<PAGE>
SALOMON BROTHERS
Investment Series
[GRAPHIC]
Semi-
Annual
Report
1999
JUNE 30,1999
. ASIA GROWTH FUND
. SMALL CAP GROWTH FUND
. CAPITAL FUND
. INVESTORS FUND
. TOTAL RETURN FUND
. HIGH YIELD BOND FUND
. STRATEGIC BOND FUND
. NATIONAL INTERMEDIATE
MUNICIPAL FUND
. U.S.GOVERNMENT INCOME
FUND
. NEW YORK MUNICIPAL
MONEY MARKET FUND
. CASH MANAGEMENT FUND
<PAGE>
Table of Contents
A MESSAGE FROM THE CHAIRMAN ........................................ 1
THE SALOMON BROTHERS INVESTMENT SERIES
ASIA GROWTH FUND.................................................. 4
SMALL CAP GROWTH FUND ............................................ 7
CAPITAL FUND...................................................... 9
INVESTORS FUND.................................................... 12
TOTAL RETURN FUND................................................. 15
HIGH YIELD BOND FUND.............................................. 17
STRATEGIC BOND FUND............................................... 20
NATIONAL INTERMEDIATE MUNICIPAL FUND.............................. 23
U.S.GOVERNMENT INCOME FUND........................................ 26
SCHEDULES OF INVESTMENTS............................................ 30
STATEMENTS OF ASSETS AND LIABILITIES................................ 74
STATEMENTS OF OPERATIONS............................................ 76
STATEMENTS OF CHANGES IN NET ASSETS ................................ 78
STATEMENTS OF CASH FLOWS............................................ 82
NOTES TO FINANCIAL STATEMENTS....................................... 83
FINANCIAL HIGHLIGHTS................................................ 96
DIRECTORS AND OFFICERS OF
THE SALOMON BROTHERS INVESTMENT SERIES............................ IBC
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS INVESTMENT SERIES
A Message From
the Chairman
DEAR SHAREHOLDER:
We are pleased to present the semi-annual report for the Salomon Brothers
Investment Series -- Asia Growth Fund, Small Cap Growth Fund, Capital Fund,
Investors Fund, Total Return Fund, High Yield Bond Fund, Strategic Bond Fund,
National Intermediate Municipal Fund, U.S. Government Income Fund, New York
Municipal Money Market Fund and Cash Management Fund ("Funds") for the six
months ended June 30, 1999. We hope you find this shareholder report to be
useful and informative.
Below is a chart showing each Fund's Class A share total returns for the six
months ended June 30, 1999 with and without sales charges. Moreover, portfolio
information regarding the New York Municipal Money Market Fund and Cash
Management Fund ("Funds") for the reporting period can be found on pages 69 and
71, respectively.
THE PERFORMANCE OF THE SALOMON BROTHERS
INVESTMENT SERIES FUNDS
Class A Shares Total Return for the Six Months Ended June 30, 1999
WITH WITHOUT
SALES CHARGES(1) SALES CHARGES(2)
---------------- ----------------
Asia Growth Fund 37.25% 45.69%
Small Cap Growth Fund 9.59 16.31
Capital Fund 7.17 13.71
Investors Fund 8.53 15.13
Total Return Fund 2.99 9.27
High Yield Bond Fund (0.96) 3.95
Strategic Bond Fund (4.74) 0.03
National Intermediate
Municipal Fund (5.23) (0.50)
U.S. Government Income Fund (5.26) (0.56)
- --------------
(1) These total return figures assume reinvestment of all dividends and reflect
the deduction of the maximum front-end sales charge for each Fund's Class A
shares of 5.75% for the Asia Growth, Small Cap Growth, Capital, Investors
and Total Return Funds and 4.75% for the High Yield Bond, Strategic Bond,
National Intermediate Municipal and U.S. Government Income Funds.
(2) The total return figures assume reinvestment of all dividends and do not
reflect the deduction of sales charge for each Fund's Class A shares.
In addition, both columns of data represent past performance, which is not
indicative of future results. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. This shareholder report has been
prepared for the information of shareholders of the Salomon Brothers Investment
Series and is not authorized for use unless preceded or accompanied by a current
prospectus. The prospectus contains information regarding each Fund's sales
charges, expenses, objectives, policies, management and performance. To obtain a
copy of the prospectus, please call your financial advisor directly or call
1-800-725-6666. Please read it carefully before you invest or send money.
1
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The first half of 1999 was a period of economic growth at home and recovery
abroad. Following the events surrounding the Russian debt default in August of
1998 -- which included a decrease in bond yields and a 0.75% decrease in
interest rates -- yields have recovered quite well. Investor optimism, however,
was tempered by concerns about inflation, interest rates and continued economic
growth.
The long anticipated slowdown in U.S. economic activity again failed to happen
during the reporting period. Global stock markets continued to rise led by
better than expected profit growth and continued merger and acquisition
activity. The risks of higher U.S. economic growth were more fairly reflected in
the yield curve in the U.S. at the end of the first quarter of 1999 than they
were at the beginning.
The stronger than expected growth caused interest rates to rise in the first
quarter of 1999. The 30-year U.S. Treasury bond had its third worst quarter of
the 1990s. In fact, only the first quarters of 1994 and 1996 were worse. The
Lehman Government/Corporate Index declined about 1.2% in the first quarter of
1999. U.S. Treasuries underperformed as spreads narrowed in all sectors.
During the first half of 1999, U.S. economic growth continued at a robust pace,
posting a 4.3% Gross Domestic Product ("GDP") growth rate for the first quarter
of 1999. Furthermore, the labor market continued to be extremely tight, as the
unemployment rate fell to a 29-year low of 4.2% in March. Defying the
expectations of many economists, inflation -- as measured by the Consumer Price
Index ("CPI") -- was virtually absent. Productivity gains and sagging global
demand were credited with keeping inflation under control. However, in the month
of April, the CPI rose by 0.7%, its largest monthly increase in nine years.
This, coupled with signs that many world economies were in the nascent stages of
growth and recovery, deepened fears that inflationary pressures were reaching a
breaking point. These concerns brought about an increase in the yield of the
benchmark 30-year U.S. Treasury Bond, which gained 71 basis points between April
8th and June 24th to close at 6.16%.
To counter these inflationary pressures, the Federal Reserve Board ("Fed")
raised short-term interest rates by 0.25% in late June, and subsequently adopted
a neutral stance on monetary policy. Meanwhile, during the months of May and
June, the CPI remained constant, generating considerable optimism that inflation
had retreated. Further reports of rising U.S. jobless claims added to the
optimism.
As measured by the S&P 500 Stock Index, the U.S. stock market returned 12.38%
during the first six months of 1999. Last year's strong stock market performance
has continued so far in 1999, as many stock investors enjoyed competitive
returns. Although large-capitalization stocks were once again the best
performers, smaller-sized company stocks also provided decent
2
<PAGE>
returns. Stocks reacted positively to evidence of a worldwide recovery.
U.S. multinationals reported stronger sales overseas, particularly in
Southeast Asia.
Major political and economic crosscurrents influenced the international equity
markets during the first half of the year. Despite rising interest rate
anxieties, global equity markets delivered positive returns. While investors
fretted about rising U.S. and Japanese bond yields, economic data showed that
many Asian countries have begun their recoveries from steep recessions of the
past two years. Performance of the European markets, for dollar-based investors,
lagged during the first half of 1999, primarily due to weakness of the new Euro
currency versus the U.S. dollar.
MARKET OUTLOOK
The unwillingness of consumer spending to slow down keeps the Fed's monetary
policy on watch. With the world economic crisis abating, we cannot rule out the
possibility of the Fed raising rates before year-end. However, in our view, the
most likely case is that the Fed's monetary policy should remain neutral through
the third quarter of 1999. By next year we think that nominal growth should slow
below 5% and may allow room for additional short-term rate cuts. However, if
global economic growth accelerates unexpectedly and signs of inflation emerge
during the remainder of 1999, the Fed will not hesitate to raise rates again.
We believe that U.S. stock market returns for the remainder of 1999 should
depend greatly on the actions of the Fed, which increased interest rates in
June. The markets reacted with relief when there were indications that this
would not be the first of many increases. If, however, the Fed were to increase
rates further, the U.S. stock market would be vulnerable to a correction.
In the pages that follow, we provide commentaries from the Funds' managers. On
behalf of everyone here at Salomon Brothers Asset Management, we would like to
thank you for your continued confidence in the Salomon Brothers Investment
Series. We look forward to helping you pursue your financial goals in the years
ahead.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman and President
August 3, 1999
3
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[GRAPHIC] THE SALOMON BROTHERS
Asia Growth Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers Asia Growth Fund seeks long-term capital appreciation. The
Fund invests at least 65% of total assets in the equity and equity-related
securities of Asian companies. Areas considered for investments include, but are
not limited to, China, Hong Kong, India, Indonesia, South Korea, Malaysia,
Philippines, Singapore, Taiwan, and Thailand. In seeking to capture high
long-term returns with volatility in line with or lower than that usually
experienced in the Asian markets, the Fund will allocate its assets among
countries and industries believed by the portfolio manager to be most likely to
benefit from positive regional economic trends.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
Managed by an investment team out of the Hong Kong office.
PERFORMANCE UPDATE
The Asia Growth Fund's Class A shares returned 45.69% without sales charges for
the six months ended June 30, 1999. This compares favorably with the 44.59%
return for the Morgan Stanley Capital International All Country Asia Free
Ex-Japan Index ("MSCI AC Asia Free Ex-Japan"), and the 40.62% for the Lipper,
Inc. Pacific ex-Japan Funds peer group average. (Lipper is a major fund-tracking
organization.)
MARKET REVIEW
Asia's markets continued to exhibit significant gains on the back of a
liquidity-driven rally. Positive foreign exchange reserves and external
surpluses, successful recapitalization in the banking sector and considerably
stronger balance sheets of many Asian companies, all contributed to the
sustained liquidity inflow into the region. Positive first quarter Gross
Domestic Product ("GDP") growth in South Korea (4.6%), Taiwan (4.3%), Singapore
(1.2%), the Philippines (1.2%) and Thailand (0.9%) has highlighted the strong
rebound of the region despite diminishing export growth.
The Bank of Japan's pursuit of an aggressive inflationary policy coupled with
restructuring in the corporate sector was perceived as supportive of Japan's
efforts at economic stabilization and recovery. In addition, the marked increase
in foreign investors' participation in the Japanese equity market reinforced
optimism and contributed largely to favorable liquidity, thereby boding well for
the rest of the region. Despite the rise in U.S. long bond yields and a 25 basis
point rate hike by the U.S. Federal Reserve Board ("Fed") in June, Asian markets
rallied further suggesting to us that there were enough positive developments in
the region to counter the negative impact of higher interest rates.
PORTFOLIO HIGHLIGHTS
The Asia Growth Fund maintained its focus on stock selection by owning equities
it deemed attractive on a regional or sector basis. Notwithstanding the fact
that liquidity inflows led index-related stocks to rally, the Fund's
outperformance in the first half of the year versus its benchmark was also
largely owed to stock selection within the non-benchmark stocks -- evidence of a
successful bottom-up focus.
Key contributors to the Fund's performance included corporate restructuring
themes such as Giordano International, First Pacific Co., Samsung Corp. and
Housing & Commercial Bank. Others were part of the Fund's positive stance on the
telecommunications sector which included regional telecom stocks such as SK
Telecom, Korea Telecom and China Telecom Ltd. One of the Fund's top-ten holdings
throughout first half was United Overseas Bank Ltd. (i.e., local shares) which
was bought through an equity-linked note product. Purchased on the basis of
attractive valuations vs. the sector and expectations of a favorable boost from
a merger of foreign and local branches in Singapore, owning OUB allowed the Fund
to capture considerable gains and reinforced a successful strategy. (Of course,
past performance is not indicative of future results.)
4
<PAGE>
MARKET OUTLOOK
One of the Fund's main investment themes for the second half of 1999 will be a
focus on Asian companies with more visible earnings growth as opposed to the
potential restructuring plays. Many companies have taken the opportunity to
restructure and cut costs during the crisis and are therefore expected to
re-emerge as stronger regional players. Moreover, the Fund sees earnings upgrade
potentials from bottom-up profit estimates as well as upward adjustments to
top-down GDP growth forecasts. This combination is important as positive growth
surprises provide the fundamental underpinnings to a sustainable flow of
liquidity into the markets. Further, large capital inflows are not only easing
credit conditions in Asia, they also provide a liquidity cushion that would
allow policy makers to accelerate the cyclical upturn already underway. While
there are a fair number of positive developments in the region, the Fund
recognizes that the risk of higher volatility is growing, given expectations of
higher bond yields in the U.S. Nevertheless, the Fund continues to find a number
of attractive stock selection themes in Asia and the managers believe that Asian
financial assets should continue to perform well against a backdrop of higher
volatility.
5
<PAGE>
- -------------------------------------
Portfolio Highlights
- -------------------------------------
[CHART APPEARS HERE]
Composition of portfolio as of
June 30, 1999
Common Stock 89%
Convertible Securities 1%
Warrants 1%
Purchase Options 4%
Equity-Linked Securities 5%
- -------------------------------------
Breakdown By Country(#)
- -------------------------------------
Hong Kong 32.5%
Singapore 16.6%
South Korea 14.7%
Taiwan 11.5%
India 6.0%
Indonesia 5.9%
Malaysia 4.7%
Thailand 3.7%
Philippines 2.4%
China 2.0%
=====================================
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(*)
- --------------------------------------------------------------------------------
Since Inception (5/6/96) -0.28% -2.13%
1 year 66.43% 56.79%
- --------------------------------------------------------------------------------
Class B Shares
Since Inception (5/6/96) -1.01% -1.93%
1 year 65.07% 60.07%
- --------------------------------------------------------------------------------
Class 2 Shares
Since Inception (5/6/96) -0.98% -1.29%
1 year 65.07% 62.33%
- --------------------------------------------------------------------------------
Class O Shares
Since Inception (5/6/96) -0.03% -0.03%
1 year 66.90% 66.90%
================================================================================
- --------------------------------------------------------------------------------
Lipper Comparative Performance+
Salomon Brothers Asia Growth Fund
- --------------------------------------------------------------------------------
Lipper Category: Pacific Ex-Japan Funds
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (5/6/96) -6.78% -0.28% 2nd Quartile - Top 23% #13 of 57 Funds
1 year 69.87% 66.43% 2nd Quartile - Top 43% #36 of 83 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (5/6/96) -1.01% 2nd Quartile - Top 28% #16
1 year 65.07% 2nd Quartile - Top 47% #39
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (5/6/96) -0.98% 2nd Quartile - Top 26% #15
1 year 65.07% 2nd Quartile - Top 47% #39
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (5/6/96) -0.03% 1st Quartile - Top 19% #11
1 year 66.90% 2nd Quartile - Top 42% #35
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
6
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
Small Cap Growth Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Small Cap Growth Fund seeks to obtain long-term growth of capital. The Fund
seeks to achieve its objective by investing primarily in securities of companies
with market capitalizations at the time of purchase similar to that of companies
included in the Russell 2000 Index ("Small Cap Companies"). The Russell 2000
Index includes companies with market capitalizations below the top 1,000 stocks
of the equity market. Under normal market conditions the Fund will invest at
least 65% of its total assets in equity securities of Small Cap Companies. This
revised investment strategy was effective as of February 25, 1999.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
The Fund is managed by an experienced team of managers.
PERFORMANCE UPDATE
The Small Cap Growth Fund's Class A shares returned 16.31% without sales charges
for the six months ended June 30, 1999. This compares quite favorably with the
9.28% return for the Russell 2000 Index and 8.60% for the Lipper, Inc. Small Cap
Funds peer group average. (Lipper is a major fund-tracking organization.) Please
note that on July 16, 1999 the Small Cap Growth Fund acquired the assets of the
Smith Barney Special Equities which has similar objectives.
MARKET REVIEW
The Russell 2000 Index's second quarter 1999 return of 15.1%, which outperformed
the S&P 500's return of 7.1%, was the best quarterly performance by small caps
since fourth quarter 1992. This outperformance was driven by the market's
renewed interest in cyclicals as the Asian economies started to show signs of
recovery. In fact, this is the first quarter since third quarter 1997 that the
Russell 2000 Index did better than the S&P 500 Index.
We believe for small caps to continue to outperform, mutual fund cash inflows
into small-cap funds and projected earnings growth need to be attained.
Small-cap companies remain undervalued relative to the S&P 500. We are finding
many select opportunities to invest in small companies with solid fundamental
outlooks.
PORTFOLIO HIGHLIGHTS
The Small Cap Growth Fund uses a bottom-up approach to select small
capitalization companies that are growing their earnings faster than the overall
market. Ideally, the companies should be on verge of a sustainable growth spurt
from new products, technology or consolidation within an industry. The Fund
invests in several companies that meet this criteria found primarily in four
sectors: technology, health care, consumer and financial services.
The Fund continues to be overweight in consumer and technology. Many retailers
such as Cost Plus and Dollar Tree are benefiting from the strength in the
consumer. The Fund has several investments in semiconductor chip companies that
are serving the demand for voice and data over the Internet.
MARKET OUTLOOK
We believe small cap stocks should benefit from the economy's continued growth
with moderate inflation. Our strategy remains constant as we concentrate on
selecting companies with powerful franchises and market positions. And while no
guarantees can be given, we believe this focus should offer our investors
potential long-term price appreciation.
7
<PAGE>
- --------------------------------------------------
Portfolio Highlights(#)
- --------------------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Common Stock 99%
Short-Term Obligations 1%
- --------------------------------------------------
- ------------------------------
Top Holdings
- ------------------------------
MedQuist,Inc.
CMGI Inc.
TranSwitch Corp.
DeVry,Inc.
Fossil,Inc.
Profit Recovery Group
International,Inc.
Cost Plus,Inc.
U.S.Franchise
Systems,Inc.
Protective Life Corp.
American Heritage
Life Investment Corp.
==============================
- --------------------------------------------------------------------------------
Cumulative Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(*)
- --------------------------------------------------------------------------------
Since Inception (7/1/98) 34.80% 27.05%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (7/1/98) 33.70% 28.70%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (7/1/98) 33.90% 31.57%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
Since Inception (7/1/98) 35.10% 35.10%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers Small Cap Growth Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Small Cap Funds
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
Since Inception (7/1/98) 10.93% 34.80% 1st Quartile - Top 6% #41 of 715 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (7/1/98) 33.70% 1st Quartile - Top 7% #47
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (7/1/98) 33.90% 1st Quartile - Top 6% #46
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (7/1/98) 35.10% 1st Quartile - Top 5% #39
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
Portfolio holdings may vary.
8
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
Capital Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Capital Fund seeks capital appreciation through investments primarily in
common stocks or securities convertible into common stocks. The Fund seeks to
achieve its investment objective through investments in securities that are
believed to have above-average price appreciation potential. Such investments
may also involve above-average risk. The Fund may invest in seasoned,
established companies, relatively small new companies as well as new issues.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] Ross S. Margolies, Managing Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 18 years of investment industry experience in
the equity, convertible and high yield markets. Mr. Margolies is primarily
responsible for day-to-day Fund management.
[PHOTO] Robert Donahue, Director and Co-Portfolio Manager at Salomon Brothers
Asset Management Inc, has 6 years of investment industry experience. Mr. Donahue
assists in the day-to-day management of the Fund.
PERFORMANCE UPDATE
The Capital Fund's Class A shares returned 13.71% without sales charges for the
six months ended June 30, 1999. This compares with the return of 11.36% for the
Russell 3000 Index((R)) and 13.89% for the Lipper, Inc. Capital Appreciation
Funds peer group average. (The Russell 3000 Index((R)) is a market
capitalization weighted index made up of the 3,000 largest U.S. stocks in terms
of market capitalization and is the Capital Fund's performance benchmark.
Lipper is a major fund-tracking organization.)
MARKET REVIEW
During the six months ended June 30, 1999, the U.S. economy continued to show
signs of benign inflation and productivity-driven growth. Domestic demand growth
outstripped even optimistic estimates of the economy's long-term capacity, and a
combination of rising productivity, a flood of goods from abroad and more
intensive use of labor kept inflation from overheating. Globally, there were
strong signs that the world economy had bottomed and was on the road to
recovery. While the biggest market risk in the period remained the lingering
threat of eventual overheating resulting in Federal Reserve Board tightening,
policy-makers, led by Chairman Greenspan, held their stance on the sidelines
until implementing a well-telegraphed twenty-five basis point tightening on June
30, 1999.
Continued improvement in international stability after last summer's economic
turmoil caused investors to focus on cyclical stocks that had mostly
underperformed for the last several quarters. As a result, the market
experienced both an increase in breadth and a significant rotation into
cyclicals. Importantly, this increase in market breadth permitted sector
rotations without causing a significant sell-off in the broad market averages.
PORTFOLIO HIGHLIGHTS
The Fund demonstrated the benefits associated with its all-capitalization
strategy as the first half of 1999 showed improved market breadth. The Fund's
all-capitalization strategy, sometimes described as broad market
strategy-attempts to exceed the returns associated with popular market indices
by purchasing companies of all sizes based on which are the most attractive to
own at the time. While the twenty largest growth stocks have generally driven
market returns over the last few years, in our opinion many of these stocks are
overpriced and provide small margins of safety for investors. In contrast,
during this same period we have found small-cap and mid-cap companies that have
attractive business prospects, and, yet, their stocks have larger margins of
safety for investors. We believe that investors can benefit from a disciplined
process of security analysis that assesses company fundamentals, strategic
positioning and valuation to determine whether a given company represents an
attractive investment.
Certain communications services, consumer staples and technology stocks drove
the Fund's performance gains in the period. Among the individual companies
contributing meaningfully to overall performance were Hormel Foods, Tellabs and
Tesoro Petroleum.
9
<PAGE>
During the recent energy rally, we took some profits from the run-up in refiners
and reinvested in strategically well-positioned energy production companies.
Importantly, among the top ten contributors to overall results were companies in
each capitalization range: small-cap, less than $1 billion (SpeedFam IPEC and
Tesoro Petroleum), mid-cap, $1 billion to $5 billion (Hormel Foods and Rogers
Cantel Mobile Communications), and large-cap, more than $5 billion, (NTL Inc.
and PanAmSat).
Over the reporting period, we also established new positions in certain media
stocks and selectively exited technology positions that had reached our
assessment of full value. Average individual position size has decreased
modestly as the portfolio has added a number of new ideas. Finally, we increased
positions in a few existing holdings that are experiencing improving business
fundamentals that, in our opinion, are not yet reflected in current market
prices.
MARKET OUTLOOK
The rotation that has recently taken place in the equity markets has principally
benefited three categories: value stocks, cyclical stocks and small/mid-cap
stocks. We believe that this rotation, while no longer in its early stages,
should continue to evolve. At the same time, while many market valuation
indicators appear expensive, we are still able to find selected companies that
we believe have attractive fundamental profiles at reasonable prices.
While the secular case supporting the long-term bull market still appears to be
intact, the cyclical recovery of many depressed economies around the world does
create the potential for rising U.S. interest rates. This, in turn, could dampen
near term enthusiasm for U.S. equities. Our strategy in the Capital Fund is not
to try to time markets but, rather, to continue to evaluate the risk/reward of
each security we own and use position size to reflect our views of risk and
potential return. Overall, we believe that the Fund's portfolio continues to be
positioned with companies that have favorable growth characteristics yet retain
reasonable current valuations.
10
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Common Stock 92%
Convertible Securities 2%
Short-Term Obligations 4%
Corporate Bonds 2%
- ----------------------------------------
- -------------------------
Top Stock Holdings
- -------------------------
Hormel Foods
Food Lion
Philip Morris Cos.
Federated Department
Stores, Inc.
Rogers Cantel Mobile
Communications
Nabisco Group Holdings
Corp.
PanAmSat Corp.
Costco Cos.
Tesoro Petroleum Corp.
Pharmacia & Upjohn, Inc.
=========================
Portfolio holdings may vary
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(*)
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 27.67% 24.87%
1 year 22.05% 15.03%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 26.74% 25.98%
1 year 20.99% 15.99%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 26.71% 26.23%
1 year 20.84% 18.65%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
10 year 16.15% 16.15%
5 year 26.40% 26.40%
3 year 27.48% 27.48%
1 year 22.18% 22.18%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers Capital Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Capital Appreciation Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (11/1/96) 18.06% 27.67% 2nd Quartile - Top 31% #59 of 188 Funds
1 year 20.04% 22.05% 2nd Quartile - Top 44% #117 of 264 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (11/1/96) 26.74% 2nd Quartile - Top 38% #71
1 year 20.99% 2nd Quartile - Top 48% #126
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (11/1/96) 26.71% 2nd Quartile - Top 38% #72
1 year 20.84% 2nd Quartile - Top 48% #127
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception N/A N/A
1 year 22.18% 2nd Quartile - Top 44% #116
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
11
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
Investors Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers Investors Fund seeks long-term growth of capital. Current
income is a secondary objective. The Fund invests primarily in common stocks of
large-capitalization stocks representing well-known companies with good growth
potential at a reasonable price.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] John B. Cunningham, Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 10 years of financial industry experience. Mr.
Cunningham assists in day-to-day management of the Fund.
[PHOTO] Ross S. Margolies, Managing Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 18 years of investment industry experience in
the equity, convertible and high yield markets. Mr. Margolies is primarily
responsible for day-to-day Fund management.
PERFORMANCE UPDATE
The Investors Fund's Class A shares returned 15.13% without sales charges for
the six months ended June 30, 1999. This compares favorably with the return of
12.38% for the S&P 500 Index and 10.91% for the Lipper, Inc. Growth and Income
peer group average. (Lipper is a major fund-tracking organization.)
MARKET REVIEW
The Fund performed quite well in the first six months, significantly outpacing
both its large-cap value peer group and the S&P 500 Index. Most of the Fund's
gains occurred during the second quarter of 1999. An increase in interest rates
during the second quarter of 1999 caused investors to look beyond the narrow
group of large-cap growth stocks that had driven the market's performance over
several prior quarters. Cyclical stocks rebounded nicely due to continued strong
economic growth in the United States as well as signs of economic improvement
overseas. The Fund was well positioned to benefit from the increased breadth in
the market.
Over the past several years, large-sized company stocks have outperformed small
ones, and growth stocks have outperformed value. But in the last six months,
small stocks and value stocks have improved their relative price performance.
PORTFOLIO HIGHLIGHTS
The increased breadth in the market during the second quarter was evident in the
number of sectors and stocks that contributed to the Investors Fund's overall
six-month performance. In particular, the technology, communications, capital
goods, energy and transportation sectors led performance. Technology standouts
included IBM, Hewlett Packard and Texas Instruments, among others. The Fund also
benefited from two take-overs -- Frontier Corp. and Atlantic Richfield. Other
significant contributors included Liberty Media, Morgan Stanley Dean Witter and
Williams Cos. However, the Fund's tobacco holdings held back performance.
12
<PAGE>
MARKET OUTLOOK
In the near term, we expect continued volatility in the equity markets due to
the relatively high level of equity valuations and investor uncertainty over the
direction of the economy, interest rates and inflation. Yet we do see an
opportunity for individual stocks to outperform as investors seek greater
breadth in the market by focusing on stocks with more attractive valuations. As
of June 30, 1999, the average projected 1999 price-to-earnings ("P/E") ratio for
the top 50 companies in the S&P 500 was 40x compared with 28x for the next 450
companies. Although many of the largest companies deserve P/E multiple premiums,
this discrepancy is large by historical standards.
Currently, the Fund has overweight positions in the consumer non-cyclicals,
energy and communication services sectors. Moreover, the Fund is underweight in
technology, capital goods and healthcare. Recently, we have been trimming
positions in sectors that have performed quite well this year, such as
technology, media and telecommunications, and adding to sectors that have
underperformed, such as healthcare. And while no guarantees can be made, we
believe that the Investors Fund should perform well relative to the S&P 500 due
to the Fund's lower valuations yet similar growth prospects.
13
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Common Stock 94%
Short-Term Obligations 3%
Convertible Securities 3%
- ----------------------------------------
- -------------------------
Top Stock Holdings
- -------------------------
International
Business Machines Corp.
Philip Morris Cos.
News Corp. ADR
Nabisco Group Holdings
Corp.
The Pepsi Bottling
Group Inc.
Federated Department
Stores, Inc.
The Bank of New York
Bell Atlantic Corp.
Pharmacia & Upjohn, Inc.
GTE Corp.
============================
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(*)
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 27.25% 25.58%
3 year 24.68% 22.24%
1 year 18.34% 11.53%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 26.31% 26.11%
3 year 23.75% 23.09%
1 year 17.39% 12.39%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 26.33% 26.04%
3 year 23.77% 23.36%
1 year 17.46% 15.29%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
10 year 16.90% 16.90%
5 year 25.09% 25.09%
3 year 24.99% 24.99%
1 year 18.55% 18.55%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers Investors Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Growth & Income Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30,1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (1/3/95) 23.73% 27.25% 1st Quartile - Top 13% #52 of 390 Funds
1 year 14.48% 18.34% 2nd Quartile - Top 32% #269 of 843 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (1/3/95) 26.31% 1st Quartile - Top 22% #85
1 year 17.39% 2nd Quartile - Top 37% #315
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (1/3/95) 26.33% 1st Quartile - Top 22% #85
1 year 17.46% 2nd Quartile - Top 37% #310
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception N/A N/A
1 year 18.55% 2nd Quartile - Top 31% #261
=========================================================================================================
</TABLE>
Portfolio holdings may vary.
See page 29 for all footnotes.
14
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
Total Return Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers Total Return Fund seeks to obtain above-average income
compared to a portfolio that invests only in common stocks. The Fund's secondary
objective is to take advantage of opportunities for growth of capital and income
by investing in a variety of asset classes including stocks, bonds and
short-term obligations.
The Fund's equity investments have been in large-capitalization stocks that are
paying dividends greater than the S&P 500 Index average. With assets allocated
to investment-grade, high-yield and convertible securities, the bond portion of
the Fund's portfolio is distributed across a broader range of fixed income
instruments than most balanced funds. The Fund's strategic approach in the bond
market tends to raise its income potential and the variety of its bond holdings
also provides diversification benefits that the portfolio manager believes could
help to limit its volatility.
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] George J. Williamson, Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 40 years of investment industry experience in
the equity markets. Mr. Williamson is primarily responsible for day-to-day Fund
management.
PERFORMANCE UPDATE
The Total Return Fund's Class A shares returned 9.27% without sales charges for
the six months ended June 30, 1999. This compares with the 5.50% return for a
composite index of 50% Salomon Smith Barney Broad Investment-Grade Bond Index
and 50% S&P 500 Index, and 5.57% for the Lipper, Inc. Balanced Funds peer group
average over the same period. (Lipper is a major fund-tracking organization.)
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
In the first half of 1999, the Total Return Fund benefited from its energy and
basic materials companies. These stocks performed well because of a strong
economy and a recovery in their sectors.
We gradually increased positions in high-quality growth stocks such as IBM,
Pfizer and undervalued stocks such as Rite Aid and First Union. We believe that
the outlook for growth in these companies is well defined. With the late spring
run up in cyclicals, we took the opportunity to cut back on some names such as
Willamette Industries, Geon and Lyondell.
MARKET OUTLOOK
We will continue to strive to buy growing companies at reasonable prices and
focus on companies that tend to be leaders in expanding industries. Also, we
will look to maintain above average income. We think that the economy should
grow moderately through the end of 2001 and, while no guarantees can be made, we
expect that stock valuations will increase moderately in response.
15
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Common Stock 53%
Corporate Bonds 18%
Convertible Securities 10%
Asset-Backed Securities 4%
Short-Term Obligations 1%
U.S. Government Agencies &
Obligations 14%
- ----------------------------------------
- ----------------------------
Top Stock Holdings
- ----------------------------
Canadian National
Railway Co.
BCE Inc.
Suncor Energy, Inc.
Avon Products, Inc.
Frontier Corp.
Union Pacific Corp.
USEC Inc.
SBC Communications Inc.
CIGNA Corp.
Bell Atlantic Corp.
============================
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(*)
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 15.79% 14.00%
3 year 15.42% 13.17%
1 year 9.28% 2.97%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 14.90% 14.37%
3 year 14.56% 13.79%
1 year 8.47% 3.47%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 14.92% 14.62%
3 year 14.52% 14.14%
1 year 8.37% 6.28%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 16.19% 16.19%
3 year 15.79% 15.79%
1 year 9.41% 9.41%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers Total Return Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Balanced Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (9/11/95) 15.37% 15.79% 2nd Quartile - Top 45% #119 of 267 Funds
1 year 9.98% 9.28% 3rd Quartile - Top 53% #226 of 429 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (9/11/95) 14.90% 3rd Quartile - Top 57% #151
1 year 8.47% 3rd Quartile - Top 59% #251
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (9/11/95) 14.92% 3rd Quartile - Top 56% #149
1 year 8.37% 3rd Quartile - Top 59% #252
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (9/11/95) 16.19% 2nd Quartile - Top 37% #98
1 year 9.41% 3rd Quartile - Top 51% #217
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
16
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
High Yield Bond Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers High Yield Bond Fund seeks to maximize current income by
investing primarily in a diversified portfolio of high-yield bonds rated in
medium or lower categories. As a secondary objective, the Fund seeks capital
appreciation.
Under normal market conditions, the Fund intends to invest at least 65% of its
assets in securities rated Baa or lower by Moody's Investors Service, Inc., or
those rated BBB or lower by Standard & Poor's Ratings Service. (Moody's and S&P
are two major credit reporting and bond rating agencies.) A key component of the
Fund's overall investment strategy is to determine the optimal asset allocation
between domestic high-yield bonds and international U.S. dollar-denominated
bonds such as Brady Bonds and lower-rated sovereign debt.
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] Peter J.Wilby, CFA, Managing Director and Senior Portfolio Manager at
Salomon Brothers Asset Management Inc, has 16 years of investment industry
experience principally in the high-yield and emerging debt markets. Mr. Wilby is
primarily responsible for the day-to-day management of the High Yield Bond Fund.
PERFORMANCE UPDATE
During the six months ended June 30, 1999, the High Yield Bond Fund's Class A
shares without sales charges posted a return of 3.95%. This performance compares
with the 1.77% return for the high-yield bond market, as measured by the Salomon
Smith Barney High-Yield Market Index, and a 3.55% return for the Lipper, Inc.
High Current Yield Funds peer group average. (Lipper is a major fund-tracking
organization.) In addition, the High Yield Bond Fund's Class A share return of
3.95% compares to the 10.58% return for the J.P. Morgan Emerging Market Bond
Index Plus ("EMBI+"), a standard benchmark for the emerging debt market. (As of
June 30, 1999, the Fund's emerging market debt holdings were roughly 31%.)
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
The U.S. High Yield Market returned 1.77% for the first half of 1999, as
reported by the Salomon Smith Barney High Yield Market Index. While benefiting
from a strong economy and a booming U.S. equity market, high yield suffered from
the following:
1. A back-up in Treasuries due to concern about rising inflation;
2. slowing mutual fund inflows;
3. a heavy new issue calendar;
4. a reduction in broker/dealer liquidity; and
5. a rise in default rates, especially among marginal commodity
producers.
The period began with concerns that a weak recovery in Asia and recession in
Latin America would trigger a slowdown in the U.S. economy. However, economic
growth in the U.S. was stronger than anticipated and led to concerns about
rising inflation. These inflation fears caused interest rates to trend higher
and dampened returns in the market, especially during the second quarter.
Also pressuring the high-yield market during the second quarter was near-record
new issue volume, as companies scrambled to secure financings before rates rose
further, the general belief that the primary market would close during the
fourth quarter and mutual fund outflows occurring during May and June.
For the period, the high-yield market's top performers included Basic Industries
such as Metals/Mining, and Paper & Forest Products, which continued to rebound
from the severe declines last fall. Several Non-Cyclical industries such as
Gaming, Consumer Products and Cable & Media also outperformed, driven by
improving earnings and buoyed by acquisition news. Energy outperformed,
benefiting from increases in oil prices. The worst performers included Health
Care, due to the industry's troubles with the recently imposed Medicare
reimbursement system, Textile/Apparel, which is suffering from cheaper imports,
Automotive, Restaurants and Services. In terms of credit quality, investors
favored the lower tiers, as the better quality bonds, which trade more closely
17
<PAGE>
with Treasuries, were hurt by the falling Treasury market: BB, B and CCC issues
showed returns of 0.70%, 1.60% and 7.57%, respectively.
The Fund benefited from an overweighting in Basic Industries and Consumer
Non-Cyclicals, such as Gaming and Food/Beverage companies. It was also helped by
underweightings in Textiles, Restaurants and Health Care. Performance was hurt,
however, by overweightings in Automotive and Financials and an underweighting in
Energy.
MARKET OUTLOOK
On June 30, 1999, the high-yield market was yielding 10.70% up from 10.28% at
year-end. The excess yield over U.S. Treasuries was 4.97% down from 5.66% at
year-end. We believe that these levels still represent attractive long-term
value. However, we expect to experience volatility through year-end due to Y2K
concerns, inflation fears and a general lack of liquidity. We are looking to
take advantage of attractive opportunities that may materialize in this
environment.
18
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
High Yield Securities 66%
Emerging Markets Debt 31%
Short-Term Obligations 2%
Warrants and
Preferred Stock 1%
- ----------------------------------------
- -------------------------
Top Five Industries
- -------------------------
Media/
Telecommunications
Consumer Non-Cyclicals
Basic Industries
Manufacturing
Services/Other
=========================
Each of the sectors represents various industries. Media includes cable,
publishing and printing, and telecommunications. Consumer Non-Cyclicals:
consumer products, food products, bottling, gaming, healthcare,
supermarkets/drugstores, tobacco. Manufacturing: aerospace and defense,
automotive, capital goods, building products. Basic Industries: chemicals,
containers/packaging, paper and forest products, steel/metal. Services/Other:
consumer, data/tech/business and industrial.
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(***)
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 10.62% 9.39%
3 year 6.75% 5.02%
1 year -5.07% -9.58%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 9.81% 9.48%
3 year 5.98% 5.18%
1 year -5.77% -10.04%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 9.82% 9.57%
3 year 6.02% 5.66%
1 year -5.68% -7.43%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 10.85% 10.85%
3 year 7.07% 7.07%
1 year -4.90% -4.90%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers High Yield Bond Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: High Current Yield Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (2/22/95) 9.36% 10.62% 1st Quartile - Top 18% #22 of 122 Funds
1 year -1.44% -5.07% 4th Quartile - Top 82% #239 of 290 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 9.81% 2nd Quartile - Top 33% #40
1 year -5.77% 4th Quartile - Top 84% #244
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 9.82% 2nd Quartile - Top 32% #39
1 year -5.68% 4th Quartile - Top 84% #243
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 10.85% 1st Quartile - Top 15% #18
1 year -4.90% 4th Quartile - Top 81% #236
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
19
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
Strategic Bond Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers Strategic Bond Fund seeks a high level of current income.
The Fund seeks to achieve its objective by investing in a globally diverse
portfolio of fixed-income securities. As a secondary objective, the Fund seeks
capital appreciation. Assets of the Fund may be deployed among various sectors
of the global bond market, depending on portfolio managers' analysis of current
economic and market conditions and the relative risks and opportunities
presented in various market segments.
PERFORMANCE UPDATE
For the six months ended June 30, 1999, the Strategic Bond Fund's Class A shares
posted a 0.03% total return without sales charges. This compares with the
negative 1.39% return for the Salomon Smith Barney Broad Investment-Grade (BIG)
Bond Index and the 0.83% return for the Lipper, Inc. Multi-Sector Income Funds
peer group average. (Lipper is a major fund-tracking organization.) The Fund's
outperformance relative to the BIG Index can be attributed to its allocation to
the high yield and emerging market debt sectors, which had a stellar six months
relative to investment grade bond sector.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
During the first half of 1999, a strong domestic economy, rising oil prices and
a rebound in economic activity overseas combined to force interest rates up and
prices on investment grade bonds down across the U.S. yield curve. The Federal
Reserve Board ("Fed") added to the bond market malaise by adopting a tightening
bias in May and raising the federal-funds rate by 25 basis points to 5.00% at
the Federal Open Market Committee ("FOMC") in late June.
Financial markets began 1999 under the shadow of the 1998 financial crisis.
Caution prevailed among fixed income investors who remained overweighted in high
quality bonds such as U.S. Treasuries. Investor fears proved to be well founded
as by mid-January, Brazil devalued its currency and saw its interest rates rise
sharply. Rather than Brazil serving as the catalyst for another vicious round of
contagion, financial markets seemed to shrug it off. In effect, the episode
became a bottoming event that boosted the confidence of investors to venture out
of U.S. Treasuries into higher yielding bonds.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] Peter J. Wilby, CFA, Managing Director and Senior Portfolio Manager
at Salomon Brothers Asset Management Inc, has 16 years of investment industry
experience principally in the high-yield and emerging debt markets. Mr. Wilby is
primarily responsible for day-to-day Fund management of the U.S. high-yield and
foreign sovereign bond portions of the Fund.
