<PAGE>
SEMI-ANNUAL
REPORT [PICTURES]
June 30, 2000
SALOMON BROTHERS ASSET MANAGEMENT
. Asia Growth Fund
. Intermational Equity Fund
SALOMON BROTHERS
. Capital Fund
. Large Cap Growth Fund
. Investors Value Fund
. Balanced Fund
<PAGE>
For almost a century, Salomon Brothers has provided serious investors
with advice and resources to help them reach their financial goals.
Salomon Brothers offers...
Quality Service
Scope of Choice
An Information Advantage
We offer cutting-edge solutions and investment programs delivered through
financial advisors. Our rich tradition and expertise provides access to
innovative ideas and extensive resources.
We wish to extend our sincere thanks for investing with us. Technology,
new innovations and business opportunities have changed the financial
world over the years -- but one constant remains: our commitment to serve
your investment needs.
BRIDGING WALL STREET OPPORTUNITIES TO YOUR FINANCIAL FUTURE
-----------------------------------------------------------
RICH TRADITION
--------------
Bold initiative, determination and market foresight have defined the
Salomon Brothers name for nearly a century.
GLOBAL RESOURCES
----------------
We have access to one of the world's largest financial institutions,
creating a global web of resources comprised of 170,000 employees in over
100 countries.
INVESTMENT EXPERTISE
--------------------
Averaging over 16 years of professional industry experience, our seasoned
portfolio management team consistently demonstrates a disciplined
institutional approach to money management.
PERFORMANCE
-----------
We believe that a true measure of performance extends beyond short-term
time frames to long-term outcomes, quality of management, quality of
relationship and quality of thought.
INFORMATION ADVANTAGE
---------------------
We offer a global information advantage to investors and their advisors -
- providing the benefits of a world of rapid knowledge acquisition.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
A Message From the Chairman.......................................... 2
Salomon Brothers Investment Series
Asia Growth Fund................................................... 5
International Equity Fund.......................................... 10
Small Cap Growth Fund.............................................. 13
Capital Fund....................................................... 15
Large Cap Growth Fund.............................................. 19
Investors Value Fund............................................... 22
Balanced Fund...................................................... 25
Schedules of Investments............................................. 29
Statements of Assets and Liabilities................................. 52
Statements of Operations............................................. 54
Statements of Changes in Net Assets.................................. 56
Notes to Financial Statements........................................ 60
Financial Highlights................................................. 72
Directors and Officers of Salomon Brothers Investment Series......... IBC
</TABLE>
1
<PAGE>
[PHOTO OF HEATH B. MCLENDON]
Chairman
SALOMON BROTHERS INVESTMENT SERIES
A Message From the Chairman
Dear Shareholder:
We are pleased to provide the semi-annual report for the Salomon Brothers
Investment Series -- Asia Growth Fund, Small Cap Fund, Investors Value Fund,
International Equity Growth Fund, Capital Chairman Fund, Large Capitalization
Growth Fund and Balanced Fund (the "Funds" and each a "Fund") for the period
ended June 30, 2000. We hope you find this report to be useful and informative.
Below is a chart showing each Fund's Class A share return for the six-month
period ended June 30, 2000 with and without sales charges.
The Performance of the Salomon Brothers Investment Series
Class A Shares Total Returns for the Six Months Ended June 30, 2000
Without With
Sales Charges/1/ Sales Charges/2/
---------------- ----------------
Asia Growth Fund (8.21)% (13.47)%
International Equity Fund (9.21) (14.42)
Small Cap Growth Fund 20.49 13.57
Capital Fund 17.32 10.58
Large Cap Growth Fund (3.44) (8.98)
Investors Value Fund 9.08 2.82
Balanced Fund 5.16 (0.87)
______________
1 The total return figures assume reinvestment of all dividends and do not
reflect the deduction of sales charges for each Fund's Class A shares.
2 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, International Equity, Small Cap
Growth, Capital, Large Cap Growth, Investors Value and Balanced Funds. 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 share-holder 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. Other share classes are available. 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.
2
<PAGE>
Market Commentary
As the world welcomed in the new millennium with an uneventful Y2K date change,
many investors wanted to know whether the historic returns posted by many
companies in 1999 could possibly be achieved in 2000.
Several major stock and bond markets hit record highs in 2000, but have since
backed off from their highs. The first half of 2000 was characterized by
increased levels of stock market volatility worldwide, predominantly in the
technology sector. In fact, the tech-laden Nasdaq Composite Index/1/ experienced
four declines of 10% or more. As the divergence between the so-called "New
Economy," represented by the telecommunications, media and technology companies,
versus the more established blue-chip "Old Economy" stocks continues, we have
focused on identifying companies we believe are best-positioned to grow in the
new millennium.
In the first six months of the year, the Federal Reserve Board ("Fed") raised
interest rates three times (February 2, 2000, March 21, 2000, and May 16, 2000)
in an effort to slow the growth of the robust U.S. economy. While rising
interest rates often lead historically to falling stock prices, the economy and
the bond and stock markets appeared to absorb the Fed's rate hikes. While
consumer confidence slipped somewhat so far this year, consumer spending
continues to increase as evidenced by recent economic data. Unemployment remains
near its 30-year low. Despite the possibility of future rate hikes this year by
the Fed, we remain optimistic that the growth of the U.S. economy should
continue for the near term.
After a tumultuous start, the euro has finally begun strengthening and we may
have seen a bottoming out. (The euro is the single currency of the European
Monetary Union that was adopted by Belgium, Germany, Spain, France, Ireland,
Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland on January 1,
1999.) The euro is now trading near parity to the U.S. dollar and we view Europe
positively on investment opportunities and believe that many stocks and bonds of
European companies represent compelling stories.
The Asian markets have shown a wide range of performance in 2000, as several
markets negatively reacted to changes in Fed monetary policy. However, many
Asian companies have and continue to leverage technology in order to streamline
their operations, which may have a positive effect in the years to come.
_______________
1 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. An investor cannot invest directly in an index.
3
<PAGE>
Bond investors were faced with many challenges in 2000, largely due to the
actions of the Fed and to the U.S. Treasury Department's plan to buyback
approximately $30 billion in long-term debt obligations. This led to an inverted
yield curve,/2/ a unique occurrence whereby bonds with longer maturities have
lower yields than bonds with shorter maturities.
As markets continue to exhibit greater volatility and investment returns revert
back to their historical averages, we believe the advantages of active
management will become more apparent in the months ahead.
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 new
century.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman and President
July 24, 2000
___________
2 The yield curve is a graphical depiction of the relationship between the
yield on bonds of the same credit quality, but different maturities.
4
<PAGE>
[PICTURE APPEARS HERE]
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 companies located in Asian countries. Areas considered for
investments include, but are not limited to, China, Hong Kong, Indonesia, Korea,
Philippines, Singapore, Taiwan, Malaysia, Thailand and Indian sub-continents. 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 managers 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 of Salomon Brothers
Asset Management Asia Pacific,Ltd.
S A L O M O N B R O T H E R S
Asia Growth Fund
PERFORMANCE UPDATE
The Asia Growth Fund's Class A shares, without sales charges, returned a
negative 8.21% for the six months ended June 30, 2000. In comparison, the Morgan
Stanley Capital International All Country Asia Free Ex-Japan Index's ("MSCI AC
Asia Free Ex-Japan Index") total return of a negative 12.93% for the same
period. (The MSCI AC Asia Free (ex-Japan) Index is a market capitalization
weighted index that measures the performance of equities of 12 stock exchanges
in the Asia Pacific region.) Past performance is not indicative of future
results. An investor cannot invest directly in an index.
MARKET REVIEW
In our view, one of the more conspicuous effects of the globalization of
international capital markets has been the increasing influence of the sharp
corrections in the U.S. capital markets, especially in the volatile performance
of the Nasdaq Composite Index/1/ during the period. The year started on an
auspicious note for Asian markets, characterized by aggressive buying in many
major stock markets, which were given a clean bill of health by Y2K experts.
Notwithstanding valuation levels that were at odds with earnings potential,
investors' purchases of the recently coined "TMT" (technology, media and
telecommunications) stocks, appeared to have reached its height in mid-February.
A much higher-than-expected inflation figure in the U.S., however, appeared to
have been one of the catalysts that led to a re-assessment by many investors of
valuation levels and subsequent realizations that hefty premiums were being
demanded for so-called "growth plays." The resulting correction was sharp and
quick. Investors who had until recently been oblivious to the dampening effects
of tighter monetary policy by the U.S. Federal Reserve Board ("Fed") took
profits and channeled money into so-called "Old Economy" value stocks./2/
Singapore and Korea suffered double-digit losses during the reporting period,
with shares of many Korean companies declining largely due to concerns
surrounding massive Investment Trust Company ("ITC") redemptions. Hong Kong and
Taiwanese markets moderately declined during the period. Hong Kong's problems
were compounded by the local dollar's peg to the U.S. dollar and a dramatic, if
not controversial, victory by an opposition leader in the March presidential
elections resulted in a sell-off in the U.S. dollar.
The smaller markets of Southeast Asia continued to be plagued by remnants of
political and financial reform woes from the 1997 crisis and struggled
throughout the period. While valuation levels were undergoing downward
__________
1 The Nasdaq Compostite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. An investor cannot invest directly in an index.
2 Value stocks are shares of companies that are believed to be undervalued but
have potentially good longer-term business prospects.
5
<PAGE>
adjustments, macroeconomic statistics remained favorable. Economic growth,
albeit at a more moderate pace, was evident across most countries while
inflationary pressures remained muted.
PORTFOLIO HIGHLIGHTS/3/
Throughout the first half of 2000, the Asia Growth Fund maintained its emphasis
on individual stock selections. In the absence of strong economic data, we
remained neutral versus the MSCI AC Asia Free Ex-Japan Index in terms of
allocating the Fund's assets, taking a more "bottom-up"/4/ approach in managing
the Fund. In many cases, the Fund's holdings, which differed from those of the
benchmark, generated higher returns versus stocks included in the MSCI AC Asia
Free Ex-Japan.
In Hong Kong, trading company Li & Fung was consistently within the Fund's top
ten holdings throughout the first half of 2000. We believe Li & Fung may be the
top regional sourcing franchise with superb management and long-term strategies
that may prove effective. In our view, this combination has propelled Li & Fung
and led to the creation of consistent high returns for its shareholders. We
believe the company has strong growth potential, has demonstrated adaptability
to changes in technology (i.e., Internet) and its ventures into new
opportunities all contributed to its exceptional share price performance during
the period. In fact, the company's share price rose about 100% since year-end
1999 versus the Hang Seng Index,/5/ which fell 4.8% during the same period.
The Fund's other holdings consisted of various large capitalization stocks with
what we deem are sustainable growth drivers consistent with our stock selections
made in 1999. These holdings include China Mobile (formerly named China
Telecom), a telecommunications company with strong subscriber growth. The Fund's
holding in Samsung Electronics, the leading South Korean company, continues to
be Asia's best Dynamic Random Access Memory ("DRAM") play. The company is an
exporter with limited group risk compared to other chaebols, Korean
conglomerates of many companies clustered around one holding company whose
parent company is usually controlled by one family. Moreover, Samsung has all
the right products: Static Random Access memory ("SRAM"), flash and cell phones,
all of which are currently in high demand.
We believe that Taiwan Semiconductor Manufacturing Company, Asia's leading
foundry, has an outstanding earnings outlook. Indian software company Satyam
Computers has what we deem to be the best combination of growth potential,
reasonable valuations and outstanding management. The company's shift from
reliance on Y2K-related projects to e-business-related revenues has been
seamless. We are pleased to report that all of the above companies have
generated positive contributions in the first half of 2000 for the Fund during a
time when most regional markets declined. Additionally, these companies
____________
3 Past performance is not indicative of future results. Portfolio holdings are
subject to change.
