUST 31, 2000 (INCEPTION DATE) TO OCTOBER 31, 2000.
(4) THE MANAGER WAIVED A PORTION OF ITS FEES FOR THE SIX MONTHS ENDED APRIL 30,
2003, THE YEARS ENDED OCTOBER 31, 2002 AND 2001, AND THE PERIOD ENDED
OCTOBER 31, 2000. IF SUCH FEES WERE NOT WAIVED, THE PER SHARE INCREASES TO
NET INVESTMENT LOSS AND THE ACTUAL EXPENSE RATIOS WOULD HAVE BEEN AS
FOLLOWS:
Per Share Increases to Expense Ratios
Net Investment Loss Without Fee Waiver
---------------------------------- ---------------------------------
2003 2002 2001 2000 2003 2002 2001 2000
------- ------ ------ ------ ------ ------ ------ ------
Class L Shares $0.01 $0.03 $0.03 $0.00* 2.57%+ 2.75% 2.74% 3.84%+
(5) AS A RESULT OF A VOLUNTARY EXPENSE LIMITATION, THE RATIO OF EXPENSES TO
AVERAGE NET ASSETS WILL NOT EXCEED 2.25% FOR CLASS L SHARES.
* 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.
ADDITIONAL SHAREHOLDER INFORMATION (UNAUDITED)
On May 7, 2003, a special meeting of the shareholders of the Fund was held for
the purpose of voting on the following matter:
1. To approve the Series' Plan of Reorganization providing for (i) the
acquisition of all the assets and liabilities of the Fund by the
Health Sciences Fund ("Acquiring Fund"), also an investment fund of
the Series, (ii) the amendment of the Series' Charter reclassifying
all shares of the Fund as shares of the Acquiring Fund, and (iii) the
accomplishment of the reclassification by the issuance of shares of
the Acquiring Fund to shareholders of the Fund.
The results of the vote on Proposal 1 were as follows:
% OF VOTES % OF VOTES % OF SHARES
VOTES FOR SHARES VOTED AGAINST SHARES VOTED ABSTAINED VOTED
====================================================================================================================================
1,786,604.291 86.29% 188,523.376 9.11% 95,311.145 4.60%
====================================================================================================================================
12 SMITH BARNEY SECTOR SERIES INC. | 2003 Semi-Annual Report to Shareholders
SMITH BARNEY
BIOTECHNOLOGY FUND
DIRECTORS
Herbert Barg
Dwight B. Crane
Burt N. Dorsett
R. Jay Gerken, Chairman
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Cornelius C. Rose, Jr.
OFFICERS
R. Jay Gerken
President and Chief
Executive Officer
Lewis E. Daidone
Senior Vice President and
Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer
and Treasurer
Kaprel Ozsolak
Controller
Christina T. Sydor
Secretary
INVESTMENT MANAGER
Smith Barney Fund Management LLC
INVESTMENT SUB-ADVISER
Citigroup Asset Management Ltd.
DISTRIBUTORS
Citigroup Global Markets Inc.
CUSTODIAN
State Street Bank and
Trust Company
TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENTS
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island
02940-9699
SMITH BARNEY BIOTECHNOLOGY FUND
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This report is submitted for the general information of the shareholders of
Smith Barney Sector Series Inc. -- Smith Barney Health Sciences Fund, but it may
also be used as sales literature when preceded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Fund. If used as sales material after July 31,
2003, this report must be accompanied by performance information for the most
recently completed calendar quarter.
SMITH BARNEY HEALTH SCIENCES FUND
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free
prospectus. Read it carefully before you invest or send money.
www.smithbarneymutualfunds.com
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02550 6/03 03-4964
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. [RESERVED]
ITEM 9. 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-2(c) under the
Investment Company Act of 1940, as amended) are effective based
on their evaluation of the disclosure controls and procedures as
of a date within 90 days of the filing date of this document.
(b) In the last 90 days, there have been no significant changes in
the Registrant's internal controls or in other factors that could
significantly affect these controls.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
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 SECTOR SERIES INC.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Smith Barney Sector Series Inc.
Date: July 2, 2003
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 Sector Series Inc.
Date: July 2, 2003
By: /s/ RICHARD PETEKA
Chief Financial Officer of
Smith Barney Sector Series Inc.
Date: July 2, 2003