[PHOTO] David J. Scott, Director and Portfolio Manager at Salomon Brothers
Asset Management Inc., has 16 years of investment industry experience. SBAM Ltd
provides certain advisory services to SBAM Inc relating to currency transactions
and investments in non-dollar denominated securities.
[PHOTO] Roger Lavan, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 14 years of investment industry experience in fixed-income
markets.
20
<PAGE>
Emerging markets debt had a stellar six months for the first half of 1999, with
Russia taking the lead as top performer. Continued strong growth in the U.S. and
the 50 basis point easing by the European Central Bank calmed many investors'
fears that a major slowdown in the industrialized world would have a detrimental
impact on emerging markets. Within the emerging markets, interest rate declines
and surprisingly low inflation numbers in Brazil encouraged a resumption of
private sector capital flows to the entire Latin American region, despite the
country's devaluation earlier in the year. Additionally, the rebound in oil
prices strengthened all oil producing economies and especially those in emerging
markets. Venezuela, Ecuador, Algeria, Russia and Mexico have all benefited by
the nearly 50% increase in the price of oil since late February.
MARKET OUTLOOK
In general, we would expect volatility to remain high into year-end, but we do
not expect a further significant rise in U.S. bond yields. The Fed has
engineered a nice balance of strong economic growth, low inflation and favorable
interest rates. And while no guarantees can be made, those factors, coupled with
a strong economy, should help provide a favorable performance for the Fund.
21
<PAGE>
- ----------------------------------------
Portfolio Hightlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Corporate Bonds 34%
Sovereign Bonds 25%
Loan Participations 2%
Mortgage Obligations 8%
Short-Term Obligations 13%
U.S. Government Agencies &
Obligations 18%
Portfolio holdings may vary.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- ------------------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(***)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Since Inception (2/22/95) 9.73% 8.50%
3 year 6.70% 4.98%
1 year -1.22% -5.93%
- ------------------------------------------------------------------------------------------
Class B Shares
- ------------------------------------------------------------------------------------------
Since Inception (2/22/95) 8.85% 8.51%
3 year 5.87% 5.04%
1 year -2.02% -6.56%
- ------------------------------------------------------------------------------------------
Class 2 Shares
- ------------------------------------------------------------------------------------------
Since Inception (2/22/95) 8.91% 8.66%
3 year 5.94% 5.58%
1 year -1.92% -3.81%
- ------------------------------------------------------------------------------------------
Class O Shares
Since Inception (2/22/95) 9.97% 9.97%
3 year 6.96% 6.96%
1 year -0.95% -0.95%
==========================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers Strategic Bond Fund
- ------------------------------------------------------------------------------------------
Lipper Category: Multi-Sector Income Funds
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return** Ranking
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (2/22/95) 8.30% 9.73% 1st Quartile - Top 16% #8 of 49 Funds
1 year -0.62% -1.22% 3rd Quartile - Top 59% #57 of 96 Funds
- --------------------------------------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 8.85% 2nd Quartile - Top 33% #16
1 year -2.02% 3rd Quartile - Top 75% #72
- --------------------------------------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 8.91% 2nd Quartile - Top 31% #15
1 year -1.92% 3rd Quartile - Top 73% #70
- --------------------------------------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 9.97% 1st Quartile - Top 12% #6
1 year -0.95% 3rd Quartile - Top 54% #52
==============================================================================================================
</TABLE>
See page 29 for all footnotes.
22
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
National Intermediate
Municipal Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers National Intermediate Municipal Fund seeks to achieve a
high level of current income exempt from regular federal income taxes. Under
normal circumstances, at least 80% of the Fund's net assets will be invested in
municipal obligations, the interest on which is exempt from regular federal
income tax. Please note that all or a portion of the Fund's income may be
subject to the federal alternative minimum tax.
THE FUND MANAGERS
[PHOTO] Robert E. Amodeo, CFA Director and Co-Portfolio Manager at Salomon
Brothers Asset Management Inc, has 12 years of investment industry experience.
Mr. Amodeo shares responsibility for day-to-day Fund Management.
[PHOTO] Thomas A. Croak, Vice President and Co-Portfolio Manager at Salomon
Brothers Asset Management Inc, has 15 years of investment industry experience in
the municipal securities market. Mr. Croak shares responsibility for day-to-day
Fund Management.
PERFORMANCE UPDATE
The National Intermediate Municipal Fund's Class A shares returned a negative
0.50% without sales charges for the six months ended June 30, 1999. This return
was roughly in line with the negative 0.39% return for the weighted average of
the Lehman Brothers 1-10 year Municipal Bond Index and was better than the
negative 1.27% return for Lipper, Inc. Intermediate Municipal Debt Funds peer
group average. (Lipper is a major fund-tracking organization.) The Fund
performed well during the reporting period due to its neutral to short duration
and high credit quality orientation.
We are also pleased to report that your Fund continues to be a top performer
relative to its Lipper peers. The National Intermediate Fund's Class A shares
ranked in the second quartile of national intermediate municipal bond funds for
the one-year period ended June 30, 1999. (Lipper rankings show a fund's 1-, 5-
and 10-year year annualized returns (at NAV) of a particular reporting period.
Lipper also compares a fund's returns to the average of its peer group. The
rankings are subject to change every month. Past performance is not indicative
of future results. For the 1-, 5- and 10-year periods ended June 30, 1999, there
were 133, 88 and 24 funds, respectively, in the Lipper peer group category.)
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
During the first half of 1999, a strong domestic economy, rising oil prices and
reviving economic activity overseas combined to force interest rates up across
the U.S. Treasury yield curve. U.S. economic growth continued at a robust pace
during the first half of the year as evidenced by the 4.3% and 2.3% GDP growth
rates for the first and second quarter, respectively. Domestic labor markets
remained extremely tight, with the unemployment rate near a 29-year low.
Collectively, the aforementioned heightened obstinate worries about the prospect
for higher inflation in the near-term. The Federal Reserve ("Fed") addressed
some of those concerns when it increased its short-term lending rate by 25 basis
points to 5.00% at the conclusion of its mid-year Federal Open Market Committee
meeting. The Fed also cited that "conflicting forces in the economy" led it to
adopt a neutral stance concerning its near-term policy action, therefore
dropping its previous tightening bias. However, the Fed has signaled its
willingness to raise rates if there are any signs of inflationary pressures.
Inflation -- as measured by the Consumer Price Index ("CPI") -- was relatively
well behaved during the first half of the year. Productivity gains and moderate
global demand were credited with keeping inflation at a tepid rate.
23
<PAGE>
Municipal bond performance, although negative during the first six months of the
year, outpaced most taxable fixed income asset classes. Decreased supply and
generous municipal yields compared to U.S. Treasuries influenced the municipal
market favorably. State and local governments issued approximately $115 billion
of debt during 1999, about 23% shy of the same period last year. New project
funding continues to outpace refunding issues. The need for municipal new
project funding comes from the demands of a growing economy along with general
disrepair of municipal infrastructures from decades past. Burgeoning tax
receipts are helping to improve the financial standing of many municipal
authorities. Evidence of this improvement is the soaring number of rating
upgrades for many municipal authorities from both Moody's Investors Service,
Inc. and Standard & Poor's Ratings Service, two major credit rating
organizations.
The Fund's investment strategy involves three steps:
1) Market profile: Our Investment Policy Committee's perspective on interest
rate movements and U.S. economic stability drives the Fund's top-down
investment decisions;
2) Security analysis: Analysts and portfolio managers use a bottom-up approach
that combines technical evaluation tools with experienced human judgement to
identify relative values among municipal securities;
3) Portfolio construction: The portfolio is the result of both top-down and
bottom-up viewpoints ensuring each security is contributing to the Fund's
investment objectives.
As of June 30, 1999, the Fund's long-term holdings consisted of 42 issues in 17
different states and the District of Columbia with an average credit quality of
"AA". The Fund's top five sectors as of June 30, 1999, were transportation
(20.2%), health care (15.5%), education (14.4%), power (12.3%), and housing
(6.2%).
MARKET OUTLOOK
We expect the U.S. economy will remain stable for the remainder of the year as
low unemployment and strong consumer confidence will support demand for goods.
Additionally, the Fed has engineered a good balance of stable economic growth,
low inflation and favorable interest rates. We are generally optimistic about
the prospects for the municipal bond market through the end of 1999. We believe
that municipal bonds are attractive versus taxable fixed income securities and
the National Intermediate Municipal Fund is well positioned for the market
conditions we expect for the remainder of 1999.
24
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Credit Quality Breakdown as of
June 30, 1999
[CHART APPEARS HERE]
AAA 51%
A 17%
BBB 13%
AA 12%
- ----------------------------------------
Cash equivalents represent 7% of the Fund's total investments.
- -------------------------
Composition of portfolio
of June 30, 1999(#)
- -------------------------
New York 25%
Indiana 11%
Illinois 10%
Pennsylvania 8%
Virginia 8%
South Carolina 7%
California 4%
Texas 4%
Ohio 3%
District of
Columbia 3%
New Jersey 3%
Massachusetts 3%
Michigan 3%
Mississippi 2%
Louisiana 2%
Hawaii 2%
North Carolina 1%
Florida 1%
=========================
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(***)
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 5.66% 4.48%
3 year 5.29% 3.59%
1 year 1.97% -2.89%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 4.77% 4.37%
3 year 4.48% 3.56%
1 year 1.28% -3.59%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 4.79% 4.55%
3 year 4.51% 4.17%
1 year 1.38% -0.63%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 5.83% 5.83%
3 year 5.53% 5.53%
1 year 2.30% 2.30%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers National Intermediate Municipal Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Intermediate Municipal Debt Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30, 1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (2/22/95) 5.48% 5.66% 2nd Quartile - Top 37% #38 of 102 Funds
1 year 1.93% 1.97% 2nd Quartile - Top 49% #64 of 131 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 4.77% 4th Quartile - Top 91% #93
1 year 1.28% 4th Quartile - Top 88% #115
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 4.79% 4th Quartile - Top 90% #92
1 year 1.38% 4th Quartile - Top 82% #108
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 5.83% 1st Quartile - Top 21% #21
1 year 2.30% 2nd Quartile - Top 26% #34
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
25
<PAGE>
[GRAPHIC] THE SALOMON BROTHERS
U.S. Government
Income Fund
INVESTMENT OBJECTIVE
AND STRATEGY
The Salomon Brothers U.S. Government Income Fund seeks to obtain a high level of
current income. Under normal conditions the Fund invests 100% of its net assets
in debt obligations and mortgage-backed securities issued by or guaranteed by
the U.S. government, its agencies or instrumentalities. The Fund expects to
maintain an average portfolio duration of two to four years. (Duration is a
rough measure of a Fund's sensitivity to changes in interest rates.)
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] Roger Lavan, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 14 years of investment industry experience in the fixed-
income markets. Mr. Lavan is responsible for day-to-day Fund management.
PERFORMANCE UPDATE
The U.S. Government Income Fund Class A shares returned a negative 0.56% for the
six months ended June 30, 1999, versus the Lipper Short/Intermediate Fund
Average that returned negative 0.26 basis points. (Lipper is a major fund-
tracking organization.) The Fund's slight underperformance relative to its
Lipper category was due primarily to a longer duration position that made the
portfolio more sensitive to changes in interest rates.
MARKET REVIEW
The U.S. bond market slump, which began in February 1999, continued throughout
the second quarter of 1999. Interest rates moved higher in each month of the
quarter, with most of the damage inflicted in May when the Federal Reserve
signalled that a boost in the federal-funds rate was likely. Overall,
intermediate yields increased 55-65 basis points during the second quarter,
bringing the year-to-date totals to 100-125 basis points. Higher rates caused
most bonds to post negative total returns for the first six months of the year.
U.S. economic data, which had taken a back seat to global financial turmoil for
the last year, returned to its normal level of scrutiny. The April Consumer
Price Index ("CPI") figures that were reported in May proved to be the most
critical for the bond market. Investors had begun to embrace higher levels of
economic growth and consumer spending as long as it was accompanied by low
inflation. With inflation indicators holding at 30-year lows, long-term interest
rates were sustainable in a 5.25% to 5.75% range. The April CPI, up 0.7%, not
only changed the perception of investors but also prompted the Fed to move from
a "neutral" to a "tightening" bias. Ultimately, at quarter-end, the Fed followed
through on their May announcement by raising short-term interest rates a quarter
point to 5.00%.
Although the recent boost in the federal funds rate was clearly expected by the
market, the Fed did nonetheless surprise investors on June 30, 1999 by
announcing a shift in its bias back to "neutral." Despite the soothing words in
the latest policy statement, we believe the risk remains for higher bond yields
over the next few months. Bonds must price off the "final" expected resting
place for rates. We are assuming 5.25% for the federal funds rate in the near
term. Although we look for the Fed to act again soon, we are considering
extending interest-rate sensitivity in our portfolios on the belief that yields
will be lower over a three- to six-month horizon.
26
<PAGE>
The Fund's performance during the first half was hampered by the 100 plus basis
points rise in bond yields. We began 1999 with the expectation U.S. interest
rates would remain relatively steady as economic growth outside the U.S.
remained anemic. To boast the Fund's yield we executed two strategies. First, we
reduced the Fund's U.S. Treasury holdings and increased the allocation to
mortgage securities. Fortunately, prices of mortgage securities declined
considerably less than comparable Treasury securities. For the first half of
1999, mortgage pass-throughs outperformed comparable on-the-run Treasuries by 59
basis points. Our second strategy called for a duration shift out to 3.5 years.
This proved ill timed because interest rates rose considerably.
MARKET OUTLOOK
Fed action of raising the federal funds rate 25 basis points on June 30, 1999
did not prove alarming, although we were surprised that the Fed adopted a
neutral bias. However, we would note that the Fed has often adopted a neutral
bias after raising rates in the past, whether or not it subsequently raised
rates later. Thus, we believe that the markets will remain volatile over the
next few months as investors focus on economic data points to try to get a sense
of whether the Fed may need to tighten again.
27
<PAGE>
- ----------------------------------------
Portfolio Highlights(#)
- ----------------------------------------
Composition of portfolio as of
June 30, 1999
[CHART APPEARS HERE]
Agency Pass Throughs 43%
Treasury & Agency Debentures 13%
Mortgage Obligations 9%
Short-Term Obligations 35%
- ----------------------------------------
Portfolio holdings may vary.
- --------------------------------------------------------------------------------
Average Annual Total Returns for Period Through June 30, 1999
- --------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges(***)
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.39% 5.20%
3 year 6.37% 4.65%
1 year 3.60% -1.32%
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 5.60% 5.22%
3 year 5.63% 4.73%
1 year 2.91% -1.94%
- --------------------------------------------------------------------------------
Class 2 Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 5.60% 5.36%
3 year 5.63% 5.28%
1 year 2.92% 0.96%
- --------------------------------------------------------------------------------
Class O Shares
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.66% 6.66%
3 year 6.69% 6.69%
1 year 3.94% 3.94%
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Lipper Comparative Performance(+)
Salomon Brothers U.S. Government Income Fund
- ---------------------------------------------------------------------------------------------------------
Lipper Category: Short/Intermediate U.S. Government Funds
- ---------------------------------------------------------------------------------------------------------
1 Year & Since Inception Total Returns as of June 30,1999
Class A Shares Lipper Average Fund Return(**) Ranking
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since Inception (2/22/95) 5.96% 6.39% 1st Quartile - Top 21% #14 of 66 Funds
1 year 3.34% 3.60% 2nd Quartile - Top 46% #44 of 96 Funds
- ---------------------------------------------------------------------------------------------------------
Class B Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 5.60% 3rd Quartile - Top 75% #50
1 year 2.91% 3rd Quartile - Top 72% #69
- ---------------------------------------------------------------------------------------------------------
Class 2 Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 5.60% 3rd Quartile - Top 75% #50
1 year 2.92% 3rd Quartile - Top 72% #69
- ---------------------------------------------------------------------------------------------------------
Class O Shares
- ---------------------------------------------------------------------------------------------------------
Since Inception (2/22/95) 6.66% 1st Quartile - Top 12% #8
1 year 3.94% 1st Quartile - Top 25% #24
=========================================================================================================
</TABLE>
See page 29 for all footnotes.
28
<PAGE>
FOOTNOTES
(*) Class A & 2 shares reflect the deduction of the maximum 5.75% and 1.00%
sales charges respectively. Class B & 2 shares reflect the maximum
contingent deferred sales charge of 5.00% and 1.00%, respectively. Class
O shares have no initial or contingent deferred sales charge.
(**) Return does not reflect the deduction of sales changes.
(***) Class A & 2 shares reflect the deduction of the maximum 4.75% and 1.00%
sales charges respectively. Class B & 2 shares reflect the maximum
contingent deferred sales charge of 5.00% and 1.00%, respectively. Class
O shares have no initial or contingent deferred sales charge.
(+) Lipper, Inc. an industry recognized analysis company, calculates rankings
based on total return performance of funds within each category. Lipper
rankings change monthly and do not reflect the effect of sales charges.
Accordingly, the result in this table for the Class A, Class B, Class 2
and Class O shares of each Fund do not reflect the effects of the sales
charges applicable to each Class. Lipper performance results represent
changes in net asset value, adjusted to reflect reinvestment of dividends
and capital gains.
(#) As a % of total investments.
N/A Not available.
GENERAL PERFORMANCE AND RANKING NOTES
Average annual total returns are based on changes in net asset value and assume
the reinvestment of all dividends, and/or capital gains distributions in
additional shares with and without the effect of the maximum sales charge (Class
A and 2) and the contingent deferred sales charge (Class B and 2). Class O
shares are only available to existing Class O shareholders. Past performance
does not guarantee future results. Investment return and principal value
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Returns for certain Funds reflect a voluntary expense
cap imposed by Salomon Brothers Asset Management Inc to limit total Fund
operating expenses. Absent this expense cap, Fund returns would be lower.
Expense caps may be revised or terminated at any time.
29
<PAGE>
Schedules of Investments
June 30, 1999 (unaudited)
Salomon Brothers Asia Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCK -- 89.2%
China -- 2.0%
2,200,000 Guangzhou Pharmaceutical Co. Ltd., Class H Shares..... $ 354,431
-----------
Hong Kong -- 32.5%
362,000 China Everbright Ltd. (a)............................. 361,586
464,000 China Merchants Holdings International Co. Ltd........ 406,657
149,000 China Telecom Ltd. (a)................................ 413,842
510,000 Cosco Pacific Ltd..................................... 423,966
851,000 First Pacific Co. Ltd................................. 723,893
952,000 Giordano International Ltd............................ 674,839
1,010,000 Glorious Sun Enterprises Ltd.......................... 344,960
149,000 Guoco Group Ltd....................................... 399,438
523,200 HKR International Ltd................................. 451,796
126,000 Li & Fung Ltd......................................... 302,053
3,030,000 Moulin International Holdings Ltd..................... 324,131
150,000 New World Development Co. Ltd......................... 449,483
80,000 Television Broadcasting Ltd........................... 375,315
-----------
5,651,959
-----------
India -- 3.3%
40,500 Reliance Industries Ltd. GDR.......................... 407,025
29,500 Tata Engineering & Locomotive GDR..................... 171,100
-----------
578,125
-----------
Indonesia -- 3.8%
300,000 PT Astra International................................ 137,254
148,000 PT Hanjaya Mandala Sampoern........................... 339,636
324,000 PT Telekomunikasi Indonesia........................... 188,235
-----------
665,125
-----------
Malaysia -- 4.7%
122,000 AMMB Holdings......................................... 299,799
146,000 Gamuda Berhad......................................... 266,308
139,000 Malaysia International Shipping Corp. (b)............. 244,736
-----------
810,843
-----------
Philippines -- 2.4%
13,500 Philippine Long Distance Telephone Co................. 411,563
-----------
Singapore -- 14.4%
74,000 Fraser & Neave Ltd.................................... 328,164
105,000 GP Batteries International Ltd........................ 201,057
85,000 Natsteel Electronics Ltd.............................. 371,953
120,000 Pacific Century Regional Development Ltd. (a)......... 511,013
12,000 Pacific Internet Ltd. (a)............................. 568,500
76,000 United Overseas Bank Ltd. (a)(b)...................... 531,218
-----------
2,511,905
-----------
South Korea -- 10.9%
14,000 Daewoo Securities..................................... 272,138
380 Hansol Paper.......................................... 6,040
13,000 Korea Housing & Finance............................... 409,935
7,600 Korea Telecom Corp. ADR (a)........................... 304,000
5,338 Pohang Iron & Steel Co. Ltd........................... 643,382
11,527 Samsung Corp.......................................... 270,872
-----------
1,906,367
-----------
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Asia Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Taiwan -- 11.5%
64,000 Cathay Life Insurance Co. Ltd........................ $ 229,845
96,075 Compal Electronics Inc............................... 377,758
150,000 First Commercial Bank................................ 285,603
640,000 Lealea Enterprises Co................................ 246,687
75,800 President Chain Store Corp........................... 256,969
158,670 Taiwan Semiconductor Manufacturing Co. (a)........... 606,679
-----------
2,003,541
-----------
Thailand -- 3.7%
112,000 Bangkok Bank Public Co. Ltd. (b)..................... 419,145
National Finance & Securities Finance Public Co. Ltd.
380,000 (b).................................................. 229,288
-----------
648,433
-----------
TOTAL COMMON STOCK
(Cost -- $12,161,818)................................ 15,542,292
-----------
<CAPTION>
Face
Amount
----------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 1.2%
Indonesia -- 1.2%
Asia Pulp & Paper, 3.500% due 4/30/03 (Cost --
$ 280,000 $169,041)........................................... 207,200
-----------
EQUITY-LINKED NOTES -- 4.9%
India -- 2.7%
16,000 Satyam Comp, Series B, due 3/31/02 (c)............... 476,544
-----------
Singapore -- 2.2%
188,385 OUB, due 1/6/02 (d).................................. 376,922
-----------
TOTAL EQUITY-LINKED NOTES
(Cost -- $593,648)................................... 853,466
-----------
<CAPTION>
Warrants
----------
<C> <S> <C>
WARRANTS (a) -- 0.9%
Indonesia -- 0.9%
PT Bank Panin Indonesia, Expires 6/26/00 (Cost --
1,500,000 $79,523)............................................ 151,416
-----------
<CAPTION>
Contracts
----------
<C> <S> <C>
PURCHASED OPTIONS (a) -- 3.8%
South Korea -- 3.8%
S.K. Telecom Lepo Call (Expires 12/9/99, exercise
500 price $0.001) (Cost -- $651,665)..................... 669,545
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $13,655,695*)............................... $17,423,919
===========
</TABLE>
- ------
(a) Non-income producing security.
(b) Foreign shares.
(c) The current principal amount of these notes is eqivalent to 629,920 shares
of Satyam Computer. Redemption proceeds will be determined at date of re-
demption based on change in the value of the shares of Satyam Computer. In-
terest on the notes is equal to the amount of dividends paid on the under-
lying shares of Satyam Computer.
(d) The current principal amount of these notes is eqivalent to 152,600 shares
of Overseas Union Bank. Redemption proceeds will be determined at date of
redemption based on change in (1) the value of the shares of Overseas Union
Bank and (2) the exchange rate between the U.S. Dollar and Singapore Dol-
lar. Interest on the notes is equal to the amount of dividends paid on the
underlying shares of Overseas Union Bank.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
ADR -- American Depository Receipt.
GDR -- Global Depository Receipt.
HKD -- Hong Kong Dollar.
KRW -- Korean Won.
NTD -- New Taiwan Dollar.
SGD -- Singapore Dollar.
See Notes to Financial Statements.
31
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Small Cap Growth Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCK -- 98.8%
Basic Industries -- 1.5%
2,500 The Geon Co............................................ $ 80,625
7,000 M.A. Hanna Co.......................................... 115,063
-----------
195,688
-----------
Capital Goods -- 3.1%
5,000 Matthews International Corp., Class A Shares........... 148,125
5,000 Navistar International Corp. (a)....................... 250,000
-----------
398,125
-----------
Communications -- 8.4%
4,500 Cox Radio, Inc., Class A Shares (a).................... 244,125
6,000 Metromedia Fiber Network, Inc., Class A Shares (a)..... 215,625
6,000 PanAmSat Corp. (a)..................................... 233,625
Rogers Cantel Mobile Communications Inc., Class B
13,000 Shares (a)............................................. 213,688
3,500 WinStar Communications, Inc. (a)....................... 170,625
-----------
1,077,688
-----------
Consumer -- 34.1%
2,000 Abacus Direct Corp. (a)................................ 183,000
12,000 Ascent Entertainment Group, Inc. (a)................... 169,500
4,000 bebe Stores, Inc. (a).................................. 136,000
Beringer Wine Estates Holdings, Inc., Class B Shares
1,000 (a).................................................... 41,781
8,000 Cinar Corp., Class B Shares (a)........................ 196,000
7,000 Cost Plus, Inc. (a).................................... 318,500
16,000 DeVry, Inc. (a)........................................ 358,000
4,500 Dollar Tree Stores, Inc. (a)........................... 198,000
2,800 Entercom Communications Corp. (a)...................... 119,700
1,500 Factset Research Systems Inc........................... 84,937
7,000 Fossil, Inc. (a)....................................... 338,625
10,000 Insight Enterprises, Inc. (a).......................... 247,500
5,200 Michael Foods, Inc..................................... 122,200
3,000 O'Reilly Automotive, Inc. (a).......................... 151,125
6,750 Outback Steakhouse Inc. (a)............................ 265,359
5,000 Pegasus Communications Corp. (a)....................... 197,187
7,000 Profit Recovery Group International, Inc. (a).......... 331,187
7,500 Station Casinos, Inc. (a).............................. 152,812
3,500 Steiner Leisure Ltd. (a)............................... 106,093
13,000 U.S. Franchise Systems, Inc. (a)....................... 301,437
3,800 Univision Communications Inc. (a)...................... 250,800
3,000 Williams-Sonoma, Inc. (a).............................. 104,437
-----------
4,374,180
-----------
Energy -- 0.8%
3,000 Devon Energy Corp...................................... 107,250
-----------
Financial Services -- 14.7%
11,500 American Heritage Life Investment Corp................. 281,750
9,000 The Enstar Group, Inc. (a)............................. 140,625
5,000 Legg Mason, Inc........................................ 192,500
8,000 London Pacific Group Ltd., ADR......................... 184,000
9,000 Protective Life Corp................................... 297,000
6,650 Reinsurance Group of America, Inc. .................... 234,413
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Small Cap Growth Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Financial Services -- 14.7% (continued)
6,000 Reliastar Financial Corp............................... $ 262,500
7,000 UICI (a)............................................... 193,375
6,000 Willis Lease Finance Corp. (a)......................... 97,875
-----------
1,884,038
-----------
Health Care -- 7.8%
3,000 IDEC Pharmaceuticals Corp. (a)......................... 231,188
3,500 Idexx Laboratories, Inc. (a)........................... 81,594
9,800 Medquist Inc. (a)...................................... 428,750
5,000 ResMed Inc. (a)........................................ 165,937
2,000 Xomed Surgical Products, Inc. (a)...................... 97,375
-----------
1,004,844
-----------
Technology -- 28.4%
Affiliated Computer Services, Inc., Class A Shares
5,000 (a).................................................... 253,125
3,000 Applied Micro Circuit Corp............................. 246,750
5,000 AVT Corp. (a).......................................... 189,375
3,400 Carrier Access Corp. (a)............................... 148,963
3,600 CMGI Inc. (a).......................................... 410,625
7,000 Com21, Inc. (a)........................................ 119,438
5,000 Concord Communications................................. 225,000
3,000 Dallas Semiconductor Corp.............................. 151,500
500 High Speed Access Corp. (a)............................ 12,813
1,500 Legato Systems, Inc. (a)............................... 86,625
1,500 MMC Networks, Inc. (a)................................. 67,125
4,000 Network Appliance, Inc. (a)............................ 223,500
200 Network Plus Corp. (a)................................. 4,175
3,800 New Era of Networks, Inc. (a).......................... 166,962
6,000 Oak Industries Inc. (a)................................ 262,125
4,000 Polycom, Inc. (a)...................................... 156,000
600 Razorfish Inc. (a)..................................... 22,238
16,000 S3 Inc. (a)............................................ 145,500
4,000 Siebel Systems, Inc. (a)............................... 265,500
500 Silknet Software, Inc. (a)............................. 20,250
4,100 Software.com, Inc. (a)................................. 95,069
7,700 TranSwitch Corp. (a)................................... 364,788
-----------
3,637,446
-----------
TOTAL COMMON STOCK
(Cost -- $9,919,124)................................... 12,679,259
-----------
<CAPTION>
Face
Amount
--------
<C> <S> <C>
REPURCHASE AGREEMENT -- 1.2%
$153,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $153,020; (Fully
collateralized by U.S. Treasury Bonds, 13.875% due
5/15/01; Market value -- $157,988) (Cost --
$153,000)............................................ 153,000
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $10,072,124*)................................. $12,832,259
===========
</TABLE>
- ------
(a) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depository Receipt.
See Notes to Financial Statements.
33
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCK -- 91.5%
Basic Industries -- 6.2%
100,000 Crown Cork & Seal Co., Inc. ....................... $ 2,850,000
125,000 The Geon Co. ...................................... 4,031,250
60,000 Martin Marietta Materials, Inc. ................... 3,540,000
125,000 OM Group, Inc. .................................... 4,312,500
65,000 Vulcan Materials Co. .............................. 3,136,250
------------
17,870,000
------------
Capital Goods -- 2.3%
250,000 Harnishfeger Industries, Inc. ..................... 500,000
45,000 Ingersoll-Rand Co. ................................ 2,908,125
75,000 York International Co. ............................ 3,210,937
------------
6,619,062
------------
Communications -- 11.1%
75,000 Bell Atlantic Corp. ............................... 4,903,125
40,000 Frontier Corp. .................................... 2,360,000
2,821 General Motors Corp., Class H Shares............... 158,681
25,000 GTE Corp. ......................................... 1,893,750
30,000 MCI WorldCom, Inc. (a)............................. 2,587,500
50,000 NTL Inc. (a)....................................... 4,309,375
196,800 PanAmSat Corp. (a)................................. 7,662,900
Rogers Cantel Mobile Communications Inc., Class B
500,000 Shares (a)......................................... 8,218,750
------------
32,094,081
------------
Consumer Cyclicals -- 8.1%
90,000 Costco Cos., Inc. (a).............................. 7,205,625
175,000 Federated Department Stores, Inc. (a).............. 9,264,062
466,286 Fine Host Corp. (a)................................ 4,359,085
225,000 Hollinger International Inc. ...................... 2,671,875
------------
23,500,647
------------
Consumer Non-Cyclicals -- 26.8%
120,000 AT&T Corp. - Liberty Media, Class A Shares (a)..... 4,410,000
900,000 Food Lion, Inc., Class B Shares.................... 10,406,250
42,500 Hannaford Bros. Co. ............................... 2,273,750
50,000 Hearst-Argyle Television, Inc. (a)................. 1,200,000
265,000 Hormel Foods Corp. ................................ 10,666,250
250,000 John B. Sanfilippo & Son, Inc. (a)................. 953,125
175,000 Michael Foods, Inc. ............................... 4,112,500
400,000 Nabisco Group Holdings Corp. ...................... 7,825,000
150,000 The News Corp. Ltd., ADR........................... 4,734,375
250,000 Philip Morris Cos. Inc. ........................... 10,046,875
150,000 R.J. Reynolds Tobacco Holdings, Inc. (a)........... 4,725,000
Sinclair Broadcast Group, Inc., Class A Shares
100,000 (a)................................................ 1,637,500
225,000 Tyson Foods, Inc., Class A Shares.................. 5,062,500
United States Satellite Broadcasting Co., Inc.
300,000 (a)................................................ 5,398,818
90,000 Viacom Inc., Class A Shares (a).................... 3,960,000
------------
77,411,943
------------
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Energy -- 6.9%
100,000 Devon Energy Co. ................................... $ 3,575,000
275,000 Paradigm Geophysical Ltd. (a)....................... 1,873,438
100,000 Suncor Energy, Inc. ................................ 4,112,500
400,000 Tesoro Petroleum Corp. (a).......................... 6,375,000
150,000 Tosco Corp. ........................................ 3,890,625
------------
19,826,563
------------
Financial Services -- 9.2%
150,000 The Bank of New York Co., Inc. ..................... 5,503,125
100,000 Fleet Financial Group, Inc. ........................ 4,437,500
40,000 Goldman Sachs Group, Inc. .......................... 2,890,000
225,000 Independence Community Bank Corp. .................. 3,037,500
225,000 Peoples Heritage Financial Group, Inc. ............. 4,232,813
100,000 Protective Life Corp. .............................. 3,300,000
100,000 Reinsurance Group of America, Inc. ................. 3,350,000
------------
26,750,938
------------
Health Care -- 2.5%
225,000 CombiChem, Inc. (a)................................. 914,063
110,000 Pharmacia & Upjohn, Inc. ........................... 6,249,375
------------
7,163,438
------------
Technology -- 15.8%
75,000 ADC Telecommunications, Inc. (a).................... 3,417,188
125,000 Amdocs Ltd. (a)..................................... 2,843,750
40,000 Comverse Technology, Inc. (a)....................... 3,020,000
35,000 Hewlett-Packard Co. ................................ 3,517,500
25,000 International Business Machines Corp. .............. 3,231,250
225,000 Latitude Communications, Inc. (a)................... 2,925,000
50,000 Legato Systems, Inc. (a)............................ 2,887,500
90,000 Plantronics, Inc. (a)............................... 5,861,250
500,000 S3 Inc. (a)......................................... 4,546,875
225,000 Seagate Technology, Inc. (a)........................ 5,765,625
232,500 SpeedFam-IPEC, Inc. (a)............................. 3,734,531
60,000 Tellabs, Inc. (a)................................... 4,053,750
------------
45,804,219
------------
Utilities -- 2.6%
250,000 Azurix Corp. (a).................................... 5,000,000
200,000 KN Energy, Inc. .................................... 2,675,000
------------
7,675,000
------------
TOTAL COMMON STOCK
(Cost -- $200,039,269).............................. 264,715,891
------------
CONVERTIBLE PREFERRED STOCK -- 0.3%
Consumer Cyclicals -- 0.3%
150,500 BTI Capital Trust, 6.500% (Cost -- $6,810,822)...... 808,938
------------
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 1.8%
Consumer Cyclicals -- 1.4%
$25,000,000 Sunbeam Corp., zero coupon due 3/25/18 (b)......... $ 4,187,500
------------
Technology -- 0.4%
Aspect Telecommunications, zero coupon due
5,000,000 8/10/18............................................ 1,093,750
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $6,181,441)............................... 5,281,250
------------
CORPORATE BONDS -- 2.0%
Basic Industries -- 1.3%
Harnischfeger Industries Inc.:
2,000,000 8.900% due 3/1/22 (c).............................. 1,230,000
2,000,000 8.700% due 6/15/22 (c)............................. 1,230,000
2,000,000 6.875% due 2/15/27 (c)............................. 1,230,000
------------
3,690,000
------------
Financial Services -- 0.7%
2,500,000 Contifinancial Corp., 8.375% due 8/15/03........... 2,075,000
------------
TOTAL CORPORATE BONDS
(Cost -- $5,426,591)............................... 5,765,000
------------
<CAPTION>
Contracts
-----------
<C> <S> <C>
PURCHASED OPTIONS -- 0.2%
Call Purchased -- 0.1%
Iridium World Communications Ltd.:
300 Expires 7/17/99, exercise price $12.50............. 24,374
1,000 Expires 7/17/99, exercise price $20................ 15,625
1,000 Expires 10/16/99, exercise price $20............... 68,750
------------
108,749
------------
Put Purchased -- 0.1%
Amazon.com, Inc.:
1,000 Expires 7/17/99, exercise price $70................ 12,500
250 Expires 7/17/99, exercise price $90................ 12,500
500 Expires 7/17/99, exercise price $80................ 9,375
250 Expires 7/17/99, exercise price $100............... 46,875
Interactive Index Put:
50 Expires 7/17/99, exercise price $290............... 28,750
100 Expires 7/17/99, exercise price $310............... 120,000
Iridium World Communications Ltd.:
450 Expires 7/17/99, exercise price $5................. 2,813
403 Expires 7/17/99, exercise price $7.50.............. 25,188
442 Expires 7/17/99, exercise price $10................ 69,062
------------
327,063
------------
TOTAL PURCHASED OPTIONS
(Cost -- $1,343,533)............................... 435,812
------------
SUB-TOTAL INVESTMENTS
(Cost -- $219,801,656)............................. 277,006,891
------------
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.2%
$12,187,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $12,188,591; (Fully
collateralized by U.S. Treasury Notes, 8.875% due
8/15/17; Market value -- $12,431,745) (Cost --
$12,187,000)..................................... $ 12,187,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $231,988,656*)............................ $289,193,891
============
</TABLE>
- ------
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(c) Security is currently in default.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depository Receipt.
See Notes to Financial Statements.
37
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCK -- 93.8%
Basic Industries -- 3.6%
285,000 International Paper Co. ........................... $ 14,392,500
145,000 Martin Marietta Materials, Inc. ................... 8,555,000
170,400 Vulcan Materials Co. .............................. 8,221,800
------------
31,169,300
------------
Capital Goods -- 3.6%
135,000 Ingersoll-Rand Co. ................................ 8,724,375
153,000 Raytheon Co., Class A Shares....................... 10,537,875
130,000 Tyco International Ltd. ........................... 12,317,500
------------
31,579,750
------------
Communication Services -- 10.7%
258,000 Bell Atlantic Corp. ............................... 16,866,750
260,000 Frontier Corp. .................................... 15,340,000
135,000 General Motors, Class H Shares (a)................. 7,593,750
215,000 GTE Corp. ......................................... 16,286,250
120,000 MCI WorldCom Inc. (a).............................. 10,350,000
127,600 PanAmSat Corp. (a)................................. 4,968,425
265,000 SBC Communications Inc. (a)........................ 15,370,000
United States Satellite Broadcasting Co., Inc.