4 Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
5 The Hang Seng Index is an aggregate market cap weighted index, which tracks
33 stocks representing 70% of total market capitalization on the stock
exchange of Hong Kong Limited. An investor cannot invest directly in an
index.
6
<PAGE>
were all consistently within the top ten positions of the Fund throughout the
period.
Apart from the Fund's core holdings, other positions included conglomerate Citic
Pacific, which was bought and has been re-rated since its announcement of a
series of telecommunication asset purchases in China. The company's value
enhancing deals clearly illustrate strong backing from its parent company, Citic
Beijing. After several visits to China, we were encouraged by the overall
cyclical recovery of the country's economy and operating improvements by many
Chinese state-owned enterprises ("SOEs"). As such, we increased the Fund's
exposure to Chinese companies in the second quarter. Positions in H-shares
listed in Hong Kong, representing the SOEs, were added. These included one of
the major airline stocks, China Southern. We believe China Southern may be a
direct beneficiary of increased traffic flow in the southern regions trading at
attractive valuations of 0.6 times price to book./6/
Aside from the maintenance of core positions and initiation of new stock
purchases, the Fund also gained from profits on positions such as Datacraft
Asia, a Singapore-based leading networking company that spans different parts of
Asia. This stock was sold when the share price moved up sharply above U.S.
dollar $10, rendering valuation levels too high in our opinion. The Fund's
entire position in Hong Kong-based Giordano, one of the top ten holdings for
most of 1999 was sold. This position was bought as we believed the company was
poised to benefit from the restructuring and anticipated recovery of the
regional retail sector. As a result, the Fund made over five times its
investment in profits. Although we believe Giordano continues to have strong
growth potential, we believe this has already been reflected in the strong
performance of its share price.
From an asset allocation perspective, the decision not to have exposure to the
smaller Southeast Asian markets, namely Thailand, Indonesia and the Philippines
was maintained during the second quarter of 2000. This was done mainly from the
lack of a visible growth story, weak corporate governance and in some cases,
higher political risks.
MARKET OUTLOOK
From a top-down/7/ perspective, we believe markets in North Asia should continue
to be favored over the smaller markets of Southeast Asia. Moreover, in our view,
the markets of Hong Kong, South Korea, Singapore and Taiwan stand to benefit
from improvements in the economic landscape as well as with their focus on
industries with stronger growth potentials. Our positive stance on China-related
counters on the back of the country's strong cyclical recovery and its entry
into the World Trade Organization ("WTO") will also remain.
__________
6 Price-to-book is the difference between the market value of a stock and the
book value of the company.
7 A top-down perspective refers to looking at trends in the general economy and
selecting industries and then companies that should benefit from those
trends.
7
<PAGE>
From a sector perspective, the recently adopted strategy of being overweight in
interest-rate sensitive sectors should continue as we assign a high probability
to a peak in U.S. short-term interest rates. Diversification into interest-rate
sensitive stocks, however, may not preclude the Fund from exposure to technology
companies especially as the year progresses.
We believe it's unlikely that corporate results in the region will disappoint
and as such, earnings of technology companies should confirm longer-term growth
prospects. We think that stronger growth potential still can be found in the
technology sector. We will therefore limit our focus to companies with proven
business models and profitable earnings.
8
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights#
--------------------------------------------------------------------------------
Composition of portfolio as of June 30, 2000
[PIE CHART]
Common Stock 96%
Equity Linked Securities 4%
----------------------
Breakdown By Country#
----------------------
Hong Kong 31.2%
---------------------
South Korea 20.2%
---------------------
Taiwan 15.9%
---------------------
Singapore 10.1%
---------------------
India 8.4%
---------------------
Malaysia 6.8%
---------------------
China 3.2%
=====================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
ASIA GROWTH FUND
Average Annual Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
-------------------------------------------------------------------------
Since Inception (5/6/96) 4.85% 3.37%
3 year (0.76)% (2.71)%
1 year 22.81% 15.72%
-------------------------------------------------------------------------
Class B Shares
-------------------------------------------------------------------------
Since Inception (5/6/96) 4.08% 3.65%
3 year (1.51)% (2.50)%
1 year 21.91% 16.91%
-------------------------------------------------------------------------
Class 2 Shares
-------------------------------------------------------------------------
Since Inception (5/6/96) 4.09% 3.84%
3 year (1.51)% (1.84)%
1 year 21.80% 19.64%
-------------------------------------------------------------------------
Class O Shares
-------------------------------------------------------------------------
Since Inception (5/6/96) 5.09% 5.09%
3 year (0.56)% (0.56)%
1 year 22.98% 22.98%
=========================================================================
See page 28 for all footnotes.
9
<PAGE>
[PICTURE APPEARS HERE]
INVESTMENT OBJECTIVE AND STRATEGY
The International Equity Fund seeks long-term growth of capital by investing in
equity securities of non-U.S. issuers throughout the world. Moreover, the Fund
seeks to achieve its investment objective by investing primarily in equity
securities or common stock of companies that participate in growth industries
and can deliver sustainable above-average growth in earnings over a two- to
three-year time horizon.
Under normal market conditions, the Fund is generally diversified among a number
of different countries by investing at least 65% of its total assets in at least
three countries. Our primary focus is on sustainable growth companies. The
companies in which we invest show strong earnings growth visibility; however, we
tend to seek out those companies that are not selling at an excessive premium to
the market.
The Fund Managers
The Fund is managed by Citibank,N.A., through its Citibank Global Asset
Management ("CGAM") division.
S A L O M O N B R O T H E R S
International Equity Fund
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
For the six months ended June 30, 2000, the International Equity Fund's Class A
shares, without sales charges, returned a negative 9.21%. In comparison, the
Morgan Stanley Capital International Europe, Australasia, and Far East Index
("MSCI EAFE")1 returned a negative 4.06% for the same period. Past performance
is not indicative of future results.
During the period, both stock and bond markets worldwide have been characterized
by increased levels of volatility. The period began with a sharp rise in the
stock markets by the end of 1999, as many investors correctly anticipated a
smooth "Y2K" transition. However, that euphoria gave way to a sharp downward
move during the end of the period, especially in technology stocks, as inflation
and interest rate worries concerned most investors.
As the period progressed, the prognosis for global economic growth improved.
From many perspectives, the outlook for the global economy is the strongest seen
in more than a decade. The U.S. economy has consistently surpassed forecasts,
while European economic resurgence and Asian recovery have set the stage for
robust earnings gains in many industries. Concerns over accelerating price
increases, however, have resulted in a number of interest rate increases around
the world. Yet, there appears to be few signs of a slowdown in ongoing global
economic growth.
During the period, we continued to look for those companies that represent what
we think are investment opportunities through bottom-up2 evaluation, employing a
disciplined investment approach to identify what are deemed to be solid
companies in established growth sectors of the market. Lastly, we looked to
maintain a relatively low turnover in the Fund's portfolio of approximately 20%.
(Portfolio turnover is the volume of shares traded as a percentage of total
shares listed on an exchange during a period. Please note that there is no
guarantee that the portfolio turnover will continue to be approximately 20% of
the Fund's portfolio.)
Because we generally look to invest with a long-term horizon, we did not alter
the Fund's holdings significantly during the period. Additionally, our original
earnings outlook did not change, which was a key factor in our decision to
maintain the Fund's portfolio. Although no guarantees can be made, we remain
confident that the companies held in the Fund should offer long-term capital
growth potential by delivering sustainable above-average earnings growth.
__________
1 The MSCI EAFE is an unmanaged index of common stocks of companies located in
Europe, Australasia and the Far East. An investor cannot invest directly in
an index.
2 Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
10
<PAGE>
MARKET OUTLOOK
We don't believe that there will be a further acceleration in economic growth
worldwide. If our expectations come true, we anticipate that most investors will
focus on identifying those companies that have and continue to demonstrate an
ability to sustain earnings growth solely based on the products and/or services
they offer. Consequently, we intend to maintain the Fund's portfolio until later
on this year, when many companies' earnings reports are released. At that time,
we may make some additional changes to the Fund's holdings if we have to revise
our earnings estimates for 2000 and 2001.
We believe that the International Equity Portfolio may be well-positioned to
take advantage of the expected growth in the markets. Large capitalization
growth stocks, in our opinion, should continue to offer solid performance over
the long term. And while no assurances can be made, we also expect that our
focus on industry leaders in high-growth industries such as telecommunications,
technology, health care and retailing should benefit the Portfolio over the long
term.
11
<PAGE>
Portfolio Highlights#
Composition of portfolio as of
June 30, 2000
[PIE CHART]
Common Stock 100%
----------------------
Breakdown By Country#
----------------------
United Kingdom 26.9%
---------------------------
Japan 24.8%
---------------------------
Netherlands 10.3%
---------------------------
Spain 7.3%
---------------------------
Ireland 5.7%
---------------------------
Italy 5.5%
---------------------------
Finland 4.8%
---------------------------
Canada 4.7%
---------------------------
France 2.7%
---------------------------
Switzerland 2.7%
===========================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
Cumulative Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
--------------------------------------------------------------------------------
Since Inception (10/25/99) 13.40% 6.88%
--------------------------------------------------------------------------------
Class B Shares
--------------------------------------------------------------------------------
Since Inception (10/25/99) 12.80% 7.80%
--------------------------------------------------------------------------------
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (10/25/99) 12.70% 10.58%
--------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------------------------------
Since Inception (10/25/99) 13.50% 13.50%
================================================================================
See page 28 for all footnotes.
12
<PAGE>
[PICTURE]
INVESTMENT OBJECTIVE AND STRATEGY
The Small Cap Growth Fund seeks long-term growth of capital. The Fund invests
primarily in equity securities of companies with market capitalizations at the
time of purchase similar to that of the companies included in the Russell 2000
Index ("small cap companies"). The Russell 2000 Index includes companies with
market capitalizations below the top 1,000 of stocks of the equity market. Under
normal conditions, the Fund will invest at least 65% of its total assets in
equity securities of small cap companies.
-----------------
THE FUND MANAGERS
-----------------
The Fund is managed by an experienced team of managers.
S A L O M O N B R O T H E R S
Small Cap Growth Fund
PERFORMANCE UPDATE
We are proud to report the Small Cap Growth Fund's ("Fund") Class A shares,
without sales charges returned 20.49% for the six months ended June 30, 2000. In
comparison, the Russell 2000 Index returned 3.04% for the same period./1/
(Please note that past performance is not indicative of future results.)
MARKET OVERVIEW & PORTFOLIO HIGHLIGHTS
The period was marked by an early year surge in technology and biotechnology
stocks, followed by a significant April and May sell-off in shares of many
technology stocks. Small-capitalization stocks outperformed large-capitalization
stocks during the period; the Russell 2000 Growth Index/2/ rose by 1.23% versus
the negative return of 0.43% for the Standard and Poor's 500 Index ("S&P
500"),/3/ while the overall Russell 2000 Index rose by 3.04%. Consumer
cyclicals, technology and media/telecommunication stocks were, in our view, the
main negative factors, while healthcare and energy stocks posted strong positive
returns. The Fund significantly outperformed its benchmark due to stock
selection in technology, communications, healthcare and financials. The Fund was
about evenly weighted in technology, the benchmark's largest sector, during the
first half of the year.