367,200 (a)................................................ 6,608,153
------------
93,383,328
------------
Consumer Cyclicals -- 6.3%
150,000 Costco Cos., Inc. (a).............................. 12,009,375
220,000 Dayton Hudson Corp. ............................... 14,300,000
325,000 Federated Department Stores, Inc. (a).............. 17,204,688
704,700 KMart Corp. (a).................................... 11,583,506
------------
55,097,569
------------
Consumer Non-Cyclicals -- 19.2%
400,000 AT&T Corp. - Liberty Media, Class A Shares......... 14,700,000
990,000 Food Lion, Inc., Class A Shares.................... 11,756,250
133,500 Hormel Foods Corp. ................................ 5,373,375
975,000 Nabisco Group Holdings Corp. ...................... 19,073,438
630,000 The News Corp. Ltd. ADR............................ 19,884,375
780,000 The Pepsi Bottling Group Inc. ..................... 17,988,750
550,000 Philip Morris Cos. Inc. ........................... 22,103,125
424,999 R.J. Reynolds Tobacco Holdings, Inc. (a)........... 13,387,490
465,000 Ralston Purina Group............................... 14,153,438
643,500 Tyson Foods, Inc., Class A Shares.................. 14,478,750
350,000 Viacom Inc., Class B Shares (a).................... 15,400,000
------------
168,298,991
------------
Energy -- 9.5%
150,000 Amerada Hess Corp. ................................ 8,925,000
150,000 Atlantic Richfield Co. ............................ 12,534,375
386,300 Conoco Inc., Class A Shares........................ 10,768,113
240,000 Royal Dutch Petroleum Co. ......................... 14,460,000
220,000 Total Fina SA ADR (a).............................. 14,176,250
215,000 Unocal Corp. ...................................... 8,519,375
415,000 USX - Marathon Group............................... 13,513,438
------------
82,896,551
------------
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Fund
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- --------------------------------------------------------------------------------
Financial Services -- 16.7%
85,600 American Express Co. ............................... $ 11,138,700
115,000 American General Corp. ............................. 8,668,125
191,600 Associates First Capital Corp. ..................... 8,490,275
195,000 Bank of America Corp. .............................. 14,295,935
465,000 The Bank of New York................................ 17,059,688
215,000 BankBoston Corp. ................................... 10,991,875
43,700 Comerica Inc. ...................................... 2,597,419
180,000 Fleet Financial Group, Inc. ........................ 7,987,500
185,000 Freddie Mac......................................... 10,730,000
95,700 The Goldman Sachs Group Inc. (a).................... 6,914,325
185,000 Household International, Inc. ...................... 8,764,375
133,000 Morgan Stanley Dean Witter & Co. ................... 13,632,500
375,000 Provident Cos., Inc. ............................... 15,000,000
310,000 The St. Paul Cos., Inc. ............................ 9,861,875
------------
146,132,592
------------
Health Care -- 6.3%
220,000 Abbott Laboratories................................. 10,010,000
185,000 American Home Products Corp. ....................... 10,637,500
300,000 Becton, Dickinson and Co. .......................... 9,000,000
130,000 Eli Lilly and Co. .................................. 9,311,250
289,000 Pharmacia & Upjohn, Inc. ........................... 16,418,813
------------
55,377,563
------------
Real Estate Investment Trust -- 0.2%
81,700 Glenborough Realty Trust Inc. ...................... 1,429,750
------------
Technology -- 13.8%
495,000 Alcatel SA ADR...................................... 14,045,625
169,800 Corning Inc. ....................................... 11,907,225
158,000 Hewlett-Packard Co. ................................ 15,879,000
134,000 Intel Corp. ........................................ 7,973,000
200,000 International Business Machines Corp. .............. 25,850,000
100,000 Plantronics, Inc. (a)............................... 6,512,500
350,000 Seagate Technology, Inc. (a)........................ 8,968,750
125,000 Tellabs, Inc. (a)................................... 8,445,313
80,000 Texas Instruments Inc. ............................. 11,600,000
160,000 Xerox Corp. ........................................ 9,450,000
------------
120,631,413
------------
Transportation -- 2.9%
450,000 Canadian National Railway Co. ...................... 9,380,000
140,000 Canadian Pacific Ltd. .............................. 10,715,625
86,000 Union Pacific Corp. ................................ 5,014,875
------------
25,110,500
------------
Utilities -- 1.0%
206,400 The Williams Cos., Inc. ............................ 8,784,900
------------
TOTAL COMMON STOCK
(Cost -- $562,435,886).............................. 819,892,207
------------
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK (b) -- 0.5%
Transportation -- 0.5%
Union Pacific Capital Trust, 6.250% (Cost --
80,000 $4,055,342)....................................... $ 4,160,000
------------
<CAPTION>
Face
Amount
------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 2.4%
Technology -- 1.4%
$12,500,000 Micron Technology Inc., 7.000% due 7/1/04.......... 12,671,875
------------
Telecommunications & Utilities -- 1.0%
5,115,000 NTL Inc., 7.000% due 12/15/08 (b).................. 8,369,417
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $17,893,743).............................. 21,041,292
------------
SUB-TOTAL INVESTMENTS
(Cost -- $584,384,971)............................. 845,093,499
------------
REPURCHASE AGREEMENT -- 3.3%
28,784,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $28,787,758; (Fully
collateralized by U.S. Treasury Notes, 7.500% due
11/15/16; Market value -- $29,362,500) (Cost --
$28,784,000)..................................... 28,784,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $613,168,971*)............................ $873,877,499
============
</TABLE>
- ------
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depository Receipt.
See Notes to Financial Statements.
40
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCK -- 53.0%
Basic Industries -- 5.7%
24,000 Alcoa Inc. .......................................... $ 1,485,000
29,704 International Paper Co. ............................. 1,500,052
30,000 Lyondell Chemical Co. ............................... 618,750
16,000 Nalco Chemical Co. .................................. 830,000
218,600 USEC Inc. ........................................... 3,251,675
38,400 Vulcan Materials Co. ................................ 1,852,800
15,000 Weyerhaeuser Co. .................................... 1,031,250
21,000 Willamette Industries, Inc. ......................... 967,312
------------
11,536,839
------------
Capital Goods -- 0.9%
15,000 Fluor Corp. ......................................... 607,500
43,000 Stone & Webster, Inc. ............................... 1,144,875
------------
1,752,375
------------
Communications -- 6.6%
80,000 BCE Inc. (a)......................................... 3,945,000
40,000 Bell Atlantic Corp. (a).............................. 2,615,000
40,000 Edison International................................. 1,070,000
60,000 Frontier Corp. ...................................... 3,540,000
28,000 GTE Corp. ........................................... 2,121,000
------------
13,291,000
------------
Consumer Cyclicals -- 3.9%
20,726 Cooper Industries, Inc. (a).......................... 1,077,752
8,705 DaimlerChrysler AG................................... 773,657
19,500 Eastman Kodak Co. ................................... 1,321,125
27,428 Fine Host Corp. (b).................................. 256,411
20,240 Hollinger International Inc. ........................ 240,350
16,000 J.C. Penney Co., Inc. ............................... 777,000
33,150 The May Department Stores Co. ....................... 1,355,006
48,000 Sears, Roebuck & Co. ................................ 2,139,000
------------
7,940,301
------------
Consumer Non-Cyclicals -- 5.2%
70,000 Avon Products, Inc. (a).............................. 3,885,000
150,000 Food Lion Inc., Class B Shares....................... 1,734,375
10,000 H.J. Heinz Co. ...................................... 501,250
20,000 Hormel Foods Corp. .................................. 805,000
1,000 Interstate Hotels Corp. (b).......................... 4,125
6,000 McDonald's Corp. .................................... 247,875
8,000 PepsiCo, Inc. ....................................... 309,500
20,000 Philip Morris Cos. Inc. ............................. 803,750
45,000 Ralston Purina Group................................. 1,369,687
40,000 Rite Aid Corp. ...................................... 985,000
------------
10,645,562
------------
Energy -- 8.2%
25,000 Amerada Hess Corp. (a)............................... 1,487,500
15,218 BP Amoco PLC......................................... 1,651,153
23,000 Exxon Corp. ......................................... 1,773,875
50,000 Halliburton Co. ..................................... 2,262,500
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Energy -- 8.2% (continued)
14,000 Mobil Corp. ........................................ $ 1,386,000
45,000 Reliant Energy, Inc. ............................... 1,243,125
16,000 Royal Dutch Petroleum Co. ADR....................... 964,000
20,000 Schlumberger Ltd. .................................. 1,273,750
95,000 Suncor Energy, Inc. ................................ 3,906,875
12,000 Texaco Inc. ........................................ 750,000
------------
16,698,778
------------
Financial Services -- 5.0%
30,000 The Allstate Corp. ................................. 1,076,250
1,556 American International Group, Inc. ................. 182,149
9,000 Bank of America Corp. .............................. 659,813
18,000 The Chubb Corp. .................................... 1,251,000
30,000 CIGNA Corp. ........................................ 2,670,000
20,000 First Union Corp. .................................. 940,000
30,000 Fleet Financial Group, Inc. ........................ 1,331,250
23,000 Marsh & McLennan Cos., Inc. ........................ 1,736,500
5,700 Nationwide Financial Services, Inc., Class A
Shares............................................. 257,925
------------
10,104,887
------------
Health Care -- 3.9%
42,000 American Home Products Corp. ....................... 2,415,000
26,000 Bausch & Lomb Inc. ................................. 1,989,000
4,000 Johnson & Johnson................................... 392,000
10,000 Monsanto Co. ....................................... 394,375
10,000 Pfizer Inc. ........................................ 1,097,500
10,000 Pharmacia & Upjohn, Inc. ........................... 568,125
20,000 Schering-Plough Corp. .............................. 1,060,000
------------
7,916,000
------------
Real Estate Investment Trust -- 5.6%
67,500 Arden Realty, Inc. ................................. 1,662,188
35,000 Bedford Property Investors, Inc. ................... 625,625
55,000 Brandywine Realty Trust............................. 1,089,688
45,000 Duke-Weeks Realty Corp. ........................... 1,015,313
65,000 Glenborough Realty Trust Inc. ...................... 1,137,500
46,950 JDN Realty Corp. ................................... 1,050,506
75,000 Mid-Atlantic Realty Trust........................... 834,375
84,000 New Plan Excel Realty Trust......................... 1,512,000
18,000 Prentiss Properties Trust........................... 423,000
35,000 Reckson Associates Realty Corp. .................... 822,500
30,000 Sun Communities, Inc. .............................. 1,065,000
30,000 Wyndham International, Inc. ........................ 135,000
------------
11,372,695
------------
Technology -- 1.5%
5,000 International Business Machines Corp. .............. 646,250
36,000 Pitney Bowes Inc. .................................. 2,313,000
------------
2,959,250
------------
Telecommunication & Utilities -- 2.5%
7,000 Nortel Networks Corp. .............................. 607,688
50,000 SBC Communications Inc. ........................... 2,900,000
38,000 The Williams Cos., Inc. ............................ 1,617,375
------------
5,125,063
------------
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Transportation -- 4.0%
60,000 Canadian National Railway Co. ...................... $ 4,020,000
25,000 Canadian Pacific Ltd. .............................. 595,313
60,000 Union Pacific Corp. ................................ 3,498,750
------------
8,114,063
------------
TOTAL COMMON STOCK
(Cost -- $83,025,508)............................... 107,456,813
------------
PREFERRED STOCK -- 0.0%
Real Estate Investment Trust -- 0.0%
528 Patriot American Hospitality (Cost -- $13,199)...... 12,837
------------
CONVERTIBLE PREFERRED STOCK -- 2.7%
Basic Industries -- 0.3%
10,000 International Paper Capital Trust, 5.250%........... 527,500
------------
Consumer Cyclicals -- 0.0%
17,000 BTI Capital Trust, 6.500%........................... 91,375
------------
Consumer Non-Cyclicals -- 0.3%
12,500 Ralston Purina Group, 7.000%........................ 581,250
------------
Energy -- 0.8%
6,000 EL Paso Energy Capital Trust, 4.750%................ 297,000
15,000 Pogo Trust I, 6.500%................................ 762,150
20,000 Tesoro Petroleum Corp., 7.250%...................... 315,000
4,000 Tosco Financing Trust, 5.750%....................... 195,000
------------
1,569,150
------------
Financial Services -- 0.5%
10,000 Finova Finance Trust, 5.500%........................ 690,000
7,500 Morgan Stanley Dean Witter & Co., Medium-Term Notes,
Series C, Reset PERQS, 6.000% due 5/15/00.......... 401,250
TCR Holding:
321 Class B Shares...................................... 19
177 Class C Shares...................................... 10
466 Class D Shares...................................... 25
964 Class E Shares...................................... 61
------------
1,091,365
------------
Technology -- 0.3%
30,000 Amdocks, 6.753%..................................... 667,500
------------
Telecommunication & Utilities -- 0.4%
20,000 Skytel Communications, $2.25 (d).................... 735,000
------------
Transportation -- 0.1%
4,500 Canadian National Railway Co., 5.25%................ 240,750
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost -- $5,551,989)................................ 5,503,890
------------
RIGHTS (b) -- 0.0%
Real Estate Investment Trust -- 0.0%
70,000 Excel Realty Trust, Inc., Expires 5/1/08............ 0
65,000 Glenborough Realty Trust Inc., Expires 7/20/08...... 0
------------
TOTAL RIGHTS
(Cost -- $0)........................................ 0
------------
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 18.4%
Basic Industries -- 2.2%
$ 200,000 Berry Plastics Corp., 12.250% due 4/15/04........... $ 210,500
125,000 Breed Technologies Inc., 9.250% due 4/15/08......... 18,750
200,000 EnviroSource Inc., 9.750% due 6/15/03............... 126,000
250,000 Federal-Mogal Co., 7.500% due 1/15/09 (d)........... 231,562
125,000 Hexcel Corp., 9.750% due 1/15/09 (d)................ 125,781
125,000 Huntsman Corp., 9.500% due 7/1/07 (d)............... 120,000
125,000 Indesco International Inc., 9.750% due 4/15/08...... 82,500
250,000 Millar Western Forest Products, 9.875% due 5/15/08.. 241,250
175,000 Monsanto Co., 5.875% due 12/1/08.................... 162,969
250,000 P&L Coal Holdings Corp., 9.625% due 5/15/08......... 252,500
575,000 Pohang Iron & Steel Co. Ltd., 7.500% due 8/1/02..... 548,688
1,200,000 Praxair Inc., 6.150% due 4/15/03.................... 1,182,000
200,000 Radnor Holdings Corp., 10.000% due 12/1/03.......... 201,500
1,000,000 Raytheon Co., 6.150% due 11/1/08.................... 943,750
------------
4,447,750
------------
Capital Goods -- 0.1%
125,000 Jordon Industries Inc., 10.375% due 8/1/07 (d)...... 126,563
------------
Consumer Cyclicals -- 1.1%
250,000 Cole National Group Inc., 8.625% due 8/15/07........ 232,500
100,000 Collins & Aikman Corp., 10.000% due 1/15/07......... 101,000
250,000 HMH Properties, 7.875% due 8/1/08................... 230,000
250,000 Musicland Stores Group, 9.875% due 3/15/08.......... 252,188
250,000 Prime Hospitality Corp., 9.750% due 4/1/07.......... 246,875
1,200,000 Staples Inc., 7.125% due 8/15/07.................... 1,198,500
------------
2,261,063
------------
Consumer Non-Cyclicals -- 3.8%
350,000 American Safety Razor Co., 9.785% due 8/1/05........ 353,500
250,000 Ameriserve Food Distributors Inc., 10.125% due
7/15/07............................................ 212,500
500,000 Aristar Inc., 7.250% due 6/15/06.................... 502,500
250,000 B&G Foods Inc., 9.625% due 8/1/07................... 235,000
200,000 CFP Holdings Inc., 11.625% due 1/15/04.............. 171,000
1,000,000 Costco Cos. Inc., zero coupon due 8/19/17........... 938,750
250,000 Dade International Inc., 11.125% due 5/1/06......... 270,937
250,000 Delta Beverage Group Inc., 9.750% due 12/15/03...... 258,125
250,000 Ekco Group Inc., 9.250% due 4/1/06.................. 252,187
1,500,000 Fremont General Corp., 7.700% due 3/17/04........... 1,490,625
125,000 French Fragrance Inc., 10.375% due 5/15/07.......... 127,031
250,000 Harrahs Operating Co. Inc., 7.875% due 12/15/05..... 242,500
130,000 Hines Horticulture, Inc., 11.750% due 10/15/05...... 138,775
250,000 Home Interiors & Gifts Inc., 10.125% due 6/1/08..... 250,000
200,000 NBTY, Inc., 8.625% due 9/15/07...................... 177,250
250,000 North Atlantic, 11.000% due 6/15/04................. 251,875
250,000 Park Place Entertainment Corp., 7.875% due
12/15/05........................................... 238,125
300,000 Revlon Worldwide Corp., zero coupon due 3/15/01..... 204,750
250,000 Shop Vac Corp., 10.625% due 9/1/03.................. 275,938
125,000 Simmons Co., 10.250% due 3/15/09 (d)................ 127,500
1,000,000 Spieker Properties, Inc., 7.250% due 5/1/09......... 968,750
------------
7,687,618
------------
</TABLE>
See Notes to Financial Statements.
44
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Data Technology/Information Services -- 1.2%
$ 250,000 DecisionOne Corp., 9.750% due 8/1/07................ $ 13,750
1,000,000 First Data Corp., 6.375% due 12/15/07 (b)........... 975,000
1,200,000 International Business Machines Corp., 5.375% due
2/1/09............................................. 1,096,500
250,000 Unisys Corp., 7.875% due 4/1/08..................... 251,875
------------
2,337,125
------------
Energy -- 0.7%
250,000 Bellwether Exploration, Co., 10.875% due 4/1/07..... 239,375
200,000 Benton Oil & Gas Co., 11.625% due 5/1/03............ 146,000
150,000 Clark R&M Inc., 8.875% due 11/15/07................. 128,437
925,000 Empresa Electric Pehuenche, 7.300% due 5/1/03....... 850,639
200,000 Transamerican Energy, (Zero coupon until 6/15/99,
13.000% thereafter) due 6/15/02 (e)................ 21,000
------------
1,385,451
------------
Financial/Leasing -- 2.5%
Contifinancial Corp.:
125,000 7.500% due 3/15/02.................................. 103,750
125,000 8.125% due 4/1/08................................... 103,750
200,000 Donaldson Lufkin & Jenrette Securities, Inc., 5.875%
due 4/1/02......................................... 196,500
325,000 DVI Inc., 9.875% due 2/1/04......................... 316,875
900,000 Ford Motor Credit Corp., 5.800% due 1/12/09......... 824,625
780,000 Merrill Lynch & Co., 6.000% due 11/15/04............ 761,475
250,000 Motors & Gears Inc., 10.750% due 11/15/06........... 254,375
1,250,000 Sears Roebuck Acceptance Corp., 7.000% due 6/15/07.. 1,254,688
1,000,000 U.S. Bank, 5.700% due 12/15/08...................... 916,250
250,000 Williams Scotsman, 9.875% due 6/1/07................ 248,750
------------
4,981,038
------------
Health Care -- 0.1%
1,000 Fresenius Medical Care Capital Trust I, 9.000% due
12/1/06............................................ 99,000
150,000 HEALTHSOUTH Corp., 3.250% due 4/1/03................ 126,375
------------
225,375
------------
Housing Related -- 0.1%
250,000 CB Richard Ellis Services, 8.875% due 6/1/06........ 249,375
------------
Manufacturing -- 1.0%
125,000 Alvey Systems Inc., 11.375% due 1/31/03............. 125,937
250,000 Axiohm Transaction Solution, Inc., 9.750% due
10/1/07............................................ 125,000
250,000 BE Aerospace, Inc., 8.000% due 3/1/08............... 237,500
125,000 Furon Co., 8.125% due 3/1/08........................ 120,000
250,000 Hayes Lemmerz International Inc., 8.250% due
12/15/08 (d)....................................... 236,250
250,000 High Voltage Engineering Inc., 10.500% due 8/15/04.. 233,750
125,000 International Knife & Saw Inc., 11.375% due
11/15/06........................................... 123,438
125,000 L-3 Communications Corp., 8.000% due 8/1/08......... 125,156
250,000 Navistar International, 8.000% due 2/1/08........... 259,375
200,000 Packard BioScience Co., 9.375% due 3/1/07........... 189,000
250,000 Polymer Group, Inc., 9.000% due 7/1/07.............. 245,000
------------
2,020,406
------------
Media -- 3.0%
1,725,000 A.H. Belo Corp., 7.250% due 9/15/27................. 1,573,286
200,000 Adelphia Communications, 10.500% due 7/15/04........ 214,500
250,000 Big Flower Holdings, Inc., 8.625% due 12/1/08....... 232,500
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Media -- 3.0% (continued)
$ 250,000 Centennial Cellular Corp., 10.750% due 12/15/08..... $ 258,750
150,000 Century Communications, zero coupon due 1/15/08..... 67,500
200,000 CSC Holdings Inc., 10.500% due 5/15/16.............. 226,000
250,000 Diamond Cable Communications, (Zero coupon until
12/15/00, 11.750% thereafter) due 12/15/05......... 221,250
250,000 Falcon Holding Group, 8.375% due 4/15/10............ 247,500
250,000 FrontierVision Holdings, 11.000% due 10/15/06....... 275,625
250,000 Granite Broadcasting Corp., 8.875% due 5/15/08...... 241,250
850,000 GTE Corp., 6.940% due 4/15/28....................... 812,813
250,000 Hollinger International Publishing, 9.250% due
3/15/07............................................ 255,625
125,000 ICG Holdings Inc., (Zero coupon until 9/15/00,
13.500% thereafter) due 9/15/05.................... 112,500
175,000 Intermedia Communication Inc., 8.600% due 6/1/08.... 162,750
375,000 LIN Holdings, (Zero coupon until 3/1/03, 10.000%
thereafter) due 3/1/08............................. 244,688
300,000 Metronet Communications, (Zero coupon until 6/15/03,
9.950% thereafter) due 6/15/08..................... 223,500
400,000 NTL Inc., (Zero coupon until 2/1/01, 11.500%
thereafter) due 2/1/06............................. 340,000
Rogers Communications, Inc.:
100,000 2.000% due 11/26/05................................. 77,500
250,000 8.875% due 7/15/07.................................. 252,500
135,000 SFX Broadcasting, Inc., 10.750% due 5/15/06......... 149,006
------------
6,189,043
------------
Services & Other -- 1.9%
250,000 Allied Waste Industries, Inc., 7.875% due 1/1/09.... 232,187
1,450,000 Comdisco, Inc., 6.000% due 1/30/02.................. 1,431,875
250,000 Iron Mountain Inc., 10.125% due 10/1/06............. 265,625
250,000 Loomis Fargo & Co., 10.000% due 1/15/04............. 255,000
250,000 Pierce Leahy Corp., 11.125% due 7/15/06............. 275,000
250,000 Protection One, Inc., 8.125% due 1/15/09 (d)........ 237,500
125,000 Safety Kleen Corp., 9.250% due 6/1/08............... 130,625
1,200,000 Service Corp. International, 6.000% due 12/15/05.... 1,107,000
------------
3,934,812
------------
Telecommunication & Utilities -- 0.4%
250,000 Calpine Corp., 8.750% due 7/15/07................... 251,875
250,000 Garden State Newspapers, 8.750% due 10/1/09......... 237,500
400,000 Integrated Process, 6.250% due 9/15/04.............. 306,000
------------
795,375
------------
Transportation -- 0.3%
250,000 Enterprises Shipholding, 8.876% due 5/1/08.......... 175,000
200,000 Holt Group, 9.750% due 1/15/06 (d).................. 140,000
150,000 Teekay Shipping Corp., 8.320% due 2/1/08............ 142,313
400,000 TFM, (Zero coupon until 6/15/02, 11.750% thereafter)
due 6/15/09........................................ 240,000
------------
697,313
------------
TOTAL CORPORATE BONDS
(Cost -- $39,334,178)............................... 37,338,307
------------
CONVERTIBLE CORPORATE BONDS -- 6.8%
Consumer Non-Cyclicals -- 1.6%
1,750,000 Credit Suisse First Boston Corp., 1.000% due
4/7/05............................................. 1,610,000
1,000,000 Interpublic Group Co. Inc., 1.870% due 6/1/06....... 912,500
2,500,000 Network Associates Inc., zero coupon due 2/13/18.... 753,125
------------
3,275,625
------------
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Data Technology/Information Services -- 2.3%
$2,500,000 Aspect Telecommunications Corp., zero coupon due
8/10/18............................................ $ 546,875
750,000 EMCOR Group Inc., 5.750% due 4/1/05................. 768,750
600,000 Integrated Process Equipment, 6.250% due 9/15/04.... 459,000
750,000 Micron Technology Inc., 7.000% due 7/1/04........... 760,312
1,000,000 Quantum Corp., 7.000% due 8/1/04.................... 955,000
400,000 S3 Inc., 5.750% due 10/1/03......................... 338,500
1,000,000 Solectron Corp., zero coupon due 1/27/19............ 581,250
325,000 Wind River System, 5.000% due 8/1/02................ 283,563
------------
4,693,250
------------
Energy -- 0.5%
1,000,000 Halter Marine Group Inc., 4.500% due 9/15/04........ 645,000
300,000 Kerr-McGee Corp., 7.500% due 5/15/14................ 299,250
------------
944,250
------------
Financial Services -- 0.4%
750,000 Bell Atlantic Financial Services, 5.750% due
4/1/03............................................. 772,950
------------
Health Care -- 1.1%
600,000 Alpharma Inc., 3.000% due 6/1/06.................... 752,250
250,000 Centocor, Inc., 4.750% due 2/15/05.................. 280,312
600,000 HEALTHSOUTH Corp., 3.250% due 4/1/03................ 505,500
200,000 Omnicare Inc., 5.000% due 12/1/07................... 148,750
450,000 Rite Aid Corp., 5.250% due 9/15/02.................. 451,406
------------
2,138,218
------------
Manufacturing -- 0.3%
750,000 Mark IV Industries, 4.750% due 11/1/04.............. 672,188
------------
Media & Telecommunications -- 0.6%
750,000 NTL Inc., 7.000% due 12/15/08....................... 1,227,188
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $13,537,327)............................... 13,723,669
------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 14.1%
Federal Home Loan Mortgage Corporation (FHLMC):
795,071 8.000% due 7/1/20................................... 824,139
227,476 6.500% due 3/1/26................................... 220,865
2,500,000 6.500% due 8/13/27 (f).............................. 2,416,400
223,084 Gold, 6.500% due 3/1/26............................. 216,600
294,209 Gold, 6.500% due 5/1/26............................. 285,658
Federal National Mortgage Association (FNMA):
27,412 6.500% due 10/1/10.................................. 27,086
179,151 6.500% due 10/1/11.................................. 177,023
412,027 6.500% due 4/1/13................................... 407,134
273,628 6.500% due 5/1/13................................... 270,379
508,789 6.500% due 7/1/13................................... 502,747
817,458 9.000% due 1/1/24................................... 866,245
59,729 7.000% due 9/1/25................................... 59,263
142,817 6.500% due 12/1/25.................................. 138,399
210,593 7.000% due 3/1/26................................... 208,948
395,544 6.500% due 6/1/26................................... 383,307
304,915 7.000% due 3/1/27................................... 302,533
665,855 7.000% due 11/1/28.................................. 660,653
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Total Return Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 14.1% (continued)
$3,260,000 6.500% due 11/15/28 (f)............................. $ 3,157,106
610,312 7.000% due 2/1/29................................... 605,543
46,797 7.000% due 3/1/29................................... 46,431
965,756 7.000% due 4/1/29................................... 958,211
2,460,000 6.000% due 9/1/30 (f)............................... 2,320,088
2,475,000 8.000% due 11/1/30 (f).............................. 2,537,642
478,420 Government National Mortgage Association (GNMA),
6.625% due 9/20/22................................. 485,893
U.S. Treasury Notes:
910,000 6.375% due 3/31/01.................................. 923,304
3,200,000 5.250% due 8/15/03.................................. 3,138,304
800,000 6.500% due 10/15/06................................. 826,096
2,000,000 6.125% due 8/15/07.................................. 2,022,120
1,075,000 4.750% due 11/15/08................................. 986,893
2,700,000 U.S. Treasury Bond, 6.125% due 11/15/27............. 2,679,993
------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(Cost -- $29,481,645)............................... 28,655,003
------------
ASSET-BACKED SECURITIES -- 4.1%
Financial/Leasing -- 4.1%
2,500,000 Contimortgage Home Equity Loan Trust, Series 1998-2,
Class A3, 6.130% due 3/15/13....................... 2,489,825
1,808,196 DLJ Commercial Mortgage Corp., Series 1998-CGI,
Class AIA, 6.110% due 12/10/07..................... 1,772,599
2,275,000 Ford Credit Auto Owner Trust, Series 1999-B, Class
A4, 5.800% due 6/15/02............................. 2,258,649
763,077 Green Tree Financial Corp., Series 1997-6, Class A8,
7.070% due 1/15/29................................. 763,611
1,100,000 Nationsbank Credit Card Master Trust, Series 1995-I,
Class A, 6.450% due 4/15/03........................ 1,107,898
------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $8,449,853)................................ 8,392,582
------------
SUB-TOTAL INVESTMENTS
(Cost -- $179,393,699).............................. 201,083,101
------------
REPURCHASE AGREEMENT -- 0.9%
1,760,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $1,760,230; (Fully
collateralized by U.S. Treasury Notes, 8.500% due
2/15/20; Market value -- $1,800,333) (Cost --
$1,760,000) ...................................... 1,760,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $181,153,699*)............................. $202,843,101
============
</TABLE>
- ------
(a) All or part of the security is segregated as collateral for mortgage dollar
rolls.
(b) Non-income producing security.
(c) Reset Performance Equity-linked Redemption Quarterly-pay Securities ("Reset
PERQS"), which entitles the holder to convert the preferred stock to shares
of common stock of Applied Materials on May 15, 2000 at a specified ex-
change ratio.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(e) Security is currently in default.
(f) Mortgage dollar roll.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depository Receipt.
See Notes to Financial Statements.
48
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 65.5%
Basic Industries -- 8.1%
AEI Resources Holdings Inc., 10.500% due 12/15/05
$ 1,500,000 (a)................................................ $ 1,470,000
Asia Pulp & Paper Co. Inc., 12.000% due 12/29/49
3,000,000 (b)................................................ 1,980,000
Asia Pulp & Paper International Finance, 11.750%
500,000 due 10/1/05........................................ 392,500
3,250,000 Berry Plastics Corp., 12.250% due 4/15/04.......... 3,420,625
1,000,000 Doman Industries Ltd., 12.000% due 7/1/04.......... 965,000
3,250,000 EnviroSource, Inc., 9.750% due 6/15/03............. 2,047,500
2,000,000 Glencore Nickel Property Ltd., 9.000% due 12/1/14.. 1,700,000
2,000,000 Huntsman Packaging Corp., 9.125% due 10/1/07....... 1,980,000
5,000,000 Indesco International Inc., 9.750% due 4/15/08..... 3,300,000
Lyondell Chemical Co.:
2,000,000 9.875% due 5/1/07 (a).............................. 2,040,000
1,500,000 10.875% due 5/1/09 (a)............................. 1,563,750
Murrin Murrin Holdings Property, 9.375% due
3,000,000 8/31/07............................................ 2,640,000
P.C.I. Chemicals & Pharmaceuticals, 9.250% due
4,000,000 10/15/07........................................... 3,400,000
P&L Coal Holdings Corp.:
2,000,000 8.875% due 5/15/08................................. 2,010,000
2,000,000 9.625% due 5/15/08................................. 2,020,000
3,000,000 Pindo Deli Fin Mauritius, 10.750% due 10/1/07...... 2,115,000
5,000,000 Plastic Containers, Inc., 10.000% due 12/15/06..... 5,650,000
PT Polytama International Finance, 11.250% due
2,043,753 6/15/07 (c)........................................ 459,845
4,000,000 Randor Holdings, 10.000% due 12/1/03............... 4,030,000
Tjiwi Kimia International Finance Co. B.V., 10.000%
5,000,000 due 8/1/04......................................... 3,550,000
------------
46,734,220
------------
Consumer Cyclicals -- 5.1%
Cole National Group:
3,300,000 9.875% due 12/31/06................................ 2,846,250
1,000,000 8.625% due 8/15/07................................. 930,000
5,000,000 Collins & Aikman Flooring, 10.000% due 1/15/07..... 5,050,000
3,500,000 Finlay Fine Jewelery Corp., 8.375% due 5/1/08 (a).. 3,430,000
5,000,000 HMH Properties, 8.450% due 12/1/08................. 4,750,000
2,500,000 Leslie's Poolmart, 10.375% due 7/15/04............. 2,600,000
2,000,000 Maxim Group, 9.250% due 10/15/07................... 2,002,500
5,000,000 Musicland Group, 9.875% due 3/15/08 (a)............ 5,043,750
3,000,000 Prime Hospitality Corp., 9.750% due 4/1/07......... 2,962,500
------------
29,615,000
------------
Consumer Non-Cyclicals -- 13.0%
1,300,000 ALARIS Medical, Inc., 9.750% due 12/1/06........... 1,327,625
Anchor Advanced Products, Inc., 11.750% due 4/1/04
4,500,000 (a)................................................ 4,612,500
5,000,000 Aztar Corp., 8.875% due 5/15/07 (a)................ 4,800,000
3,250,000 B&G Foods Inc., 9.625% due 8/1/07.................. 3,055,000
2,000,000 CFP Holdings Inc., 11.625% due 1/15/04............. 1,710,000
Graham-Field Health Products Inc., 9.750% due
1,500,000 8/15/07............................................ 1,042,500
1,298,000 Hines Horticulture, Inc., 11.750% due 10/15/05..... 1,385,615
Horseshoe Gaming Holding Corp., 9.375% due 6/15/07
2,500,000 (a)................................................ 2,525,000
4,000,000 Imperial Holly Corp., 9.750% due 12/15/07.......... 3,960,000
2,000,000 Iowa Select Farms, 10.750% due 12/1/05............. 1,600,000
Jafra Cosmetics International, Inc., 11.750% due
3,500,000 5/1/08............................................. 3,027,500
4,000,000 Kinetic Concepts, Inc., 9.625% due 11/1/07......... 3,580,000
Nebco Evans Holdings Co., (Zero coupon until
7,000,000 7/15/02, 12.375% thereafter) due 7/15/07.......... 3,500,000
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 13.0% (continued)
$ 4,000,000 North Atlantic Trading Co., 11.000% due 6/15/04.... $ 4,030,000
Park Place Entertainment Corp., 7.875% due
6,000,000 12/15/05.......................................... 5,715,000
2,000,000 Pueblo Xtra International Inc., 9.500% due 8/1/03.. 1,940,000
2,055,000 Purina Mills Inc., 9.000% due 3/15/10 (a).......... 1,623,450
4,500,000 Revlon Worldwide Corp., zero coupon due 3/15/01.... 3,071,250
2,500,000 Sealy Mattress Co., 9.875% due 12/15/07............ 2,509,375
Sun International Hotels Ltd., 8.625% due
4,000,000 12/15/07.......................................... 4,020,000
32,500,000 Sunbeam Corp., zero coupon due 3/25/18............. 5,443,750
Triarc Consumer Products Group, 10.250% due 2/15/09
5,000,000 (a)............................................... 4,837,500
Universal Hospital Services, Inc., 10.250% due
3,000,000 3/1/08............................................ 2,670,000
3,000,000 Waterford Gaming LLC, 9.500% due 3/15/10 (a)....... 3,000,000
------------
74,986,065
------------
Data Technology/Information Services -- 0.9%
DecisionOne Corp.:
1,500,000 9.750% due 8/1/07.................................. 82,500
Zero coupon until 8/1/02 (11.500% thereafter) due
4,000,000 8/1/08............................................ 50,000
Jordan Telecommunications Products, (Zero coupon
until 8/1/00, 11.750% thereafter) due 4/1/09 (a)
6,000,000 .................................................. 5,122,500
------------
5,255,000
------------
Energy -- 3.3%
3,000,000 Bellwether Exploration Co., 10.875% due 4/1/07..... 2,872,500
3,000,000 Benton Oil & Gas Co., 11.625% due 5/1/03........... 2,190,000
1,500,000 Clark Refining & Marketing, 8.875% due 11/15/07.... 1,284,375
Companhia Energetica De Sao Paulo, 9.125% due
3,000,000 6/26/07 (b)....................................... 2,505,000
5,000,000 Costilla Energy, Inc., 10.250% due 10/1/06......... 1,475,000
1,000,000 Grey Wolf Inc., 8.875% due 7/1/07.................. 870,000
4,000,000 Lomak Petroleum Inc., 8.750% due 1/15/07 (a)....... 3,520,000
2,000,000 Northern Offshore Asia, 10.000% due 5/15/05........ 1,020,000
TransAmerican Energy Corp.:
1,000,000 11.500% due 6/15/02 (d)(e)......................... 115,000
5,000,000 13.000% due 6/15/02 (d)(e)......................... 525,000
3,500,000 United Refining Co., 10.750% due 6/15/07........... 2,563,750
------------
18,940,625
------------
Financial Services -- 4.0%
Airplanes Pass-Through Trust, 10.875% due 3/15/19
3,250,000 (a)............................................... 3,247,725
3,750,000 Avis Rent A Car Inc., 11.000% due 5/1/09 (a)....... 3,764,063
Contifinancial Corp.:
1,500,000 7.500% due 3/15/02................................. 1,245,000
1,000,000 8.375% due 8/15/03................................. 830,000
2,500,000 8.125% due 4/1/08 (a).............................. 2,075,000
1,500,000 DVI Inc., 9.875% due 2/1/04........................ 1,462,500
Imperial Credit Industries, Inc., 9.875% due
1,000,000 1/15/07........................................... 800,000
2,000,000 Intertek Finance, 10.250% due 11/1/06.............. 1,952,500
Morgan Stanley Aircraft Finance, Series 1A, Class
3,000,000 D1, 8.700% due 3/15/23 (a)........................ 2,715,000
1,250,000 Nationwide Credit Inc., 10.250% due 1/15/08........ 887,500
4,000,000 Williams Scotsman, Inc., 9.875% due 6/1/07......... 3,980,000
------------
22,959,288
------------
Housing Related -- 0.1%
American Architecture Products Corp., 11.750% due
1,000,000 12/1/07........................................... 705,000
------------
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Manufacturing -- 6.9%
$ 1,000,000 Alvey Systems Inc., 11.375% due 1/31/03............ $ 1,007,500
American Axle & Manufacturing Holdings, Inc.,
2,500,000 9.750% due 3/1/09................................. 2,506,250
Axiohm Transaction Solutions Inc., 9.750% due
5,000,000 10/1/07........................................... 2,500,000
3,500,000 BE Aerospace, Inc., 9.500% due 11/1/08 ............ 3,543,750
4,000,000 Breed Technologies, Inc., 9.250% due 4/15/08....... 600,000
1,250,000 Federal Mogul, 7.500% due 1/15/09 (a).............. 1,157,812
3,250,000 Foamex International Inc., 9.875% due 6/15/07...... 2,778,750
Hayes Lemmerz International, Inc., 8.250% due
2,500,000 12/15/08.......................................... 2,362,500
High Voltage Engineering Corp., 10.500% due
5,000,000 8/15/04........................................... 4,675,000
825,000 International Knife & Saw, 11.375% due 11/15/06.... 814,688
International Utility Structures Inc., 10.750% due
875,000 2/1/08............................................ 881,563
2,000,000 JH Heafner Co. Inc., 10.000% due 5/15/08........... 2,052,500
Jordan Industries, Inc., (Zero coupon until 4/1/02,
2,010,483 11.750% thereafter) due 4/1/09 (a)................ 1,304,300
L-3 Communications Holdings, Inc., 10.375% due
2,000,000 5/1/07............................................ 2,120,000
2,000,000 Packard BioScience Co., 9.375% due 3/1/07.......... 1,890,000
4,000,000 Polymer Group Inc., 9.000% due 7/1/07.............. 3,920,000
3,500,000 Stellex Industries Inc., 9.500% due 11/1/07........ 3,180,625
ZSC Specialty Chemicals PLC, 11.000% due 7/1/99
2,500,000 (a)............................................... 2,525,000
------------
39,820,238
------------
Media & Telecommunication -- 16.4%
Adelphia Communications Corp.:
2,000,000 10.500% due 7/15/04................................ 2,145,000
1,750,000 9.875% due 3/1/07.................................. 1,855,000
2,250,000 Advanstar Communications Inc., 9.250% due 5/1/08... 2,250,000
Avalon Cable Holdings, (Zero coupon until 12/1/03,
5,000,000 11.875% thereafter) due 12/1/08................... 3,350,000
Big Flower Press:
1,000,000 8.875% due 7/1/07.................................. 970,000
3,000,000 8.675% due 12/1/08 (a)............................. 2,790,000
2,250,000 Centennial Cellular Corp., 10.750% due 12/15/08.... 2,328,750
Century Communications:
2,500,000 8.750% due 10/1/07................................. 2,481,250
1,750,000 8.375% due 12/15/07................................ 1,715,000
1,500,000 Chancellor Media Corp., 9.375% due 10/1/04......... 1,545,000
Charter Communications International, (Zero coupon
5,000,000 until 4/1/04, 9.920% thereafter) due 4/1/11 (a)... 3,112,500
Citadel Broadcasting Co.:
2,000,000 10.250% due 7/1/07................................. 2,160,000
1,000,000 9.250% due 11/15/08................................ 1,032,500
5,000,000 CSC Holdings Inc., 10.500% due 5/15/16............. 5,650,000
Diamond Cable Communications PLC, (Zero coupon
2,000,000 until 12/15/00, 11.750% thereafter) due 12/15/05.. 1,770,000
3,250,000 Facilicom International, 10.500% due 1/15/08....... 2,518,750
1,500,000 Garden State Newspapers, Inc., 8.750% due 10/1/09.. 1,425,000
Hollinger International Publishing:
1,000,000 9.250% due 2/1/06.................................. 1,022,500
4,000,000 9.250% due 3/15/07................................. 4,090,000
ICG Holdings:
Zero Coupon until 9/15/00 (13.500% thereafter) due
2,250,000 5/1/01............................................ 1,800,000
Zero Coupon until 9/15/00 (13.500% thereafter) due
2,500,000 9/15/05........................................... 2,250,000
Intermedia Communications of Florida, (Zero coupon
3,000,000 until 5/15/01, 12.500% thereafter) due 9/15/05.... 2,482,500
1,810,000 Jacor Communications, Inc., 9.750% due 12/15/06.... 1,959,325
Lin Holdings Co., (Zero coupon until 3/1/03,
5,000,000 10.000% thereafter) due 3/1/08.................... 3,262,500
2,000,000 Lin Television, 8.375% due 3/1/08.................. 1,925,000
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Media & Telecommunication -- 16.4% (continued)
Metronet Communications, (Zero coupon until
$ 8,000,000 6/15/03, 9.950% thereafter) due 6/15/08........... $ 5,960,000
Nextel Communications, Inc.:
4,900,000 9.750% due 8/15/04................................. 4,998,000
Zero coupon until 10/31/02 (9.750% thereafter) due
2,000,000 10/31/07.......................................... 1,395,000
NTL, Inc., (Zero coupon until 2/1/01, 11.500%
3,000,000 thereafter) due 2/1/06............................ 2,550,000
2,500,000 Orange PLC, 9.000% due 6/1/09 (a).................. 2,506,250
500,000 Perry-Judd, 10.625% due 12/15/07................... 492,500
Price Communications Wireless, Inc., 9.125% due
2,500,000 12/15/06.......................................... 2,525,000
1,250,000 Rogers Communictions, Inc., 8.875% due 7/15/07..... 1,262,500
3,975,000 SFX Broadcasting, Inc., 10.750% due 5/15/06........ 4,387,406
1,949,000 Sun Media Corp., 9.500% due 2/15/07................ 2,046,450
Telewest Communications PLC, (Zero coupon until
4,500,000 10/1/00, 11.000% thereafter) due 10/1/07.......... 4,016,250
1,000,000 Transwestern Publishing Co., 9.625% due 11/15/07... 982,500
United International Holdings, (Zero Coupon until
6,000,000 2/15/03, 10.750% thereafter) due 2/15/08 (a)...... 3,990,000
------------
95,002,431
------------
Services & Other -- 5.7%
5,000,000 Allied Waste Industries, Inc., 7.875% due 1/1/09... 4,643,750
2,500,000 COMFORCE Corp., 12.000% due 12/1/07................ 2,375,000
3,200,000 DynCorp., 9.500% due 3/1/07........................ 3,200,000
3,000,000 Employee Solutions, Inc., 10.000% due 10/15/04..... 1,811,250
3,250,000 Federal Data Corp., 10.125% due 8/1/05............. 3,152,500
1,000,000 Iron Mountain Inc., 10.125% due 10/1/06 (a)........ 1,062,500
3,000,000 Loomis Fargo & Co., 10.000% due 1/15/04............ 3,060,000
4,000,000 Pierce Leahy Corp., 11.125% due 7/15/06............ 4,400,000
5,000,000 Protection One, Inc., 8.125% due 1/15/09 (a)....... 4,750,000
4,000,000 Safety-Kleen Services, 9.250% due 6/1/08........... 4,180,000
------------
32,635,000
------------
Transportation -- 2.0%
Atlantic Express Transportation, 10.750% due
2,000,000 2/1/04............................................ 2,000,000
2,500,000 Holt Group, 9.750% due 1/15/06 (a)................. 1,750,000
1,000,000 Teekay Shipping, 8.320% due 2/1/08................. 948,750
TFM, (Zero coupon until 6/15/02, 11.750%
6,500,000 thereafter) due 6/15/09 (d)....................... 3,900,000
4,928,700 Viacao Aerea Riograndens, 9.600% due 2/10/05....... 2,957,220
------------
11,555,970
------------
TOTAL CORPORATE BONDS
(Cost -- $426,143,908)............................. 378,208,837
------------
SOVEREIGN BONDS -- 29.0%
Argentina -- 4.8%
Republic of Argentina, Global Bonds:
21,570,000 11.000% due 12/4/05................................ 19,844,400
4,650,000 11.750% due 4/7/09................................. 4,185,000
1,925,000 11.375% due 1/30/17................................ 1,657,906
2,000,000 12.125% due 2/25/19................................ 1,820,000
------------
27,507,306
------------
Brazil -- 4.7%
Federal Republic of Brazil:
32,859,297 C Bond, 8.000% due 4/15/14 (c)..................... 21,430,414
125,000 DCB, Series L, 5.9375% due 4/15/12 (b)............. 77,500
10,000,000 FLIRB, Series L, 5.000% due 4/15/09 (b) ........... 5,800,000
------------
27,307,914
------------
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Bulgaria -- 1.7%
Republic of Bulgaria, FLIRB, Series A, Bearer,
$15,750,000 2.500% due 7/28/12 (b)............................ $ 9,528,750
------------
Colombia -- 1.4%
Republic of Colombia:
2,500,000 7.270% due 6/15/03 (b)............................. 2,156,250
5,300,000 9.705% due 8/13/05 (b)............................. 4,558,000
2,100,000 9.750% due 4/23/09 (b)............................. 1,735,125
------------
8,449,375
------------
Croatia -- 1.3%
Republic of Croatia, Series B, 5.8125% due 7/31/06
8,851,097 (b)............................................... 7,423,858
------------
Ecuador -- 0.8%
Republic of Ecuador, Bearer:
5,600,000 Par Bond, 4.000% due 2/28/25 (b)................... 2,184,000
3,892,500 Series IE, 6.1875% due 2/27/15 (b)................. 2,395,250
------------
4,579,250
------------
Ivory Coast -- 0.7%
Republic of Ivory Coast, FLIRB, 2.000% due 3/29/18
15,000,000 (b)............................................... 4,087,500
------------
Mexico -- 3.3%
United Mexican States, Global Bond:
5,400,000 10.375% due 2/17/09................................ 5,487,750
12,550,000 11.375% due 9/15/16................................ 13,420,594
------------
18,908,344
------------
Panama -- 0.7%
4,500,000 Republic of Panama, 8.250% due 4/22/08............. 3,960,000
------------
Peru -- 1.6%
Republic of Peru:
1,000,000 FLIRB, 3.750% due 3/7/17 (b)....................... 549,375
14,200,000 PDI, 4.500% due 3/7/17 (b)......................... 8,804,000
------------
9,353,375
------------
Philippines -- 1.2%
Republic of the Philippines, Global Bond:
3,750,000 8.875% due 4/15/08................................. 3,703,125
3,500,000 8.750% due 10/7/16................................. 3,209,500
------------
6,912,625
------------
Poland -- 0.2%
1,950,000 Republic of Poland, Par, 3.000% due 10/27/24 (b)... 1,174,875
------------
Russia -- 2.6%
Russia, Global Bond:
1,725,000 11.750% due 6/10/03................................ 1,047,938
8,560,000 Federation, 11.750% due 6/10/03.................... 5,200,200
15,400,000 Ministry of Finance, 12.750% due 6/24/28........... 8,758,750
------------
15,006,888
------------
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Venezuela -- 4.0%
Republic of Venezuela:
$10,095,175 FLIRB, Series A, 6.000% due 3/31/07 (b)............ $ 7,763,825
3,619,025 FLIRB, Series B, 6.000% due 3/31/07 (b)............ 2,783,285
12,734,000 Global Bond, 13.625% due 8/15/18................... 11,492,435
1,367,000 Global Bond, 9.250% due 9/15/27.................... 919,308
------------
22,958,853
------------
TOTAL SOVEREIGN BONDS
(Cost -- $166,320,962)............................. 167,158,913
------------
LOAN PARTICIPATIONS (f) -- 2.3%
Jamaica, Tranche B, 5.8125% due 11/15/04 (Chase
1,218,750 Manhattan Bank) (b)............................... 999,375
Kingdom of Morocco, Tranche A, 5.90625% due 1/1/09
4,321,428 (J.P. Morgan Securities) (b)...................... 3,489,553
The People's Democratic Republic of Algeria:
Tranche 1, 6.000% due 9/4/06 (Chase Manhattan Bank)
6,902,272 (b)............................................... 4,313,920
Tranche 3, 6.000% due 3/4/10 (Chase Manhattan Bank)
3,500,000 (b)............................................... 1,986,250
Tranche A, 6.750% due 3/4/00 (Chase Manhattan Bank)
1,959,090 (b)............................................... 1,866,034
Russia, Principal Loan, 5.96875% due 12/15/20
6,075,000 (Chase Manhattan Bank) (d)(e) .................... 747,984
------------
TOTAL LOAN PARTICIPATIONS
(Cost -- $15,966,840).............................. 13,403,116
------------
<CAPTION>
Shares
------
<C> <S> <C>
PREFERRED STOCK -- 0.4%
80,000 California Federal Capital, Series A, 9.125%....... 2,100,000
TCR Holding Corp:
9,787 Class B (d)........................................ 587
5,383 Class C (d)........................................ 301
14,191 Class D (d)........................................ 752
29,362 Class E (d)........................................ 1,850
------------
TOTAL PREFERRED STOCK
(Cost -- $2,003,490)............................... 2,103,490
------------
<CAPTION>
Warrants
--------
<C> <S> <C>
WARRANTS (d) -- 0.4%
4,000 Glasstech, Expires 6/30/04......................... 2,000
900 In Flight Phone, Expires 8/31/02................... 0
18,950 Republic of Argentina, Expires 12/3/99............. 165,813
2,000 Terex Stock Appreciation Rights, Expires 5/15/02... 48,000
32,623 United Mexican States, Expires 2/18/00............. 2,120,495
750 Wireless One, Expires 10/19/00..................... 187
------------
TOTAL WARRANTS
(Cost -- $1,967,132)............................... 2,336,495
------------
SUB-TOTAL INVESTMENTS
(Cost -- $612,402,332)............................. 563,210,851
------------
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers High Yield Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<S> <C> <C>
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.4%
$13,910,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $13,911,816; (Fully
collateralized by U.S. Treasury Notes, 8.875% due
8/15/17; Market value -- $14,189,180) (Cost --
$13,910,000)..................................... $ 13,910,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $626,312,332*)............................ $577,120,851
============
</TABLE>
- ------
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(b) Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
(c) Payment-in-kind security for which all or part of the interest earned may
be paid in additional bonds.