MARKET OUTLOOK
As we enter the second half of 2000, market volatility has continued but we have
seen a broader-based market than the tech-driven one of late 1999 and early
2000. Inflows to small cap mutual funds have slowed from a robust first quarter
pace, but so has the Initial Public Offerings ("IPO") calendar, thereby helping
to avoid excess supply overhang. In our opinion, relative value versus large cap
stocks are still attractive by most historical measures. We remain broadly
diversified across market sectors, which has helped to limit performance
volatility so far in 2000. While it may be sound strategy, diversification does
not assure against market loss.
_________________
1 The Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 8% of
the total market capitalization of the Russell 3000 Index. An investor
cannot invest directly in an index.
2 The Russell 2000 Growth Index measures the performance of the Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
rates. (A price-to-book ratio is the price of a stock dividend divided by
its net asset value.) An investor cannot invest directly in an index.
3 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. An investor cannot invest directly in an index.
13
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights#
--------------------------------------------------------------------------------
Composition of portfolio as of
June 30, 2000
[PIE CHART]
Common Stock 90%
Convertible Corporate Notes 3%
Short-Term Obligations 70%
----------------------------
Top Holdings
----------------------------
Siebel Systems, Inc.
----------------------------
Network Appliance, Inc.
----------------------------
Digital Microwave Corp.
----------------------------
Insight Enterprises, Inc.
----------------------------
Newport Corp.
----------------------------
OM Group, Inc.
----------------------------
Alpharma, Inc.,
Class A Shares
----------------------------
Integrated Silicon
Solution, Inc.
----------------------------
Advanced Fibre
Communications, Inc.
----------------------------
Sawtek Inc.
============================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
Average Annual Total Returns for Period Through June 31, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
--------------------------------------------------------------------------------
Since Inception (7/1/98) 48.31% 43.99%
1 year 63.18% 53.82%
--------------------------------------------------------------------------------
Class B Shares
--------------------------------------------------------------------------------
Since Inception (7/1/98) 47.16% 45.80%
1 year 61.98% 56.98%
--------------------------------------------------------------------------------
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (7/1/98) 47.26% 46.53%
1 year 61.96% 59.28%
--------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------------------------------
Since Inception (7/1/98) 48.67% 48.67%
1 year 63.59% 63.59%
================================================================================
See page 28 for all footnotes.
14
<PAGE>
[PICTURE APPEARS HERE]
INVESTMENT OBJECTIVE AND STRATEGY
The Capital Fund seeks capital appreciation through investments in securities
which the managers believe have above-average capital appreciation potential.
The Fund seeks to achieve its investment objective through investments primarily
in common stocks or securities convertible into common stocks. These companies
may range in size from established large capitalization companies (over $5
billion in market capitalization) to small capitalization companies (less than
$1 billion in market capitalization) at the beginning of their life cycles. 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 OF ROSS S. MARGOLIES] Ross S. Margolies, Managing Director and
Portfolio Manager at Salomon Brothers
Asset Management Inc, has 19 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 OF ROBERT M. DONAHUE, Jr.] Robert M. Donahue, Jr., Director and Co-
Portfolio Manager at Salomon Brothers
Asset Management Inc., has 7 years of
investment industry experience. Mr.
Donahue assists in the day-to-day
management of the Fund.
S A L O M O N B R O T H E R S
Capital Fund
PERFORMANCE UPDATE
The Capital Fund's Class A shares without sales charges, returned 17.32% for the
six months ended June 30, 2000. In comparison, the Russell 3000 Index returned
0.95% and the Standard and Poor's 500 Index ("S&P 500") returned a negative
0.43% for the same time period. (The S&P 500 is a market capitalization-weighted
measure of 500 widely-held common stocks. The Russell 3000 Index measures the
performance of the 3,000 largest U.S. companies based on total market
capitalization, which represents approximately 98% of the investable U.S. equity
market.) An investor cannot invest directly in an index. Past performance is not
indicative of future results.
PERFORMANCE OVERVIEW & INVESTMENT STRATEGY
The Capital Fund's investment strategy is known as a broad market strategy. We
attempt to find the best opportunities across the market, wherever they may be.
It is an "all cap" or "multicap" strategy in that we invest in large-, small-and
mid-size companies. It is also known as a "style neutral" or "blend" portfolio
in that we purchase both growth and value stocks. (Value investing consists of
identifying securities of companies that are believed to be undervalued in the
market. Growth investing focuses on the stocks of corporations that are
exhibiting or are expected to exhibit faster-than-average growth within their
industry.) In fact, one of our primary goals is to find out-of-favor value
stocks that can blossom into growth stocks. These can sometimes include some of
our best performers because we buy them when they are inexpensive and hold them
through the entire period of appreciation as the market finally recognizes their
true potential.
Because it owns some stocks from most categories, the Fund has the opportunity
to own some promising securities under most market conditions and our strategy
can result in a unique, diversified portfolio of stocks. We think that these are
two key advantages to our investment strategy./1/
Another aspect of our core investment style is a bottom-up stock picking
strategy. (Bottom-up investing is an asset management style that focuses on the
analysis of individual stocks instead of basing decisions on economics or market
trends.) We focus on understanding a company's business, its strategy, its
competitive position and its industry. We also determine if management is
credible and has the right team to lead the company. Our exhaustive financial
analysis focuses on the company's resources to meet its goals, the consistency
of the numbers to determine their quality, (for instance, are receivables
growing much faster than sales, a sign that current sales may overstate the long
term trend) and is used as a framework for valuation and risk assessment. These
and other factors are the basis of our stock-selection process. If we think that
the risk and reward trade-off for a particular company's stock is favorable, we
will generally invest.
_______________
1 Of course, investors can also lose money in the Fund if our judgement about
the attractiveness, relative value or potential appreciation of a particular
sector or security proves to be incorrect.
15
<PAGE>
As portfolio managers, we have another role in addition to stock picking; we
need to make sure that the individual security selections in the portfolio meet
a set of investment objectives. We use tools such as diversification and
position weighting to determine exactly how much of each security to own in the
portfolio. For instance, our best ideas in the Fund generally get very high
weightings, as much as 5% of the portfolio on occasion. This strategy, known as
high position concentration, can generate above-market returns when executed
properly. (Of course, past performance is not indicative of future results.)
At the same time we always factor in excess risk. A good idea that has a very
high-risk profile will get lower weighting, such as 1% of the portfolio, in
order to diversify risk and dampen portfolio volatility. And while no guarantees
can be made, in this way we can take individual risks on behalf of our
shareholders without creating an overly risky portfolio. Diversification does
not assure against market loss.
MARKET OVERVIEW AND OUTLOOK
Even though it made no headway, the stock market offered something for everyone
during the first half of 2000. Initially the speculative momentum market of 1999
continued the market rally, peaking during the second week of March. The Federal
Reserve Board's ("Fed") continued increases in interest rates then started to be
felt, leading to a violent sell-off, particularly in the volatile NASDAQ/2/
market, through May. At the same time, many oversold "Old Economy" stocks
rallied as money rotated from the Internet and biotech stocks into areas such as
consumer staples. By the end of the half of the reporting period, most of the
market losses recovered so that most broad indices were down modestly.
One way to describe what happened is that "investment gravity" finally took hold
of stocks that previously seemed to continually float skyward. The catalyst was
the seemingly unrelated comments by President Bill Clinton and British Prime
Minister Tony Blair that genomics companies would not reap all of the benefits
of the public research money devoted to their field of science. The sell-off in
biotech stocks spread like a contagion to virtually all high priced growth
stocks. For a relatively brief time, earnings counted and stories were
discounted. By the end of June, the market was once again awarding future
potential a premium to ability.
We are proud to report that the Fund's investment strategy worked exceptionally
well throughout the period. When the market was rising, our broad, diversified
equity exposure allowed us to participate even though much of what we liked was
out of favor. The declines in less speculative stocks provided us with
opportunities as well. For the first time in over two years we were given an
attractive opportunity to start building positions in drug stocks, a sector that
we think should exhibit above-average growth well into the future due to
favorable demographic and technological trends.
Later in the half, during the NASDAQ led market decline, the Fund actually
appreciated as money flowed to companies that could be more easily valued, most
of which had been materially oversold in the previous few months. The
______________
2 National Association of Securities Dealers Automated Quotations ("NASDAQ")
system is a computerized system that provides brokers and dealers with price
quotations for more than 5,000 actively traded over-the-counter stocks.
16
<PAGE>
rotation favored drug stocks as well as companies we previously owned such as
Safeway, Nabisco Group Holdings and Devon Energy while giving us the opportunity
to add to undervalued technology stocks like 3Com and Seagate. Going forward we
expect to continue to hold many of these stocks although there have been tender
offers announced for Nabisco and Seagate. Portfolio holdings are subject to
change.
We continue to see the growth of the Internet as one of the driving forces of
the economy going forward. If you closely examine the Fund's portfolio, you will
see that relatively little of your money is invested in traditional Internet
companies (i.e., the "dot.coms"). We think the long-term risk and reward
proposition in most of these companies to be unattractive, a view we think the
market is starting to embrace. We also think most of these companies do not have
sustainable business models (translation: in our opinion they will always lose
money), while others have valuations that assume they will be the only survivors
in the eventual shakeout. However, you will see a lot of your money invested in
companies that, in our view, stand to benefit from or build the Internet. In the
Fund we own companies such as:
. 3Com (a company that split into two pieces in July; Palm Pilot, the leading
PDA which will offer wireless internet access, and the remaining 3Com
networking business helping individual access the Internet)
. Federated Department Stores (a leader in the "clicks and mortar" e-commerce
strategy and owner of several valuable Internet businesses)
. Verizon Communications (formed from the merger of Bell Atlantic and GTE,
Verizon Communications is the leading U.S. wireless company also offering
telecom services such as local, long distance and high speed Internet
access).
It is our strong belief that over time the leading established companies that
embrace today's new technologies should emerge as the dominant and most
profitable companies in the economy. Their stocks should recognize this over
time. On the other hand, we believe the stock market will continue to lose
patience with those traditional Internet companies that cannot transform
themselves into growth companies with enough profits to support their underlying
stock price.
We expect the Capital Fund to consistently apply its investment strategy in the
future. We will invest in both users and manufacturers of technology when we
believe their risk and reward ratios are favorable. Most of all, we will look
for the best opportunities that we can find, regardless of where they reside in
the market.
17
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights
--------------------------------------------------------------------------------
Composition of portfolio as of
June 30, 2000
[PIE CHART]
Common Stock 91%
Convertible Securities 2%
Corporate Bonds 1%
Short-Term Obligations 6%
---------------------------------
Top Stock Holdings
---------------------------------
Safeway Inc
---------------------------------
Nabisco Group Holdings Corp.
---------------------------------
Federated Department Stores, Inc.
---------------------------------
Costco Wholesale Corp.
---------------------------------
Hormel Foods Corp.
---------------------------------
The Pepsi Bottling Group, Inc.
---------------------------------
3Com Corp.
---------------------------------
Merck & Co., Inc.
---------------------------------
Tesoro Petroleum Corp.
---------------------------------
The Bank of New York Co., Inc.
=================================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
CAPITAL FUND
Average Annual Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
--------------------------------------------------------------------------------
Since Inception (11/1/96) 27.47% 25.43%
3 year 25.49% 23.04%
1 year 27.02% 19.69%
Class B Shares
--------------------------------------------------------------------------------
Since Inception (11/1/96) 26.54% 26.10%
3 year 24.52% 23.88%
1 year 26.08% 21.08%
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (11/1/96) 26.52% 26.18%
3 year 24.47% 24.06%
1 year 26.11% 23.84%
Class O Shares
--------------------------------------------------------------------------------
10 year 17.58% 17.58%
5 year 28.41% 28.41%
3 year 25.75% 25.75%
1 year 27.34% 27.34%
================================================================================
See page 28 for all footnotes
18
<PAGE>
[PICTURE APPEARS HERE]
PERFORMANCE OBJECTIVE AND STRATEGY
The Large Cap Growth Fund seeks long-term growth of capital by investing in the
equity securities of U.S. large cap issuers that, at the time of purchase, have
market capitalizations within the top 1,000 stocks of publicly traded companies
listed in the United States stock markets.
The Fund's equity securities consist primarily of common stocks. The Fund may
also invest in preferred stocks, warrants and securities convertible into common
stocks. The Fund may also invest up to 15% of its assets in securities of
foreign issuers.
Our investment process seeks to identify quality growth companies. The criteria
we use for evaluating historical performance and ascertaining future prospects
are: earnings growth, earnings consistency, sales growth, return on equity, and
low debt to capitalization. For a company to be considered a candidate for
investment purposes it has to be superior to the S&P 500 in four out of five
criteria.
THE FUND MANAGERS
The Fund is managed by Citibank, N.A., through its Citibank Global Asset
Management (CGAM) division.
S A L O M O N B R O T H E R S
Large Cap Growth Fund
PERFORMANCE UPDATE
The Large Cap Growth Fund's Class A shares, without sales charges returned a
negative 3.44% for the six months ended June 30, 2000. In comparison, the
Standard & Poor's 500 Index ("S&P 500")/1/ returned a negative 0.43% for the
same period. Past performance is not indicative of future results.
MARKET REVIEW & PORTFOLIO HIGHLIGHTS
During the period, we favored companies that we believed would benefit from
strength in manufacturing and a global economic recovery such as industrial
services (oilfield services), producer manufacturing, retail, and technology.
The Fund's overweight position in technology stocks -- specifically holdings in
computer networking (Cisco, Network Appliance), software and services (Oracle,
Adobe Systems), and semiconductors (Linear Technology, Xilinx) -- proved
beneficial.
In general, our emphasis on stocks with good earnings momentum and strong
balance sheets hurt relative returns during the period as the market strongly
favored companies with leveraged balance sheets and high earnings variability.
Examples include our overweight stance in the retail sector (Wal-Mart, Home
Depot), our focus on less cyclical components of the capital goods sector
(Illinois Tool Works) and our focus on financial companies with strong balance
sheets (Fannie Mae and Freddie Mac obligators)./2/ Portfolio holdings are
subject to change.
Moreover, following the trend in the fourth quarter of 1999, market breadth
remained narrow in the first quarter of 2000. The technology sector's gain came
at the expense of all others, as it was the only sector to increase its
percentage weight in the Index. However, in the second quarter there was a
reversal from the first quarter, when 15 of the largest 25 contributors to the
S&P 500 performance were technology or telecom companies. In the second quarter,
the top four contributors to the S&P 500 performance were drug stocks, and 15 of
the largest 25 detractors from the index performance were technology or telecom
stocks.
Furthermore, the market has been experiencing a continued shift out of high
quality stocks into low quality stocks. As of the fourth quarter of 1999,
companies with leveraged balance sheets and high earnings variability were up
17.9%, while the highest quality stocks gained 5.3%/3/. This divergence
continued into the first quarter of 2000, with the lowest quality stocks gaining
31.9% and the highest quality stocks losing 3.2%/3/. Overall, companies with the
most leveraged balance sheets and most volatile earnings were up 28.6%, while
the highest quality stocks lost 1.4% during the first half of 2000/3/.
_________
1 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. An investor cannot invest directly in an index.
2 Fannie Mae (Federal Mortgage Association) is a publicly owned, government-
sponsored corporation established in 1938 to purchase both government-backed
and conventional mortgages from lenders and securitize them. Freddie Mac
(Federal Home Loan Mortgage Corporation) sells mortgage-backed securities,
issued in minimum denominations of $25,000, that it packages and guarantees.
3 Source: Citibank Global Asset Management (CGAM) division.
19
<PAGE>
MARKET OUTLOOK
Going forward, we anticipate a strong and well-balanced, U.S. economy for the
remainder of 2000. We believe rising corporate profitability, coupled with
technology-driven business opportunities and a healthy financial system, may
provide strong domestic support. Inflation remains contained, and we expect the
core rate to remain between 2% to 2.5%. Job growth is expected to moderate and
labor markets may become more stretched. In addition, we think Gross Domestic
Product ("GDP")/4/ growth should be near 4% during the third quarter of 2000,
characterized by a changing mix of stronger exports and slowing consumer
spending. While we would expect to see slightly stronger growth in the third
quarter than in the second quarter, we do not expect to see a repeat of the
strong second half of 1999 this year.
During the first half of this year, the Federal Reserve Board ("Fed") raised
both the discount and federal funds/5/ target rates 100 basis points,/6/ to 6.0%
and 6.5%, respectively. While we leave open the possibility of another 25 basis
point tightening later this year depending on subsequent economic news, we place
a higher probability on no more tightening.
Our view is that the Fed is done, or nearly done, raising rates for this cycle.
In the coming months, the interest rate increases made by the Fed over the last
year should, in our view, begin to slow the growth of the U.S. economy.
Moreover, as government economic reports begin to reflect this slowdown,
investor fears regarding inflation and higher interest rates should subside.
This in turn should create an attractive environment for U.S. stocks, in which
growth stocks should then regain their leadership position due to strong
fundamentals.
And while no guarantees can be made, we are confident that our focus on
fundamental analysis of individual companies in an effort to uncover
opportunities that are making profits today may benefit the Large Cap Growth
Fund in the long term.
__________
4 The GDP is the market value of the goods and services produced by labor and
property in the United States.
5 The discount rate is the interest rate that the Fed charges member banks for
loans, using government securities as collateral. The federal funds rate is
the interest rate that banks with excess reserves at a Federal Reserve
district bank charge other banks that need overnight loans. The Federal funds
rate, as it is called, often points to the direction of U.S. interest rates.
6 A basis point is 0.01% or one one-hundredth of a percent.
20
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS#
--------------------------------------------------------------------------------
Composition of portfolio as of
June 30,2000
[PIE CHART]
Common Stock 100%
----------------------------
Top Holdings
----------------------------
General Electric Co.
Intel Corp.
----------------------------
Cisco Systems,Inc.
----------------------------
Microsoft Corp.
----------------------------
Pfizer Inc.
----------------------------
International Business
Machines Corp.
----------------------------
American International
Group,Inc.
----------------------------
Wal-Mart Stores,Inc.
----------------------------
Exxon Mobil Corp.
----------------------------
Oracle Corp.
============================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
Cumulative Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
--------------------------------------------------------------------------------
Since Inception (10/25/99) 7.95% 1.74%
--------------------------------------------------------------------------------
Class B Shares
--------------------------------------------------------------------------------
Since Inception (10/25/99) 7.35% 2.35%
--------------------------------------------------------------------------------
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (10/25/99) 7.45% 5.39%
--------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------------------------------
Since Inception (10/26/99) 8.15% 8.15%
================================================================================
See page 28 for all footnotes.
21
<PAGE>
[PICTURE APPEARS HERE]
INVESTMENT OBJECTIVE AND STRATEGY/1/
The Investors Value Fund's primary investment objective is to seek 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 reasonable prices.
THE FUND MANAGERS
[PHOTO OF JOHN B. CUNNINGHAM] John B. Cunningham, Director and Portfolio
Manager at Salomon Brothers Asset
Management Inc, has 11 years of financial
industry experience. Mr. Cunningham assists
in the day-to-day management of the Fund.
[PHOTO OF MARK MCALLISTER] Mark McAllister, Director and Co-Portfolio
Manager at Salomon Brothers Asset
Management Inc, has 13 years of investment
industry experience. Mr. McAllister has
been co-portfolio manager of the Fund since
April 2000.
S A L O M O N B R O T H E R S
Investors ValueFund
PERFORMANCE UPDATE
The Investors Value Fund's Class A shares, without sales charges returned 9.08%
for the six-months ended June 30, 2000. In comparison, the Standard & Poor's 500
Index ("S&P 500") returned a negative 0.43% for the same time period. (The S&P
500 is a market capitalization-weighted measure of 500 widely held common
stocks.) An investor cannot invest directly in an index. Past performance is not
indicative of future results.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
In the first half of this year, the stock markets experienced increased
volatility. Technology stocks continued to drive the market through early March.
In our view, the momentum behind technology stocks came at the expense of most
other sectors of the market, including consumer staples, financials and
pharmaceuticals. During the period, the Fund added to these out-of-favor
sectors. In mid-March, investors took profits in technology stocks and rotated
into undervalued sectors. Specifically, defensive sectors such as consumer
staples, healthcare and energy all performed well as investors continued to
worry about the Federal Reserve Board's ("Fed") reaction to inflationary
pressures. The Fund benefited from the increase in market breadth.
For the six-month period under review, the significant decline in a number of
large-capitalization stocks held back the performance of the S&P 500. Microsoft,
which represented 4.9% of the S&P 500 at year-end, declined 31.5%, which alone
penalized the S&P 500 by 1.5%. Other notable decliners included notable
companies such as: Lucent, America Online, AT&T, Home Depot, Procter & Gamble
and Qualcomm, all of which fell more than 20%. Including Microsoft, these eight
stocks accounted for about 13% of the S&P 500 at year-end.
FUND HIGHLIGHTS
We are pleased to tell you that the Fund performed quite well in the first six
months, significantly outpacing both its Lipper/2/ large-cap value fund peer
group and the S&P 500. During the first quarter, we continued to trim most of
our technology holdings due to valuation concerns. We redeployed those proceeds
into other sectors of the market that we thought offered much more attractive
valuations. In particular, we added consumer staples, financials and
armaceuticals, all of which rebounded as investors moved assets out of
technology. Since the correction in technology in mid-March, we have been adding
to select technology stocks on weakness in the sector. We plan to
________________
1 The information provided represents the opinion of the manager and is not
intended to be a forecast of future events. There is no assurance that
certain securities will remain in or out of the Fund's portfolio.
2 Lipper Inc. is a major fund tracking organization.
22
<PAGE>
continue increasing our weighting in technology as we see
opportunities to do so.
Our overweight position in consumer staples contributed to the
Fund's outperformance during the period. In particular, Nabisco
Group Holdings, Pepsi Bottling Group, Safeway and Kimberly Clark
all were strong performers. Nabisco Group Holdings was the Fund's
top contributor during the period as a result of the planned sale
of the company.
In other sectors, leading contributors included News Corporation,
Intel, Eli Lilly and Coastal Corp., among others. Laggards
included International Paper, Compuware, Tyson Foods, Federated
Department Stores and UnumProvident. The Fund no longer owns
Compuware and UnumProvident.
MARKET OUTLOOK
Recent economic data suggests that the economy may be slowing,
however, inflationary concerns are likely to keep the Fed on
guard. We expect recent stock market volatility to persist.
Uncertainty over economic growth and prospective actions may
continue to result in market swings. Fortunately, market breadth
remains favorable.
Currently, the Investors Value Fund has overweight positions
versus the S&P 500 in consumer staples, communications, energy
and financials. As a result of the merger between Bell Atlantic
and GTE, the Fund's top position is now Verizon Communications,
the newly combined entity. The Fund is underweight in technology,
capital goods and consumer cyclicals. As mentioned above, we
continue to look for opportunities to add to technology stocks.
Overall, we believe that the Investors Value Fund may be well
positioned for the current market environment in which individual
stock selection plays a more important role than sector momentum.
23
<PAGE>
Portfolio Highlights#
Composition of portfolio as of
June 30,2000
[PIE CHART]
Common Stock 94%
Convertible
Securities 1%
Short-Term
Obligations 5%
---------------------------------------
Top Stock Holdings
---------------------------------------
Nabisco Group Holdings
Corp.