(d) Non-income producing security.
(e) Security is currently in default.
(f) Participation interest was aquired through the financial institutions indi-
cated parenthetically.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
<TABLE>
<CAPTION>
<S> <C>
DCB -- Debt Conversion Bonds.
FLIRB -- Front-Loaded Interest Reduction Bonds.
IE -- Interest Equalization.
PDI -- Past Due Interest.
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 34.1%
Basic Industries -- 4.4%
$ 250,000 Berry Plastics Corp., 12.250% due 4/15/04........... $ 258,750
185,000 EnviroSource, Inc., 9.750% due 6/15/03.............. 116,550
250,000 Huntsman Corp., 9.500% due 7/1/07................... 240,000
250,000 Huntsman Packaging Corp., 9.125% due 10/1/07........ 247,500
1,000,000 Hylsa S.A. de C.V., 9.250% due 9/15/07.............. 797,500
250,000 Indesco International Inc., 9.750% due 4/15/08...... 165,000
250,000 Lyondell Chemicals Co., 10.875% due 5/1/09 (e)...... 260,625
250,000 Millar Western Forest, 9.875% due 5/15/08........... 241,250
350,000 Monsanto Co., 5.875% due 12/1/08 (e)................ 325,938
250,000 Murrin Murrin Holdings, 9.375% due 8/31/07.......... 220,000
500,000 Octel Development PLC, 10.000% due 5/1/06........... 517,500
225,000 P&L Coal Holdings, 9.625% due 5/15/08............... 227,250
250,000 Phillip Brothers Chemical, 9.875% due 6/1/08........ 235,000
600,000 Praxair, Inc., 6.150% due 4/15/03................... 591,000
250,000 Radnor Holdings Inc., 10.000% due 12/1/03........... 251,875
300,000 Raytheon Co., 6.150% due 11/1/08.................... 283,125
500,000 United Industries Corp., 9.875% due 4/1/09 (e)...... 475,000
500,000 ZSC Speciality, 11.000% due 7/1/09 (e).............. 505,000
------------
5,958,863
------------
Consumer Cyclicals -- 3.5%
400,000 Archibald Candy Corp., 10.250% due 7/1/04........... 405,000
375,000 Avis Rent A Car, 11.000% due 5/1/09 (e)............. 376,407
250,000 Cole National Group, 8.625% due 8/15/07............. 232,500
250,000 Collins & Aikman Flooring, 10.000% due 1/15/07...... 252,500
250,000 Finlay Fine Jewelry, 8.375% due 5/1/08.............. 242,812
350,000 HMH Properties Inc., 7.875% due 8/1/08.............. 322,000
500,000 Maxim Group Inc., 9.250% due 10/15/07............... 500,625
500,000 Musicland Group, 9.875% due 3/15/08................. 504,375
250,000 Prime Hospitality, 9.750% due 4/1/07................ 246,875
375,000 Simmons Co., 10.250% due 3/15/09 (e)................ 382,500
550,000 Staples Inc., 7.125% due 8/15/07 ................... 549,313
250,000 Sun International Hotel, 8.625% due 12/15/07........ 251,250
500,000 Worldtex Inc., 9.625% due 12/15/07.................. 427,500
------------
4,693,657
------------
Consumer Non-Cyclicals -- 5.8%
500,000 Aetna Services Inc., 7.625% due 8/15/26............. 487,320
250,000 Ameriserve Foods, 10.125% due 7/15/07............... 212,500
250,000 CFP Holdings, 11.625% due 1/15/04................... 213,750
250,000 Dade International Inc., 11.125% due 5/1/06......... 270,937
250,000 Delta Beverage Group, 9.750% due 12/15/03........... 258,125
200,000 Dole Foods Co., 6.750% due 7/15/00.................. 200,500
300,000 Ekco Group, Inc., 9.250% due 4/1/06................. 302,625
250,000 French Fragrances, Inc., 10.375% due 5/15/07 ....... 254,062
250,000 Graham Field, 9.750% due 8/15/07.................... 173,750
350,000 Harrahs Operating, 7.875% due 12/15/05.............. 339,500
163,000 Hines Horticulture, 11.750% due 10/15/05............ 174,003
375,000 Home Interiors, 10.125% due 6/1/08.................. 375,000
375,000 Horseshoe Gaming, 9.375% due 6/15/07................ 378,750
375,000 Imperial Holly, 9.750% due 12/15/07................. 371,250
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 5.8% (continued)
$ 500,000 Iowa Select, 10.750% due 12/1/05 (e)............... $ 400,000
250,000 Mail-Well Corp., 8.750% due 12/15/08............... 243,750
250,000 Majestic Star, 10.875% due 7/1/06 (e).............. 248,750
50,000 Maxxim Medical, 10.500% due 8/1/06................. 53,750
150,000 Mohegan Tribal Gaming, 8.750% due 1/1/09........... 148,500
250,000 NBTY, 8.625% due 9/15/07........................... 221,563
Nebco Evans, (Zero coupon until 7/15/02, 12.375%
375,000 thereafter) due 7/15/07............................ 187,500
250,000 North Atlantic Trading, 11.000% due 6/15/04........ 251,875
250,000 Orange PLC, 9.000% due 6/1/09 (e).................. 250,625
250,000 Park Place Entertainment, 7.875% due 12/15/05...... 238,125
190,000 Pueblo Xtra International, 9.500% due 8/1/03....... 184,300
205,000 Purina Mills Inc., 9.000% due 3/15/10.............. 161,950
300,000 Revlon Worldwide, zero coupon bond due 3/15/01..... 204,750
205,000 Shop Vac Corp., 10.625% due 9/1/03................. 226,270
375,000 Universal Hospital Services, 10.250% due 3/1/08.... 333,750
350,000 Waterford Gaming, 9.500% due 3/15/10 (e)........... 350,000
------------
7,717,530
------------
Data Technology/Information Services -- 0.4%
500,000 Amphenol Corp., 9.875% due 5/15/07................. 511,875
250,000 DecisionOne Corp., 9.750% due 8/1/07............... 13,750
------------
525,625
------------
Energy -- 0.6%
200,000 Benton Oil & Gas Co., 11.625% due 5/1/03........... 146,000
250,000 Clark USA, 10.875% due 12/1/05..................... 215,625
500,000 Costilla Energy, 10.250% due 10/1/06............... 147,500
250,000 Frontier Oil Corp., 9.125% due 2/15/06............. 238,125
TransAmerican Energy Corp.:
250,000 11.500% due 6/15/02 (c)(d)......................... 28,750
Zero coupon until 6/15/99 (13.000% thereafter) due
250,000 6/15/02 (c)(d)..................................... 26,250
------------
802,250
------------
Financial Services -- 3.1%
500,000 Airplanes Pass-Through Trust, 10.875% due 3/15/19.. 499,650
450,000 Bankamerica Corp., 5.750% due 3/1/04............... 438,187
500,000 Contifinancial Corp., 8.375% due 8/15/03........... 415,000
500,000 DVI Inc., 9.875% due 2/1/04 (e).................... 487,500
330,000 First Data Corp., 6.375% due 12/15/07.............. 321,750
270,000 Ford Motor Credit, 5.800% due 1/12/09.............. 247,388
210,000 Merrill Lynch & Co., Inc., 6.000% due 11/15/04..... 205,014
400,000 PaineWebber Group, 7.750% due 9/1/02............... 409,000
200,000 Spieker Properties, 7.250% due 5/1/09.............. 193,750
600,000 U.S. Bank, 5.700% due 12/15/08..................... 549,750
200,000 USL Capital Corp., 8.450% due 1/25/05.............. 213,250
250,000 William Scottsman, 9.875% due 6/1/07............... 248,750
------------
4,228,989
------------
Housing Related -- 0.7%
250,000 CB Richard Ellis, 8.875% due 6/1/06................ 249,375
250,000 Forest City Enterprises, 8.500% due 3/15/08........ 246,250
Panolam Industries International, 11.500% due
375,000 2/15/09 (e)........................................ 386,250
------------
881,875
------------
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Manufacturing -- 4.3%
$ 250,000 Alvey Systems Inc., 11.375% due 1/31/03............ $ 251,875
American Axle & Manufacturing Inc., 9.750% due
375,000 3/1/09............................................. 375,937
Axiohm Transaction Solution Inc., 9.750% due
300,000 10/1/07............................................ 150,000
500,000 BE Aerospace Inc., 8.000% due 3/1/08............... 475,000
500,000 Breed Technologies Inc., 9.250% due 4/15/08........ 75,000
250,000 Cabot Safety Corp., 12.500% due 7/15/05............ 271,250
500,000 Foamex L.P., 9.875% due 6/15/07.................... 427,500
250,000 Hexcel Corp., 9.750% due 1/15/09................... 251,563
125,000 International Knife and Saw, 11.375% due 11/15/06.. 123,438
500,000 J.L. French, 11.500% due 6/1/09 (e)................ 506,250
Jordan Industries Inc.:
125,000 10.375% due 8/1/07................................. 127,188
Zero coupon until 4/1/02 (11.750% thereafter) due
402,096 4/1/09............................................. 260,860
250,000 Key Plastics Inc., 10.250% due 3/15/07............. 245,000
250,000 L-3 Communications Corp., 8.000% due 8/1/08........ 250,313
335,000 Motors and Gears, 10.750% due 11/15/06 (e)......... 340,863
250,000 Neenah Corp., 11.125% due 5/1/07................... 247,813
250,000 Packard Bioscience, 9.375% due 3/1/07.............. 236,250
Polymer Group, Inc.:
375,000 9.000% due 7/1/07.................................. 367,500
125,000 8.750% due 3/1/08.................................. 121,250
250,000 Stellex Industries Inc., 9.500% due 11/1/07........ 227,188
400,000 TRW Inc., 6.450% due 6/15/01 (e)................... 400,000
------------
5,732,038
------------
Media & Telecommunications -- 6.3%
Adelphia Communications:
17,091 9.500% due 2/15/04................................. 17,924
150,000 10.500% due 7/15/04................................ 160,875
250,000 7.875% due 5/1/09.................................. 232,500
Avalon Cable Holdings, (Zero coupon until 12/1/03,
750,000 11.875% thereafter) due 12/1/08 (e)................ 502,500
500,000 Big Flower Press Holdings, 8.625% due 12/1/08...... 465,000
500,000 Capstar Broadcasting, 9.250% due 7/1/07............ 517,500
Century Communications:
500,000 8.375% due 12/15/07................................ 490,000
250,000 Zero coupon due 1/15/08............................ 112,500
Charter Communications Holdings LLC, (Zero coupon
750,000 until 4/1/04, 9.920% thereafter) due 4/1/11 (e).... 466,875
Diamond Cable, (Zero coupon until 12/15/00, 11.750%
250,000 thereafter) due 12/15/05........................... 221,250
500,000 Energis PLC, 9.750% due 6/15/09 (e)................ 501,250
375,000 Falcon Holding Group, 8.375% due 4/15/10........... 371,250
250,000 Garden State Newspapers, 8.750% due 10/1/09........ 237,500
Hollinger International Publishing Inc., 9.250% due
275,000 2/1/06............................................. 281,188
Intelcom Group, (Zero coupon until 9/15/00, 13.500%
350,000 thereafter) due 9/15/05............................ 315,000
250,000 Intermedia Communications, 8.600% due 6/1/08....... 232,500
500,000 Jordan Telecom, 9.875% due 8/1/07.................. 490,625
Lin Holdings Corp., (Zero coupon until 3/1/03,
500,000 10.000% thereafter) due 3/1/08..................... 326,250
500,000 Mediacom LLC, 8.500% due 4/15/08................... 495,000
Metronet Communications, (Zero coupon until
500,000 6/15/03, 9.950% thereafter) due 6/15/08............ 372,500
Nextel Communications:
250,000 9.750% due 8/15/04................................. 255,000
Zero coupon until 2/15/03 (9.950% thereafter) due
250,000 2/15/08............................................ 173,125
NTL Inc., (Zero coupon until 2/1/01, 11.500%
325,000 thereafter) due 4/15/05............................ 276,250
165,000 SFX Broadcasting, 10.750% due 5/15/06.............. 182,119
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Media & Telecommunications -- 6.3% (continued)
Telewest Communication PLC, (Zero coupon until
$ 450,000 10/1/00, 11.000% thereafter) due 10/1/07...... $ 401,625
United International Holdings, (Zero coupon
until 2/15/03, 10.750% thereafter) due
525,000 2/15/08....................................... 349,125
------------
8,447,231
------------
Services & Other -- 3.6%
Allied Waste North America, 7.875% due
375,000 1/1/09........................................ 348,282
500,000 Comdisco, Inc., 6.000% due 1/30/02............ 493,750
250,000 Dyncorp Inc., 9.500% due 3/1/07............... 250,000
Integrated Electric Services, 9.375% due
375,000 2/1/09........................................ 369,375
Iron Mountain Inc.:
250,000 10.125% due 10/1/06........................... 265,625
125,000 8.750% due 9/30/09............................ 123,750
Kinder-Care Learning Centers, 9.500% due
500,000 2/15/09....................................... 480,000
500,000 Loomis Fargo, 10.000% due 1/15/04............. 510,000
250,000 Marsulex Inc., 9.625% due 7/1/08.............. 257,188
300,000 Pierce Leahy Corp., 8.125% due 5/15/08........ 285,000
250,000 Primark, Corp., 9.250% due 12/15/08........... 245,938
375,000 Protection One, 8.125% due 1/15/09 (e)........ 356,250
500,000 Safety-Kleen, Corp., 9.250% due 5/15/09 (e)... 505,000
Service Corp. International, 6.000% due
450,000 12/15/05...................................... 415,125
------------
4,905,283
------------
Transportation -- 1.1%
500,000 Coach USA Inc., 9.375% due 7/1/07............. 520,000
250,000 Enterprise Shipholding, 8.875% due 5/1/08..... 175,000
500,000 Holt Group, 9.750% due 1/15/06 (e)............ 350,000
TFM S.A. de C.V., (Zero coupon until 6/15/02,
400,000 11.750% thereafter) due 6/15/09............... 240,000
410,725 Viacao Aerea Riograndens, 9.600% due 2/10/05.. 246,435
------------
1,531,435
------------
Utilities -- 0.2%
250,000 GTE Corp., 6.940% due 4/15/28................. 239,063
------------
TOTAL CORPORATE BONDS
(Cost -- $49,564,258)......................... 45,663,839
------------
SOVEREIGN BONDS -- 24.6%
Argentina -- 3.7%
Republic of Argentina, Global Bond:
1,000,000 11.000% due 12/4/05........................... 920,000
4,650,000 11.375% due 1/30/17........................... 4,004,813
------------
4,924,813
------------
Australia -- 0.9%
1,590,000 AUD Commerzbank, 10.250% due 4/20/00.............. 1,091,495
New South Wales Treasury Corp., 7.375% due
110,000 AUD 2/21/07....................................... 76,077
------------
1,167,572
------------
Brazil -- 3.9%
Federal Republic of Brazil:
5,651,064 C Bond, 8.000% due 4/15/14 (f)(g)............. 3,685,557
475,000 EI Bond, 5.875% due 4/15/06 (f)............... 376,734
1,500,000 Global Bond, 9.375% due 4/7/08................ 1,166,250
------------
5,228,541
------------
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Bulgaria -- 1.6%
Republic of Bulgaria:
$ 2,000,000 FLIRB, Series A, 2.500% due 7/28/12 (f)....... $ 1,210,000
1,400,000 IAB, 5.875% due 7/28/11 (f)................... 964,250
------------
2,174,250
------------
Canada -- 0.2%
360,000 CAD Canadian Government, 6.000% due 6/1/08........ 252,347
------------
Ecuador -- 1.3%
Republic of Ecuador:
187,500 IE Bond, 6.1875% due 12/21/04 (f)............. 115,378
800,000 Par Bond, 4.000% due 2/28/25 (f).............. 312,000
4,139,775 PDI Bond, 6.000% due 2/27/15 (f)(g)........... 1,371,301
------------
1,798,679
------------
Greece -- 1.5%
Hellenic Republic:
102,000,000 GRD 11.000% due 2/25/00........................... 327,194
135,000,000 GRD 7.600% due 1/22/02............................ 435,640
321,500,000 GRD 8.900% due 4/1/03............................. 1,098,740
37,000,000 GRD 8.700% due 4/8/05............................. 130,421
------------
1,991,995
------------
Italy -- 0.3%
340,000 EUR Buoni Polienna, 5.250% due 11/1/29............ 335,178
------------
Ivory Coast -- 1.5%
Republic of Ivory Coast, FLIRB, 2.000% due
7,400,000 3/29/18 (f)................................... 2,016,500
------------
Mexico -- 0.5%
United Mexico States, Global Bond, 8.625% due
750,000 3/12/08....................................... 695,625
------------
Norway -- 0.5%
5,000,000 NOK Norwegian T-Bill, 6.500% due 9/15/99.......... 636,234
------------
Peru -- 1.6%
Republic of Peru:
2,500,000 FLIRB, 3.750% due 3/7/17 (f).................. 1,373,437
200,000 FLIRB, Bearer, 3.750% due 3/7/17 (f).......... 109,875
1,000,000 PDI, 4.500% due 3/7/17 (f).................... 620,000
------------
2,103,312
------------
Poland -- 0.5%
European Investment Bank, 10.500% due
600,000 PLN 1/25/01....................................... 149,950
KFW International Finance, 16.300% due
1,400,000 PLN 6/24/03....................................... 419,714
190,000 PLN Nordic Investment Bank, 17.750% due 4/15/02... 55,205
------------
624,869
------------
Russia -- 1.6%
Russia, Ministry of Finance, Global Bond:
4,000,000 11.000% due 7/24/18........................... 1,995,000
300,000 12.750% due 6/24/28........................... 170,625
------------
2,165,625
------------
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Slovenia -- 0.3%
$ 440,000 EUR Republic of Slovenia, 5.375% due 5/27/05...... $ 465,011
------------
Sweden -- 0.1%
1,500,000 SEK Kingdom of Sweden, 6.500% due 5/5/08.......... 195,205
------------
United Kingdom -- 0.9%
Sudwest LB Capital Markets, 17.500% due
660,000 PLN 5/5/03........................................ 200,556
United Kingdom Treasury Bill, 6.500% due
630,000 GBP 12/7/03....................................... 1,036,461
------------
1,237,017
------------
Venezuela -- 3.7%
Republic of Venezuela:
809,521 DCB, Series DL, 6.3125% due 12/18/07 (f)...... 623,837
761,900 FLIRB, Series A, 6.000% due 3/31/07 (f)....... 585,950
1,142,850 FLIRB, Series B, 6.000% due 3/31/07 (f)....... 878,924
3,200,000 Global Bond, 13.625% due 8/15/18.............. 2,888,000
------------
4,976,711
------------
TOTAL SOVEREIGN BONDS
(Cost -- $35,119,509)......................... 32,989,484
------------
LOAN PARTICIPATIONS (h) -- 1.9%
Kingdom of Morocco, Tranche A, 5.906% due
847,618 1/1/09 (J.P. Morgan) (f)...................... 684,452
The People's Democratic Republic of Algeria,
Tranche 3, 6.000% due 3/4/10 (Chase Manhattan
3,300,000 Bank) (f)..................................... 1,872,750
------------
TOTAL LOAN PARTICIPATIONS
(Cost -- $2,470,318).......................... 2,557,202
------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS -- 18.1%
Federal Home Loan Mortgage Corporation
(FHLMC):
121,417 10.000% due 5/15/20........................... 131,345
2,177 1.1157% due 6/15/21 -- Interest Only.......... 54,534
12,500 Gold, 6.000% due 10/1/10...................... 12,075
331,817 Gold, 7.000% due 7/1/11....................... 334,513
Federal National Mortgage Association (FNMA):
16,550,000 6.500%, 30 year (TBA) (i)..................... 16,027,641
1,000,000 6.000%, 30 year (TBA) (i)..................... 943,125
943,032 7.368% due 8/17/03............................ 948,632
13,085 13.000% due 11/15/15.......................... 15,318
180,989 7.000% due 11/18/15........................... 180,537
55,579 10.400% due 4/25/19........................... 58,278
3,449,370 0.606% due 3/17/20 -- Interest Only........... 80,881
75,714 6.500% due 2/1/26............................. 73,372
776,637 6.500% due 3/1/26............................. 752,610
5,840,795 1.641% due 2/25/35 -- Interest Only........... 428,364
8,451,376 0.548% due 10/17/36 -- Interest Only.......... 217,716
11,383,383 1.044% due 6/25/38 -- Interest Only........... 655,193
U.S. Treasury Notes:
200,000 4.750% due 2/15/04............................ 191,750
250,000 6.125% due 11/15/27........................... 248,147
1,210,000 5.500% due 8/15/28............................ 1,106,969
2,000,000 5.250% due 11/15/28........................... 1,771,340
------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(Cost -- $25,145,537)......................... 24,232,340
------------
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.1%
Commercial Mortgage Asset Trust, Series 1999-C1,
$ 2,000,000 Class C, 7.350% due 8/17/13....................... $ 1,926,250
Contimortgage Home Equity Loan Trust, Series 1999-
1,000,000 3, Class B, 7.000% due 7/25/30.................... 843,750
First Union Residential Securitization, Series
295,222 1998-A, Class B2, 7.000% due 8/25/28.............. 266,992
GE Capital Mortgage Services Inc., Series 1998-15,
1,297,943 Class B1, 6.750% due 11/25/28..................... 1,216,822
Green Tree Financial, Series 1997-6, Class A8,
1,049,231 7.070% due 1/15/29................................ 1,049,966
Mid-State Trust, Series 6, Class A1, 7.340% due
1,350,141 7/1/35............................................ 1,360,267
PNC Mortgage Securities:
395,536 Series 1998-4, Class 3B3, 6.750% due 5/25/28...... 350,792
568,391 Series 1998-4, Class CB3, 6.838% due 5/25/28...... 497,166
946,693 Series 1998-5, Class CB2, 6.772% due 3/25/29...... 877,467
517,793 Series 1998-5, Class CB3, 6.734% due 7/25/28...... 457,600
746,989 Series 1998-5, Class DB3, 6.904% due 4/25/29...... 652,682
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost -- $9,872,693).............................. 9,499,754
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 0.8%
DLJ Commercial Mortgage Corp.:
Series 1998-CF2, Class S, 0.851% due 11/12/31 --
10,930,958 Interest Only.................................... 570,465
Series 1998-CG1, Class S, 0.708% due 5/10/23 --
11,765,672 Interest Only.................................... 500,041
------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost -- $1,147,436).............................. 1,070,506
------------
<CAPTION>
Shares
------
<C> <S> <C>
PREFERRED STOCK -- 0.0%
Financial/Leasing -- 0.0%
841 TCR Holding, Series B............................. 50
462 TCR Holding, Series C............................. 26
1,218 TCR Holding, Series D............................. 65
2,521 TCR Holding, Series E............................. 159
------------
TOTAL PREFERRED STOCK
(Cost -- $300).................................... 300
------------
<CAPTION>
Warrants
--------
<C> <S> <C>
WARRANTS -- 0.1%
400 In Flight Phone, Expires 2/18/00.................. 0
1,200 Republic of Argentina, Expires 12/3/99............ 10,500
942 United Mexican States, Expires 8/31/02............ 61,230
------------
TOTAL WARRANTS
(Cost -- $59,325)................................. 71,730
------------
SUB-TOTAL INVESTMENTS
(Cost -- $123,379,376)............................ 116,085,155
------------
</TABLE>
See Notes to Financial Statements.
62
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Strategic Bond Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount(a) Security Value
- -------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT (b) -- 13.3%
$17,834,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $17,836,328; (Fully
collateralized by U.S. Treasury Notes, 8.500% due
2/15/20; Market value -- $18,194,176) (Cost --
$17,834,000)..................................... $ 17,834,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $141,213,376*)............................ $133,919,155
============
</TABLE>
- ------
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) All or part of the security is segregated as collateral for mortgage dollar
rolls.
(c) Non-income producing security.
(d) Security is currently in default.
(e) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(f) Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
(g) Payment-in-kind security for which all or part of the interest earned may
be paid by the issuance of additional bonds.
(h) Participation interest was acquired through the financial institutions in-
dicated.
(i) Mortgage dollar roll.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
---------------
AUD -- Australian Dollar.
CAD -- Canadian Dollar.
DCB -- Debt Conversion Bonds.
EI -- Eligible Interest.
EUR -- Euro.
FLIRB -- Floating Rate Interest Reduction Bonds.
GBP -- Great Britain Pound.
GRD -- Greek Drachma.
IAB -- Interest in Arrears Bond.
IE -- Interest Equalization.
NOK -- Norwegian Krona.
PDI -- Past Due Interest.
PLN -- Poland Zloty.
SEK -- Swedish Krona.
TBA -- To be announced.
See Notes to Financial Statements.
63
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers National Intermediate Municipal Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 92.8%
California -- 3.8%
Los Angeles, CA Harbor Department Revenue, Series B,
$285,000 AMBAC-Insured, 6.00% due 8/1/03........................ $ 302,966
Oakland, CA Port Revenue, Series G, MBIA-Insured, 6.00%
250,000 due 11/1/05............................................ 271,460
-----------
574,426
-----------
District of Columbia -- 3.3%
District of Columbia GO, Series A, MBIA-Insured, 5.00%
500,000 due 6/1/06............................................. 503,465
-----------
Florida -- 1.2%
Florida Housing Finance Agency Refunding, Single-Family
175,000 Mortgage, Series A, 6.15% due 7/1/06................... 182,206
-----------
Hawaii -- 1.7%
Hawaii State Department of Budget and Finance, Special
250,000 Purpose Revenue, 5.60% due 7/1/06...................... 260,117
-----------
Illinois -- 10.0%
Chicago, IL O'Hare International Airport Revenue,
250,000 Series B, 5.00% due 1/1/02............................. 253,283
Chicago, IL Water Reclamation District Refunding, GO,
300,000 5.90% due 12/1/06...................................... 321,657
Illinois Student Assistance Commission Student Loan
400,000 Revenue, Series M, 6.40% due 3/1/04.................... 423,432
Springfield, IL Electric Revenue Refunding, MBIA-
500,000 Insured, 6.00% due 3/1/06.............................. 532,980
-----------
1,531,352
-----------
Indiana -- 10.0%
500,000 Indiana Health Facilities Financing Authority Hospital
Revenue Refunding, (Hancock Memorial Hospital Health
Services), 5.80% due 8/15/06.......................... 519,930
Indiana Secondary Market for Educational Loans Revenue,
300,000 Series C, AMBAC-Insured, 5.55% due 12/1/05............. 310,116
Indiana Transportation Finance Authority Airport
650,000 Facilities Lease Revenue, Series A, 6.25% due 11/1/03.. 688,799
-----------
1,518,845
-----------
Louisiana -- 2.4%
Louisiana Public Facilities Authority Student Loan
350,000 Revenue, Series A-2, 6.75% due 9/1/06.................. 366,965
-----------
Massachusetts -- 2.9%
400,000 Massachusetts State Health and Educational Facilities
Authority Revenue, (Dana Farber Cancer Project),
Series G-1, 6.50% due 12/1/05......................... 435,556
-----------
Michigan -- 1.8%
Detroit, MI Water Supply Systems, Series A, MBIA-
250,000 Insured, 6.00% due 7/1/07.............................. 268,883
-----------
Mississippi -- 2.4%
Mississippi Higher Education, Series C, 6.05% due
360,000 9/1/07................................................. 368,935
-----------
New Jersey -- 3.1%
Passaic Valley, NJ Sewer Systems, Series D, AMBAC-
450,000 Insured, 5.75% due 12/1/07............................. 476,091
-----------
New York -- 25.5%
Long Island Power Authority, NY Electric Systems
250,000 Revenue, MBIA-Insured, 5.00% due 4/1/04................ 254,528
Municipal Assistance Corp. for the City of New York,
250,000 NY, Series J, 5.50% due 7/1/02......................... 258,580
320,000 New York City, NY GO, Series D, 6.50% due 2/1/02....... 335,897
130,000 New York City, NY GO, Escrowed to maturity with U.S.
government securities, Series D, 6.50% due 2/1/02..... 137,108
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers National Intermediate Municipal Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
New York -- 25.5% (continued)
$700,000 New York State Dormitory Authority Revenue, (College
and University Educational Loan), MBIA-Insured,
5.60% due 7/1/06...................................... $ 723,219
New York State Dormitory Authority Revenue, (Department
500,000 of Health), 6.00% due 7/1/06........................... 530,450
400,000 New York State Dormitory Authority Revenue, (State
University of New York), Escrowed to maturity with
U.S. government securities, Series X, 6.625% due
7/1/04................................................ 439,576
500,000 New York State Mortgage Agency Revenue Homeowner
Mortgage, Series 46, 5.90% due 10/1/06................ 518,370
400,000 New York State Thruway Authority Service Contract
Revenue, (Local Highway and Bridge), Series A, MBIA-
Insured, 6.00% due 1/1/04............................. 423,376
250,000 New York State Urban Development Corporation Revenue,
(Correctional Facilities Service Contract A),
5.00% due 1/1/06...................................... 250,825
-----------
3,871,929
-----------
Ohio -- 3.0%
Cleveland, OH Airport Systems Revenue, Series A, FSA-
250,000 Insured, 5.50% due 1/1/08.............................. 256,655
190,000 Miami County, OH Hospital Facilities Refunding and
Improvement, (Upper Valley Medical Center),
5.60% due 5/15/02..................................... 193,984
-----------
450,639
-----------
Pennsylvania -- 7.7%
500,000 Allegheny County, PA Airport Revenue Refunding,
(Pittsburgh International Airport), 5.50% due 1/1/03.. 514,240
400,000 Geisinger Authority, PA Health System, Series A, 6.00%
due 7/1/01............................................ 412,916
250,000 Pennsylvania Housing Finance Agency, Single-Family
Mortgage, Series 62A, 4.85% due 10/1/07............... 246,640
-----------
1,173,796
-----------
South Carolina -- 7.1%
250,000 Piedmont Municipal Power Agency, SC Electric Revenue
Refunding, Series B, FGIC-Insured,
6.00% due 1/1/07...................................... 266,770
750,000 South Carolina State Public Service Authority Revenue
Refunding, Series B, FGIC-Insured, 6.50% due 1/1/05... 815,168
-----------
1,081,938
-----------
Texas -- 3.6%
500,000 Austin, TX Airport System Revenue, Series A, MBIA-
Insured, 6.50% due 11/15/05........................... 545,600
-----------
Virginia -- 3.3%
500,000 Pocahontas Parkway Association, VA Toll Road Revenue,
Series A, 5.00% due 8/15/06........................... 499,080
-----------
TOTAL LONG-TERM INVESTMENTS
(Cost -- $13,754,928).................................. 14,109,823
-----------
Indiana -- 0.6%
100,000 Rockport, IN Pollution Control Revenue Refunding, (AEP
Generating Company Project B), VR,
3.45% due 7/1/99...................................... 100,000
-----------
Michigan -- 0.7%
100,000 University of Michigan, University Revenue, (Medical
Service Plan), Series A, VR, 3.45% due 7/1/99......... 100,000
-----------
SHORT-TERM INVESTMENTS -- 7.2%
North Carolina -- 1.3%
200,000 Halifax County, NC Industrial Facilities and Pollution
Control Financing Authority Revenue, VR,
3.60% due 7/1/99...................................... 200,000
-----------
</TABLE>
See Notes to Financial Statements.