---------------------------------------
The Pepsi Bottling
Group,Inc.
---------------------------------------
National Semiconductor
Corp.
---------------------------------------
Safeway Inc.
SBC Communications Inc.
---------------------------------------
The Bank of New York
Co., Inc.
---------------------------------------
3Com Corp.
---------------------------------------
Pharmacia Corp.
---------------------------------------
Costco Wholesale Corp.
=======================================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
INVESTORS VALUE FUND
Average Annual Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
--------------------------------------------------------------------------------
Since Inception (1/3/95) 22.99% 21.67%
5 year 21.67% 20.24%
3 year 15.43% 13.17%
1 year 5.61% (0.45)%
--------------------------------------------------------------------------------
Class B Shares
--------------------------------------------------------------------------------
Since Inception (1/3/95) 22.07% 22.00%
5 year 20.74% 20.55%
3 year 14.55% 13.79%
1 year 4.79% 0.54%
--------------------------------------------------------------------------------
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (1/3/95) 22.09% 21.86%
5 year 20.76% 20.52%
3 year 14.58% 14.19%
1 year 4.81% 2.93%
--------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------------------------------
10 year 16.45% 16.45%
5 year 21.94% 21.94%
3 year 15.68% 15.68%
1 year 5.84% 5.84%
================================================================================
See page 28 for all footnotes.
24
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGY
The Balanced Fund, seeks to obtain above average income (compared to a portfolio
invested in equity securities). The Fund's secondary objective is to take
advantage of opportunities for growth of capital and income. The Fund invests in
a broad range of equity and fixed income securities of both U.S. and foreign
issuers. The Fund varies its allocations between equity and fixed income
securities depending on the manager's view of economic and market conditions,
fiscal and monetary policy, and security values. However, under normal market
conditions at least 40% of the Fund's assets are allocated to equity securities.
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. Diversification does not assure against market
loss.
THE FUND MANAGER
[PHOTO OF GEORGE J. WILLIAMSON] 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.
S A L O M O N B R O T H E R S
Balanced Fund
PERFORMANCE UPDATE
For the six months ended June 30, 2000, the Balanced Fund's ("Fund") Class A
shares, without sales charges, returned 5.16%. In comparison, the Standard and
Poor's 500 Index ("S&P 500") returned a negative 0.43% for the same time period.
(The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks.) An investor cannot invest directly in an index. Past performance
is not indicative of future results.
MARKET REVIEW AND HIGHLIGHTS/1/
In the first half of 2000, the common stock sector of the portfolio continued to
emphasize high quality companies in growth industries including communications,
pharmaceutical, energy, consumer brands, and technology. The bond segment of the
Fund represented 50% of total assets including 12% in convertible issues and
about 7% in high-yield bonds in order to achieve added exposure to stocks and to
maintain a yield of roughly 5.1% for the overall portfolio.
As the Federal Reserve Board ("Fed") moves to slow the growth of the economy, we
anticipate moderate growth in the U.S. and continuing improvement in most of the
major overseas countries. Earnings for U.S. companies should be restrained
somewhat during the coming year.
In a period of economic growth, the common stock portion of the portfolio is
being positioned in companies with financial strength and in areas where we
believe product demand will be firm. As of June 30, 2000, the largest holdings
in order of size were:
. Verizon Communications, formed by the merger of Bell Atlantic and GTE, is
one of the world's leading providers of high-growth communications services.
. IBM, creates, develops and manufactures the computer industry's advanced
information technologies, including computer systems, software, networking
systems, storage devices and microelectronics.
. Exxon-Mobil, one of the world's largest oil producers and sellers.
. SBC Communications, a provider of telecommunications services in the United
States and the world, offering multiple communications services and products.
. Avon Products, a manufacturer and marketer of beauty and related products,
which include cosmetics, fragrance and toiletries; jewelry, accessories and
apparel; gift, decorative and home entertainment products.
____________
1 Please keep in mind, sector weightings and portfolio holdings are subject to
change.
25
<PAGE>
. Halliburton, provides a variety of services, equipment, maintenance
and engineering and construction to energy, industrial and
governmental customers.
. Bausch & Lomb, develops, manufactures and markets healthcare
products for the eye in three business segments: vision care,
pharmaceuticals, and surgical.
. American Home Products, involved in discovery, development,
manufacture, distribution and sale of pharmaceuticals, consumer
health care and agricultural products.
26
<PAGE>
--------------------------------------------------------------------------------
Portfolio Highlights#
--------------------------------------------------------------------------------
Composition of portfolio as of
June 30,2000
[PIE CHART]
Common Stock 49%
Corporate Bonds 15%
Convertible Securities 12%
Asset-Backed Securities 3%
U.S. Government
Agencies & Obligations 15%
Short-Term
Obligations 6%
---------------------------------------
Top Stock Holdings
---------------------------------------
International Business
Machines Corp.
---------------------------------------
Exxon Mobil Corp.
---------------------------------------
Avon Products,Inc.
---------------------------------------
SBC Communications Inc.
---------------------------------------
Halliburton Co.
---------------------------------------
Bell Atlantic Corp.
---------------------------------------
Bausch & Lomb Inc.
---------------------------------------
American Home
Products Corp.
---------------------------------------
GTE Corp.
---------------------------------------
BP Amoco PLC
=======================================
Portfolio holdings may vary.
--------------------------------------------------------------------------------
BALANCED FUND
Average Annual Total Returns for Period Through June 30, 2000
--------------------------------------------------------------------------------
Class A Shares Without Sales Charges With Sales Charges*
Since Inception (9/11/95) 12.14% 10.77%
3 year 7.83% 5.73%
1 year (0.67)% (6.39)%
--------------------------------------------------------------------------------
Class B Shares
--------------------------------------------------------------------------------
Since Inception (9/11/95) 11.30% 11.02%
3 year 7.02% 6.14%
1 year (1.38)% (5.99)%
--------------------------------------------------------------------------------
Class 2 Shares
--------------------------------------------------------------------------------
Since Inception (9/11/95) 11.31% 11.08%
3 year 6.98% 6.61%
1 year (1.38)% (3.27)%
--------------------------------------------------------------------------------
Class O Shares
--------------------------------------------------------------------------------
Since Inception (9/11/95) 12.52% 12.52%
3 year 8.05% 8.05%
1 year (0.37)% (0.37)%
================================================================================
See page 28 for all footnotes.
27
<PAGE>
FOOTNOTES
* Class A and 2 shares reflect the deduction of the maximum
5.75% and 1.00% sales charges respectively. Class B and 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.
# As a % of total investments.
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.
28
<PAGE>
Schedules of Investments
June 30, 2000 (unaudited)
Salomon Brothers Asia Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
COMMON STOCK -- 95.8%
China -- 3.2%
1,740,000 China Southern Airlines Co. Ltd. (a)................... $ 415,173
126,000 China Unicom Ltd. (a).................................. 267,508
-----------
682,681
-----------
Hong Kong -- 31.2%
83,000 Asia Satellite Telecommunications Holdings Ltd. ....... 283,754
5,000 Asiainfo Holdings, Inc. (a)............................ 223,438
50,000 ASM Pacific Technology Ltd. ........................... 187,292
44,000 Cheung Kong (Holdings) Ltd. ........................... 486,832
74,000 China Mobile (Hong Kong) Ltd. (a)...................... 652,637
91,000 Citic Pacific Ltd. .................................... 476,287
92,400 Dah Sing Financial Group............................... 372,194
400,000 Denway Motors Ltd. (a)................................. 46,182
382,409 Esprit Holdings Ltd. .................................. 397,356
360,000 Hong Kong Exchanges & Clearing Ltd. (a)................ 487,217
42,800 HSBC Holdings PLC...................................... 488,653
49,600 Hutchison Whampoa Ltd. ................................ 623,555
290,000 Legend Holdings Ltd. .................................. 280,874
134,000 Li & Fung Ltd. ........................................ 670,404
1,700,000 Phoenix Satellite Television Holdings Ltd. (a)......... 235,527
900,000 TCL International Holdings Ltd. (a).................... 329,044
58,000 Television Broadcasts Ltd. ............................ 386,900
-----------
6,628,146
-----------
India -- 8.4%
34,800 Bajaj Auto Ltd. GDR.................................... 318,420
1,700 Infosys Technologies Ltd. (a).......................... 301,325
5,200 SSI Ltd. GDR........................................... 34,840
50,000 State Bank of India GDR................................ 493,750
100,000 Tata Engineering and Locomotive Co. Ltd. GDR........... 272,500
23,500 Videsh Sanchar Nigam Ltd. GDR.......................... 370,125
-----------
1,790,960
-----------
Malaysia -- 6.8%
90,000 AMMB Holdings Berahd................................... 300,789
78,000 Genting Berhad......................................... 287,368
120,000 MAA Holdings Berhad.................................... 315,790
23,000 Malaysian Pacific Industries Berhad.................... 236,053
95,000 Tenaga Nasional Berhad................................. 310,000
-----------
1,450,000
-----------
Singapore -- 10.1%
52,000 Chartered Semiconductor Manufacturing Ltd. (a)......... 454,135
42,120 Datacraft Asia Ltd. ................................... 370,656
34,700 DBS Group Holdings Ltd. ............................... 445,541
31,000 Overseas Union Bank Ltd. .............................. 120,127
158,000 St. Assembly Test Service Ltd. (a)..................... 405,738
35,000 Venture Manufacturing (Singapore) Ltd. ................ 356,275
-----------
2,152,472
-----------
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Asia Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
South Korea -- 20.2%
38,000 Daeduck Electronics Co., Ltd. ........................ $ 385,104
17,010 H&CB.................................................. 398,163
15,009 Hyundai Electronics Industries Co. (a)................ 296,135
41,818 Hyundai Motor Co. Ltd. GDR............................ 269,726
3,200 Korea Telecom Corp.................................... 281,823
13,000 L.G. Chemical Ltd. ................................... 259,994
3,200 L.G. Information & Communication Ltd. ................ 179,942
6,028 Pohang Iron & Steel Co., Ltd. (b)..................... 524,208
4,500 Samsung Electro Mechanics Co., Ltd. .................. 282,101
2,100 Samsung Electronics................................... 694,962
35,000 Shinhan Bank.......................................... 329,589
1,200 SK Telecom Co., Ltd. ................................. 392,816
-----------
4,294,563
-----------
Taiwan -- 15.9%
117,600 Acer Communications & Multimedia Inc. ................ 332,182
124,992 Cathay Life Insurance Co., Ltd. ...................... 288,131
590,000 Chinatrust Commercial Bank............................ 511,461
65,000 Compeq Manufacturing Co., Ltd. ....................... 398,864
56,000 Hon Hai Precision Industry Co., Ltd. ................. 505,454
81,444 President Chain Store Corp. .......................... 304,093
151,897 Taiwan Semiconductor Manufacturing Co. (a)............ 720,034
20,000 VIA Technologies Inc. (a)............................. 308,441
-----------
3,368,660
-----------
TOTAL COMMON STOCK
(Cost -- $17,999,974)................................. 20,367,482
-----------
<CAPTION>
Face
Amount
---------
<C> <S> <C>
EQUITY-LINKED NOTES -- 4.2%
India -- 2.6%
$ 4,000 Satyam Computer Services Ltd., Series B, due 3/31/02
(c).................................................. 540,000
-----------
Singapore -- 1.6%
188,385 Overseas Union Bank, due 1/6/02 (d)................... 346,403
-----------
TOTAL EQUITY-LINKED NOTES
(Cost -- $291,077).................................... 886,403
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $18,291,051*)................................ $21,253,885
===========
</TABLE>
------
(a) Non-income producing security.
(b) Foreign shares.