65
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers National Intermediate Municipal Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
Virginia -- 4.6%
$300,000 Alexandria, VA Redevelopment and Housing Authority
Residential Care Facilities Revenue, (Multi-Mode First
Mortgage Goodwin B), VR, 3.60% due 7/1/99............. $ 300,000
100,000 King George County, VA Industrial Development Authority
Exempt Facilities Revenue, (Birchwood Power Partners
B), VR, 3.70% due 7/1/99.............................. 100,000
300,000 Petersburg, VA Hospital Authority Hospital Facilities
Revenue, (Southside Regional), VR, 3.60% due 7/1/99... 300,000
-----------
700,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost -- $1,100,000)................................... 1,100,000
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $14,854,928*)................................. $15,209,823
===========
</TABLE>
- ------
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
---------------
AMBAC -- Insured as to principal and interest by the American Municipal Bond
Assurance Corporation.
FGIC -- Insured as to principal and interest by the Financial Guaranty Insur-
ance Corporation.
FSA -- Insured as to principal and interest by the Financial Security Assur-
ance Corporation.
GO -- General Obligation.
MBIA -- Insured as to principal and interest by the MBIA Insurance Corpora-
tion.
VR -- Variable Rate Demand Note. Date shown is the date of next interest rate
change.
See Notes to Financial Statements.
66
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers U.S. Government Income Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES -- 12.7%
U.S. Treasury Notes:
$3,500,000 5.250% due 5/31/01................................... $ 3,484,110
700,000 4.750% due 2/15/04................................... 671,125
450,000 4.750% due 11/15/08.................................. 413,118
500,000 5.250% due 2/15/29................................... 448,940
-----------
TOTAL U.S. TREASURY NOTES
(Cost -- $5,655,616)................................. 5,017,293
-----------
U.S. GOVERNMENT AGENCIES -- 43.0%
Federal Home Loan Bank:
100,000 5.940% due 6/13/00................................... 100,453
500,000 5.800% due 9/2/08.................................... 478,710
Federal Home Loan Mortgage Corporation (FHLMC):
11,341 11.750% due 1/1/11................................... 12,833
137 11.750% due 6/1/14................................... 156
3,660 11.750% due 12/1/14.................................. 4,142
25,755 11.750% due 7/1/15................................... 29,144
468,753 8.000% due 7/1/20.................................... 485,891
568,631 10.000% due 9/1/20................................... 611,342
183,521 7.000% due 4/15/21................................... 184,440
500,000 6.000% due 8/28/28 (a)............................... 470,935
212,498 Gold, 7.500% due 5/1/07.............................. 216,083
22,886 Gold, 6.000% due 7/1/10.............................. 22,107
112,267 Gold, 7.000% due 5/1/11.............................. 113,179
299,651 Gold, 7.000% due 7/1/11.............................. 302,086
465,786 Gold, 7.000% due 7/1/11.............................. 469,573
201,693 Gold, 7.000% due 8/1/11.............................. 203,332
103,209 Gold, 8.250% due 4/1/17.............................. 106,854
194,553 Gold, 8.000% due 12/1/19............................. 199,721
3,435,515 Gold, 6.000% due 1/1/28.............................. 3,246,562
Federal National Mortgage Association (FNMA):
140,449 6.500% due 12/1/03................................... 139,834
18,161 14.500% due 11/15/14................................. 21,487
50,665 12.500% due 9/20/15.................................. 58,867
52,342 13.000% due 11/15/15................................. 61,273
303,775 12.000% due 1/1/16................................... 345,259
20,119 12.000% due 1/15/16.................................. 23,175
184,036 12.500% due 1/15/16.................................. 211,757
15,189 11.500% due 9/1/19................................... 16,889
112,444 10.500% due 8/1/20................................... 123,231
205,257 8.500% due 11/1/23................................... 214,301
108,434 9.000% due 8/1/26.................................... 114,906
5,100,000 6.500% due 11/15/28 (a).............................. 4,939,031
500,049 6.500% due 4/1/29.................................... 484,579
3,000,000 6.000% due 9/1/30 (a)................................ 2,829,375
113,914 Government National Mortgage Association (GNMA),
8.500% due 1/15/18.................................. 119,360
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost -- $16,805,482)................................ 16,960,867
-----------
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers U.S. Government Income Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 8.9%
Fanniemae-aces, Class A:
$ 646,529 Series 1997-M1, 6.780% due 1/17/30................... $ 650,279
637,333 Series 1998-T1, 6.793% due 12/28/28.................. 605,467
675,000 Fanniemae-aces, Class B, Series 1998-M2, 6.250% due
3/17/21............................................. 660,997
800,000 Fanniemae-aces, Class C, Series 1998-M4, 6.527% due
5/25/30............................................. 778,460
750,000 Federal Home Loan Mortgage Corp, Class J, Series
1763, 8.500% due 3/15/24............................ 783,510
19,199 Vendee Mortgage Trust, Class 1B, Series 1995-3,
7.250% due 10/15/10................................. 19,178
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost -- $3,594,835)................................. 3,497,891
-----------
SUB-TOTAL INVESTMENTS
(Cost -- $26,055,933)................................ 25,476,051
-----------
REPURCHASE AGREEMENTS (b) -- 35.4%
7,000,000 SBC Warburg Dillion Read Inc., 4.800% due 7/1/99;
Proceeds at maturity -- $7,000,933;
(Fully collateralized by U.S. Treasury Notes, 6.375%
due 8/15/27; Market value -- $7,140,111)............ 7,000,000
6,994,000 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $6,994,913;
(Fully collateralized by U.S. Treasury Notes, 8.875%
due 8/15/17; Market value -- $7,139,985)............ 6,994,000
-----------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $13,994,000)................................ 13,994,000
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $40,049,933*)............................... $39,470,051
===========
</TABLE>
- ------
(a) Mortgage dollar roll.
(b) All or part of the security is segregated as collateral for mortgage dollar
rolls.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
68
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers New York Municipal Money Market Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Yield to
Face Maturity on Date Maturity
Amount Security of Purchase+ Date Value
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 100%
New York -- 99.6%
$ 655,000 Albany County, NY
Industrial Development
Agency VR............... 3.70% 7/1/99 $ 655,000
1,550,000 Auburn, NY Industrial
Development Agency VR... 3.90 7/7/99 1,550,000
1,050,000 Broome County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 1,050,000
900,000 Cattaraugus County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 900,000
1,330,000 Cattaraugus County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 1,330,000
1,300,000 Chautauqua County, NY
Industrial Development
Agency VR............... 3.90 7/7/99 1,300,000
1,700,000 Chemung County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 1,700,000
4,100,000 Chenango, NY Industrial
Development Agency VR... 3.85 7/1/99 4,100,000
645,000 Colonie, NY Housing
Development Corp. VR.... 3.50 7/7/99 645,000
450,000 Colonie, NY Industrial
Development Agency VR... 3.70 7/1/99 450,000
900,000 Dutchess County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 900,000
405,000 Erie County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 405,000
550,000 Erie County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 550,000
2,125,000 Erie County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 2,125,000
200,000 Erie County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 200,000
201,200 Erie County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 201,200
2,100,000 Islip, NY Industrial
Development Authority
VR...................... 3.70 7/1/99 2,100,000
4,400,000 Long Island, NY Power
Authority VR............ 3.55 7/7/99 4,400,000
1,500,000 Metropolitan Transit
Authority, NY (Pre-
Refunded)............... 3.58 7/1/00 1,588,679
5,000,000 Metropolitan Transit
Authority, NY TECP...... 3.10 8/5/99 5,000,000
1,430,000 Monroe County, NY
Industrial Development
Agency PUT.............. 3.35 12/1/99 1,430,000
700,000 Monroe County, NY
Industrial Development
Agency PUT.............. 3.50 6/15/00 700,000
765,000 Monroe County, NY
Industrial Development
Agency VR............... 3.60 7/1/99 765,000
3,005,000 Monroe County, NY
Industrial Development
Agency VR............... 3.60 7/1/99 3,005,000
2,370,000 Monroe County, NY
Industrial Development
Agency VR............... 3.65 7/1/99 2,370,000
2,525,000 Monroe County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 2,525,000
6,500,000 Monroe County, NY
Industrial Development
Agency VR............... 3.80 7/7/99 6,500,000
660,000 Monroe County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 660,000
1,370,000 Monroe County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 1,370,000
1,610,000 Monroe County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 1,610,000
850,000 Municipal Assistance
Corp. NY City, NY....... 3.15 7/1/99 850,000
2,500,000 Nassau County, NY BANS... 3.50 8/17/99 2,501,014
2,500,000 Nassau County, NY
Industrial Development
Agency VR............... 3.40 7/1/99 2,500,000
750,000 Nassau County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 750,000
2,500,000 New York City, Municipal
Water and Sewer Agency
P/R..................... 3.39 6/15/00 2,629,668
5,000,000 New York City, NY VR..... 3.45 7/7/99 5,000,000
2,530,000 New York City, NY VR..... 3.35 7/7/99 2,530,000
1,000,000 New York City, NY VR..... 3.45 7/7/99 1,000,000
1,870,000 New York City, NY Health
and Hospital Corp. VR... 3.50 7/7/99 1,870,000
1,800,000 New York City, NY Housing
Development Corp. VR.... 3.25 7/7/99 1,800,000
2,200,000 New York City, NY Housing
Development Corp. VR.... 3.30 7/7/99 2,200,000
900,000 New York City, NY Housing
Development Corp. VR.... 3.30 7/7/99 900,000
2,800,000 New York City, NY Housing
Development Corp. VR.... 3.30 7/7/99 2,800,000
1,300,000 New York City, NY Housing
Development Corp. VR.... 3.30 7/7/99 1,300,000
4,000,000 New York City, NY Housing
Development Corp. VR.... 3.45 7/7/99 4,000,000
2,500,000 New York City, NY Housing
Development Corp. VR.... 3.65 7/7/99 2,500,000
1,700,000 New York City, NY Housing
Development Corp. VR.... 3.65 7/7/99 1,700,000
605,000 New York City, NY
Industrial Development
Agency VR............... 3.70 7/1/99 605,000
300,000 New York City, NY
Industrial Development
Agency VR............... 3.85 7/1/99 300,000
175,000 New York City, NY
Industrial Development
Agency VR............... 3.95 7/1/99 175,000
</TABLE>
See Notes to Financial Statements.
69
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers New York Municipal Money Market Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Yield to
Face Maturity on Date Maturity
Amount Security of Purchase+ Date Value
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
New York -- 99.6% (continued)
$ 7,000,000 New York City, NY
Transitional Finance
Authority VR............ 3.45% 7/7/99 $ 7,000,000
1,000,000 New York State, Dormitory
Authority FGIC.......... 3.78 7/1/99 1,000,000
7,155,000 New York State, Dormitory
Authority P/R........... 3.30 5/15/00 7,541,633
3,000,000 New York State, Dormitory
Authority VR............ 4.15 7/1/99 3,000,000
500,000 New York State,
Environmental Facilities
Corp. .................. 3.90 2/15/00 502,757
1,000,000 New York State, Housing
Finance Agency VR....... 3.30 7/7/99 1,000,000
130,000 New York State, Job
Development Authority
VR...................... 3.20 7/1/99 130,000
115,000 New York State, Job
Development Authority
VR...................... 3.20 7/1/99 115,000
450,000 New York State, Job
Development Authority
VR...................... 3.30 7/1/99 450,000
1,490,000 New York State, Job
Development Authority
VR...................... 3.30 7/1/99 1,490,000
165,000 New York State, Job
Development Authority
VR...................... 3.95 7/7/99 165,000
1,770,000 New York State, Local
Government Assistance
Corp. VR................ 3.30 7/7/99 1,770,000
2,900,000 New York State, Power
Authority TECP.......... 3.10 7/12/99 2,900,000
800,000 New York State, Power
Authority TECP.......... 3.20 7/12/99 800,000
400,000 Niagara County, NY
Industrial Development
Agency VR............... 3.70 7/7/99 400,000
10,000,000 Niagara County, NY
Industrial Development
Agency VR............... 3.75 7/7/99 10,000,000
615,000 Niagara County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 615,000
4,750,000 Oneida County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 4,750,000
4,200,000 Onondaga County, NY
Industrial Development
Agency VR............... 3.75 7/7/99 4,200,000
1,300,000 Onondaga County, NY
Industrial Development
Agency VR............... 3.75 7/7/99 1,300,000
4,600,000 Ontario County, NY
Industrial Development
Agency VR............... 4.00 7/1/99 4,600,000
2,680,000 Otsego County, NY
Industrial Development
Agency VR............... 3.40 7/1/99 2,680,000
1,100,000 Rockland County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 1,100,000
4,270,000 Suffolk County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 4,270,000
3,800,000 Syracuse, NY Industrial
Development Agency VR... 3.90 7/7/99 3,800,000
4,235,000 Ulster County, NY
Industrial Development
Agency VR............... 3.50 7/7/99 4,235,000
2,210,000 Warren & Washington
Counties, NY Industrial
Development Agency VR... 3.55 7/1/99 2,210,000
300,000 Wyoming County, NY
Industrial Development
Agency VR............... 3.70 7/1/99 300,000
5,460,000 Wyoming County, NY
Industrial Development
Agency VR............... 3.85 7/1/99 5,460,000
------------
167,779,951
------------
Puerto Rico -- 0.4%
285,000 Commonwealth of Puerto
Rico, Electric Power
Authority MBIA.......... 3.65 7/1/99 285,000
100,000 Commonwealth of Puerto
Rico, MBIA P/R.......... 3.68 7/1/00 105,633
250,000 Commonwealth of Puerto
Rico, Public Improvement
MBIA P/R................ 3.69 7/1/99 253,750
------------
644,383
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $168,424,334*).. $168,424,334
============
</TABLE>
- ------
+ Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR) and Put Bonds, whose yields are determined on date of the
last interest rate change. For Variable Rate Demand Notes and Put Bonds, ma-
turity date shown is the date of next interest rate change.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
FGIC -- Insured as to principal and interest by the Financial Guaranty Insur-
ance Corporation.
MBIA -- Insured as to principal and interest by the MBIA Insurance Corpora-
tion.
PUT -- Optional or mandatory put. Maturity date shown is the put date as well
as the date of the next interest rate change.
TAN -- Tax Anticipation Note.
TECP -- Tax Exempt Commercial Paper.
See Notes to Financial Statements.
70
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Cash Management Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Yield to
Face Maturity on Date Maturity
Amount Security of Purchase+ Date Value
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 7.2%
Financial Services -- 7.2%
$ 384,189 Ford Credit Auto......... 4.97% 1/18/00 $ 384,189
678,568 Ford Credit Auto......... 5.09 1/18/00 678,568
1,000,000 Green Tree Financial
Services................ 4.94 6/1/00 1,000,000
1,000,000 SMM Trust................ 5.31 12/15/99 1,000,000
------------
TOTAL ASSET-BACKED
SECURITIES
(Cost -- $3,062,757)..... 3,062,757
------------
CERTIFICATES OF DEPOSIT -- 23.6%
Banks -- 23.6%
1,500,000 ABN AMRO Bank Chicago.... 5.13 9/14/99 1,500,593
1,000,000 Commerze AG Bank......... 5.08 2/11/00 999,985
1,500,000 Credit Suisse/First
Boston.................. 5.71 7/20/99 1,500,466
1,500,000 Landesbank Hessen-Thurin
Bank.................... 5.21 2/29/00 1,498,992
1,000,000 Michigan National Bank... 5.01 9/10/99 1,000,019
1,000,000 Montreal Bank............ 4.98 7/21/99 999,955
1,500,000 National Bank of Canada.. 4.69 10/25/99 1,497,189
1,000,000 UBS AG Stanford.......... 5.65 7/26/99 1,000,225
------------
TOTAL CERTIFICATES OF
DEPOSIT
(Cost -- $9,997,424)..... 9,997,424
------------
COMMERCIAL PAPER -- 25.6%
Agriculture -- 2.4%
1,000,000 Ocean Spray Cranberries.. 4.79 7/8/99 999,069
------------
Banks -- 2.3%
1,000,000 Nordbanken NA Inc........ 4.81 8/10/99 994,655
------------
Beverages, Food & Tobacco -- 3.8%
1,590,000 Heinz Co................. 5.35 7/7/99 1,588,582
------------
Consumer Products -- 3.5%
1,500,000 Jostens Co............... 5.21 7/6/99 1,498,885
------------
Electric -- 1.8%
777,000 Sharp Electric........... 5.12 7/20/99 774,900
------------
Municipal -- 5.9%
1,000,000 Emory University,
Georgia................. 4.95 7/13/99 1,000,000
500,000 Tennessee State School
Board................... 5.05 8/12/99 500,000
1,000,000 Tennessee State School
Board................... 5.10 8/12/99 1,000,000
------------
2,500,000
------------
Oil & Gas -- 3.5%
1,500,000 BOC Group Inc............ 5.25 7/2/99 1,499,781
------------
Publishing -- 2.4%
1,009,000 New York Times Co........ 4.85 7/6/99 1,008,320
------------
TOTAL COMMERCIAL PAPER
(Cost -- $10,864,192).... 10,864,192
------------
</TABLE>
See Notes to Financial Statements.
71
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Cash Management Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Yield to
Face Maturity on Date Maturity
Amount Security of Purchase+ Date Value
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
FLOATING RATE NOTES -- 29.9%
California -- 2.4%
$ 1,000,000 Sacramento County, CA
VR...................... 5.06% 7/7/99 $ 1,000,000
------------
Florida -- 5.1%
1,155,000 Baptist Health Systems,
MBIA-Insured, VR........ 5.10 7/7/99 1,155,000
1,000,000 Dade County, FL
Expressway Authority,
FGIC-Insured, VR........ 5.10 7/1/99 1,000,000
------------
2,155,000
------------
Illinois -- 4.8%
340,000 Aurora Kane & Dupage
County, IL Industrial
Development Authority
VR...................... 5.14 7/1/99 340,000
1,500,000 Edwards Hospital Group
VR...................... 5.06 7/7/99 1,500,000
200,000 Illinois Student
Assistance Commission
VR...................... 5.06 7/7/99 200,000
------------
2,040,000
------------
Indiana -- 1.2%
500,000 Indiana State Development
Finance Authority VR.... 5.06 7/7/99 500,000
------------
Louisiana -- 0.7%
300,000 Calcasieu Parish, LA
Industrial Development
Agency VR............... 5.05 7/7/99 300,000
------------
Michigan -- 1.6%
700,000 Genesys Health Systems
VR...................... 5.11 7/7/99 700,000
------------
Minnesota -- 5.2%
1,000,000 Catholic Health
Initiatives VR.......... 5.10 7/7/99 1,000,000
1,200,000 Fairview Hospital &
Healthcare Systems VR... 5.09 7/1/99 1,200,000
------------
2,200,000
------------
New Jersey -- 0.6%
235,000 New Jersey Economic
Development Authority
VR...................... 5.35 7/5/99 235,000
------------
New York -- 4.3%
925,000 Clinton County, NY
Industrial Development
Agency VR............... 5.25 7/1/99 925,000
900,000 New York State Housing
Finance Authority VR.... 5.10 7/7/99 900,000
------------
1,825,000
------------
North Carolina -- 0.9%
400,000 Community Health Systems
VR...................... 5.15 7/7/99 400,000
------------
Pennsylvania -- 3.1%
395,000 Moon, PA Industrial
Development Authority
VR...................... 5.14 7/1/99 395,000
925,000 Pennsylvania Economic
Development Authority
VR...................... 5.00 7/1/99 925,000
------------
1,320,000
------------
TOTAL FLOATING RATE NOTES
(Cost -- $12,675,000).... 12,675,000
------------
SUB-TOTAL INVESTMENTS
(Cost -- $36,599,373).... 36,599,373
------------
</TABLE>
See Notes to Financial Statements.
72
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Cash Management Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 13.7%
$5,801,301 State Street Bank & Trust Co., 4.700% due 7/1/99;
Proceeds at maturity -- $5,802,058;
(Fully collateralized by U.S. Treasury Bills,
0.000% due 5/15/01; Market value -- $5,917,350)
(Cost -- $5,801,301).............................. $ 5,801,301
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $42,400,674*)............................. $ 42,400,674
============
</TABLE>
- ------
+ Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR) and Put Bonds, whose yields are determined on date of the
last interest rate change. For Variable Rate Demand Notes and Put Bonds, ma-
turity date shown is the date of next interest rate change.
*Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
FGIC -- Insured as to principal and interest by the Financial Guaranty In-
surance Corporation.
GO -- General Obligation.
MBIA -- Insured as to principal and interest by the MBIA Insurance Corpora-
tion.
See Notes to Financial Statements.
73
<PAGE>
Statements of Assets and Liabilities
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Asia Small Cap Capital Investors
Growth Fund Growth Fund Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Note A)................. $17,423,919 $12,679,259 $277,006,891 $845,093,499
Repurchase agreements, at
value.................... -- 153,000 12,187,000 28,784,000
Foreign currency, at
value+................... 183,500 -- -- --
Cash...................... -- 978 403 147
Receivable for securities
sold..................... 709,528 1,032,405 2,075,555 16,895,745
Receivable for Fund shares
sold..................... 219,505 252,173 785,775 510,901
Dividends and interest
receivable............... 14,041 343 273,662 1,340,562
Receivable for open
forward foreign currency
contracts................ 2,451 -- -- --
Receivable from manager... 91,066 -- -- --
Deferred organization
costs.................... 41,600 -- -- --
Other assets.............. 1,990 -- 13,599 9,375
----------- ----------- ------------ ------------
Total Assets.............. 18,687,600 14,118,158 292,342,885 892,634,229
----------- ----------- ------------ ------------
LIABILITIES:
Dividends payable......... -- -- -- --
Administration fees
payable.................. 2,004 1,368 -- --
Management fees payable... -- 288 184,692 1,049,211
Payable for open forward
foreign currency
contracts................ 134,073 -- -- --
Payable for Fund shares
purchased................ 18,739 22,247 128,865 295,164
Payable for options
written.................. -- -- 930,975 --
Service and distribution
fees payable............. 9,542 7,421 50,312 94,547
Payable to bank........... 362,832 -- -- --
Payable for securities
purchased................ 459,104 752,681 1,725,548 3,732,374
Accrued expenses.......... 67,608 6,247 1,070 195,950
Other liabilities......... -- -- -- --
----------- ----------- ------------ ------------
Total Liabilities......... 1,053,902 790,252 3,021,462 5,367,246
----------- ----------- ------------ ------------
Total Net Assets........... $17,633,698 $13,327,906 $289,321,423 $887,266,983
=========== =========== ============ ============
NET ASSETS:
Par value of shares of
capital stock............ $ 1,881 $ 993 $ 11,139 $ 35,056,281
Capital paid in excess of
par value................ 21,107,575 10,360,213 205,574,347 461,972,642
Undistributed
(overdistributed) net
investment income........ (71,540) (75,074) 552,213 2,369,840
Accumulated net realized
gain (loss) from security
transactions, options and
futures contracts........ (7,074,501) 281,639 26,075,126 127,159,692
Net unrealized
appreciation
(depreciation) on
investments, options,
foreign currencies and
futures contracts........ 3,670,283 2,760,135 57,108,598 260,708,528
----------- ----------- ------------ ------------
Total Net Assets.......... $17,633,698 $13,327,906 $289,321,423 $887,266,983
=========== =========== ============ ============
Shares Outstanding:
Class A.................... 590,189 340,960 734,230 2,033,637
=========== =========== ============ ============
Class B.................... 823,956 416,488 1,869,337 3,476,315
=========== =========== ============ ============
Class 2.................... 359,961 235,215 534,183 757,539
=========== =========== ============ ============
Class O.................... 107,293 754 8,001,431 28,788,790
=========== =========== ============ ============
Net Asset Value:
Class A Shares
Net asset value*.......... $ 9.47 $ 13.48 $ 25.99 $ 25.30
=========== =========== ============ ============
Maximum offering price per
share (based on maximum
sales charge of 5.75%,
except Cash Management
Fund and New York
Municipal Money Fund).... $ 10.05 $ 14.30 $ 27.58 $ 26.84
=========== =========== ============ ============
Maximum offering price per
share (based on maximum
sales charge of 4.75%,
except Cash Management
Fund and New York
Municipal Money Fund).... N/A N/A N/A N/A
=========== =========== ============ ============
Class B Shares
Net asset value and
offering price per
share*................... $ 9.31 $ 13.37 $ 25.60 $ 25.07
=========== =========== ============ ============
Class 2 Shares
Net asset value*.......... $ 9.31 $ 13.39 $ 25.64 $ 25.10
=========== =========== ============ ============
Maximum offering price per
share (based on maximum
sales charge of 1.00%,
except Cash Management
Fund and New York
Municipal Money Fund).... $ 9.40 $ 13.53 $ 25.90 $ 25.35
=========== =========== ============ ============
Class O Shares
Net asset value, offering
price and redemption
price per share.......... $ 9.53 $ 13.51 $ 26.08 $ 25.34
=========== =========== ============ ============
Note A: Cost of investments
and repurchase
agreements................ $13,655,695 $10,072,124 $231,988,656 $613,168,971
=========== =========== ============ ============
</TABLE>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
+ Foreign currency at cost for the Asia Growth and Strategic Bond Funds are
$157,787 and $112,264, respectively.
See Notes to Financial Statements.
74
<PAGE>
<TABLE>
<CAPTION>
National U.S. New York Cash
Total High Yield Strategic Intermediate Government Municipal Management
Return Fund Bond Fund Bond Fund Municipal Fund Income Fund Money Fund Fund
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$201,083,101 $563,210,851 $116,085,155 $15,209,823 $25,476,051 $168,424,334 $36,599,373
1,760,000 13,910,000 17,834,000 -- 13,994,000 -- 5,801,301
-- -- 111,902 -- -- -- --
445 55 487 91,655 733 1,878,614 --
194,892 5,054,604 126,750 -- -- -- --
126,750 1,422,671 446,038 3,335 76,979 -- --
1,428,230 11,898,296 2,268,500 277,090 186,102 856,006 412,262
-- -- 19,681 -- -- -- --
-- -- -- 26,624 -- -- --
22,952 19,115 19,189 15,161 15,698 -- --
9,444 8,441 4,923 36,707 57,501 -- 44,990
------------ ------------ ------------ ----------- ----------- ------------ -----------
204,625,814 595,524,033 136,916,625 15,660,395 39,807,064 171,158,954 42,857,926
------------ ------------ ------------ ----------- ----------- ------------ -----------
504,897 4,899,426 783,444 58,867 141,252 417,610 70,686
24,014 74,684 15,011 1,997 3,904 11,579 12,176
55,845 355,874 64,787 -- 4,123 28,909 35,241
-- -- -- -- -- -- --
247,339 936,101 132,330 -- 14,176 -- 17,040
-- -- -- -- -- -- --
129,822 357,913 78,476 5,637 17,672 -- --
-- -- -- -- -- -- --
10,383,889 10,812,283 16,937,427 -- 8,176,226 -- --
90,567 365,804 3,723 3,841 11,618 219,150 41,757
6,133 -- -- -- -- -- --
------------ ------------ ------------ ----------- ----------- ------------ -----------
11,442,506 17,802,085 18,015,198 70,342 8,368,971 677,248 176,900
------------ ------------ ------------ ----------- ----------- ------------ -----------
$193,183,308 $577,721,948 $118,901,427 $15,590,053 $31,438,093 $170,481,706 $42,681,026
============ ============ ============ =========== =========== ============ ===========
$ 13,769 $ 59,350 $ 12,174 $ 1,513 $ 3,164 $ 170,717 $ 42,684
168,091,053 686,483,586 130,113,044 15,322,784 32,225,933 170,546,707 42,641,186
6,788 (3,191,359) (1,554,839) (52,673) (218,223) -- --
3,382,296 (56,438,148) (2,392,975) (36,466) 7,101 (235,718) (2,844)
21,689,402 (49,191,481) (7,275,977) 354,895 (579,882) -- --
------------ ------------ ------------ ----------- ----------- ------------ -----------
$193,183,308 $577,721,948 $118,901,427 $15,590,053 $31,438,093 $170,481,706 $42,681,026
============ ============ ============ =========== =========== ============ ===========
3,053,304 14,583,394 2,225,793 471,130 741,703 5,062,194 18,258,181
============ ============ ============ =========== =========== ============ ===========
8,624,743 34,085,735 7,294,280 317,942 1,592,876 224,716 14,043,660
============ ============ ============ =========== =========== ============ ===========
1,977,055 9,420,232 2,603,178 308,017 494,569 25,281 1,782,308
============ ============ ============ =========== =========== ============ ===========
113,913 1,260,983 50,267 415,630 334,400 165,405,233 8,599,721
============ ============ ============ =========== =========== ============ ===========
$ 14.06 $ 9.74 $ 9.77 $ 10.32 $ 9.93 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 14.92 N/A N/A N/A N/A N/A N/A
============ ============ ============ =========== =========== ============ ===========
N/A $ 10.23 $ 10.26 $ 10.83 $ 10.43 N/A N/A
============ ============ ============ =========== =========== ============ ===========
$ 14.02 $ 9.73 $ 9.76 $ 10.28 $ 9.94 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 14.05 $ 9.73 $ 9.78 $ 10.29 $ 9.94 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 14.19 $ 9.83 $ 9.88 $ 10.39 $ 10.04 N/A N/A
============ ============ ============ =========== =========== ============ ===========
$ 14.13 $ 9.74 $ 9.76 $ 10.32 $ 9.94 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$181,153,699 $626,312,332 $141,213,376 $14,854,928 $40,049,933 $168,424,334 $42,400,674
============ ============ ============ =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
Statements of Operations
For the Six Months Ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Asia Small Cap Capital Investors
Growth Fund Growth Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest................ $ 13,332 $ 12,242 $ 1,019,361 $ 1,849,618
Dividends............... 99,521 12,835 1,740,519 5,933,403
Less: Foreign
withholding tax (Note
1)..................... (3,749) -- (6,059) (70,154)
---------- ---------- ----------- ------------
Total Investment
Income................. 109,104 25,077 2,753,821 7,712,867
---------- ---------- ----------- ------------
EXPENSES:
Management fees (Note
2)..................... 57,490 40,477 1,028,431 2,047,661
Custody................. 50,429 2,000 23,697 18,100
Distribution and service
fees................... 47,393 36,906 229,719 534,525
Shareholder and system
servicing fees......... 44,888 16,886 43,078 258,106
Registration fees....... 39,418 20,900 21,901 58,363
Amortization of deferred
organization costs
(Note 1)............... 11,155 -- -- --
Administration fees
(Note 2)............... 6,642 2,530 -- --
Audit and legal......... 15,973 6,500 54,843 55,205
Directors' fees......... 1,448 1,500 33,666 48,734
Shareholder
communications......... 905 10,500 14,299 52,128
Other................... 4,844 2,141 17,692 30,770
---------- ---------- ----------- ------------
Total expenses.......... 280,585 140,340 1,467,326 3,103,592
Less: Management fee
waiver and expense
reimbursement (Note
2)..................... (148,555) (40,189) -- --
---------- ---------- ----------- ------------
Net Expenses............ 132,030 100,151 1,467,326 3,103,592
---------- ---------- ----------- ------------
Net Investment Income
(Loss).................. (22,926) (75,074) 1,286,495 4,609,275
---------- ---------- ----------- ------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS, OPTIONS,
FUTURES CONTRACTS AND
FOREIGN CURRENCIES (NOTES
1 AND 4):
Realized Gain (Loss)
From:
Security transactions
(excluding short-term
securities)............ 2,507,533 601,600 21,230,180 80,922,888
Options written......... 106,575 -- -- --
Options purchased....... 304,124 -- -- --
Futures contracts....... 8,161 -- -- --
Foreign currency
transactions........... (142,683) -- -- --
---------- ---------- ----------- ------------
Net Realized Gain
(Loss)................. 2,783,710 601,600 21,230,180 80,922,888
---------- ---------- ----------- ------------
Change in Net Unrealized
Appreciation
(Depreciation) on
Investments, Options,
Futures Contracts and
Foreign Currencies:
Beginning of period..... 710,436 1,581,980 45,726,233 228,921,656
End of period........... 3,670,283 2,760,135 57,108,598 260,708,528
---------- ---------- ----------- ------------
Change in Unrealized
Appreciation
(Depreciation) ........ 2,959,847 1,178,155 11,382,365 31,786,872
---------- ---------- ----------- ------------
Net Gain (Loss) on
Investments, Options,
Futures Contracts
and Foreign Currencies.. 5,743,557 1,779,755 32,612,545 112,709,760
---------- ---------- ----------- ------------
Increase (Decrease) in
Net Assets From
Operations.............. $5,720,631 $1,704,681 $33,899,040 $117,319,035
========== ========== =========== ============
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
<TABLE>
<CAPTION>
National U.S. New York Cash
Total High Yield Strategic Intermediate Government Municipal Management
Return Fund Bond Fund Bond Fund Municipal Fund Income Fund Money Fund Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,007,480 $ 31,752,812 $ 5,249,597 $ 400,443 $ 856,113 $2,866,623 $1,208,143
1,533,352 144,000 -- -- -- -- --
(26,160) -- (3,385) -- -- -- --
- ----------- ------------ ----------- --------- --------- ---------- ----------
4,514,672 31,896,812 5,246,212 400,443 856,113 2,866,623 1,208,143
- ----------- ------------ ----------- --------- --------- ---------- ----------
529,518 2,130,074 443,946 39,572 92,421 182,299 48,704
30,982 65,422 26,754 3,198 6,834 5,550 4,200
785,035 2,158,451 478,776 30,031 106,046 -- --
171,950 462,817 87,604 24,616 24,978 46,155 39,000
32,352 94,683 25,888 16,227 15,807 11,500 17,399
9,483 14,603 14,654 11,579 11,986 -- --
48,138 141,995 29,597 3,957 7,701 45,978 12,176
36,924 97,921 12,670 1,810 1,629 32,100 7,000
1,991 1,448 1,448 1,448 1,448 1,448 1,448
14,480 45,793 7,421 1,086 905 39,144 3,470
7,273 14,349 6,095 2,274 2,433 17,250 5,462
- ----------- ------------ ----------- --------- --------- ---------- ----------
1,668,126 5,227,556 1,134,853 135,798 272,188 381,424 138,859
(209,161) (70,864) (70,068) (66,195) (73,713) -- (6,159)
- ----------- ------------ ----------- --------- --------- ---------- ----------
1,458,965 5,156,692 1,064,785 69,603 198,475 381,424 132,700
- ----------- ------------ ----------- --------- --------- ---------- ----------
3,055,707 26,740,120 4,181,427 330,840 657,638 2,485,199 1,075,443
- ----------- ------------ ----------- --------- --------- ---------- ----------
3,577,307 (21,528,838) 149,861 171 8,476 (217) (112)
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- (146,721) -- -- -- --
- ----------- ------------ ----------- --------- --------- ---------- ----------
3,577,307 (21,528,838) 3,140 171 8,476 (217) (112)
- ----------- ------------ ----------- --------- --------- ---------- ----------
11,774,971 (65,018,558) (2,843,208) 777,460 336,443 -- --
21,689,402 (49,191,481) (7,275,977) 354,895 (579,882) -- --
- ----------- ------------ ----------- --------- --------- ---------- ----------
9,914,431 15,827,077 (4,432,769) (422,565) (916,325) -- --
- ----------- ------------ ----------- --------- --------- ---------- ----------
13,491,738 (5,701,761) (4,429,629) (422,394) (907,849) (217) (112)
- ----------- ------------ ----------- --------- --------- ---------- ----------
$16,547,445 $ 21,038,359 $ (248,202) $ (91,554) $(250,211) $2,484,982 $1,075,331
=========== ============ =========== ========= ========= ========== ==========
</TABLE>
See Notes to Financial Statements.
77
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Small Cap
Asia Growth Capital Investors
Growth Fund Fund Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ (22,926) $ (75,074) $ 1,286,495 $ 4,609,275
Net realized gain
(loss)................ 2,783,710 601,600 21,230,180 80,922,888
Change in net
unrealized
appreciation
(depreciation)........ 2,959,847 1,178,155 11,382,365 31,786,872
----------- ----------- ------------ -------------
Increase (Decrease) in
Net Assets From
Operations............ 5,720,631 1,704,681 33,899,040 117,319,035
----------- ----------- ------------ -------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. -- -- (759,786) (2,361,904)
----------- ----------- ------------ -------------
Decrease in Net Assets
From Distributions to
Shareholders.......... -- -- (759,786) (2,361,904)
----------- ----------- ------------ -------------
FUND SHARE TRANSACTIONS
(NOTE 3):
Net proceeds from sale
of shares............. 6,355,850 4,880,136 71,586,912 94,755,814
Net asset value of
shares issued for
reinvestment of
dividends............. -- -- 709,756 1,622,237
Cost of shares
reacquired............ (7,728,138) (1,850,441) (51,175,696) (118,806,044)
----------- ----------- ------------ -------------
Increase (Decrease) in
Net Assets From Fund
Share Transactions.... (1,372,288) 3,029,695 21,120,972 (22,427,993)
----------- ----------- ------------ -------------
Increase (Decrease) in
Net Assets............. 4,348,343 4,734,376 54,260,226 92,529,138
NET ASSETS:
Beginning of Period.... 13,285,355 8,593,530 235,061,197 794,737,845
----------- ----------- ------------ -------------
End of Period*......... $17,633,698 $13,327,906 $289,321,423 $ 887,266,983
=========== =========== ============ =============
* Includes undistributed
(overdistributed) net
investment income of:.. $(71,540) $(75,074) $552,213 $2,369,840
=========== =========== ============ =============
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
<TABLE>
<CAPTION>
National U.S. New York Cash
Total High Yield Strategic Intermediate Government Municipal Management
Return Fund Bond Fund Bond Fund Municipal Fund Income Fund Money Fund Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,055,707 $ 26,740,120 $ 4,181,427 $ 330,840 $ 657,638 $ 2,485,199 $ 1,075,443
3,577,307 (21,528,838) 3,140 171 8,476 (217) (112)
9,914,431 15,827,077 (4,432,769) (422,565) (916,325) -- --
------------ ------------ ------------ ----------- ------------ ------------ -------------
16,547,445 21,038,359 (248,202) (91,554) (250,211) 2,484,982 1,075,331
------------ ------------ ------------ ----------- ------------ ------------ -------------
(3,199,534) (29,117,593) (4,663,715) (352,082) (825,184) (2,485,199) (1,075,443)
------------ ------------ ------------ ----------- ------------ ------------ -------------
(3,199,534) (29,117,593) (4,663,715) (352,082) (825,184) (2,485,199) (1,075,443)
------------ ------------ ------------ ----------- ------------ ------------ -------------
14,274,393 72,662,424 19,332,054 4,881,345 12,292,455 53,565,166 276,676,014
2,192,106 10,136,286 1,893,841 134,909 377,517 2,600,242 293,047
(39,870,935) (65,921,496) (15,160,157) (4,791,153) (10,260,172) (86,817,323) (289,261,212)
------------ ------------ ------------ ----------- ------------ ------------ -------------
(23,404,436) 16,877,214 6,065,738 225,101 2,409,800 (30,651,915) (12,292,151)
------------ ------------ ------------ ----------- ------------ ------------ -------------
(10,056,525) 8,797,980 1,153,821 (218,535) 1,334,405 (30,652,132) (12,292,263)
203,239,833 568,923,968 117,747,606 15,808,588 30,103,688 201,133,838 54,973,289
------------ ------------ ------------ ----------- ------------ ------------ -------------
$193,183,308 $577,721,948 $118,901,427 $15,590,053 $ 31,438,093 $170,481,706 $ 42,681,026
============ ============ ============ =========== ============ ============ =============
$6,788 $(3,191,359) $(1,554,839) $(52,673) $(218,223) -- --
============ ============ ============ =========== ============ ============ =============
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
Statements of Changes in Net Assets
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Small Cap
Asia Growth Capital Investors
Growth Fund Fund(a) Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income
(loss)................ $ 169,293 $ (27,601) $ 1,882,174 $ 7,859,877
Net realized gain
(loss)................ (6,576,500) (319,961) 23,114,686 96,281,183
Change in net
unrealized
appreciation
(depreciation)........ 2,818,104 1,581,980 19,906,306 2,173,574
----------- ---------- ------------ -------------
Increase (Decrease) in
Net Assets From
Operations............ (3,589,103) 1,234,418 44,903,166 106,314,634
----------- ---------- ------------ -------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.. -- -- (2,235,195) (6,966,393)
Net realized gain...... -- -- (26,331,355) (68,615,411)
----------- ---------- ------------ -------------
Decrease in Net Assets
From Distributions to
Shareholders.......... -- -- (28,566,550) (75,581,804)
----------- ---------- ------------ -------------
FUND SHARE TRANSACTIONS
(NOTE 3):
Net proceeds from sale
of shares............. 12,424,912 8,329,212 77,386,504 132,178,850
Net asset value of
shares issued for
reinvestment of
dividends............. -- -- 27,162,873 60,303,086
Cost of shares
reacquired............ (9,833,339) (970,100) (73,088,593) (155,469,772)
----------- ---------- ------------ -------------
Increase (Decrease) in
Net Assets From Fund
Share Transactions.... 2,591,573 7,359,112 31,460,784 37,012,164
----------- ---------- ------------ -------------
Increase (Decrease) in
Net Assets............. (997,530) 8,593,530 47,797,400 67,744,994
NET ASSETS:
Beginning of Year...... 14,282,885 -- 187,263,797 726,992,851
----------- ---------- ------------ -------------
End of Year*........... $13,285,355 $8,593,530 $235,061,197 $ 794,737,845
=========== ========== ============ =============
* Includes undistributed
(overdistributed) net
investment income of:.. $(48,614) -- $25,504 $122,469
=========== ========== ============ =============
</TABLE>
- ------
(a) For the period from July 1, 1998 (commencement of operations) to December
31, 1998.