(c) The current principal amount of these notes is eqivalent to 157,480 shares
of Satyam Computer. Redemption proceeds will be determined at the date of
redemption based on change in the value of the shares of Satyam Computer.
Interest on the notes is equal to the amount of dividends paid on the un-
derlying 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 the 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
Dollar. 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:
GDR -- Global Depository Receipt.
See Notes to Financial Statements.
30
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers International Equity Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
COMMON STOCK -- 100.0%
Canada -- 4.7%
25,600 Bombardier Inc. ......................................... $ 694,985
34,400 CGI Group Inc., Class A Shares........................... 279,500
-----------
974,485
-----------
Finland -- 4.8%
11,000 Nokia Corp., Sponsored ADR............................... 549,313
9,800 Sonera Group............................................. 448,576
-----------
997,889
-----------
France -- 2.7%
7,200 Axa, Sponsored ADR....................................... 572,850
-----------
Germany -- 2.2%
8,200 Adidas - Salomon AG ..................................... 452,765
-----------
Hong Kong -- 2.4%
14,500 Asia Satellite Telecommunications, Sponsored ADR......... 496,625
-----------
Ireland -- 5.7%
24,300 Allied Irish Banks PLC, Sponsored ADR.................... 431,325
15,600 Elan Corp. PLC, Sponsored ADR............................ 755,625
-----------
1,186,950
-----------
Italy -- 5.5%
50,600 Luxottica Group S.p.A., Sponsored ADR.................... 616,687
51,900 Telecom Italia Mobile S.p.A.............................. 532,338
-----------
1,149,025
-----------
Japan -- 24.8%
10,000 Canon, Inc. ............................................. 499,031
43 DDI Corp................................................. 414,536
1,200 Fast Retailing Co. ...................................... 503,568
14,000 Fujitsu Ltd. ............................................ 485,610
2,700 Fujitsu Support and Services Inc. ....................... 267,946
32 Nippon Telegraph & Telephone Corp. ...................... 426,445
29 NTT Data Corp. .......................................... 298,757
2,800 Ryohin Keikaku Co. ...................................... 357,261
2,800 Secom Co., Ltd., Unsponsored ADR......................... 410,189
3,000 Seven-Eleven Japan Co., Ltd. ............................ 251,500
4,500 Sony Corp. .............................................. 421,058
3,000 TDK Corp. ............................................... 432,116
2,500 Trend Micro Inc. ........................................ 413,497
-----------
5,181,514
-----------
Netherlands -- 10.3%
13,400 ASM Lithography Holding N.V. ............................ 591,275
9,329 ING Groep N.V., Sponsored ADR............................ 629,707
10,000 Koninklijke Ahold N.V., Sponsored ADR.................... 293,125
10,000 STMicroelectonics N.V., NY Shares........................ 641,875
-----------
2,155,982
-----------
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers International Equity Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
Spain -- 7.3%
48,200 Banco Santander Central Hispano SA....................... $ 510,559
7,150 Telefonica SA, Sponsored ADR............................. 458,047
99,800 Telepizza SA............................................. 564,442
-----------
1,533,048
-----------
Switzerland -- 2.7%
4,600 ABB Ltd.................................................. 552,334
-----------
United Kingdom -- 26.9%
237,800 Ashtead Group PLC........................................ 340,203
240,400 Avis Europe PLC.......................................... 864,355
39,900 Cobham PLC............................................... 604,042
113,100 Invensys PLC............................................. 424,200
43,500 Johnson Matthey PLC...................................... 609,151
47,600 Lloyds TBS Group PLC..................................... 451,103
41,025 Misys PLC................................................ 340,038
50,600 Provident Financial PLC.................................. 527,793
161,400 Rentokil Initial PLC..................................... 367,124
38,600 Shire Pharmaceuticals Group PLC.......................... 668,510
10,200 Vodafone Airtouch PLC, Sponsored ADR..................... 422,662
-----------
5,619,181
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $20,614,181*)................................... $20,872,648
===========
</TABLE>
------
* 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.
32
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Small Cap Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
COMMON STOCK -- 89.8%
Basic Industries -- 4.9%
400,000 AK Steel Holding Corp. ............................. $ 3,200,000
213,500 The Geon Co. ....................................... 3,949,750
175,000 OM Group, Inc. ..................................... 7,700,000
300,000 Steel Dynamics, Inc. (a)............................ 2,718,750
------------
17,568,500
------------
Communications -- 8.6%
105,000 Cox Radio, Inc., Class A Shares (a)................. 2,940,000
250,000 Dobson Communications Corp., Class A Shares (a)..... 4,812,500
200,000 Electric Lightwave, Inc., Class A Shares (a)........ 3,737,500
60,000 Entercom Communications Corp. (a)................... 2,925,000
170,000 ICG Communications, Inc. (a)........................ 3,750,625
50,000 Intermedia Communications, Inc. (a)................. 1,487,500
25,000 On Command Corp. (a)................................ 356,250
50,000 Pac-West Telecomm, Inc. (a)......................... 1,000,000
40,000 Pegasus Communications Corp. (a).................... 1,962,500
Rogers Cantel Mobile Communications Inc., Class B
60,000 Shares (a).......................................... 2,017,500
250,000 Sinclair Broadcast Group, Inc., Class A Shares (a).. 2,750,000
50,000 US Unwired Inc. (a)................................. 650,000
25,000 XM Satellite Radio Holdings Inc. (a)................ 935,938
50,000 Young Broadcasting Inc., Class A Shares (a)......... 1,284,375
------------
30,609,688
------------
Consumer -- 16.0%
378,800 Abercrombie & Fitch Co., Class A Shares (a)......... 4,616,625
82,500 Charles River Associates Inc. (a)................... 1,454,063
80,000 Coca-Cola Bottling Co. Consolidated................. 3,640,000
145,000 Cost Plus, Inc. (a)................................. 4,159,687
56,000 Darden Restaurants, Inc. ........................... 910,000
150,000 DeVry, Inc. (a)..................................... 3,965,625
85,000 FactSet Research Systems Inc. ...................... 2,401,250
200,000 Fossil, Inc. (a).................................... 3,887,500
150,000 Hooper Holmes, Inc. ................................ 1,200,000
115,000 MAXIMUS, Inc. (a)................................... 2,544,375
225,000 Michael Foods, Inc. ................................ 5,512,500
90,000 On Assignment, Inc. (a)............................. 2,745,000
220,000 The Profit Recovery Group International, Inc. (a)... 3,657,500
60,000 QRS Corp. (a)....................................... 1,473,750
196,500 Sun International Hotels Ltd. (a)................... 3,930,000
95,000 Station Casinos, Inc. (a)........................... 2,375,000
75,000 THQ Inc. (a)........................................ 914,063
55,000 Trex Co., Inc. (a).................................. 2,750,000
275,000 Wendy's International, Inc. ........................ 4,898,437
------------
57,035,375
------------
Energy -- 5.0%
103,400 Caminus Corp. (a)................................... 2,533,300
100,000 Frontier Oil Corp. ................................. 800,000
75,000 Paradigm Geophysical Ltd. (a)....................... 450,000
125,000 Pogo Producing Co. ................................. 2,765,625
150,000 SEACOR SMIT Inc. (a)................................ 5,803,125
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Small Cap Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Energy -- 5.0% (continued)
250,000 Tesoro Petroleum Corp. (a).......................... $ 2,531,250
300,000 3TEC Energy Corp. (a)............................... 3,000,000
------------
17,883,300
------------
Financial Services -- 7.1%
225,500 Banknorth Group, Inc. .............................. 3,452,969
129,300 Commerce Bancorp, Inc. ............................. 5,947,800
75,000 Legg Mason, Inc. ................................... 3,750,000
150,000 Mercantile Bankshares Corp. ........................ 4,471,875
150,000 Protective Life Corp. .............................. 3,993,750
140,000 Westamerica Bancorporation.......................... 3,657,500
------------
25,273,894
------------
Healthcare -- 6.9%
110,000 Alpharma, Inc., Class A Shares (a).................. 6,847,500
23,000 ArthroCare Corp. (a)................................ 1,224,750
400,000 Biota Holdings Ltd. (a)............................. 830,952
135,000 Cyberonics, Inc. (a)................................ 1,620,000
22,700 Data Critical Corp. (a)............................. 295,100
Health Management Associates, Inc., Class A Shares
220,000 (a)................................................. 2,873,750
4,950 Invitrogen Corp. (a)................................ 372,255
37,500 Laboratory Corporation of America Holdings (a)...... 2,892,188
80,000 Novoste Corp. (a)................................... 4,880,000
44,600 NPS Pharmaceuticals, Inc. (a)....................... 1,193,050
24,600 ORATEC Interventions, Inc. (a)...................... 821,025
125,000 Quidel Corp. (a).................................... 656,250
------------
24,506,820
------------
Real Estate -- 0.8%
40,000 Cousins Properties, Inc. ........................... 1,540,000
60,000 PS Business Parks, Inc., Class A Shares............. 1,440,000
------------
2,980,000
------------
Technology -- 40.5%
150,000 Advanced Fibre Communications, Inc. (a)............. 6,796,875
100,000 Aeroflex Inc. (a)................................... 4,968,750
100,000 ANTEC Corp. (a)..................................... 4,156,250
32,000 Applied Micro Circuits Corp. (a).................... 3,160,000
113,000 Applied Science and Technology, Inc. (a)............ 2,923,875
247,000 ASM International N.V. (a).......................... 6,545,500
100,000 Celeritek, Inc. (a)................................. 4,081,250
40,000 Commerce One, Inc. (a).............................. 1,815,625
100,000 Commscope, Inc. (a)................................. 4,100,000
270,000 Digital Microwave Corp. (a)......................... 10,293,750
1,800 Exfo Electro-Optical Engineering Inc. (a)........... 78,975
107,000 Inet Technologies, Inc. (a)......................... 5,804,750
131,000 Insight Enterprises, Inc. (a)....................... 7,769,937
180,000 Integrated Silicon Solution, Inc. (a)............... 6,840,000
131,700 Latitude Communications, Inc. (a)................... 1,473,394
5,500 Marvell Technology Group Ltd. (a)................... 313,500
1,100 Netease.com, Inc. ADR (a)........................... 13,338
130,000 Network Appliance, Inc. (a)......................... 10,465,000
1,900 New Focus, Inc. (a)................................. 156,037
72,000 Newport Corp. ...................................... 7,731,000
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Small Cap Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Technology -- 40.5% (continued)
50,000 NHC Communications Inc. (a)........................ $ 389,755
100,000 Organic, Inc. (a).................................. 975,000
150,000 P-Com, Inc. (a).................................... 853,125
42,500 Polycom, Inc. (a).................................. 3,998,984
230,000 Quintus Corp. (a).................................. 4,567,656
190,000 Razorfish, Inc. (a)................................ 3,051,875
117,100 Sawtek Inc. (a).................................... 6,740,569
81,900 Siebel Systems, Inc. (a)........................... 13,395,769
70,000 Silicon Storage Technology, Inc. (a)............... 6,181,875
198,400 Snowball.com, Inc. (a)............................. 967,200
47,750 TranSwitch Corp. (a)............................... 3,685,703
27,200 Ulticom Inc. (a)................................... 653,225
85,000 Valence Technology, Inc. (a)....................... 1,567,187
230,000 Viasystems Group, Inc. (a)......................... 3,723,125
150,000 Viant Corp. (a).................................... 4,443,750
------------
144,682,604
------------
TOTAL COMMON STOCK
(Cost -- $251,177,283)............................. 320,540,181
------------
<CAPTION>
Face
Amount
-----------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 3.0%
Healthcare -- 3.0%
$ 5,265,000 Invitrogen Corp., 5.500% due 3/1/07 (b)............ 5,587,481
3,500,000 Vertex Pharmaceuticals, 5.000% due 3/14/07 (b)..... 5,018,125
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $8,262,063)............................... 10,605,606
------------
REPURCHASE AGREEMENT -- 7.2%
25,757,000 SBC Warburg Dillon Read Inc., 6.550% due 7/3/00;
Proceeds at maturity -- $25,771,057; (Fully
collateralized by U.S. Treasury Bonds, 7.500% due
11/15/16; Market value -- $26,272,838) (Cost --
$25,757,000)..................................... 25,757,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $285,196,346*)............................ $356,902,787
============
</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.