See Notes to Financial Statements.
80
<PAGE>
<TABLE>
<CAPTION>
National U.S. New York Cash
Total High Yield Strategic Intermediate Government Municipal Management
Return Fund Bond Fund Bond Fund Municipal Fund Income Fund Money Fund Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 7,144,769 $ 55,484,781 $ 6,793,836 $ 661,427 $ 951,556 $ 7,872,626 $ 2,091,496
3,663,439 (35,163,319) (2,517,889) (34,108) 333,975 3,684 (532)
(1,563,026) (73,233,409) (4,180,390) 59,675 106,877 -- --
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
9,245,182 (52,911,947) 95,557 686,994 1,392,408 7,876,310 2,090,964
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
(7,141,006) (55,923,361) (7,692,789) (692,858) (1,022,452) (7,872,626) (2,091,496)
(4,430,359) -- (152,674) -- (310,665) -- --
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
(11,571,365) (55,923,361) (7,845,463) (692,858) (1,333,117) (7,872,626) (2,091,496)
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
81,251,618 235,074,449 62,532,821 6,901,659 29,828,778 164,421,373 368,516,371
9,838,523 24,078,652 4,084,584 173,630 556,947 7,632,777 625,177
(48,409,828) (159,214,216) (27,059,919) (5,419,124) (14,496,193) (280,200,849) (358,243,415)
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
42,680,313 99,938,885 39,557,486 1,656,165 15,889,532 (108,146,699) 10,898,133
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
40,354,130 (8,896,423) 31,807,580 1,650,301 15,948,823 (108,143,015) 10,897,601
162,885,703 577,820,391 85,940,026 14,158,287 14,154,865 309,276,853 44,075,688
- ------------- ------------- ------------ ----------- ------------ ------------- -------------
$ 203,239,833 $ 568,923,968 $117,747,606 $15,808,588 $ 30,103,688 $ 201,133,838 $ 54,973,289
============= ============= ============ =========== ============ ============= =============
$150,615 $(813,886) $(925,830) $(31,431) $(50,677) -- --
============= ============= ============ =========== ============ ============= =============
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
Statements of Cash Flows
For the Six Months Ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
U.S.
Strategic Government
Bond Fund Income Fund
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Used by Operating Activities:
Net purchase/sale of short-term portfolio
investments....................................... 10,585,000 (7,990,000)
Purchases of long-term portfolio investments....... (102,981,645) (11,394,424)
Proceeds from disposition of long-term portfolio
investments and principal paydowns................ 87,234,061 17,033,453
------------ -----------
(5,162,584) (2,350,971)
Net investment income.............................. 4,181,427 657,638
Net amortization of premium/discount on
investments....................................... (609,642) 13,991
Amortization of organization expenses.............. 14,654 11,986
Net change is receivables/payables related to
operations........................................ (363,016) (95,291)
------------ -----------
Net Cash Flows Used By Operating Activities........ (1,939,161) (1,762,647)
------------ -----------
Cash Flows Provided by Financing Activities:
Proceeds from shares sold.......................... 19,683,819 12,352,160
Payments on shares redeemed........................ (15,406,084) (10,246,029)
Cash dividends and distributions paid.............. (2,338,374) (343,038)
------------ -----------
Net Cash Flows Provided by Financing Activities.... 1,939,361 1,763,093
------------ -----------
Net Increase in Cash................................ 200 446
Cash, Beginning of Period........................... 287 287
------------ -----------
Cash, End of Period................................. $487 $733
============ ===========
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
Notes to Financial Statements
(unaudited)
1. Organization and Significant Accounting Policies
The Salomon Brothers Investment Series ("Investment Series") consists of
certain portfolios of the Salomon Brothers Series Funds Inc ("Series Funds"),
as indicated below, the Salomon Brothers Investors Fund Inc ("Investors Fund")
and the Salomon Brothers Capital Fund Inc ("Capital Fund"). The Series Funds
were incorporated in Maryland on April 17, 1990 as an open-end management
investment company, and currently operate as a series company comprised of ten
portfolios: Salomon Brothers Asia Growth Fund ("Asia Growth Fund"), Salomon
Brothers Small Cap Growth Fund ("Small Cap Growth Fund"), Salomon Brothers
Total Return Fund ("Total Return Fund"), Salomon Brothers High Yield Bond Fund
("High Yield Bond Fund"), Salomon Brothers Strategic Bond Fund ("Strategic Bond
Fund"), Salomon Brothers National Intermediate Municipal Fund ("National
Intermediate Municipal Fund"), Salomon Brothers U.S. Government Income Fund
("U.S. Government Income Fund"), Salomon Brothers New York Municipal Money
Market Fund ("New York Municipal Money Fund"), Salomon Brothers Cash Management
Fund ("Cash Management Fund"), and Salomon Brothers Institutional Money Market
Fund ("Institutional Money Market Fund"). Separate financial statements are
prepared for the Institutional Money Market Fund which is not part of the
Investment Series. All of the other portfolios of the Series Funds are included
in the Investment Series, which also includes the Investors Fund, a diversified
open-end management investment company incorporated in Maryland on April 2,
1958 and the Capital Fund, a non-diversified open-end management investment
company incorporated in Maryland on August 23, 1976. The Investment Series
operates under a multiple class pricing structure, with each portfolio of the
Investment Series (individually, a "Fund") offering Class A, Class B, Class 2,
and Class O shares, each with their own expense structure. Each Fund has a
specific investment objective: the Cash Management Fund's objective is to seek
as high a level of current income as is consistent with liquidity and the
stability of principal; the New York Municipal Money Fund's objective is to
seek as high a level of current income exempt from Federal income taxes, New
York State and New York City personal income taxes consistent with liquidity
and the stability of principal; the National Intermediate Municipal Fund's
objective is to seek a high level of current income which is exempt from
regular federal income taxes; the U.S. Government Income Fund's objective is to
seek a high level of current income; the High Yield Bond Fund's primary
objective is to maximize current income; the Strategic Bond Fund's primary
objective is to seek a high level of current income; the Total Return Fund's
primary objective is to obtain above-average income (compared to a portfolio
entirely invested in equity securities); the Asia Growth Fund's objective is to
seek long-term capital appreciation; the Small Cap Growth Fund seeks to obtain
long-term growth of capital; the Investors Fund's primary objective is to seek
long-term growth of capital; the Capital Fund's objective is to seek capital
appreciation through investments primarily in common stock, or securities
convertible into common stocks, which are believed to have above average price
appreciation potential.
Certain costs incurred in connection with each Fund's organization, which were
payable to Salomon Brothers Asset Management Inc ("SBAM"), have been deferred
and are being amortized by the Funds over a 60 month period from the date each
Fund commenced investment operations. A summary of those expenditures that
remain as of June 30, 1999 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Expiration of Amortization Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
Asia Growth Fund............................ May 2001 $41,600
Total Return Fund........................... September 2000 $22,952
High Yield Bond Fund........................ February 2000 $19,115
Strategic Bond Fund......................... February 2000 $19,189
National Intermediate Municipal Fund........ February 2000 $15,161
U.S. Government Income Fund................. February 2000 $15,698
</TABLE>
The following is a summary of significant accounting policies followed by the
Investment Series in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles ("GAAP"). The
preparation of financial statements in accordance with GAAP requires management
to make estimates of certain reported amounts in the financial statements.
Actual amounts could differ from those estimates.
83
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
(a) Investment Valuation. Portfolio securities listed or traded on national
securities exchanges, or reported on the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day, at
the mean of the current bid and asked price which represents the current value
of the security. Over-the-counter securities are valued at the mean of the
current bid and asked price. Debt securities are valued by using either market
quotations or independent pricing services which use prices provided by market-
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Publicly traded
sovereign bonds are typically traded internationally on the over-the-counter
market and are valued at the mean of the last current bid and asked price as of
the close of business of that market. Short-term securities with less than 60
days remaining to maturity when acquired by a Fund are valued at amortized cost
which approximates market value. If a Fund, other than the New York Municipal
Money Fund and Cash Management Fund, acquires such securities with more than 60
days remaining to maturity, they are valued at current market value, until the
60th day prior to maturity, and are then valued on an amortized cost basis.
Portfolio securities for the New York Municipal Money Fund and the Cash
Management Fund are valued using the amortized cost method, which involves
initially valuing an investment at its cost and thereafter assuming a constant
amortization to maturity of any premium or discount. This method results in a
value approximating market value.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging market countries, and the extent of
foreign investment in domestic companies may be subject to limitation in other
emerging market countries. Foreign ownership limitations also may be imposed by
the charters of individual companies in emerging market countries to prevent,
among other things, violation of foreign investment limitations. As a result,
an additional class of shares (identified as "Foreign Shares" in the Portfolio
of Investments) may be created and offered for investment by such companies.
The "local" and "foreign" shares' market values may differ.
Foreign securities quoted in a foreign currency are translated into U.S.
dollars using exchange rates at approximately 2:30 p.m. Eastern time (and at
approximately 12:30 p.m. for the Asia Growth Fund), or at such other rates as
SBAM may determine to be appropriate in computing net asset value.
Securities for which reliable quotations or prices from pricing services are
not readily available (as may be the case for securities of limited
marketability) and all other assets are valued at their respective fair value
as determined in good faith by, or under procedures established by, the Board
of Directors.
(b) Futures Contracts. The Asia Growth Fund, Small Cap Growth Fund, Capital
Fund, Investors Fund, Total Return Fund, High Yield Bond Fund, Strategic Bond
Fund, and National Intermediate Municipal Fund may enter into futures
contracts, which involves paying or receiving variation margin, which will be
recorded as unrealized gain or loss until the contract is closed. When the
contract is closed, a realized gain or loss is recognized. Outstanding
contracts may involve elements of market risk in excess of amounts reported in
the financial statements.
(c) Option Contracts. When a Fund writes or purchases a call or a put option,
an amount equal to the premium received or paid by the Fund is recorded as a
liability or asset, the value of which is marked-to-market daily to reflect the
current market value of the option. When the option expires, the Fund realizes
a gain or loss equal to the amount of the premium received or paid. When the
Fund exercises an option or enters into a closing transaction by purchasing or
selling an offsetting option, it realizes a gain or loss without regard to any
unrealized gain or loss on the underlying security. When a written call option
is exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds from such sale are increased by the premium
originally received. When a written put option is exercised, the amount of the
premium received reduces the cost of the security that the Fund purchased upon
exercise of the option.
(d) Mortgage Rolls. The Total Return Fund, Strategic Bond Fund, and U.S.
Government Income Fund may enter into mortgage "dollar rolls" in which a Fund
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. The Fund
84
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
is compensated by a fee paid by the counterparty. Dollar rolls are accounted
for as financing arrangements; the fee is accrued into interest income ratably
over the term of the dollar roll and any gain or loss on the roll is deferred
until disposition of the rolled security. The average monthly balance of dollar
rolls outstanding during the six months ended June 30, 1999 was approximately
$11,414,000, $20,381,083, and $7,818,209 for the Total Return Fund, Strategic
Bond Fund, and U.S. Government Income Fund, respectively.
(e) Repurchase Agreements. When entering into repurchase agreements, it is
each Fund's policy that the Fund take possession, through its custodian, of the
underlying collateral and monitor the collateral's value at the time the
agreement is entered into and on a daily basis during the term of the
repurchase agreement to ensure that it equals or exceeds the repurchase price.
In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.
(f) Reverse Repurchase Agreements. Certain Funds may enter into reverse
repurchase agreements in which a Fund sells portfolio securities and agrees to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, the custodian delivers liquid
assets in an amount at least equal to the repurchase price marked-to-market
daily (including accrued interest), and subsequently monitors the account to
ensure that such equivalent value is maintained. A Fund pays interest on
amounts obtained pursuant to reverse repurchase agreements. Reverse repurchase
agreements are considered to be borrowings by a Fund. Transactions in reverse
repurchase agreements for the Funds during the six months ended June 30, 1999
were as follows:
<TABLE>
<CAPTION>
Average Weighted Maximum
Daily Average Amount
Fund Balance Interest Rate Outstanding
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Strategic Bond Fund........................ $2,007,500 3.56% $2,007,500
</TABLE>
(g) Foreign Currency Translation. The accounting records of each Fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities of the Asia Growth Fund, Small Cap Growth Fund, Capital Fund,
Investors Fund, Total Return Fund, High Yield Bond Fund, and Strategic Bond
Fund denominated in a foreign currency are translated into U.S. dollars at the
prevailing rates of exchange each day. Purchases and sales of securities,
income receipts and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions. Net
realized gains and losses on foreign currency transactions represent net gains
and losses from sales and maturities of forward currency contracts, disposition
of foreign currencies, currency gains and losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effect of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statements of Operations
from the effects of changes in market prices of those securities, but are
included with the net realized and unrealized gain or loss on investments.
(h) Forward Foreign Currency Contracts. The Asia Growth Fund, Small Cap Growth
Fund, Capital Fund, Investors Fund, Total Return Fund, High Yield Bond Fund,
and Strategic Bond Fund may enter into forward foreign currency contracts. A
forward foreign currency contract is an agreement between two parties to buy
and sell a currency at a set price on a future date. The contract is marked-to-
market daily and the change in value is recorded by the Fund as an unrealized
gain or loss. When a forward foreign currency contract is extinguished, through
either delivery or offset by entering into another forward foreign currency
contract, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value of
the contract at the time it was extinguished or offset.
85
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
At June 30, 1999, the Asia Growth Fund and Strategic Bond Fund had open forward
currency contracts as described below:
<TABLE>
<CAPTION>
Settlement Local Market Unrealized
Asia Growth Fund Date Currency Value Gain (Loss)
- ------------------------- ---------- ------------- --------------- -----------
To Buy:
<S> <C> <C> <C> <C>
Indonesian Rupiah 7/1/99 2,723,734,131 $ 395,604 $ (19,599)
New Taiwan Dollar 7/1/99 42,434,350 1,313,757 2,233
Singapore Dollar 7/1/99 1,917,500 1,126,285 (331)
Singapore Dollar 7/1/99 547,434 321,547 151
<CAPTION>
To Sell:
<S> <C> <C> <C> <C>
Hong Kong Dollar 7/1/99 752,616 97,000 (40)
Hong Kong Dollar 7/1/99 6,415,798 826,895 (160)
Hong Kong Dollar 10/26/99 20,028,750 2,576,244 (76,244)
Korean Won 7/28/99 1,107,000,000 956,371 (2,883)
New Taiwan Dollar 7/1/99 9,831,000 304,365 (4,365)
New Taiwan Dollar 7/1/99 32,603,350 1,009,392 (13,839)
New Taiwan Dollar 7/18/99 32,603,350 1,009,392 (1,560)
Singapore Dollar 7/1/99 1,400,000 822,756 (10,926)
Singapore Dollar 7/1/99 517,500 304,126 (4,126)
Singapore Dollar 7/28/99 1,917,500 1,129,070 67
---------
$(131,622)
=========
<CAPTION>
Settlement Local Market Unrealized
Strategic Bond Fund Date Currency Value Gain (Loss)
- ------------------------- ---------- ------------- --------------- -----------
To Buy:
<S> <C> <C> <C> <C>
Australian Dollar 7/28/99 610,000 $ 403,879 $ 8,861
Australian Dollar 7/1/99 3,378 2,236 20
Euro 7/28/99 620,536 641,300 (2,259)
Euro 7/28/99 261,537 270,288 (238)
Euro 7/28/99 247,957 256,253 (3,747)
---------
2,637
---------
To Sell:
Australian Dollar 7/28/99 610,000 403,879 (7,013)
Australian Dollar 7/28/99 850,000 562,782 (1,314)
British Pound 7/28/99 664,487 1,047,614 9,665
Euro 7/28/99 577,892 597,229 13,736
Norwegian Krone 7/28/99 2,660,000 337,563 1,704
Swedish Krona 7/28/99 1,200,000 141,385 (375)
---------
16,403
---------
Cross Currency Forwards**
<CAPTION>
Market Value
Settlement -----------------------------
Date Euro Norwegian Krone
---------- ------------- ---------------
<S> <C> <C> <C> <C>
To Sell:
Euro vs. Norwegian Krone 7/28/99 $336,229 $337,563 1,334
<CAPTION>
Euro Swedish Krona
------------- ---------------
<S> <C> <C> <C> <C>
Euro vs. Swedish Krona 7/28/99 $142,078 $141,385 (693)
---------
641
---------
Net Unrealized Gain on Open Forward
Foreign & Cross Currency Contracts $19,681
=========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
**Local Currency on Cross Currency
Forwards
<CAPTION>
Sell Buy
--- ------- --------- ---
<S> <C> <C> <C> <C>
Sell Euro vs. Norwegian Krone 325,342 2,660,000
Sell Euro vs. Swedish Krone 137,478 1,200,000
</TABLE>
86
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
(i) Loan Participations. The Total Return Fund, High Yield Bond Fund, and
Strategic Bond Fund may invest in fixed and floating rate loans arranged
through private negotiations between a foreign sovereign entity and one or more
financial institutions ("lender"). The market values of the High Yield Bond
Fund and the Strategic Bond Fund's loan participations at June 30, 1999 were
$13,403,116 and $2,557,202, respectively.
(j) Federal Income Taxes. Each Fund has complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
distributed all of its income, including any net realized gains, to
shareholders. Therefore, no Federal income tax or excise tax provision is
required for such Funds.
(k) Dividends and Distributions to Shareholders. Dividends from net investment
income on the shares of each of the Funds (except the Asia Growth Fund, Small
Cap Growth Fund, Capital Fund, and Investors Fund) are declared each business
day to shareholders of record that day, and are paid on the last business day
of the month. Dividends from net investment income for the Asia Growth Fund,
Small Cap Growth Fund, and the Capital Fund are declared on an annual basis.
Dividends from net investment income for the Investors Fund are declared on a
quarterly basis. Distributions of net realized gains to shareholders of each
Fund, if any, are declared at least annually. Dividends and distributions to
shareholders of each Fund are recorded on the ex-dividend date and are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles due primarily to differences in the
treatment of foreign currency gains/losses, deferral of wash sales, and post-
October losses incurred by each Fund. Permanent book/tax differences are
reclassified within the capital accounts based on their federal income tax
basis treatment; temporary differences do not require reclassifications.
(l) Class Accounting. Investment income, common expenses and gain (loss) on
investments are allocated to the various classes of a Fund on the basis of
daily net assets of each class. Distribution and shareholder servicing fees
relating to a specific class are charged directly to that class. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
(m) Expenses. Direct expenses are charged to the Fund that incurred them, and
general expenses of the Investment Series are allocated to the Funds based on
each Fund's relative net assets.
(n) Other. Investment transactions are recorded as of the trade date. Dividend
income is recorded on the ex-dividend date (except for the Asia Growth Fund,
where certain dividends may be recorded as soon as the Fund is informed of such
dividends). Interest income, including the accretion of discounts or
amortization of premiums, is recognized when earned. Gains or losses on sales
of securities are calculated for financial accounting and Federal income tax
purposes on the identified cost basis. Net investment income (other than
distribution fees), unrealized and realized gains or losses are allocated daily
to each class of shares based upon the relative proportion of each class's net
assets to the Fund's total net assets.
(o) Cash Flow Information. Statement of Financial Accounting Standards Number
102 generally exempts entities such as the Funds from reporting a Statement of
Cash Flows. However, the amount and nature of certain activities entered into
by the Total Return Fund, Strategic Bond Fund, and U.S. Government Income Fund
may be considered financing arrangements, which may require the presentation of
a Statement of Cash Flows. General investing and operating activities of the
Funds are reported in the Statement of Changes in Net Assets and additional
information on cash receipts and cash payments are presented in the Statement
of Cash Flows. Accounting practices that do not affect reporting activities on
a cash basis include carrying investments at value and amortizing discounts or
premiums on debt obligations.
2. Management Fee and Other Agreements
Each Fund retains SBAM, a wholly owned subsidiary of Salomon Brothers Holding
Co., Inc., which in turn is wholly owned by Salomon Smith Barney Holdings, Inc.
("SSBH"), to act as investment manager of each Fund, subject to the supervision
by the Board of Directors of each Fund. Each management agreement with SBAM was
most recently approved by shareholders at
87
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
a special meeting held on January 14, 1998. Approval of the agreements was nec-
essary due to the merger of Salomon Inc, which had been the ultimate parent
company of the investment manager, with and into SSBH, which occurred on Novem-
ber 28, 1997. SBAM furnishes the Investment Series with office space and cer-
tain services and facilities required for conducting the business of the In-
vestment Series and pays the compensation of its officers. The management fee
for these services for each Fund (except the Capital Fund and Investors Fund)
is payable monthly and is based on the following annual percentages of each
Fund's average daily net assets: 0.80% for the Asia Growth Fund and Small Cap
Growth Fund, 0.55% for the Total Return Fund, 0.75% for the High Yield Bond
Fund and Strategic Bond Fund, 0.50% for the National Intermediate Municipal
Fund, 0.60% for the U.S. Government Income Fund, 0.20% for the New York Munici-
pal Money Fund and Cash Management Fund. The management fee for the Capital
Fund is payable monthly and is based on the following annual percentages of the
Fund's average daily net assets: first $100 million-1%; next $100 million-
0.75%; next $200 million-0.625%; excess over $400 million-0.50%. SBAM Ltd., an
affiliate of SBAM, provides certain advisory services to SBAM for the benefit
of the Strategic Bond Fund, as well as, certain administrative services for the
Asia Growth Fund. SBAM Ltd. is compensated by SBAM at no additional expense to
the Strategic Bond Fund and Asia Growth Fund. SBAM has retained Salomon Broth-
ers Asia Pacific Ltd. ("SBAM AP"), an affiliate of SBAM, to act as sub-advisor
to the Asia Growth Fund. SBAM AP is compensated by SBAM at no additional ex-
pense to the Asia Growth Fund.
The Investors Fund pays SBAM a base fee subject to an increase or decrease de-
pending on the extent, if any, to which the investment performance of the In-
vestors Fund exceeds or is exceeded by the investment record of the Standard &
Poor's 500 Index of Composite Stocks ("S&P 500 Index"). The base fee is paid
quarterly based on the following annual rates:
<TABLE>
<CAPTION>
Average Daily Net Assets Annual Fee Rate
- -------------------------------------------------------------------------------
<S> <C>
First $350 million............................................. 0.650%
Next $150 million.............................................. 0.550%
Next $250 million.............................................. 0.525%
Next $250 million.............................................. 0.500%
Over $1 billion................................................ 0.450%
</TABLE>
The performance adjustment is paid quarterly based on a rolling one year peri-
od. A performance adjustment will only be made after the investment performance
of the Investors Fund exceeds or is exceeded by the investment record of the
S&P 500 Index by at least one percentage point. For each percentage point by
which the investment performance of the Investors Fund exceeds or is exceeded
by the investment record of the S&P 500 Index, the base fee will be adjusted
upward or downward by 0.01% (annualized). The maximum annual adjustment is
0.10% which would occur if the Investors Fund's performance exceeds or is ex-
ceeded by the S&P 500 Index by ten or more percentage points. For the rolling
one year periods ended March 31, 1999 and June 30, 1999, the S&P 500 Index ex-
ceeded the Investors Fund's performance by approximately 14.84%, and 5.37%, re-
spectively. As a result, base management fees were decreased, in aggregate, by
$298,271 for the six months ended June 30, 1999.
For the six months ended June 30, 1999, SBAM waived management fees of $64,132,
$40,189, $209,161, $70,864, $70,068, $39,572, $73,713, and $6,159 for the Asia
Growth Fund, Small Cap Growth Fund, Total Return Fund, High Yield Bond Fund,
Strategic Bond Fund, National Intermediate Municipal Fund, U.S. Government In-
come Fund, and Cash Management Fund, respectively, and voluntarily absorbed ex-
penses of $84,423, and $26,623 for the Asia Growth Fund, and National Interme-
diate Municipal Fund, respectively.
SBAM also acts as administrator for each of the Funds. SBAM has delegated its
responsibilities as administrator to SSBC Fund Management Inc. ("SSBC"), for-
merly known as Mutual Management Corp., an affiliate of SBAM, pursuant to Sub-
Administration Agreement between SBAM and SSBC.
88
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
Each Fund has an agreement with CFBDS, Inc. to distribute its shares pursuant
to a multiple pricing system. Each class (except for Class O) of each Fund (ex-
cept for the New York Municipal Money Fund and Cash Management Fund) is autho-
rized pursuant to a services and distribution plan applicable to that class of
shares ("Class A Plan," the "Class B Plan," and the "Class 2 Plan," collective-
ly, the "Plans") adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("1940 Act"), to pay the distributor an annual service
fee with respect to Class A, Class B, and Class 2 shares of the applicable
Funds at the rate of 0.25% of the value of the average daily net assets of the
respective class. The distributor is paid an annual distribution fee with re-
spect to Class B shares of each Fund (except for the New York Municipal Money
Fund and Cash Management Fund) at a rate of 0.75% of the value of the average
net assets of the respective class. The distributor is also paid an annual dis-
tribution fee with respect to Class 2 shares of each Fund (except for the New
York Municipal Money Fund and Cash Management Fund) at the rate of 0.75% of the
value of the average daily net assets of the respective class of the Asia
Growth Fund, Small Cap Growth Fund, Capital Fund, Investors Fund, and Total Re-
turn Fund and 0.50% for the High Yield Bond Fund, Strategic Bond Fund, National
Intermediate Municipal Fund, and U.S. Government Income Fund. Class O shares
are not subject to a services and distribution plan fee.
For the six months ended June 30, 1999, total distribution plan fees were as
follows:
<TABLE>
<CAPTION>
Class A Class B Class 2
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Asia Growth Fund.................................... $ 5,663 $ 28,635 $ 13,095
Small Cap Growth Fund............................... 4,490 21,569 10,847
Capital Fund........................................ 18,429 165,366 45,924
Investors Fund...................................... 56,695 392,297 85,533
Total Return Fund................................... 56,662 590,097 138,276
High Yield Bond Fund................................ 177,587 1,630,348 350,516
Strategic Bond Fund................................. 27,797 346,952 104,027
National Intermediate Municipal Fund................ 5,193 15,507 9,331
U.S. Government Income Fund......................... 8,684 77,629 19,733
</TABLE>
Brokerage commissions of $450, $20,058, $40,584, and $2,400 were paid by the
Small Cap Growth Fund, Capital Fund, Investors Fund, and Total Return Fund, re-
spectively, to SSB.
SSB received $143,684 as its portion of the front-end sales charge on sales of
Class A and Class 2 shares of the Funds during the six months ended June 30,
1999. In addition, contingent deferred sales charges of $1,929,471 were paid to
SSB in connection with redemptions of certain Class B and Class 2 shares of the
Funds during the six months ended June 30, 1999.
3. Capital Stock
At June 30, 1999, the Series Funds had 10,000,000,000 shares of authorized cap-
ital stock, par value $0.001 per share, of which the Small Cap Growth Fund,
High Yield Bond Fund, Strategic Bond Fund, National Intermediate Municipal
Fund, U.S. Government Income Fund, New York Municipal Money Fund, and Cash Man-
agement Fund, each had 1,000,000,000 shares authorized. The Asia Growth Fund
and Total Return Fund had 1,000,000,008 and 999,999,992 shares authorized, re-
spectively. The Investors Fund had 50,000,000 shares of authorized capital
stock, par value $1.00 per share. The Capital Fund had 25,000,000 shares of au-
thorized capital stock, par value $0.001 per share. Transactions in Fund shares
for the periods indicated were as follows:
89
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
<TABLE>
<CAPTION>
Class A Shares Class B Shares
-------------------------------------------------------- ----------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
--------------------------- --------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asia Growth Fund
Shares sold..... 665,269 $ 4,983,705 644,747 $ 4,589,532 79,042 $ 639,177 551,800 $ 3,774,829
Shares issued on
reinvestment... -- -- -- -- -- -- -- --
Shares
reacquired..... (749,176) (5,558,713) (838,184) (5,281,391) (73,774) (505,340) (504,342) (2,733,147)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (83,907) $ (575,008) (193,437) $ (691,859) 5,268 $ 133,837 47,458 $ 1,041,682
============ ============= ============ ============= =========== ============ =========== ============
Small Cap Growth
Fund*
Shares sold..... 146,979 $ 1,791,110 329,207 $ 3,219,491 133,134 $ 1,624,566 362,365 $ 3,593,593
Shares issued on
reinvestment... -- -- -- -- -- -- -- --
Shares
reacquired..... (82,610) (1,003,338) (52,616) (492,123) (49,993) (615,934) (29,018) (260,138)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... 64,369 $ 787,772 276,591 $ 2,727,368 83,141 $ 1,008,632 333,347 $ 3,333,455
============ ============= ============ ============= =========== ============ =========== ============
Capital Fund
Shares sold..... 1,355,455 $ 32,473,997 1,503,276 $ 33,851,010 1,003,136 $ 23,389,265 793,021 $ 17,537,460
Shares issued on
reinvestment... 1,633 39,344 52,857 1,157,551 1,969 46,822 73,532 1,587,598
Shares
reacquired..... (1,121,279) (26,954,503) (1,321,984) (29,738,105) (120,935) (2,792,188) (63,204) (1,368,847)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... 235,809 $ 5,558,838 234,149 $ 5,270,456 884,170 $ 20,643,899 803,349 $ 17,756,211
============ ============= ============ ============= =========== ============ =========== ============
Investors Fund
Shares sold..... 3,146,472 $ 73,643,419 3,918,021 $ 86,842,842 520,350 $ 11,750,820 1,420,194 $ 31,363,902
Shares issued on
reinvestment... 3,915 94,049 221,667 4,765,235 2,560 61,039 257,589 5,451,926
Shares
reacquired..... (3,429,103) (79,304,707) (4,532,732) (99,576,589) (483,864) (10,977,432) (611,446) (12,896,539)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (278,716) $ (5,567,239) (393,044) $ (7,968,512) 39,046 $ 834,427 1,066,337 $ 23,919,289
============ ============= ============ ============= =========== ============ =========== ============
Total Return Fund
Shares sold..... 249,115 $ 3,335,685 1,507,893 $ 20,207,179 621,635 $ 8,304,157 3,408,556 $ 45,832,192
Shares issued on
reinvestment... 45,397 604,788 220,181 2,903,310 95,385 1,269,299 415,586 5,451,096
Shares
reacquired..... (1,166,566) (15,556,757) (1,840,113) (24,371,605) (1,331,687) (17,750,904) (1,259,486) (16,619,670)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (872,054) $ (11,626,284) (112,039) $ (1,261,116) (614,667) $ (8,177,448) 2,564,656 $ 34,663,618
============ ============= ============ ============= =========== ============ =========== ============
High Yield Bond
Fund
Shares sold..... 1,820,078 $ 17,908,017 5,453,828 $ 60,936,254 3,455,564 $ 33,907,881 10,284,730 $114,127,638
Shares issued on
reinvestment... 297,533 2,921,354 734,112 7,956,369 501,414 4,918,134 1,090,461 11,729,053
Shares
reacquired..... (2,273,495) (22,322,998) (5,901,066) (62,641,457) (3,083,640) (30,246,370) (6,318,633) (66,455,739)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (155,884) $ (1,493,627) 286,874 $ 6,251,166 873,338 $ 8,579,645 5,056,558 $ 59,400,952
============ ============= ============ ============= =========== ============ =========== ============
Strategic Bond
Fund
Shares sold..... 498,654 $ 4,990,398 1,594,029 $ 17,125,194 1,149,732 $ 11,492,719 2,937,984 $ 31,093,340
Shares issued on
reinvestment... 49,381 494,034 98,183 1,033,922 95,436 954,117 176,786 1,857,031
Shares
reacquired..... (481,723) (4,806,470) (1,099,747) (11,775,361) (626,250) (6,262,850) (823,217) (8,600,276)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... 66,312 $ 677,962 592,465 $ 6,383,755 618,918 $ 6,183,986 2,291,553 $ 24,350,095
============ ============= ============ ============= =========== ============ =========== ============
National
Intermediate
Municipal Fund
Shares sold..... 247,969 $ 2,630,636 188,013 $ 1,990,996 92,577 $ 977,181 195,942 $ 2,067,496
Shares issued on
reinvestment... 5,754 60,753 4,426 46,941 1,764 18,571 2,464 26,046
Shares
reacquired..... (22,428) (236,690) (52,697) (556,574) (37,754) (397,488) (59,428) (626,418)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... 231,295 $ 2,454,699 139,742 $ 1,481,363 56,587 $ 598,264 138,978 $ 1,467,124
============ ============= ============ ============= =========== ============ =========== ============
U.S. Government
Income Fund
Shares sold..... 403,200 $ 4,053,900 673,099 $ 6,949,956 559,496 $ 5,680,071 1,646,527 $ 17,017,347
Shares issued on
reinvestment... 10,908 110,600 19,256 198,504 19,075 193,271 25,167 259,639
Shares
reacquired..... (328,272) (3,290,254) (165,930) (1,717,967) (474,588) (4,816,208) (431,004) (4,448,196)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... 85,836 $ 874,246 526,425 $ 5,430,493 103,983 $ 1,057,134 1,240,690 $ 12,828,790
============ ============= ============ ============= =========== ============ =========== ============
New York
Municipal Money
Fund
Shares sold..... 1,397,186 $ 1,397,186 2,564,333 $ 2,564,333 208,844 $ 208,844 17,300 $ 17,300
Shares issued on
reinvestment... 75,512 75,512 157,513 157,513 1,203 1,203 -- --
Shares
reacquired..... (1,782,300) (1,782,300) (1,158,084) (1,158,084) (10,331) (10,331) (17,300) (17,300)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (309,602) $ (309,602) 1,563,762 $ 1,563,762 199,716 $ 199,716 -- $ --
============ ============= ============ ============= =========== ============ =========== ============
Cash Management
Fund
Shares sold..... 246,999,379 $ 246,999,379 281,743,858 $ 281,743,858 6,616,176 $ 6,616,176 27,061,219 $ 27,061,219
Shares issued on
reinvestment... 106,822 106,822 170,004 170,004 93,511 93,511 87,138 87,138
Shares
reacquired..... (255,640,996) (255,640,996) (273,367,264) (273,367,264) (10,039,653) (10,039,653) (13,926,068) (13,926,068)
------------ ------------- ------------ ------------- ----------- ------------ ----------- ------------
Net increase
(decrease)..... (8,534,795) $ (8,534,795) 8,546,598 $ 8,546,598 (3,329,966) $ (3,329,966) 13,222,289 $ 13,222,289
============ ============= ============ ============= =========== ============ =========== ============
</TABLE>
* Fund's commencement of investment operations was July 1, 1998.
** Effective September 14, 1998, Class C shares of each Fund were redesignated
as Class 2 shares.