35
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
COMMON STOCK -- 91.2%
Basic Industries -- 5.9%
400,000 AK Steel Holding Corp. ............................ $ 3,200,000
250,000 Crown Cork & Seal Co., Inc. ....................... 3,750,000
295,000 The Geon Co. ...................................... 5,457,500
175,000 International Paper Co. ........................... 5,217,188
750,000 LTV Corp. ......................................... 2,156,250
37,000 Olin Corp. ........................................ 610,500
200,000 OM Group, Inc. .................................... 8,800,000
------------
29,191,438
------------
Capital Goods -- 1.1%
1,000,000 Harnischfeger Industries, Inc. (a)................. 340,000
125,000 Ingersoll-Rand Co. ................................ 5,031,250
------------
5,371,250
------------
Communications -- 11.9%
125,000 Bell Atlantic Corp.+ .............................. 6,351,563
250,000 Dobson Communications Corp., Class A Shares (a).... 4,812,500
250,000 Genuity Inc. ...................................... 2,289,063
125,000 GTE Corp.+ ........................................ 7,781,250
250,000 ICG Communications, Inc. (a)....................... 5,515,625
30,700 NTL Inc. (a)....................................... 1,838,163
Rogers Cantel Mobile Communications Inc., Class B
200,000 Shares (a)......................................... 6,725,000
120,000 SBC Communications Inc. ........................... 5,190,000
Sinclair Broadcast Group, Inc., Class A Shares
575,000 (a)................................................ 6,325,000
100,000 UnitedGlobalCom Inc., Class A Shares (a)........... 4,675,000
150,000 WorldCom, Inc. (a)................................. 6,881,250
------------
58,384,414
------------
Consumer Cyclicals -- 11.4%
410,300 Abercrombie & Fitch Co. (a)........................ 5,000,531
450,000 Costco Wholesale Corp. (a)......................... 14,850,000
450,000 Federated Department Stores, Inc. (a).............. 15,187,500
466,286 Fine Host Corp. (a)(b)............................. 4,373,074
273,000 PRIMEDIA Inc. (a).................................. 6,210,750
196,500 Sun International Hotels Ltd. (a).................. 3,930,000
350,000 Wendy's International, Inc. ....................... 6,234,375
------------
55,786,230
------------
Consumer Non-Cyclicals -- 25.1%
150,000 AT&T Corp. - Liberty Media, Class A Shares......... 3,637,500
400,000 Delhaize America, Inc., Class B Shares............. 6,150,000
200,000 The Gillette Co. .................................. 6,987,500
67,700 Hannaford Bros. Co. ............................... 4,865,938
Hearst-Argyle Television, Inc., Class A Shares
175,000 (a)................................................ 3,412,500
800,000 Hormel Foods Corp. ................................ 13,450,000
250,000 John B. Sanfillippo & Son Inc. (a)................. 734,375
300,000 Michael Foods, Inc................................. 7,350,000
734,400 Nabisco Group Holdings Corp. ...................... 19,048,500
150,000 The News Corp. Ltd., ADR........................... 7,125,000
450,000 The Pepsi Bottling Group, Inc. .................... 13,134,375
175,000 PepsiCo, Inc....................................... 7,776,563
200,000 Philip Morris Cos., Inc. .......................... 5,312,500
450,000 Safeway Inc. (a)................................... 20,306,250
450,000 Tyson Foods, Inc., Class A Shares.................. 3,937,500
------------
123,228,501
------------
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Energy -- 8.2%
400,000 3TEC Energy Corp. ................................. $ 4,000,000
106,800 Caminus Corp. (a).................................. 2,616,600
200,000 Conoco Inc., Class B Shares........................ 4,912,500
150,000 Devon Energy Corp. ................................ 8,428,125
250,000 Paradigm Geophysical Ltd. (a)...................... 1,500,000
140,500 R&B Falcon Corp. (a)............................... 3,310,531
250,000 Suncor Energy Inc. ................................ 5,828,125
950,000 Tesoro Petroleum Corp. (a)......................... 9,618,750
------------
40,214,631
------------
Financial Services -- 6.8%
200,000 The Bank of New York Co., Inc. .................... 9,300,000
246,500 Banknorth Group, Inc. ............................. 3,774,531
100,000 Comerica Inc. ..................................... 4,487,500
150,000 FleetBoston Financial Corp. ....................... 5,100,000
225,000 Mercantile Bankshares Corp. ....................... 6,707,813
150,000 Protective Life Corp. ............................. 3,993,750
------------
33,363,594
------------
Healthcare -- 5.8%
Health Management Associates, Inc., Class A Shares
200,000 (a)................................................ 2,612,500
150,000 Merck & Co., Inc. ................................. 11,493,750
175,000 Novartis AG, ADR (a)............................... 7,000,000
46,000 Nycomed Amersham PLC, ADR.......................... 2,254,000
100,000 Schering-Plough Corp. ............................. 5,050,000
------------
28,410,250
------------
Technology -- 15.0%
225,000 3Com Corp. (a)..................................... 12,965,625
100,000 Advanced Micro Devices, Inc. (a)................... 7,725,000
175,000 ASM International N.V. (a)......................... 4,637,500
200,000 Compaq Computer Corp. ............................. 5,112,500
60,000 Comverse Technology, Inc. (a)...................... 5,580,000
166,200 Cypress Semiconductor Corp. (a).................... 7,021,950
200,000 Digital Microwave Corp. (a)........................ 7,625,000
2,500 Exfo Electro-Optical Engineering Inc. (a) ......... 109,688
45,000 International Business Machines Corp. ............. 4,930,313
165,500 Latitude Communications, Inc. (a).................. 1,851,531
7,500 Marvell Technology Group Ltd. ..................... 427,500
1,500 Netease.com Inc. .................................. 18,188
175,000 Organic, Inc. (a).................................. 1,706,250
50,000 Plantronics, Inc. (a).............................. 5,775,000
75,000 Seagate Technology, Inc. (a)....................... 4,125,000
250,000 SpeedFam-IPEC, Inc. (a)............................ 4,546,871
------------
74,157,916
------------
TOTAL COMMON STOCK
(Cost -- $382,081,822)............................. 448,108,224
------------
<CAPTION>
Face
Amount
<C> <S> <C>
-----------
CONVERTIBLE CORPORATE BONDS -- 1.9%
Consumer Cyclicals -- 1.2%
Sunbeam Corp.:
$25,000,000 Zero coupon due 3/25/18 (c)(d)..................... 4,062,500
10,000,000 Zero coupon due 3/25/18 (d)........................ 1,625,000
------------
5,687,500
------------
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Capital Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Energy -- 0.7%
$ 6,000,000 Friede Goldman Halter Inc., 4.500% due 9/15/04..... $ 3,637,500
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $10,402,367).............................. 9,325,000
------------
CORPORATE BONDS -- 1.4%
Capital Goods -- 1.2%
Harnischfeger Industries, Inc.:
9,000,000 8.700% due 6/15/22 (a)(d).......................... 3,465,000
6,000,000 7.250% due 12/15/25 (a)(d)......................... 2,310,000
------------
5,775,000
------------
Consumer Cyclicals -- 0.0%
Breed Technologies, Inc., 9.250% due 4/15/08
2,500,000 (a)(d)............................................. 28,125
------------
Financial Services -- 0.2%
ContiFinancial Corp.:
875,000 7.500% due 3/15/02 (a)(d).......................... 109,375
5,115,000 8.125% due 4/1/08 (d).............................. 639,375
------------
748,750
------------
TOTAL CORPORATE BONDS
(Cost -- $7,735,911)............................... 6,551,875
------------
<CAPTION>
Contracts
<C> <S> <C>
-----------
PURCHASED PUT OPTIONS -- 0.2%
125,000 DoubleClick Inc., Expire 7/22/00, exercise price
$35................................................ 285,156
Inter@ctive Week Internet Index:
25,000 Expire 8/19/00, exercise price $450................ 209,375
5,000 Expire 8/19/00, exercise price $480................ 83,750
10,000 Expire 8/19/00, exercise price $400................ 87,500
S&P 500 Index Option:
10,000 Expire 7/22/00, exercise price $1,400.............. 65,625
10,000 Expire 7/22/00, exercise price $1,425.............. 131,250
------------
TOTAL PURCHASED PUT OPTIONS
(Cost -- $1,291,351)............................... 862,656
------------
<CAPTION>
Face
Amount
<C> <S> <C>
-----------
REPURCHASE AGREEMENT -- 5.3%
$25,892,000 State Street Bank & Trust Co., 6.550% due 7/3/00;
Proceeds at maturity -- $25,906,133;
(Fully collateralized by U.S. Treasury Notes,
12.000% due 8/15/13; Market value -- $25,992,044)
(Cost -- $25,892,000)............................. 25,892,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $427,403,451*)............................ $490,739,755
============
</TABLE>
------
(a) Non-income producing security.
(b) Security valued in accordance with fair valuation procedures.
(c) 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.
(d) Security is currently in default.
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
* 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.