90
<PAGE>
<TABLE>
<CAPTION>
Class 2 Shares** Class O Shares
- ---------------------------------------------------- ------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 1999 December 31, 1998 June 30, 1999 December 31, 1998
- ------------------------- ------------------------- ------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
100,369 $ 716,720 401,276 $ 2,652,216 1,935 $ 16,248 181,197 $ 1,408,335
-- -- -- -- -- -- -- --
(97,324) (707,853) (265,260) (1,639,540) (101,571) (956,232) (29,140) (179,261)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
3,045 $ 8,867 136,016 $ 1,012,676 (99,636) $ (939,984) 152,057 $ 1,229,074
========== ============ =========== ============ =========== ============ ============ =============
122,246 $ 1,464,460 148,804 $ 1,458,618 -- $ -- 5,754 $ 57,510
-- -- -- -- -- -- -- --
(14,285) (169,210) (21,550) (217,839) (5,000) (61,959) -- --
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
107,961 $ 1,295,250 127,254 $ 1,240,779 (5,000) $ (61,959) 5,754 $ 57,510
========== ============ =========== ============ =========== ============ ============ =============
301,986 $ 7,088,351 171,556 $ 3,829,304 358,482 $ 8,635,299 990,632 $ 22,168,730
561 13,354 24,764 534,936 25,238 610,236 1,080,852 23,882,788
(49,100) (1,135,625) (29,054) (630,707) (864,183) (20,293,380) (1,853,841) (41,350,934)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
253,447 $ 5,966,080 167,266 $ 3,733,533 (480,463) $(11,047,845) 217,643 $ 4,700,584
========== ============ =========== ============ =========== ============ ============ =============
123,717 $ 2,837,182 330,038 $ 7,292,396 283,917 $ 6,524,393 307,780 $ 6,679,710
515 12,289 65,256 1,380,833 60,384 1,454,860 2,267,226 48,705,092
(174,588) (3,902,359) (144,455) (3,106,164) (1,073,455) (24,621,546) (1,843,864) (39,890,480)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
(50,356) $ (1,052,888) 250,839 $ 5,567,065 (729,154) $(16,642,293) 731,142 $ 15,494,322
========== ============ =========== ============ =========== ============ ============ =============
192,947 $ 2,599,355 1,074,705 $ 14,613,070 2,600 $ 35,196 43,871 $ 599,177
21,979 292,945 105,246 1,384,093 1,870 25,074 7,575 100,024
(484,731) (6,477,727) (536,707) (7,047,231) (6,123) (85,547) (28,787) (371,322)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
(269,805) $ (3,585,427) 643,244 $ 8,949,932 (1,653) $ (25,277) 22,659 $ 327,879
========== ============ =========== ============ =========== ============ ============ =============
1,668,051 $ 16,366,450 4,546,686 $ 50,429,921 456,947 $ 4,480,076 934,122 $ 9,580,636
176,203 1,727,571 370,671 3,977,004 57,843 569,227 40,734 416,226
(1,205,504) (11,810,992) (2,632,675) (27,403,631) (156,950) (1,541,136) (274,809) (2,713,389)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
638,750 $ 6,283,029 2,284,682 $ 27,003,294 357,840 $ 3,508,167 700,047 $ 7,283,473
========== ============ =========== ============ =========== ============ ============ =============
284,499 $ 2,847,737 1,340,214 $ 14,176,621 121 $ 1,200 13,223 $ 137,666
43,130 430,635 110,406 1,160,601 1,505 15,055 3,136 33,030
(408,487) (4,087,814) (615,411) (6,389,606) (304) (3,023) (26,791) (294,676)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
(80,858) $ (809,442) 835,209 $ 8,947,616 1,322 $ 13,232 (10,432) $ (123,980)
========== ============ =========== ============ =========== ============ ============ =============
115,804 $ 1,208,944 253,512 $ 2,680,859 6,066 $ 64,583 15,321 $ 162,308
2,615 27,559 3,398 35,947 2,651 28,026 6,105 64,696
(27,067) (285,545) (88,826) (940,562) (367,445) (3,871,429) (310,943) (3,295,570)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
91,352 $ 950,958 168,084 $ 1,776,244 (358,728) $ (3,778,820) (289,517) $ (3,068,566)
========== ============ =========== ============ =========== ============ ============ =============
238,535 $ 2,434,342 543,986 $ 5,615,027 12,110 $ 124,142 23,812 $ 246,448
6,588 66,710 8,609 88,646 684 6,936 986 10,158
(209,279) (2,132,103) (167,603) (1,723,364) (2,134) (21,607) (638,311) (6,606,666)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
35,844 $ 368,949 384,992 $ 3,980,309 10,660 $ 109,471 (613,513) $ (6,350,060)
========== ============ =========== ============ =========== ============ ============ =============
280 $ 280 127,765 $ 127,765 51,958,856 $ 51,958,856 161,711,975 $ 161,711,975
1 1 45 45 2,523,526 2,523,526 7,475,219 7,475,219
(127,810) (127,810) -- -- (84,896,882) (84,896,882) (279,025,465) (279,025,465)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
(127,529) $ (127,529) 127,810 $ 127,810 (30,414,500) $(30,414,500) (109,838,271) $(109,838,271)
========== ============ =========== ============ =========== ============ ============ =============
4,653,326 $ 4,653,326 24,803,143 $ 24,803,143 18,407,133 $ 18,407,133 34,908,151 $ 34,908,151
16,089 16,089 28,384 28,384 76,625 76,625 339,651 339,651
(5,627,679) (5,627,679) (23,897,132) (23,897,132) (17,952,884) (17,952,884) (47,052,951) (47,052,951)
- ---------- ------------ ----------- ------------ ----------- ------------ ------------ -------------
(958,264) $ (958,264) 934,395 $ 934,395 530,874 $ 530,874 (11,805,149) $ (11,805,149)
========== ============ =========== ============ =========== ============ ============ =============
</TABLE>
91
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
At June 30, 1999, Salomon Brothers Holding Co. Inc. owned approximately the
following percentages of total shares outstanding of the following Funds:
<TABLE>
<S> <C>
Small Cap Growth Fund....................................................... 21%
National Intermediate Municipal Fund........................................ 18%
U.S. Government Income Fund................................................. 9%
</TABLE>
4. Investments
During the six months ended June 30, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding short-
term securities) were as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Asia Growth Fund..................................... $ 23,143,567 $ 24,403,502
============ ============
Small Cap Growth Fund................................ $ 10,812,197 $ 8,271,008
============ ============
Capital Fund......................................... $155,478,352 $128,318,538
============ ============
Investors Fund....................................... $323,439,242 $329,866,432
============ ============
Total Return Fund:
U.S. Government Securities.......................... $ 70,880,016 $ 73,573,728
Other Investments................................... 30,226,052 37,779,188
------------ ------------
$101,106,068 $111,352,916
============ ============
High Yield Bond Fund................................. $189,587,023 $181,235,008
============ ============
Strategic Bond Fund:
U.S. Government Securities.......................... $ 8,877,806 $ 7,590,267
Other Investments................................... 85,014,515 77,010,464
------------ ------------
$ 93,892,321 $ 84,600,731
============ ============
National Intermediate Municipal Fund................. -- $ 60,000
============ ============
U.S. Government Income Fund.......................... $ 15,300,219 $ 21,889,720
============ ============
</TABLE>
At June 30, 1999, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
------------ ------------ --------------
<S> <C> <C> <C>
Asia Growth Fund.................... $ 4,052,921 $ (284,697) $ 3,768,224
Small Cap Growth Fund............... 2,897,145 (137,010) 2,760,135
Capital Fund........................ 68,823,191 (11,617,956) 57,205,235
Investors Fund...................... 263,684,850 (2,976,322) 260,708,528
Total Return Fund................... 29,591,247 (7,901,845) 21,689,402
High Yield Bond Fund................ 12,386,502 (61,577,983) (49,191,481)
Strategic Bond Fund................. 573,000 (7,867,221) (7,294,221)
National Intermediate Municipal
Fund............................... 383,347 (28,452) 354,895
U.S. Government Income Fund......... 87,171 (667,053) (579,882)
</TABLE>
92
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
Transactions in options written for the Asia Growth Fund during the six months
ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- --------
<S> <C> <C>
Options written, outstanding at December 31, 1998.......... (1) $ (760)
Options written............................................ (135) (556,299)
Options terminated in closing purchase transactions........ 17 449,485
Options expired............................................ 119 107,574
Options exercised.......................................... -- --
---- --------
Options written, outstanding at June 30, 1999.............. -- $ --
==== ========
</TABLE>
In addition, the written call option transactions for the Capital Fund which
occurred during the six months ended June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- ---------
<S> <C> <C>
Options written, outstanding at December 31, 1998.......... -- $ --
Options written ........................................... 2,300 717,756
Options terminated in closing purchase transactions........ (430) (174,363)
----- ---------
Options written, outstanding at June 30, 1999.............. 1,870 $ 543,393
===== =========
</TABLE>
The following represents the written call options open at June 30, 1999:
<TABLE>
<CAPTION>
Number of Strike
Contracts Expiration Price Value
--------- ---------- ------ ---------
<C> <S> <C> <C> <C>
500 Iridium World Communications Ltd. ... 10/16/99 $5.0 $(287,500)
800 Iridium World Communications Ltd. ... 10/16/99 7.5 (320,000)
570 Iridium World Communications Ltd. ... 10/16/99 12.5 (124,688)
---------
Total Call Options Written (Premiums
received -- $543,393)................ $(732,188)
=========
</TABLE>
The following written put option transactions for the Capital Fund which
occured during the six months ended June 30, 1999:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received
--------- --------
<S> <C> <C>
Options written, outstanding at December 31, 1998........... -- $ --
Options written ............................................ 2,395 431,939
Options terminated in closing purchase transactions......... (1,067) (140,992)
------ --------
Options written, outstanding at June 30, 1999............... 1,328 $290,947
====== ========
</TABLE>
The following represents the written put option contracts open at June 30,
1999:
<TABLE>
<CAPTION>
Number of Strike
Contracts Expiration Price Value
--------- ---------- ------ ---------
<C> <S> <C> <C> <C>
433 Amazon.com, Inc. .................... 7/17/99 $60.0 $ (8,119)
250 Amazon.com, Inc. .................... 7/17/99 80.0 (14,063)
250 America Online, Inc. ................ 7/17/99 90.0 (15,625)
203 Iridium World Communications Ltd. ... 1/22/00 7.5 (69,782)
192 Iridium World Communications Ltd. ... 1/22/00 10.0 (91,200)
---------
Total Put Options Written (Premiums
received -- $290,947)................ $(198,789)
=========
</TABLE>
93
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
5. Portfolio Investment Risks
Credit and Market Risk. Funds that invest in high yield and emerging market
instruments are subject to certain credit and market risks. The yields of high
yield and emerging market debt obligations reflect, among other things,
perceived credit risk. The Funds' investment in securities rated below
investment grade typically involve risks not associated with higher rated
securities including, among others, greater risk of timely and ultimate payment
of interest and principal, greater market price volatility and less liquid
secondary market trading. The consequences of political, social, economic or
diplomatic changes may have disruptive effects on the market prices of
investments held by the Funds. The Funds' investment in non-dollar denominated
securities may also result in foreign currency losses caused by devaluations
and exchange rate fluctuations.
The New York Municipal Money Fund and Cash Management Fund invest in money
market instruments maturing in thirteen months or less whose short-term credit
ratings are within the highest ratings categories of two nationally recognized
statistical rating organizations ("NRSROs") or if rated by only one NRSRO, that
NRSRO, or, if not rated, are believed by the investment manager to be of
comparable quality. The New York Municipal Money Fund pursues its investment
objective by investing at least 80% of its net assets in obligations that are
exempt from Federal income taxes and at least 65% of its net assets in
obligations that are exempt from personal income taxes of the State and City of
New York. Because the New York Municipal Money Fund invests primarily in
obligations of the State and City of New York, it is more susceptible to
factors adversely affecting issuers of such obligations than a fund that is
more diversified.
Financial Instruments with Off-Balance Sheet Risk. Certain Funds enter into
forward foreign currency contracts ("forward contracts") to facilitate
settlement of foreign currency denominated portfolio transactions or to manage
foreign currency exposure associated with foreign currency denominated
securities. Forward contracts involve elements of market risk in excess of the
amounts reflected in the Statements of Assets and Liabilities. The Funds bear
the risk of an unfavorable change in the foreign exchange rate underlying the
forward contract. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
Funds that enter into mortgage dollar rolls are subject to the risk that the
market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a mortgage dollar roll files for bankruptcy or becomes
insolvent, the Fund's use of proceeds of the dollar roll may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
Consistent with their objective to seek high current income, certain Funds may
invest in instruments whose values and interest rates may be linked to foreign
currencies, interest rates, indices or some other financial indicator. The
value at maturity or interest rates for these instruments will increase or
decrease according to the change in the indicator to which it is indexed. These
securities are generally more volatile in nature and the risk of loss of
principal is greater.
A risk in writing a call option is that the Fund may forego the opportunity of
profit if the market price of the underlying security increases and the option
is exercised. The risk in writing a put option is that the Fund may incur a
loss if the market price of the underlying security decreases and the option is
exercised. In addition, there is the risk that the Fund may not be able to
enter into a closing transaction because of an illiquid secondary market.
94
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
In connection with purchasing participations, the Fund generally will have no
right to enforce compliance by the borrower, and the Fund may not benefit
directly from any collateral supporting the loan in which it has purchased the
participation. As a result, the Fund will assume the credit risk of both the
borrower and the lender that is selling the participation. In the event of the
insolvency of the lender selling the participation, the Fund may be treated as
a general creditor of the lender and may not benefit from any set-off between
the lender and the borrower.
6. Tax Information
At December 31, 1998, the Asia Growth Fund, Small Cap Growth Fund, High Yield
Bond Fund, Strategic Bond Fund, National Intermediate Municipal Fund, New York
Municipal Money Fund, and Cash Management Fund had net capital loss carry-
forwards available to offset future capital gains as follows:
<TABLE>
<CAPTION>
High National New York
Asia Yield Strategic Intermediate Municipal Cash
Year of Growth Small Cap Bond Bond Municipal Money Management
Expiration Fund Growth Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999.................... -- -- -- -- -- $ 60,993 $ 894
2000.................... -- -- -- -- -- 94,778 396
2001.................... -- -- -- -- -- -- 409
2002.................... -- -- -- -- -- 65,321 415
2003.................... -- -- -- -- -- -- --
2004.................... -- -- -- -- -- -- 10
2005.................... $2,724,760 -- -- -- $ 2,529 13,552 42
2006.................... 6,954,569 $ 177,054 $20,062,569 $ 96,615 34,108 -- 566
---------- ---------- ----------- ---------- ---------- ---------- ----------
$9,679,329 $ 177,054 $20,062,569 $ 96,615 $ 36,637 $ 234,644 $ 2,732
========== ========== =========== ========== ========== ========== ==========
</TABLE>
During the year ended December 31, 1998, as permitted under Federal income tax
regulations, the Total Return Fund, High Yield Bond Fund, Strategic Bond Fund,
and U.S. Government Income Fund have elected to defer $162,721, $14,829,600,
$2,342,957, and $1,027, respectively, of Post-October net capital losses to the
next taxable year. The Asia Growth Fund, Capital Fund, Investors Fund, Total
Return Fund, and Strategic Bond Fund have also elected to defer $25,496, $15,
$521, $45, and $108,250, respectively, of Post-October net foreign currency
losses to the next taxable year.
At December 31, 1998, paid-in capital, undistributed net investment income
(distributions in excess of net investment income) and accumulated net realized
gain (loss) have been adjusted for current period book/tax differences which
arose principally from differing book/tax treatment of foreign currency
transactions, distributions from REITS, net investment loss incurred during the
year and gains on certain securities designated as "passive foreign investment
companies." The U.S. Government Income Fund, Investors Fund, High Yield Bond
Fund and Total Return Fund had net reclassifications of $(20,219), $935,307,
$375,306 and $(18,905), respectively, from undistributed net investment income
to accumulated net realized gain (loss). The Capital Fund, Asia Growth Fund and
Strategic Bond Fund had net reclassifications of $(7,032), $(478,831) and
$(8,871), respectively, from accumulated net realized gain (loss) to
undistributed net investment income. Net investment loss incurred for the Small
Cap Growth Fund and Asia Growth Fund of $(27,601) and $(260,733), respectively,
were reclassified to paid-in capital. Net investment income (loss), net
realized gain (loss) and net assets for the year ended December 31, 1998 were
not affected by these reclassifications.
95
<PAGE>
Financial Highlights
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Asia Growth Fund
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Class A Shares(1)
--------------------------------
1999(2) 1998 1997 1996(3)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $6.50 $7.48 $10.32 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment income .................. 0.01 0.10 0.03 0.05
Net realized and unrealized gain
(loss)................................. 2.96 (1.08) (2.59) 0.47
------ ------ ------ ------
Total Income (Loss) From Operations...... 2.97 (0.98) (2.56) 0.52
------ ------ ------ ------
Less Distributions From:
Net investment income................... -- -- (0.03) (0.05)
Net realized gains...................... -- -- (0.25) (0.15)
------ ------ ------ ------
Total Distributions...................... -- -- (0.28) (0.20)
------ ------ ------ ------
Net Asset Value, End of Period........... $9.47 $6.50 $7.48 $10.32
====== ====== ====== ======
Total Return(4).......................... 45.7%++ -13.1% -25.6% 5.2%++
Net Assets, End of Period (000s)......... $5,588 $4,385 $6,491 $3,693
Ratios to Average Net Assets:
Expenses................................ 1.24%+ 1.24% 1.24% 1.24%+
Net investment income................... 0.30%+ 1.48% 0.27% 0.90%+
Portfolio Turnover Rate.................. 172% 436% 294% 119%
Before applicable waiver of management
fee, expenses absorbed by SBAM and
credits earned on custodian cash
balances, net investment loss per share
and expense ratios would have been:
Net investment loss per share........... $(0.08) $(0.07) $(0.23) $(0.18)
Expense ratio........................... 3.30%+ 3.79% 3.81% 5.50%+
Asia Growth Fund
- ------------------------------------------------------------------------------
<CAPTION>
Class B Shares(1)
--------------------------------
1999(2) 1998 1997 1996(3)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $6.42 $7.44 $10.31 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment income .................. (0.02) 0.05 (0.05) 0.01
Net realized and unrealized gain
(loss)................................. 2.91 (1.07) (2.57) 0.46
------ ------ ------ ------
Total Income (Loss) From Operations...... 2.89 (1.02) (2.62) 0.47
------ ------ ------ ------
Less Distributions From:
Net investment income................... -- -- -- (0.01)
Net realized gains...................... -- -- (0.25) (0.15)
------ ------ ------ ------
Total Distributions...................... -- -- (0.25) (0.16)
------ ------ ------ ------
Net Asset Value, End of Period........... $9.31 $6.42 $7.44 $10.31
====== ====== ====== ======
Total Return(4).......................... 45.0%++ -13.7% -26.1% 4.7%++
Net Assets, End of Period (000s)......... $7,673 $5,256 $5,738 $3,163
Ratios to Average Net Assets:
Expenses................................ 1.99%+ 1.99% 1.99% 1.99%+
Net investment income (loss)............ -0.45%+ 0.77% -0.48% 0.20%+
Portfolio Turnover Rate.................. 172% 436% 294% 119%
Before applicable waiver of management
fee, expenses absorbed by SBAM and
credits earned on custodian cash
balances, net investment loss per share
and expense ratios would have been:
Net investment loss per share........... $(0.09) $(0.11) $(0.30) $(0.23)
Expense ratio........................... 4.05%+ 4.55% 4.56% 6.25%+
</TABLE>
- ------
(1) Per share amounts have been calculated using the average shares method.
(2) For the six months ended June 30, 1999 (unaudited).
(3) For the period from May 6, 1996 (inception date) to December 31, 1996.
(4) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year..
+ Annualized.
96
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Asia Growth Fund
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares(1)
--------------------------------
1999(2) 1998(3) 1997 1996(4)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 6.42 $ 7.44 $10.30 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment income (loss) .......... (0.02) 0.05 (0.05) 0.01
Net realized and unrealized gain
(loss)................................ 2.91 (1.07) (2.56) 0.45
------ ------ ------ ------
Total Income (Loss) From Operations.... 2.89 (1.02) (2.61) 0.46
------ ------ ------ ------
Less Distributions From:
Net investment income.................. -- -- -- (0.01)
Net realized gains..................... -- -- (0.25) (0.15)
------ ------ ------ ------
Total Distributions..................... -- -- (0.25) (0.16)
------ ------ ------ ------
Net Asset Value, End of Period.......... $ 9.31 $ 6.42 $ 7.44 $10.30
====== ====== ====== ======
Total Return(5)......................... 45.0%++ -13.7% -26.0% 4.6%++
Net Assets, End of Period (000s)........ $3,350 $2,291 $1,643 $246
Ratios to Average Net Assets:
Expenses............................... 1.99%+ 1.99% 1.99% 2.00%+
Net investment income (loss)........... -0.45%+ 0.80% -0.47% 0.08%+
Portfolio Turnover Rate................. 172% 436% 294% 119%
Before applicable waiver of management
fee, expenses absorbed by SBAM and
credits earned on custodian cash
balances, net investment loss per share
and expense ratios would have been:
Net investment loss per share.......... $(0.09) $(0.11) $(0.30) $(0.20)
Expense ratio.......................... 4.05%+ 4.55% 4.56% 6.26%+
Asia Growth Fund
- ------------------------------------------------------------------------------
<CAPTION>
Class O Shares(1)
--------------------------------
1999(2) 1998 1997 1996(4)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 6.54 $ 7.50 $10.32 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment income ................. 0.02 0.12 0.05 0.07
Net realized and unrealized gain
(loss)................................ 2.97 (1.08) (2.59) 0.46
------ ------ ------ ------
Total Income (Loss) From Operations.... 2.99 (0.96) (2.54) 0.53
------ ------ ------ ------
Less Distributions From:
Net investment income.................. -- -- (0.03) (0.06)
Net realized gains..................... -- -- (0.25) (0.15)
------ ------ ------ ------
Total Distributions..................... -- -- (0.28) (0.21)
------ ------ ------ ------
Net Asset Value, End of Period.......... $ 9.53 $ 6.54 $ 7.50 $10.32
====== ====== ====== ======
Total Return(5)......................... 45.7%++ -12.8% -25.3% 5.3%++
Net Assets, End of Period (000s)........ $1,022 $1,354 $412 $124
Ratios to Average Net Assets:
Expenses............................... 0.99%+ 0.99% 0.99% 0.99%+
Net investment income.................. 0.56%+ 1.90% 0.51% 1.21%+
Portfolio Turnover Rate................. 172% 436% 294% 119%
Before applicable waiver of management
fee, expenses absorbed by SBAM and
credits earned on custodian cash
balances, net investment loss per share
and expense ratios would have been:
Net investment loss per share.......... $(0.06) $(0.04) $(0.20) $(0.18)
Expense ratio.......................... 3.05%+ 3.55% 3.56% 5.25%+
</TABLE>
- ------
(1) Per share amounts have been calculated using the average shares method.
(2) For the six months ended June 30, 1999 (unaudited).
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) For the period from May 6, 1996 (inception date) to December 31, 1996.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year..
+ Annualized.
97
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Small Cap Growth Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class A Shares Class B Shares
-------------------------------------
1999(1)(2) 1998(3) 1999(1)(2) 1998(3)
-------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 11.59 $ 10.00 $ 11.55 $ 10.00
------- ------- ------- -------
Income (Loss) From Operations:
Net investment loss................ (0.06) (0.02) (0.10) (0.06)
Net realized and unrealized gain
(loss)............................ 1.95 1.61 1.92 1.61
------- ------- ------- -------
Total Income (Loss) From
Operations......................... 1.89 1.59 1.82 1.55
------- ------- ------- -------
Less Distributions From:
Net investment income.............. -- -- -- --
Net realized gains................. -- -- -- --
------- ------- ------- -------
Total Distributions................. -- -- -- --
------- ------- ------- -------
Net Asset Value, End of Period...... $ 13.48 $ 11.59 $ 13.37 $ 11.55
======= ======= ======= =======
Total Return(5)++................... 16.3% 15.9% 15.8% 15.5%
Net Assets, End of Period (000s).... $4,597 $3,205 $5,570 $3,850
Ratios to Average Net Assets+:
Expenses........................... 1.50% 1.50% 2.25% 2.25%
Net investment loss................ -1.00% -0.51% -1.75% -1.21%
Portfolio Turnover Rate............. 84% 96% 84% 96%
Before applicable waiver of
management fee, expenses absorbed by
SBAM and credits earned on custodian
cash balances, net investment loss
per share and expense ratios would
have been:
Net investment loss per share...... $(0.11) $(0.06) $(0.14) $(0.10)
Expense ratio+..................... 2.29% 2.30% 3.04% 3.05%
Small Cap Growth Fund
- -------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares Class O Shares
-------------------------------------
199(1)(2) 1998(3)(4) 1999(1)(2) 1998(3)
-------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................. $ 11.56 $ 10.00 $ 11.60 $ 10.00
------- ------- ------- -------
Income (Loss) From Operations:
Net investment loss ............... (0.10) (0.06) (0.05) (0.01)
Net realized and unrealized gain
(loss)............................ 1.93 1.62 1.96 1.61
------- ------- ------- -------
Total Income From Operations........ 1.83 1.56 1.91 1.60
------- ------- ------- -------
Less Distributions From:
Net investment income.............. -- -- -- --
Net realized gains................. -- -- -- --
------- ------- ------- -------
Total Distributions................. -- -- -- --
------- ------- ------- -------
Net Asset Value, End of Period...... $ 13.39 $ 11.56 $ 13.51 $ 11.60
======= ======= ======= =======
Total Return(5)++................... 15.8% 15.6% 16.5% 16.0%
Net Assets, End of Period (000s).... $3,150 $1,471 $10 $67
Ratios to Average Net Assets+:
Expenses........................... 2.25% 2.25% 1.25% 1.25%
Net investment loss................ -1.76% -1.35% -0.73% -0.18%
Portfolio Turnover Rate............. 84% 96% 84% 96%
Before applicable waiver of
management fee, expenses absorbed by
SBAM and credits earned on custodian
cash balances, net investment loss
per share and expense ratios would
have been:
Net investment loss per share...... $(0.15) $(0.10) $(0.10) $(0.05)
Expense ratio+..................... 3.05% 3.05% 2.06% 2.05%
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from July 1, 1998 (inception date) to December 31, 1998.
(4) On September 14, 1998, Class C shares were renamed Class 2 shares.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
98
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Capital Fund
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Class A Shares
<S> <C> <C> <C> <C> <C>
=============================================
<CAPTION>
1999(1)(2) 1998 1997 1996(2)(3)
<S> <C> <C> <C> <C> <C>
=============================================
Net Asset Value, Beginning of
Period........................... $ 22.92 $ 21.15 $19.88 $21.98
------- ------- ------ ------
Income From Operations:
Net investment income............ 0.12 0.14 -- 0.01
Net realized and unrealized gain
(loss).......................... 3.02 4.64 5.10 1.54
------- ------- ------ ------
Total Income From Operations...... 3.14 4.78 5.10 1.55
------- ------- ------ ------
Less Distributions From:
Net investment income............ (0.07) (0.18) -- (0.15)
Net realized gains............... -- (2.83) (3.83) (3.50)
------- ------- ------ ------
Total Distributions............... (0.07) (3.01) (3.83) (3.65)
------- ------- ------ ------
Net Asset Value, End of Period.... $ 25.99 $ 22.92 $21.15 $19.88
======= ======= ====== ======
Total Return(4)................... 13.7%++ 23.7% 26.4% 7.7%++
Net Assets, End of Period (000s).. $19,082 $11,425 $5,589 $344
Ratios to Average Net Assets:
Expenses......................... 1.24%+ 1.34% 1.46% 1.88%+
Net investment income (loss)..... 0.98%+ 0.81% -0.10% 0.18%+
Portfolio Turnover Rate........... 54% 141% 159% 191%
</TABLE>
Capital Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class B Shares
<S> <C> <C> <C> <C> <C>
=============================================
<CAPTION>
1999(1)(2) 1998 1997 1996(2)(3)
<S> <C> <C> <C> <C> <C>
=============================================
Net Asset Value, Beginning of
Period......................... $ 22.63 $ 21.01 $19.90 $21.98
------- ------- ------ ------
Income (Loss) From Operations:
Net investment income (loss)... 0.03 0.09 (0.07) (0.02)
Net realized and unrealized
gain.......................... 2.98 4.45 5.01 1.56
------- ------- ------ ------
Total Income From Operations.... 3.01 4.54 4.94 1.54
------- ------- ------ ------
Less Distributions From:
Net investment income.......... (0.04) (0.09) -- (0.12)
Net realized gains............. -- (2.83) (3.83) (3.50)
------- ------- ------ ------
Total Distributions............. (0.04) (2.92) (3.83) (3.62)
------- ------- ------ ------
Net Asset Value, End of Period.. $ 25.60 $ 22.63 $21.01 $19.90
======= ======= ====== ======
Total Return(4)................. 13.3%++ 22.6% 25.6% 7.6%++
Net Assets, End of Period
(000s)......................... $47,851 $22,294 $3,820 $219
Ratios to Average Net Assets:
Expenses....................... 1.99%+ 2.09% 2.20% 2.73%+
Net investment income (loss)... 0.23%+ 0.17% -0.94% -0.66%+
Portfolio Turnover Rate......... 54% 141% 159% 191%
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from November 1, 1996 (inception date) to December 31, 1996.
(4) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
99
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Capital Fund
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares
<S> <C> <C> <C> <C>
====================================
<CAPTION>
1999(1)(2) 1998(3) 1997 1996(2)(4)
<S> <C> <C> <C> <C>
====================================
Net Asset Value, Beginning of
Period............................. $22.69 $21.02 $19.91 $21.98
------- ------ ------ ------
Income (Loss) From Operations:
Net investment income (loss)....... 0.03 0.07 (0.06) (0.02)
Net realized and unrealized gain... 2.96 4.47 5.00 1.57
------- ------ ------ ------
Total Income From Operations........ 2.99 4.54 4.94 1.55
------- ------ ------ ------
Less Distributions From:
Net investment income.............. (0.04) (0.04) (3.83) (0.12)
Net realized gains................. -- (2.83) -- (3.50)
------- ------ ------ ------
Total Distributions................. (0.04) (2.87) (3.83) (3.62)
------- ------ ------ ------
Net Asset Value, End of Period...... $25.64 $22.69 $21.02 $19.91
======= ====== ====== ======
Total Return(5)..................... 13.2%++ 22.6% 25.6% 7.7%++
Net Assets, End of Period (000s).... $13,699 $6,369 $2,385 $130
Ratios to Average Net Assets:
Expenses........................... 1.99%+ 2.09% 2.21% 2.45%+
Net investment income (loss)....... 0.22%+ 0.09% -0.91% -0.50%+
Portfolio Turnover Rate............. 54% 141% 159% 191%
</TABLE>
Capital Fund
<TABLE>
- ---------------------------------------------------------------------------------------
<CAPTION>
Class O Shares
<S> <C> <C> <C> <C> <C> <C>
============================================================
<CAPTION>
1999(1)(2) 1998 1997 1996(2) 1995 1994
<S> <C> <C> <C> <C> <C> <C>
============================================================
Net Asset Value,
Beginning of Period.... $22.99 $21.23 $19.88 $18.67 $15.62 $20.80
-------- -------- -------- -------- -------- -------
Income (Loss) From
Operations:
Net investment income.. 0.14 0.21 0.05 0.13 0.14 0.03
Net realized and
unrealized gain
(loss)................ 3.03 4.62 5.13 5.70 5.27 (2.87)
-------- -------- -------- -------- -------- -------
Total Income (Loss) From
Operations............. 3.17 4.83 5.18 5.83 5.41 (2.84)
-------- -------- -------- -------- -------- -------
Less Distributions From:
Net investment income.. (0.08) (0.24) -- (0.15) (0.14) (0.03)
Net realized gains..... -- (2.83) (3.83) (4.47) (2.22) (1.51)
In excess of net
realized gains........ -- -- -- -- -- (0.80)
-------- -------- -------- -------- -------- -------
Total Distributions..... (0.08) (3.07) (3.83) (4.62) (2.36) (2.34)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $26.08 $22.99 $21.23 $19.88 $18.67 $15.62
======== ======== ======== ======== ======== =======
Total Return(5)......... 13.9%++ 23.8% 26.8% 33.3% 34.9% -14.2%
Net Assets, End of
Period (000s).......... $208,689 $194,973 $175,470 $135,943 $102,429 $86,704
Ratios to Average Net
Assets:
Expenses............... 1.00%+ 1.08% 1.22% 1.38% 1.36% 1.30%
Net investment income.. 1.21%+ 0.96% 0.26% 0.67% 0.74% 0.12%
Portfolio Turnover
Rate................... 54% 141% 159% 191% 217% 152%
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) For the period from November 1, 1996 (inception date) to December 31, 1996.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return. Total return calculated
for a period of less than one year is not annualized.
++Total return is not annualized, as it may not be represntative of the total
return for the year.
+ Annualized.
100
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Investors Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class A Shares(1)
<S> <C> <C> <C> <C> <C>
============================================
<CAPTION>
1999(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
============================================
Net Asset Value, Beginning of
Period....................... $22.04 $21.11 $18.89 $16.62 $13.61
------- ------- ------- ------- ------
Income From Operations:
Net investment income........ 0.11 0.19 0.16 0.19 0.19
Net realized and unrealized
gain........................ 3.21 2.91 4.64 4.63 4.55
------- ------- ------- ------- ------
Total Income From Operations.. 3.32 3.10 4.80 4.82 4.74
------- ------- ------- ------- ------
Less Distributions From:
Net investment income........ (0.06) (0.17) (0.21) (0.22) (0.23)
Net realized gains........... -- (2.00) (2.37) (2.33) (1.50)
------- ------- ------- ------- ------
Total Distributions........... (0.06) (2.17) (2.58) (2.55) (1.73)
------- ------- ------- ------- ------
Net Asset Value, End of
Period....................... $25.30 $22.04 $21.11 $18.89 $16.62
======= ======= ======= ======= ======
Total Return(4)............... 15.1%++ 15.2% 26.2% 30.3% 35.3%++
Net Assets, End of Period
(000s)....................... $51,456 $50,953 $57,105 $10,905 $441
Ratios to Average Net Assets:
Expenses..................... 0.88%+ 0.88% 0.95% 1.06% 0.94%+
Net investment income........ 1.02%+ 0.87% 0.86% 0.94% 1.41%+
Portfolio Turnover Rate....... 38% 74% 62% 58% 86%
Investors Fund
- -------------------------------------------------------------------------------
<CAPTION>
Class B Shares(1)
<S> <C> <C> <C> <C> <C>
============================================
<CAPTION>
1999(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
============================================
Net Asset Value, Beginning of
Period....................... $21.87 $21.00 $18.86 $16.61 $13.61
------- ------- ------- ------- ------
Income From Operations:
Net investment income........ 0.03 0.05 0.04 0.08 0.10
Net realized and unrealized
gain........................ 3.19 2.85 4.58 4.60 4.54
------- ------- ------- ------- ------
Total Income From Operations.. 3.22 2.90 4.62 4.68 4.64
------- ------- ------- ------- ------
Less Distributions From:
Net investment income........ (0.02) (0.03) (0.11) (0.10) (0.14)
Net realized gains........... -- (2.00) (2.37) (2.33) (1.50)
------- ------- ------- ------- ------
Total Distributions........... (0.02) (2.03) (2.48) (2.43) (1.64)
------- ------- ------- ------- ------
Net Asset Value, End of
Period....................... $25.07 $21.87 $21.00 $18.86 $16.61
======= ======= ======= ======= ======
Total Return(4)............... 14.7%++ 14.3% 25.3% 29.2% 34.5%++
Net Assets, End of Period
(000s)....................... $87,149 $75,189 $49,786 $9,433 $716
Ratios to Average Net Assets:
Expenses..................... 1.63%+ 1.63% 1.70% 1.82% 1.71%+
Net investment income........ 0.27%+ 0.18% 0.12% 0.21% 0.63%+
Portfolio Turnover Rate....... 38% 74% 62% 58% 86%
</TABLE>
- ------
(1) Per share amounts have been calculated using the average shares method.
(2) For the six months ended June 30, 1999 (unaudited).
(3) For the period from September 11, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
101
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Investors Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Class 2 Shares
---------------------------------------------------
1999(1)(2) 1998(3) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------
Net Asset Value,
Beginning of Period.... $21.88 $21.01 $18.86 $16.61 $13.61
-------- -------- -------- -------- --------
Income From Operations:
Net investment income.. 0.03 0.05 0.04 0.07 0.09
Net realized and
unrealized gain....... 3.21 2.84 4.59 4.60 4.55
-------- -------- -------- -------- --------
Total Income From
Operations............. 3.24 2.89 4.63 4.67 4.64
-------- -------- -------- -------- --------
Less Distributions From:
Net investment income.. (0.02) (0.02) (0.11) (0.09) (0.14)
Net realized gains..... -- (2.00) (2.37) (2.33) (1.50)
-------- -------- -------- -------- --------
Total Distributions..... (0.02) (2.02) (2.48) (2.42) (1.64)
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $25.10 $21.88 $21.01 $18.86 $16.61
======== ======== ======== ======== ========
Total Return(5)......... 14.8%++ 14.3% 25.2% 29.3% 34.5%++
Net Assets, End of
Period (000s).......... $19,016 $17,680 $11,701 $1,959 $306
Ratios to Average Net
Assets:
Expenses............... 1.63%+ 1.63% 1.70% 1.80% 1.68%+
Net investment income.. 0.27%+ 0.18% 0.13% 0.23% 0.66%+
Portfolio Turnover
Rate................... 38% 74% 62% 58% 86%
</TABLE>
Investors Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Class O Shares
---------------------------------------------------------------
1999(1)(2) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------
Net Asset Value,
Beginning of Period.... $22.05 $21.13 $18.90 $16.61 $13.63 $15.60
-------- -------- -------- -------- -------- --------
Income (Loss) From
Operations:
Net investment income.. 0.15 0.25 0.24 0.25 0.27 0.27
Net realized and
unrealized gain
(loss)................ 3.22 2.90 4.60 4.62 4.48 (0.48)
-------- -------- -------- -------- -------- --------
Total Income (Loss) From
Operations............. 3.37 3.15 4.84 4.87 4.75 (0.21)
-------- -------- -------- -------- -------- --------
Less Distributions From:
Net investment income.. (0.08) (0.23) (0.24) (0.25) (0.27) (0.27)
Net realized gains..... -- (2.00) (2.37) (2.33) (1.50) (1.49)
-------- -------- -------- -------- -------- --------
Total Distributions..... (0.08) (2.23) (2.61) (2.58) (1.77) (1.76)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $25.34 $22.05 $21.13 $18.90 $16.61 $13.63
======== ======== ======== ======== ======== ========
Total Return(5)......... 15.3%++ 15.4% 26.5% 30.6% 35.4% -1.3%++
Net Assets, End of
Period (000s).......... $729,646 $650,916 $608,401 $518,361 $428,950 $348,214
Ratios to Average Net
Assets:
Expenses............... 0.63%+ 0.63% 0.69% 0.76% 0.69% 0.69%+
Net investment income.. 1.27%+ 1.15% 1.15% 1.36% 1.67% 1.75%+
Portfolio Turnover
Rate................... 38% 74% 62% 58% 86% 66%
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) For the period from January 3, 1995 (inception date) to December 31, 1995.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
102
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Total Return Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class A Shares(1)
----------------------------------------------
1999(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $13.11 $13.13 $11.82 $10.55 $10.00
-------- -------- ------- ------- ------
Income From Operations:
Net investment income...... 0.25 0.56 0.55 0.54 0.15
Net realized and unrealized
gain...................... 0.95 0.26 1.65 1.35 0.52
-------- -------- ------- ------- ------
Total Income From
Operations................. 1.20 0.82 2.20 1.89 0.67
-------- -------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.25) (0.55) (0.53) (0.52) (0.11)
Net realized gains......... -- (0.29) (0.36) (0.10) (0.01)
-------- -------- ------- ------- ------
Total Distributions......... (0.25) (0.84) (0.89) (0.62) (0.12)
-------- -------- ------- ------- ------
Net Asset Value, End of
Period..................... $14.06 $13.11 $13.13 $11.82 $10.55
======== ======== ======= ======= ======
Total Return(4)............. 9.3%++ 6.4% 19.1% 18.3% 6.7%++
Net Assets, End of Period
(000s)..................... $42,915 $51,443 $53,024 $21,109 $3,658
Ratios to Average Net
Assets:
Expenses................... 0.95%+ 0.85% 0.77% 0.75% 0.74%+
Net investment income...... 3.75%+ 4.17% 4.29% 4.81% 4.82%+
Portfolio Turnover Rate..... 51% 63% 70% 76% 16%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share..................... $0.23 $0.51 $0.49 $0.44 $0.13
Expense ratio.............. 1.17%+ 1.17% 1.24% 1.61% 1.45%+
</TABLE>
Total Return Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class B Shares(1)
----------------------------------------------
1999(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $13.08 $13.12 $11.82 $10.54 $10.00
-------- -------- ------- ------- ------
Income From Operations:
Net investment income...... 0.20 0.45 0.45 0.45 0.13
Net realized and unrealized
gain...................... 0.95 0.26 1.65 1.35 0.51
-------- -------- ------- ------- ------
Total Income From
Operations................. 1.15 0.71 2.10 1.80 0.64
-------- -------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.21) (0.46) (0.44) (0.42) (0.09)
Net realized gains......... -- (0.29) (0.36) (0.10) (0.01)
-------- -------- ------- ------- ------
Total Distributions......... (0.21) (0.75) (0.80) (0.52) (0.10)
-------- -------- ------- ------- ------
Net Asset Value, End of
Period..................... $14.02 $13.08 $13.12 $11.82 $10.54
======== ======== ======= ======= ======
Total Return(4)............. 8.9%++ 5.5% 18.2% 17.4% 6.4%++
Net Assets, End of Period
(000s)..................... $120,885 $120,816 $87,549 $28,043 $5,378
Ratios to Average Net
Assets:
Expenses................... 1.70%+ 1.60% 1.52% 1.50% 1.49%+
Net investment income...... 3.00%+ 3.41% 3.54% 4.06% 4.06%+
Portfolio Turnover Rate..... 51% 63% 70% 76% 16%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share..................... $0.18 $0.41 $0.39 $0.36 $0.11
Expense ratio.............. 1.92%+ 1.92% 1.99% 2.36% 2.19%+
</TABLE>
- ------
(1) Per share amounts have been calculated using the average shares method.
(2) For the six months ended June 30, 1999 (unaudited).
(3) For the period from September 11, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
103
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Total Return Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class 2 Shares(1)
-------------------------------------------
1999(2) 1998(3) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $13.11 $13.15 $11.85 $10.56 $10.00
------- ------- ------- ------ ------
Income From Operations:
Net investment income......... 0.20 0.45 0.45 0.46 0.14
Net realized and unrealized
gain......................... 0.95 0.26 1.65 1.35 0.51
------- ------- ------- ------ ------
Total Income From Operations... 1.15 0.71 2.10 1.81 0.65
------- ------- ------- ------ ------
Less Distributions From:
Net investment income......... (0.21) (0.46) (0.44) (0.42) (0.08)
Net realized gains............ -- (0.29) (0.36) (0.10) (0.01)
------- ------- ------- ------ ------
Total Distributions............ (0.21) (0.75) (0.80) (0.52) (0.09)
------- ------- ------- ------ ------
Net Asset Value, End of
Period........................ $14.05 $13.11 $13.15 $11.85 $10.56
======= ======= ======= ====== ======
Total Return(5)................ 8.9%++ 5.5% 18.1% 17.5% 6.5%++
Net Assets, End of Period
(000s)........................ $27,773 $29,458 $21,085 $3,445 $445
Ratios to Average Net Assets:
Expenses...................... 1.70%+ 1.60% 1.52% 1.50% 1.51%+
Net investment income......... 3.00%+ 3.41% 3.52% 4.07% 4.26%+
Portfolio Turnover Rate........ 51% 63% 70% 76% 16%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.19 $0.41 $0.39 $0.36 $0.11
Expense ratio................. 1.92%+ 1.92% 1.99% 2.36% 2.22%+
</TABLE>
Total Return Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class O Shares(1)
-------------------------------------------
1999(2) 1998 1997 1996 1996(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $13.18 $13.20 $11.88 $10.57 $10.00
------- ------- ------- ------ ------
Income From Operations:
Net investment income ........ 0.27 0.59 0.59 0.57 0.17
Net realized and unrealized
gain......................... 0.95 0.26 1.65 1.39 0.52
------- ------- ------- ------ ------
Total Income From Operations... 1.22 0.85 2.24 1.96 0.69
------- ------- ------- ------ ------
Less Distributions From:
Net investment income......... (0.27) (0.58) (0.56) (0.55) (0.11)
Net realized gains............ -- (0.29) (0.36) (0.10) (0.01)
------- ------- ------- ------ ------
Total Distributions............ (0.27) (0.87) (0.92) (0.65) (0.12)
------- ------- ------- ------ ------
Net Asset Value, End of
Period........................ $14.13 $13.18 $13.20 $11.88 $10.57
======= ======= ======= ====== ======
Total Return(5)................ 9.3%++ 6.6% 19.3% 19.0% 6.9%++
Net Assets, End of Period
(000s)........................ $1,610 $1,523 $1,227 $213 $4,494
Ratios to Average Net Assets:
Expenses...................... 0.70%+ 0.60% 0.52% 0.50% 0.51%+
Net investment income......... 4.00%+ 4.41% 4.60% 5.13% 5.30%+
Portfolio Turnover Rate........ 51% 63% 70% 76% 16%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.25 $0.55 $0.53 $0.47 $0.15
Expense ratio................. 0.92%+ 0.92% 1.00% 1.36% 1.22%+
</TABLE>
- ------
(1) Per share amounts have been calculated using the average shares method.
(2) For the six months ended June 30, 1999 (unaudited).
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) For the period from September 11, 1995 (inception date) to December 31,
1995.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
104
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
High Yield Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Net Asset Value,
Beginning of Period.... $9.89 $11.74 $11.54 $10.53 $10.00
-------- -------- -------- -------- -------
Income (Loss) From
Operations:
Net investment income
...................... 0.48 1.05 1.06 1.10 0.92
Net realized and
unrealized gain
(loss)................ (0.10) (1.84) 0.38 1.11 0.67
-------- -------- -------- -------- -------
Total Income (Loss) From
Operations............. 0.38 (0.79) 1.44 2.21 1.59
-------- -------- -------- -------- -------
Less Distributions From:
Net investment income.. (0.53) (1.06) (1.05) (1.10) (0.91)
Net realized gains..... -- -- (0.19) (0.10) (0.15)
-------- -------- -------- -------- -------
Total Distributions..... (0.53) (1.06) (1.24) (1.20) (1.06)
-------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $9.74 $9.89 $11.74 $11.54 $10.53
======== ======== ======== ======== =======
Total Return(4)......... 3.9%++ -7.1% 13.0% 21.9% 16.6%++
Net Assets, End of
Period (000s).......... $142,029 $145,730 $169,721 $ 65,935 $10,789
Ratios to Average Net
Assets:
Expenses............... 1.31%+ 1.24% 1.24% 1.24% 1.24%+
Net investment
income................ 9.91%+ 9.58% 8.66% 9.38% 10.58%+
Portfolio Turnover
Rate................... 33% 66% 79% 85% 109%
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
income per share and
expense ratios would
have been:
Net investment income
per share............. $0.48 $1.04 $1.04 $1.09 $0.87
Expense ratio.......... 1.33%+ 1.32% 1.34% 1.50% 1.80%+
</TABLE>
High Yield Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class B Shares
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
<CAPTION>
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
--------------------------------------------------
Net Asset Value,
Beginning of Period.... $9.87 $11.71 $11.53 $10.53 $10.00
-------- -------- -------- -------- -------
Income (Loss) From
Operations:
Net investment income
...................... 0.45 0.97 0.98 1.02 0.85
Net realized and
unrealized gain
(loss)................ (0.10) (1.84) 0.37 1.11 0.68
-------- -------- -------- -------- -------
Total Income (Loss) From
Operations............. 0.35 (0.87) 1.35 2.13 1.53
-------- -------- -------- -------- -------
Less Distributions From:
Net investment income.. (0.49) (0.97) (0.98) (1.03) (0.85)
Net realized gains..... -- -- (0.19) (0.10) (0.15)
-------- -------- -------- -------- -------
Total Distributions..... (0.49) (0.97) (1.17) (1.13) (1.00)
-------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $9.73 $9.87 $11.71 $11.53 $10.53
======== ======== ======== ======== =======
Total Return(4)......... 3.6%++ -7.8% 12.2% 21.2% 15.7%++
Net Assets, End of
Period (000s).......... $331,725 $327,661 $329,672 $106,797 $10,108
Ratios to Average Net
Assets:
Expenses............... 2.05%+ 1.99% 1.99% 1.99% 1.96%+
Net investment income.. 9.19%+ 8.87% 7.90% 8.49% 9.53%+
Portfolio Turnover
Rate................... 33% 66% 79% 85% 109%
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
income per share and
expense ratios would
have been:
Net investment income
per share............. $0.45 $0.96 $0.97 $1.01 $0.80
Expense ratio.......... 2.08%+ 2.07% 2.09% 2.24% 2.51%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using average shares method.
(3) For the period from February 22, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
105
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
High Yield Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class 2 Shares
----------------------------------------------
1999(1)(2) 1998(3) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $9.86 $11.70 $11.52 $10.53 $10.00
------- ------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income ..... 0.46 0.97 0.99 1.02 0.85
Net realized and unrealized
gain (loss)............... (0.10) (1.84) 0.36 1.10 0.68
------- ------- ------- ------- ------
Total Income (Loss) From
Operations................. 0.36 (0.87) 1.35 2.12 1.53
------- ------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.49) (0.97) (0.98) (1.03) (0.85)
Net realized gains......... -- -- (0.19) (0.10) (0.15)
------- ------- ------- ------- ------
Total Distributions......... (0.49) (0.97) (1.17) (1.13) (1.00)
------- ------- ------- ------- ------
Net Asset Value, End of
Period..................... $9.73 $9.86 $11.70 $11.52 $10.53
======= ======= ======= ======= ======
Total Return(5)............. 3.7%++ -7.8% 12.2% 21.1% 15.8%++
Net Assets, End of Period
(000s)..................... $91,681 $86,596 $76,042 $13,773 $1,274
Ratios to Average Net
Assets:
Expenses................... 1.85%+ 1.99% 1.99% 1.99% 1.98%+
Net investment income...... 9.35%+ 8.89% 7.87% 8.43% 9.61%+
Portfolio Turnover Rate..... 33% 66% 79% 85% 109%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share..................... $0.46 $0.96 $0.98 $1.01 $0.80
Expense ratio.............. 1.87%+ 2.07% 2.08% 2.24% 2.54%+
</TABLE>
High Yield Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class O Shares
----------------------------------------------
1999(1)(2) 1998 1997 1996 1996(4)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $9.89 $11.75 $11.53 $10.54 $10.00
------- ------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income ..... 0.50 1.09 1.08 1.16 0.95
Net realized and unrealized
gain (loss)............... (0.10) (1.86) 0.40 1.05 0.67
------- ------- ------- ------- ------
Total Income (Loss) From
Operations................. 0.40 (0.77) 1.48 2.21 1.62
------- ------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.55) (1.09) (1.07) (1.12) (0.93)
Net realized gains......... -- -- (0.19) (0.10) (0.15)
------- ------- ------- ------- ------
Total Distributions......... (0.55) (1.09) (1.26) (1.22) (1.08)
------- ------- ------- ------- ------
Net Asset Value, End of
Period..................... $9.74 $9.89 $11.75 $11.53 $10.54
======= ======= ======= ======= ======
Total Return(5)............. 4.1%++ -6.9% 13.4% 22.0% 16.8%++
Net Assets, End of Period
(000s)..................... $12,287 $ 8,936 $ 2,386 $ 393 $7,854
Ratios to Average Net
Assets:
Expenses................... 1.06%+ 1.01% 0.99% 0.99% 1.00%+
Net investment income...... 10.12%+ 10.85% 8.93% 10.64% 10.59%+
Portfolio Turnover Rate..... 33% 66% 79% 85% 109%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share..................... $0.50 $1.08 $1.07 $1.13 $0.90
Expense ratio.............. 1.08%+ 1.09% 1.09% 1.24% 1.55%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using average shares method.
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) For the period from February 22, 1995 (inception date) to December 31,
1995.
(5) Total return is calculated assuming a $1,000 investment of the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
106
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Strategic Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class A Shares
----------------------------------------------
1999(1)(2) 1998 1997(2) 1996(2) 1995(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $10.19 $10.94 $10.83 $10.53 $10.00
------- ------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income...... 0.38 0.76 0.76 0.87 0.84
Net realized and unrealized
gain (loss)............... (0.38) (0.65) 0.41 0.55 0.78
------- ------- ------- ------- ------
Total Income From
Operations................. -- 0.11 1.17 1.42 1.62
------- ------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.42) (0.85) (0.89) (0.94) (0.85)
In excess of net investment
income.................... -- -- -- (0.01) --
Net realized gains......... -- (0.01) (0.17) (0.17) (0.24)
------- ------- ------- ------- ------
Total Distributions......... (0.42) (0.86) (1.06) (1.12) (1.09)
------- ------- ------- ------- ------
Net Asset Value, End of
Period..................... $9.77 $10.19 $10.94 $10.83 $10.53
======= ======= ======= ======= ======
Total Return(4)............. 0.03%++ 1.1% 11.2% 14.1% 16.8%++
Net Assets, End of Period
(000s)..................... $21,743 $21,995 $17,150 $8,345 $513
Ratios to Average Net
Assets:
Expenses................... 1.24%+ 1.24% 1.24% 1.24% 1.23%+
Net investment income...... 7.68%+ 7.11% 6.99% 8.09% 9.51%+
Portfolio Turnover Rate..... 74% 109% 184% 122% 161%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income (loss) per share and
expense ratios would have
been:
Net investment income per
share..................... $0.38 $0.74 $0.73 $0.79 $0.76
Expense ratio.............. 1.36%+ 3.79% 3.81% 5.50% 2.11%+
</TABLE>
Strategic Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class B Shares
----------------------------------------------
1999(1)(2) 1998 1997(2) 1996(2) 1995(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $10.18 $10.93 $10.82 $10.53 $10.00
------- ------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income...... 0.34 0.69 0.67 0.79 0.76
Net realized and unrealized
gain (loss)............... (0.38) (0.66) 0.41 0.53 0.79
------- ------- ------- ------- ------
Total Income (Loss) From
Operations................. (0.04) 0.03 1.08 1.32 1.55
------- ------- ------- ------- ------
Less Distributions From:
Net investment income...... (0.38) (0.77) (0.80) (0.85) (0.78)
In excess of net investment
income.................... -- -- -- (0.01) --
Net realized gains......... -- (0.01) (0.17) (0.17) (0.24)
------- ------- ------- ------- ------
Total Distributions......... (0.38) (0.78) (0.97) (1.03) (1.02)
------- ------- ------- ------- ------
Net Asset Value, End of
Period..................... $9.76 $10.18 $10.93 $10.82 $10.53
======= ======= ======= ======= ======
Total Return(4)............. -0.4%++ 0.3% 10.4% 13.0% 16.1%++
Net Assets, End of Period
(000s)..................... $71,212 $67,928 $47,921 $14,291 $1,879
Ratios to Average Net
Assets:
Expenses................... 1.99%+ 1.99% 1.99% 1.98% 1.97%+
Net investment income...... 6.83%+ 6.37% 6.12% 7.34% 8.75%+
Portfolio Turnover Rate..... 74% 109% 184% 122% 161%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share..................... $0.33 $0.67 $0.64 $0.71 $0.69
Expense ratio.............. 2.11%+ 2.18% 2.28% 2.73% 2.85%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from February 22, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
107
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Strategic Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class 2 Shares
----------------------------------------------
1999(1)(2) 1998 1997(2) 1996(2) 1995(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $10.18 $10.94 $10.82 $10.53 $10.00
------- ------- ------- ------ ------
Income (Loss) From
Operations:
Net investment income...... 0.35 0.69 0.66 0.78 0.77
Net realized and unrealized
gain (loss)............... (0.37) (0.67) 0.43 0.54 0.78
------- ------- ------- ------ ------
Total Income (Loss) From
Operations................. (0.02) 0.02 1.09 1.32 1.55
------- ------- ------- ------ ------
Less Distributions From:
Net investment income...... (0.38) (0.77) (0.80) (0.85) (0.78)
In excess of net investment
income.................... -- -- -- (0.01) --
Net realized gains......... -- (0.01) (0.17) (0.17) (0.24)
------- ------- ------- ------ ------
Total Distributions......... (0.38) (0.78) (0.97) (1.03) (1.02)
------- ------- ------- ------ ------
Net Asset Value, End of
Period..................... $9.78 $10.18 $10.94 $10.82 $10.53
======= ======= ======= ====== ======
Total Return(4)............. -0.2%++ 0.2% 10.5% 13.1% 16.1%++
Net Assets, End of Period
(000s)..................... $25,456 $27,327 $20,220 $4,575 $411
Ratios to Average Net
Assets:
Expenses................... 1.79%+ 1.99% 1.99% 1.98% 1.99%+
Net investment income...... 7.13%+ 6.37% 6.09% 7.26% 8.77%+
Portfolio Turnover Rate..... 74% 109% 184% 122% 161%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
loss per share and expense
ratios would have been:
Net investment loss per
share..................... $0.35 $0.67 $0.63 $0.70 $0.70
Expense ratio.............. 1.90%+ 2.18% 2.28% 2.72% 2.87%+
</TABLE>
Strategic Bond Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Class O Shares
----------------------------------------------
1999(1)(2) 1998 1997(2) 1996(2) 1996(3)
<S> <C> <C> <C> <C> <C>
----------------------------------------------
Net Asset Value, Beginning
of Period.................. $10.18 $10.93 $10.82 $10.53 $10.00
------- ------- ------- ------ ------
Income (Loss) From
Operations:
Net investment income...... 0.40 0.77 0.78 0.92 0.87
Net realized and unrealized
gain (loss)............... (0.38) (0.63) 0.41 0.51 0.77
------- ------- ------- ------ ------
Total Income From
Operations................. 0.02 0.14 1.19 1.43 1.64
------- ------- ------- ------ ------
Less Distributions From:
Net investment income...... (0.44) (0.88) (0.91) (0.96) (0.87)
In excess of net investment
income.................... -- -- -- (0.01) --
Net realized gains......... -- (0.01) (0.17) (0.17) (0.24)
------- ------- ------- ------ ------
Total Distributions......... (0.44) (0.89) (1.08) (1.14) (1.11)
------- ------- ------- ------ ------
Net Asset Value, End of
Period..................... $9.76 $10.18 $10.93 $10.82 $10.53
======= ======= ======= ====== ======
Total Return(4)............. 0.2%++ 1.3% 11.5% 14.2% 17.0%++
Net Assets, End of Period
(000s)..................... $490 $498 $649 $3,817 $9,763
Ratios to Average Net
Assets:
Expenses................... 0.99%+ 0.99% 0.96% 1.00% 0.99%+
Net investment income...... 7.93%+ 7.37% 7.22% 8.65% 9.74%+
Portfolio Turnover Rate..... 74% 109% 184% 122% 161%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
loss per share and expense
ratios would have been:
Net investment loss per
share..................... $0.39 $0.75 $0.75 $0.84 $0.79
Expense ratio.............. 1.11%+ 1.18% 1.25% 1.74% 1.87%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from February 22, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
108
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
National Intermediate Municipal Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class A Shares
------------------------------------------
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
------------------------------------------
Net Asset Value, Beginning of
Period......................... $10.61 $10.62 $10.35 $10.43 $10.00
------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income.......... 0.24 0.47 0.48 0.48 0.40
Net realized and unrealized
gain (loss)................... (0.29) -- 0.28 (0.06) 0.46
------ ------ ------ ------ ------
Total Income (Loss) From
Operations..................... (0.05) 0.47 0.76 0.42 0.86
------ ------ ------ ------ ------
Less Distributions From:
Net investment income.......... (0.24) (0.48) (0.48) (0.48) (0.40)
In excess of net investment
income........................ -- -- -- -- --
Net realized gains............. -- -- (0.01) (0.02) (0.03)
------ ------ ------ ------ ------
Total Distributions............. (0.24) (0.48) (0.49) (0.50) (0.43)
------ ------ ------ ------ ------
Net Asset Value, End of Period.. $10.32 $10.61 $10.62 $10.35 $10.43
====== ====== ====== ====== ======
Total Return(4)................. -0.5%++ 4.5% 7.5% 4.2% 8.7%++
Net Assets, End of Period
(000s)......................... $4,863 $2,545 $1,063 $696 $569
Ratios to Average Net Assets:
Expenses....................... 0.75%+ 0.75% 0.75% 0.75% 0.75%+
Net investment income.......... 4.25%+ 4.28% 4.53% 4.62% 4.63%+
Portfolio Turnover Rate ........ 0% 8% 1% 19% 29%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per share
.............................. $0.19 $0.37 $0.36 $0.35 $0.32
Expense ratio.................. 1.59%+ 1.67% 1.82% 2.02% 1.71%+
</TABLE>
National Intermediate Municipal Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class B Shares
------------------------------------------
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
------------------------------------------
Net Asset Value, Beginning of
Period......................... $10.57 $10.59 $10.33 $10.42 $10.00
------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income.......... 0.18 0.39 0.40 0.40 0.34
Net realized and unrealized
gain (loss)................... (0.27) -- 0.28 (0.06) 0.45
------ ------ ------ ------ ------
Total Income (Loss) From
Operations..................... (0.09) 0.39 0.68 0.34 0.79
------ ------ ------ ------ ------
Less Distributions From:
Net investment income.......... (0.20) (0.41) (0.40) (0.41) (0.34)
In excess of net investment
income........................ -- -- (0.01) -- --
Net realized gains............. -- -- (0.01) (0.02) (0.03)
------ ------ ------ ------ ------
Total Distributions............. (0.20) (0.41) (0.42) (0.43) (0.37)
------ ------ ------ ------ ------
Net Asset Value, End of Period.. $10.28 $10.57 $10.59 $10.33 $10.42
====== ====== ====== ====== ======
Total Return(4)................. -0.8%++ 3.7% 6.7% 3.4% 8.0%++
Net Assets, End of Period
(000s)......................... $3,269 $2,763 $1,295 $702 $432
Ratios to Average Net Assets:
Expenses....................... 1.50%+ 1.50% 1.50% 1.50% 1.50%+
Net investment income.......... 3.46%+ 3.54% 3.75% 3.88% 3.85%+
Portfolio Turnover Rate......... 0% 8% 1% 19% 29%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share......................... $0.14 $0.29 $0.28 $0.27 $0.25
Expense ratio.................. 2.33%+ 2.42% 2.57% 2.77% 2.45%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from February 22, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
109
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
National Intermediate Municipal Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1)(2) 1998(3) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $10.57 $10.59 $10.33 $10.42 $10.00
------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income......... 0.19 0.39 0.40 0.40 0.34
Net realized and unrealized
gain (loss).................. (0.27) -- 0.28 (0.06) 0.45
------ ------ ------ ------ ------
Total Income (Loss) From
Operations.................... (0.08) 0.39 0.68 0.34 0.79
------ ------ ------ ------ ------
Less Distributions From:
Net investment income......... (0.20) (0.41) (0.40) (0.41) (0.34)
In excess of net investment
income....................... -- -- (0.01) -- --
Net realized gains............ -- -- (0.01) (0.02) (0.03)
------ ------ ------ ------ ------
Total Distributions............ (0.20) (0.41) (0.42) (0.43) (0.37)
------ ------ ------ ------ ------
Net Asset Value, End of
Period........................ $10.29 $10.57 $10.59 $10.33 $10.42
====== ====== ====== ====== ======
Total Return(5)................ -0.7%++ 3.7% 6.7% 3.4% 8.0%++
Net Assets, End of Period
(000s)........................ $3,169 $2,291 $514 $468 $271
Ratios to Average Net Assets:
Expenses...................... 1.29%+ 1.50% 1.50% 1.50% 1.50%+
Net investment income......... 3.70%+ 3.51% 3.81% 3.88% 3.85%+
Portfolio Turnover Rate........ 0% 8% 1% 19% 29%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.15 $0.29 $0.28 $0.27 $0.25
Expense ratio................. 2.13%+ 2.42% 2.57% 2.77% 2.46%+
</TABLE>
National Intermediate Municipal Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class O Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1)(2) 1998 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $10.60 $10.61 $ 10.34 $10.43 $10.00
------ ------ ------- ------ ------
Income (Loss) From Operations:
Net investment income......... 0.24 0.48 0.50 0.50 0.42
Net realized and unrealized
gain (loss).................. (0.27) 0.01 0.28 (0.07) 0.46
------ ------ ------- ------ ------
Total Income (Loss) From
Operations.................... (0.03) 0.49 0.78 0.43 0.88
------ ------ ------- ------ ------
Less Distributions From:
Net investment income......... (0.25) (0.50) (0.50) (0.50) (0.42)
In excess of net investment
income....................... -- -- -- -- --
Net realized gains............ -- -- (0.01) (0.02) (0.03)
------ ------ ------- ------ ------
Total Distributions............ (0.25) (0.50) (0.51) (0.52) (0.45)
------ ------ ------- ------ ------
Net Asset Value, End of
Period........................ $10.32 $10.60 $ 10.61 $10.34 $10.43
====== ====== ======= ====== ======
Total Return(5)................ -0.3%++ 4.8% 7.8% 4.3% 9.0%++
Net Assets, End of Period
(000s)........................ $4,289 $8,211 $11,286 $9,786 $9,675
Ratios to Average Net Assets:
Expenses...................... 0.50%+ 0.50% 0.50% 0.50% 0.50%+
Net investment income......... 4.68%+ 4.58% 4.79% 4.88% 4.86%+
Portfolio Turnover Rate........ 0% 8% 1% 19% 29%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.20 $0.38 $0.39 $0.37 $0.34
Expense ratio................. 1.33%+ 1.42% 1.57% 1.77% 1.46%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) On September 14, 1998, Class C Shares were renamed Class 2 Shares.
(4) For the period from February 22, 1995 (inception date) to December 31,
1995.
(5) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
110
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
U.S. Government Income Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class A Shares
<S> <C> <C> <C> <C> <C>
--------------------------------------------
<CAPTION>
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
--------------------------------------------
Net Asset Value, Beginning of
Period....................... $ 10.28 $ 10.20 $10.07 $10.32 $10.00
------- ------- ------ ------ ------
Income (Loss) From Operations:
Net investment income........ 0.23 0.55 0.58 0.54 0.49
Net realized and unrealized
gain (loss)................. (0.29) 0.21 0.19 (0.19) 0.43
------- ------- ------ ------ ------
Total Income (Loss) From
Operations................... (0.06) 0.76 0.77 0.35 0.92
------- ------- ------ ------ ------
Less Distributions From:
Net investment income........ (0.29) (0.57) (0.54) (0.54) (0.49)
In excess of net investment
income...................... -- (0.11) (0.10) (0.06) (0.10)
Net realized gains........... -- -- -- -- (0.01)
------- ------- ------ ------ ------
Total Distributions........... (0.29) (0.68) (0.64) (0.60) (0.60)
------- ------- ------ ------ ------
Net Asset Value, End of
Period....................... $ 9.93 $ 10.28 $10.20 $10.07 $10.32
======= ======= ====== ====== ======
Total Return(4)............... -0.6%++ 7.6% 7.9% 3.6% 9.5%++
Net Assets, End of Period
(000s)....................... $7,366 $6,744 $1,320 $1,188 $278
Ratios to Average Net Assets:
Expenses..................... 0.85%+ 0.85% 0.85% 0.84% 0.85%+
Net investment income........ 4.49%+ 4.98% 5.77% 5.22% 5.67%+
Portfolio Turnover Rate....... 56% 173% 261% 365% 230%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share....................... $0.20 $0.47 $0.47 $0.38 $0.40
Expense ratio................ 1.33%+ 1.63% 2.02% 2.21% 1.90%+
U.S. Government Income Fund
- -------------------------------------------------------------------------------
<CAPTION>
Class B Shares
<S> <C> <C> <C> <C> <C>
--------------------------------------------
<CAPTION>
1999(1)(2) 1998 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
--------------------------------------------
Net Asset Value, Beginning of
Period....................... $ 10.29 $ 10.20 $10.06 $10.32 $10.00
------- ------- ------ ------ ------
Income (Loss) From Operations:
Net investment income........ 0.21 0.48 0.51 0.46 0.43
Net realized and unrealized
gain (loss)................. (0.30) 0.21 0.19 (0.20) 0.43
------- ------- ------ ------ ------
Total Income (Loss) From
Operations................... (0.09) 0.69 0.70 0.26 0.86
------- ------- ------ ------ ------
Less Distributions From:
Net investment income........ (0.26) (0.49) (0.46) (0.46) (0.43)
In excess of net investment
income...................... -- (0.11) (0.10) (0.06) (0.10)
Net realized gains........... -- -- -- -- (0.01)
------- ------- ------ ------ ------
Total Distributions........... (0.26) (0.60) (0.56) (0.52) (0.54)
------- ------- ------ ------ ------
Net Asset Value, End of
Period....................... $ 9.94 $ 10.29 $10.20 $10.06 $10.32
======= ======= ====== ====== ======
Total Return(4)............... -0.9%++ 6.9% 7.2% 2.7% 8.8%++
Net Assets, End of Period
(000s)....................... $15,833 $15,315 $2,531 $1,266 $572
Ratios to Average Net Assets:
Expenses..................... 1.60%+ 1.60% 1.60% 1.59% 1.60%+
Net investment income........ 4.15%+ 4.20% 4.96% 4.51% 4.85%+
Portfolio Turnover Rate....... 56% 173% 261% 365% 230%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share....................... $0.18 $0.39 $0.39 $0.30 $0.34
Expense ratio................ 2.08%+ 2.39% 2.77% 2.96% 2.64%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) For the period from February 22, 1995 (inception date) to December 31,
1995.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
111
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
U.S. Government Income Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1)(2) 1998(3) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $10.28 $10.19 $10.05 $10.32 $10.00
------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income......... 0.20 0.48 0.51 0.46 0.43
Net realized and unrealized
gain (loss).................. (0.28) 0.21 0.19 (0.21) 0.43
------ ------ ------ ------ ------
Total Income (Loss) From
Operations.................... (0.08) 0.69 0.70 0.25 0.86
------ ------ ------ ------ ------
Less Distributions From:
Net investment income......... (0.26) (0.49) (0.46) (0.46) (0.43)
In excess of net investment
income....................... -- (0.11) (0.10) (0.06) (0.10)
Net realized gains............ -- -- -- -- (0.01)
------ ------ ------ ------ ------
Total Distributions............ (0.26) (0.60) (0.56) (0.52) (0.54)
------ ------ ------ ------ ------
Net Asset Value, End of
Period........................ $ 9.94 $10.28 $10.19 $10.05 $10.32
====== ====== ====== ====== ======
Total Return(5)................ -0.8%++ 6.9% 7.0% 2.7% 8.8%++
Net Assets, End of Period
(000s)........................ $4,916 $4,715 $751 $422 $273
Ratios to Average Net Assets:
Expenses...................... 1.39%+ 1.60% 1.59% 1.60% 1.60%+
Net investment income......... 3.99%+ 4.25% 4.94% 4.51% 4.92%+
Portfolio Turnover Rate........ 56% 173% 261% 365% 230%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.18 $0.39 $0.39 $0.31 $0.34
Expense ratio................. 1.87%+ 2.39% 2.76% 2.97% 2.64%+
</TABLE>
U.S. Government Income Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class O Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1)(2) 1998(2) 1997 1996 1995(4)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................ $10.29 $10.19 $10.06 $10.32 $10.00
------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income......... 0.24 0.57 0.61 0.56 0.52
Net realized and unrealized
gain (loss).................. (0.28) 0.23 0.18 (0.20) 0.42
------ ------ ------ ------ ------
Total Income (Loss) From
Operations.................... (0.04) 0.80 0.79 0.36 0.94
------ ------ ------ ------ ------
Less Distributions From:
Net investment income......... (0.31) (0.59) (0.56) (0.56) (0.52)
In excess of net investment
income....................... -- (0.11) (0.10) (0.06) (0.10)
Net realized gains............ -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions............ (0.31) (0.70) (0.66) (0.62) (0.62)
------ ------ ------ ------ ------
Net Asset Value, End of
Period........................ $ 9.94 $10.29 $10.19 $10.06 $10.32
====== ====== ====== ====== ======
Total Return(5)................ -0.4%++ 8.1% 8.1% 3.7% 9.7%++
Net Assets, End of Period
(000s)........................ $3,323 $3,330 $9,553 $9,375 $9,552
Ratios to Average Net Assets:
Expenses...................... 0.60%+ 0.60% 0.60% 0.60% 0.60%+
Net investment income......... 4.76%+ 5.52% 6.01% 5.53% 5.92%+
Portfolio Turnover Rate........ 56% 173% 261% 365% 230%
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment income
per share and expense ratios
would have been:
Net investment income per
share........................ $0.22 $0.44 $0.49 $0.41 $0.42
Expense ratio................. 1.08%+ 1.38% 1.77% 1.97% 1.64%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) Per share amounts have been calculated using the average shares method.
(3) On September 14, 1998, Class C Shares were renamed Class 2 Shares.
(4) For the period from February 22, 1995 (inception date) to December 31,
1995.
(5) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
112
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
New York Municipal Money Fund
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
Class A Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1) 1998 1997 1996(2)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
Net investment income............ 0.014 0.031 0.034 0.006
Dividends from net investment
income.......................... (0.014) (0.031) (0.034) (0.006)
------- ------- ------- -------
Net Asset Value, End of Period.... $1.000 $1.000 $1.000 $1.000
======= ======= ======= =======
Total Return(3)................... 1.4%++ 3.2% 3.5% 0.6%++
Net Assets, End of Period (000s).. $5,062 $5,372 $3,808 $360
Ratios to Average Net Assets:
Expenses......................... 0.41%+ 0.41% 0.50% 0.38%+
Net investment income............ 2.66%+ 3.15% 3.39% 3.56%+
Before applicable waiver of
management fee, expenses absorbed
by SBAM and credits earned on
custodian cash balances, net
investment income per share and
expense ratios would have been:
Net investment income per share.. -- -- -- $0.006
Expense ratio.................... -- -- -- 0.39%+
New York Municipal Money Fund
- -------------------------------------------------------------------------------
<CAPTION>
Class B Shares
<S> <C> <C> <C> <C> <C>
-------------------------------------------
<CAPTION>
1999(1) 1998 1997 1996(2)
<S> <C> <C> <C> <C> <C>
-------------------------------------------
Net Asset Value, Beginning of
Period........................... $1.000 $1.000 $1.000 $1.000
------- ------- ------- -------
Net investment income............ 0.014 0.031 0.034 0.006
Dividends from net investment
income.......................... (0.014) (0.031) (0.034) (0.006)
------- ------- ------- -------
Net Asset Value, End of Period.... $1.000 $1.000 $1.000 $1.000
======= ======= ======= =======
Total Return(3)................... 1.4%++ 3.2% 3.5% 0.6%++
Net Assets, End of Period (000s).. $225 $25 $25 $25
Ratios to Average Net Assets:
Expenses......................... 0.42%+ 0.42% 0.43% 0.40%+
Net investment income............ 2.87%+ 3.21% 3.32% 3.40%+
Before applicable waiver of
management fee, expenses absorbed
by SBAM and credits earned on
custodian cash balances, net
investment income per share and
expense ratios would have been:
Net investment income per share.. -- -- -- $0.006
Expense ratio.................... -- -- -- 0.41%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) For the period from November 1, 1996 (inception date) to December 31, 1996.
(3) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
113
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
New York Municipal Money Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Class 2 Shares
----------------------------------------
1999(1) 1998(2) 1997 1996(3)
<S> <C> <C> <C> <C>
----------------------------------------
Net Asset Value,
Beginning of Period.... $1.000 $1.000 $1.000 $1.000
-------- -------- -------- --------
Net investment income.. 0.014 0.031 0.034 0.006
Dividends from net
investment income..... (0.014) (0.031) (0.034) (0.006)
-------- -------- -------- --------
Net Asset Value, End of
Period................. $1.000 $1.000 $1.000 $1.000
======== ======== ======== ========
Total Return(4)......... 1.4%++ 3.2% 3.5% 0.6%
Net Assets, End of
Period (000s).......... $25 $153 $25 $25
Ratios to Average Net
Assets:
Expenses............... 0.39%+ 0.34% 0.47% 0.40%+
Net investment income.. 2.58%+ 3.13% 3.40% 3.40%+
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
loss per share and
expense ratios would
have been:
Net investment income
per share............. -- -- -- $0.006
Expense ratio.......... -- -- -- 0.41%+
</TABLE>
New York Municipal Money Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Class O Shares
-------------------------------------------------------------
1999(1) 1998(2) 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------
Net Asset Value,
Beginning of Period.... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
-------- -------- -------- -------- -------- --------
Net investment income.. 0.014 0.031 0.034 0.032 0.037 0.027
Dividends from net
investment income..... (0.014) (0.031) (0.034) (0.032) (0.037) (0.027)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======== ======== ======== ======== ======== ========
Total Return(4)......... 1.4%++ 3.2% 3.5% 3.3% 3.7% 2.7%
Net Assets, End of
Period (000s).......... $165,170 $195,584 $305,419 $273,734 $226,549 $269,788
Ratios to Average Net
Assets:
Expenses............... 0.41%+ 0.43% 0.47% 0.53% 0.43% 0.41%
Net investment income.. 2.67%+ 3.14% 3.39% 3.25% 3.67% 2.63%
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
loss per share and
expense ratios would
have been:
Net investment income
per share............. -- -- -- $0.032 $0.037 --
Expense ratio.......... -- -- -- 0.53% 0.45% --
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) On September 14, 1998, Class C shares were renamed Class 2 shares.
(3) For the period from November 1, 1996 (inception date) to December 31, 1996.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
114
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Cash Management Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class A Shares
--------------------------------------------
1999(1) 1998 1997 1996 1995(2)
<S> <C> <C> <C> <C> <C>
--------------------------------------------
Net Asset Value, Beginning of
Period....................... $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------ -------
Net investment income........ 0.022 0.050 0.051 0.050 0.044
Dividends from net investment
income...................... (0.022) (0.050) (0.051) (0.050) (0.044)
------- ------- ------- ------ -------
Net Asset Value, End of
Period....................... $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ====== =======
Total Return(3)............... 2.2%++ 5.2% 5.2% 5.1% 4.5%++
Net Assets, End of Period
(000s)....................... $18,258 $26,793 $18,246 $8,175 $1,756
Ratios to Average Net Assets:
Expenses..................... 0.54%+ 0.55% 0.55% 0.55% 0.55%+
Net investment income........ 4.37%+ 5.02% 5.11% 4.95% 5.42%+
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share....................... $0.022 $0.049 $0.049 $0.047 $0.037
Expense ratio................ 0.56%+ 0.67% 0.70% 0.82% 1.35%+
</TABLE>
Cash Management Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Class B Shares
--------------------------------------------
1999(1) 1998 1997 1996 1995(2)
<S> <C> <C> <C> <C> <C>
--------------------------------------------
Net Asset Value, Beginning of
Period....................... $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------ -------
Net investment income........ 0.022 0.050 0.051 0.050 0.043
Dividends from net investment
income...................... (0.022) (0.050) (0.051) (0.050) (0.043)
------- ------- ------- ------ -------
Net Asset Value, End of
Period....................... $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ====== =======
Total Return(3)............... 2.2%++ 5.2% 5.2% 5.1% 4.4%++
Net Assets, End of Period
(000s)....................... $14,044 $17,374 $4,151 $3,920 $2,238
Ratios to Average Net Assets:
Expenses..................... 0.54%+ 0.55% 0.55% 0.55% 0.55%+
Net investment income........ 4.36%+ 4.95% 5.10% 4.95% 5.38%+
Before applicable waiver of
management fee, expenses
absorbed by SBAM and credits
earned on custodian cash
balances, net investment
income per share and expense
ratios would have been:
Net investment income per
share....................... $0.022 $0.049 $0.049 $0.047 $0.037
Expense ratio................ 0.56%+ 0.67% 0.70% 0.82% 1.34%+
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) For the period ended January 3, 1995 (inception date) to December 31, 1995.
(3) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
115
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Cash Management Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Class 2 Shares
---------------------------------------------
1999(1) 1998(2) 1997 1996 1995(3)
<S> <C> <C> <C> <C> <C>
---------------------------------------------
Net Asset Value,
Beginning of Period.... $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- -------
Net investment income.. 0.022 0.050 0.051 0.050 0.043
Dividends from net
investment income..... (0.022) (0.050) (0.051) (0.050) (0.043)
------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= =======
Total Return(4)......... 2.2%++ 5.2% 5.2% 5.1% 4.4%++
Net Assets, End of
Period (000s).......... $1,782 $2,741 $1,806 $435 $183
Ratios to Average Net
Assets:
Expenses............... 0.55%+ 0.55% 0.55% 0.55% 0.55%+
Net investment income.. 4.36%+ 4.98% 5.16% 4.95% 5.40%+
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
loss per share and
expense ratios would
have been:
Net investment income
per share............. $0.022 $0.049 $0.049 $0.047 $0.036
Expense ratio.......... 0.56%+ 0.67% 0.70% 0.82% 1.34%+
</TABLE>
Cash Management Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------
1999(1) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------
Net Asset Value,
Beginning of Period.... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------- ------- ------- -------
Net investment income.. 0.022 0.050 0.051 0.050 0.055 0.038
Dividends from net
investment income..... (0.022) (0.050) (0.051) (0.050) (0.055) (0.038)
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ======= ======= ======= =======
Total Return(4)......... 2.2%++ 5.2% 5.2% 5.1% 5.6% 3.9%
Net Assets, End of
Period (000s).......... $8,597 $8,066 $19,872 $14,225 $6,684 $19,127
Ratios to Average Net
Assets:
Expenses............... 0.55%+ 0.55% 0.55% 0.55% 0.55% 0.61%
Net investment income.. 4.40%+ 5.08% 5.10% 4.95% 5.46% 3.79%
Before applicable waiver
of management fee,
expenses absorbed by
SBAM and credits earned
on custodian cash
balances, net investment
loss per share and
expense ratios would
have been:
Net investment income
per share............. $0.022 $0.049 $0.049 $0.047 $0.047 $0.036
Expense ratio.......... 0.56%+ 0.67% 0.70% 0.82% 1.34% 0.81%
</TABLE>
- ------
(1) For the six months ended June 30, 1999 (unaudited).
(2) On September 14, 1998, Class C Shares were renamed Class 2 Shares.
(3) For the period ended January 3, 1995 (inception date) to December 31, 1995.
(4) Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period. Initial sales charge or contingent deferred sales charge is not re-
flected in the calculation of total return.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
116
<PAGE>
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
CUSTODIANS
PNC Bank, National Association
200 Stevens Drive
Suite 440
Lester, Pennsylvania 19113
Chase Manhattan Bank, N.A.
4 Chase Metro Tech Center
18th Floor
Brooklyn, New York 11245
DIVIDEND DISBURSING AND TRANSFER AGENT
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109-2873
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
Directors
CHARLES F. BARBER
Consultant; formerly Chairman; ASARCO Inc.
ANDREW L. BREECH(*),(***)
President, Dealer Operating Control Service Inc.
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN(**)
Vice President-General Counsel,
Pfizer International Inc.
WILLIAM R. DILL(*),(***)
Consultant; formerly President, Boston Architectural
Center; formerly President, Anna Maria College
HEATH B. MCLENDON
Chairman and President, Managing Director,
Salomon Smith Barney Inc.; President and Director,
SSBC Fund Management Inc. and Travelers
Investment Adviser, Inc.
CLIFFORD M. KIRTLAND, JR.(*),(***)
Member of the Advisory Committee, Nero-Moseley
Partners; formerly Director, Oxford Industries, Inc., Shaw
Industries Inc., Graphic Industries, Inc. and CSX Corp.;
formerly Chairman, Cox Communications, Inc.
ROBERT W.LAWLESS(*),(***)
President and Chief Executive Officer, University of
Tulsa; formerly President and Chief Executive Officer,
Texas Tech University and Tech University Health
Sciences Center
LOUIS P. MATTIS(*),(***)
Consultant; formerly Chairman and President, Sterling
Winthrop Inc.
THOMAS F. SCHLAFLY(*),(***)
Of counsel to Blackwell Sanders Peper Martin LLP (law
firm), President, The Saint Louis Brewery, Inc.
Officers
HEATH B. MCLENDON
Chairman and President
LEWIS E. DAIDONE
Executive Vice President
and Treasurer
ROBERT E. AMODEO(**)
Executive Vice President
JAMES E. CRAIGE(**)
Executive Vice President
JOHN B. CUNNINGHAM(*)
Executive Vice President
THOMAS K. FLANAGAN(**)
Executive Vice President
ROGER LAVAN(**)
Executive Vice President
ROSS S. MARGOLIES(***)
Executive Vice President
MAUREEN O'CALLAGHAN(**)
Executive Vice President
DAVID J. SCOTT(**)
Executive Vice President
BETH A. SEMMEL(**)
Executive Vice President
PETER J. WILBY(**)
Executive Vice President
GEORGE J. WILLIAMSON(**)
Executive Vice President
THOMAS A. CROAK(**)
Vice President
ROBERT DONAHUE(***)
Vice President
NANCY A. NOYES(**)
Vice President
ANTHONY PACE
Controller
CHRISTINA T. SYDOR
Secretary
- ----------------------------------------------
(*)Salomon Brothers Investors Fund Inc only
(**)Salomon Brothers Series Funds Inc only
(***)Salomon Brothers Capital Fund Inc only
<PAGE>
- -------------------------
Salomon Brothers
-------------------------
Asset Management
SEVEN WORLD TRADE CENTER . NEW YORK, NEW YORK 10048
SBSEMI 6/99