38
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Large Cap Growth Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
COMMON STOCK -- 100.0%
Business Services -- 1.6%
1,140 Automatic Data Processing, Inc. ......................... $ 61,061
3,450 Concord EFS, Inc. (a).................................... 89,700
1,600 MarchFirst, Inc. (a)..................................... 29,200
945 Paychex, Inc. ........................................... 39,690
-----------
219,651
-----------
Commercial Services -- 2.1%
3,390 The Interpublic Group of Cos., Inc. ..................... 145,770
1,580 Omnicom Group Inc. ...................................... 140,719
-----------
286,489
-----------
Communications -- 2.6%
2,500 Bell Atlantic Corp.+ .................................... 127,031
3,050 BellSouth Corp. ......................................... 130,006
1,630 QUALCOMM Inc. (a)........................................ 97,800
-----------
354,837
-----------
Computers -- 13.4%
2,770 Dell Computer Corp. (a).................................. 136,596
6,850 Intel Corp. ............................................. 915,759
4,680 International Business Machines Corp. ................... 512,753
2,880 Sun Microsystems, Inc. (a)............................... 261,900
-----------
1,827,008
-----------
Computer Software and Services -- 11.9%
610 Adobe Systems Inc. ...................................... 79,300
3,310 America Online, Inc. (a)................................. 174,603
450 Computer Sciences Corp. (a).............................. 33,609
8,480 Microsoft Corp. (a)...................................... 678,400
790 National Instruments Corp. (a)........................... 34,464
1,170 Network Appliance, Inc. (a).............................. 94,185
4,920 Oracle Corp. (a)......................................... 413,587
880 Yahoo! Inc. (a).......................................... 109,010
-----------
1,617,158
-----------
Consumer Non-Cyclicals -- 1.7%
4,080 The Coca-Cola Co......................................... 234,345
-----------
Drugs and Healthcare -- 10.1%
1,990 Amgen Inc. (a)........................................... 139,798
720 Biogen, Inc. (a)......................................... 46,440
1,240 Eli Lilly & Co. ......................................... 123,845
3,420 Johnson & Johnson........................................ 348,412
12,405 Pfizer Inc. ............................................. 595,440
2,370 Schering-Plough Corp. ................................... 119,685
-----------
1,373,620
-----------
Electronics -- 4.3%
330 Altera Corp. (a)......................................... 33,639
820 American Power Conversion Corp. (a)...................... 33,467
850 Dallas Semiconductor Corp. .............................. 34,637
2,230 Linear Technology Corp. ................................. 142,581
620 Micrel, Inc. (a)......................................... 26,931
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Large Cap Growth Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
Electronics -- 4.3% (continued)
620 Sanmina Corp. (a)........................................ $ 53,010
630 Tellabs, Inc. (a)........................................ 43,116
2,600 Texas Instruments Inc. .................................. 178,587
430 Xilinx, Inc. (a)......................................... 35,502
-----------
581,470
-----------
Entertainment -- 1.9%
2,140 Time Warner Inc. ........................................ 162,640
2,640 The Walt Disney Co. ..................................... 102,465
-----------
265,105
-----------
Finance -- 7.1%
3,180 American Express Co. .................................... 165,758
2,310 The Bank of New York Co., Inc. .......................... 107,415
2,010 Fannie Mae............................................... 104,897
1,370 Freddie Mac.............................................. 55,485
6,650 MBNA Corp. .............................................. 180,381
820 Merrill Lynch & Co., Inc. ............................... 94,300
2,270 Morgan Stanley Dean Witter & Co. ........................ 188,977
1,160 Northern Trust Corp. .................................... 75,473
-----------
972,686
-----------
Industrial Manufacturing and Processing -- 9.8%
710 Emerson Electric Co. .................................... 42,866
18,970 General Electric Co. .................................... 1,005,410
1,450 Genuine Parts Co. ....................................... 29,000
1,970 Illinois Tool Works Inc. ................................ 112,290
3,070 Tyco International Ltd. ................................. 145,441
-----------
1,335,007
-----------
Insurance -- 4.7%
3,760 American International Group, Inc. ...................... 441,800
1,885 Marsh & McLennan Cos., Inc. ............................. 196,865
-----------
638,665
-----------
Oil and Gas -- 4.3%
1,860 Diamond Offshore Drilling, Inc. ......................... 65,332
2,610 ENSCO International Inc. ................................ 93,471
5,540 Exxon Mobil Corp. ....................................... 434,890
-----------
593,693
-----------
Retail -- 8.0%
2,310 Bed Bath & Beyond Inc. (a)............................... 83,738
2,600 The Gap, Inc. ........................................... 81,250
3,280 The Home Depot, Inc. .................................... 163,795
1,700 Intimate Brands, Inc. ................................... 33,575
2,390 Kohl's Corp. (a)......................................... 132,944
1,500 The Limited, Inc. ....................................... 32,437
1,200 Lowe's Cos., Inc. ....................................... 49,275
7,640 Wal-Mart Stores, Inc. ................................... 440,255
2,440 Walgreen Co. ............................................ 78,537
-----------
1,095,806
-----------
</TABLE>
See Notes to Financial Statements.
40
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Large Cap Growth Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
Technology -- 10.7%
11,250 Cisco Systems, Inc. (a).................................. $ 715,078
350 Comverse Technology, Inc. (a)............................ 32,550
4,280 EMC Corp. (a)............................................ 329,292
1,330 Hewlett-Packard Co. ..................................... 166,084
895 Lexmark International Group, Inc. (a).................... 60,189
4,130 Motorola, Inc. .......................................... 120,028
610 Symbol Technologies, Inc. ............................... 32,940
-----------
1,456,161
-----------
Telecommunications -- 5.8%
4,600 Nortel Networks Corp. ................................... 313,950
6,130 SBC Communications Inc. ................................. 265,123
4,630 WorldCom, Inc. (a)....................................... 212,401
-----------
791,474
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $12,513,523*)................................... $13,643,175
===========
</TABLE>
------
(a) Non-income producing security.
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
41
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Value Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
COMMON STOCK -- 94.4%
Basic Industries -- 2.6%
375,000 Alcoa, Inc. ........................................ $ 10,875,000
370,000 International Paper Co. ............................ 11,030,625
------------
21,905,625
------------
Capital Goods -- 2.5%
395,000 Honeywell International Inc. ....................... 13,306,563
200,000 Ingersoll-Rand Co. ................................. 8,050,000
------------
21,356,563
------------
Communication Services -- 9.2%
150,000 ALLTEL Corp. ....................................... 9,290,625
285,000 Bell Atlantic Corp.+ ............................... 14,481,563
48,000 General Motors Corp., Class H Shares................ 4,212,000
240,000 GTE Corp.+ ......................................... 14,940,000
425,000 SBC Communications Inc. ............................ 18,381,250
347,500 WorldCom, Inc. (a).................................. 15,941,562
------------
77,247,000
------------
Consumer Cyclicals -- 4.9%
500,000 Costco Wholesale Corp. ............................. 16,500,000
367,000 Federated Department Stores, Inc. (a)............... 12,386,250
215,000 Target Corp. ....................................... 12,470,000
------------
41,356,250
------------
Consumer Non-Cyclicals -- 20.0%
340,000 AT&T Corp. - Liberty Media, Class A Shares.......... 8,245,000
100,000 Albertson's, Inc. .................................. 3,325,000
527,200 Coca-Cola Enterprises Inc. ......................... 8,599,950
297,000 Delhaize America, Inc., Class B Shares.............. 4,566,375
210,000 Kimberly-Clark Corp. ............................... 12,048,750
200,000 McDonald's Corp. ................................... 6,587,500
847,300 Nabisco Group Holdings Corp. ....................... 21,976,844
300,000 The News Corp. Ltd. ADR............................. 14,250,000
655,000 The Pepsi Bottling Group, Inc. ..................... 19,117,812
225,000 PepsiCo, Inc. ...................................... 9,998,438
535,000 Philip Morris Cos. Inc. ............................ 14,210,937
375,000 R.J. Reynolds Tobacco Holdings, Inc. ............... 10,476,563
552,700 Ralston Purina Group................................ 11,019,456
410,000 Safeway Inc. (a).................................... 18,501,250
643,500 Tyson Foods, Inc., Class A Shares................... 5,630,625
------------
168,554,500
------------
Energy -- 7.2%
150,000 Amerada Hess Corp. ................................. 9,262,500
252,000 Burlington Resources Inc. .......................... 9,639,000
475,000 Conoco Inc., Class A Shares......................... 10,450,000
205,000 Royal Dutch Petroleum Co. ADR....................... 12,620,313
185,000 Total Fina SA ADR................................... 14,210,312
166,600 USX - Marathon Group................................ 4,175,412
------------
60,357,537
------------
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Value Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
Financial Services -- 16.1%
144,000 American Express Co. ................................ $ 7,506,000
115,000 American General Corp. .............................. 7,015,000
365,000 Associates First Captial Corp. ...................... 8,144,063
395,000 The Bank of New York Co., Inc. ...................... 18,367,500
285,000 The Chase Manhattan Corp. ........................... 13,127,813
180,000 Comerica Inc. ....................................... 8,077,500
332,367 FleetBoston Financial Group, Inc. ................... 11,300,478
180,000 Freddie Mac.......................................... 7,290,000
385,000 Household International, Inc. ....................... 16,001,562
390,000 MBNA Corp. .......................................... 10,578,750
150,000 Morgan Stanley Dean Witter & Co. .................... 12,487,500
182,500 U.S. Bancorp. ....................................... 3,513,125
405,000 Washington Mutual, Inc. ............................. 11,694,375
------------
135,103,666
------------
Healthcare -- 9.0%
220,000 Abbott Laboratories.................................. 9,803,750
185,000 American Home Products Corp. ........................ 10,868,750
75,000 Eli Lilly & Co. ..................................... 7,490,625
200,000 Merck & Co., Inc. ................................... 15,325,000
225,000 Novartis AG, ADR (a)................................. 9,000,000
343,910 Pharmacia Corp. ..................................... 17,775,848
110,000 Schering-Plough Corp. ............................... 5,555,000
------------
75,818,973
------------
Real Estate Investment Trust -- 0.5%
150,000 Equity Office Properties Trust....................... 4,134,375
------------
Technology -- 18.4%
311,500 3Com Corp. (a)....................................... 17,950,187
130,000 Alcatel SA ADR....................................... 8,645,000
90,000 Applied Materials, Inc. (a).......................... 8,156,250
610,000 Compaq Computer Corp. ............................... 15,593,125
185,000 Computer Associates International, Inc. ............. 9,469,688
17,000 Corning Inc. ........................................ 4,587,893
90,000 Hewlett-Packard Co. ................................. 11,238,750
75,000 Intel Corp. ......................................... 10,026,563
170,000 International Business Machines Corp. ............... 18,625,625
109,720 Micron Technology, Inc. (a).......................... 9,662,218
150,000 Motorola, Inc. ...................................... 4,359,375
335,000 National Semiconductor Corp. (a)..................... 19,011,250
165,000 Seagate Technology, Inc. (a)......................... 9,075,000
130,000 Tellabs, Inc. (a).................................... 8,896,875
------------
155,297,799
------------
Transportation -- 1.8%
280,000 Canadian National Railway Co. ....................... 8,172,500
270,000 Canadian Pacific Ltd. ............................... 7,070,625
------------
15,243,125
------------
Utilities -- 2.2%
125,100 The Coastal Corp. ................................... 7,615,462
260,000 The Williams Cos., Inc. ............................. 10,838,750
------------
18,454,212
------------
TOTAL COMMON STOCK
(Cost -- $615,317,439)............................... 794,829,625
------------
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Investors Value Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS -- 0.7%
NTL Inc., Sub. Notes:
$ 1,750,000 7.000% due 12/15/08................................ $ 2,859,062
3,950,000 5.750% due 12/15/09 (b)............................ 3,155,062
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $5,700,000)............................... 6,014,124
------------
REPURCHASE AGREEMENT -- 4.9%
41,202,000 SBC Warburg Dillion Read Inc., 6.550% due 7/3/00;
Proceeds at maturity -- $41,224,489; Fully
collateralized by U.S. Treasury Notes, 6.500% due
8/31/01; Market value -- $42,027,000) (Cost --
$41,202,000)..................................... 41,202,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $662,219,439*)............................ $842,045,749
============
</TABLE>
------
(a) Non-income producing security.
(b) Security is exempt from registration under rule 144A of the securities Act
of 1933. The security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
* 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.
44
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
COMMON STOCK -- 48.9%
Basic Industries -- 0.8%
218,600 USEC Inc. ........................................... $ 1,011,025
------------
Capital Goods -- 1.6%
20,726 Cooper Industries, Inc. (a).......................... 674,890
36,000 Pitney Bowes Inc. ................................... 1,440,000
------------
2,114,890
------------
Communications -- 5.3%
20,000 AT&T Corp. .......................................... 632,500
40,000 Bell Atlantic Corp. (a)+............................. 2,032,500
28,000 GTE Corp.+ .......................................... 1,743,000
59,100 SBC Communications Inc. (a).......................... 2,556,075
------------
6,964,075
------------
Consumer Cyclicals -- 2.9%
19,500 Eastman Kodak Co. ................................... 1,160,250
27,428 Fine Host Corp. (b)++ ............................... 257,234
6,000 J.C. Penney Co., Inc. ............................... 110,625
33,150 The May Department Stores Co. ....................... 795,600
48,000 Sears, Roebuck & Co. ................................ 1,566,000
------------
3,889,709
------------
Consumer Non-Cyclicals -- 5.7%
6,000 Anheuser-Busch Cos., Inc. ........................... 448,125
70,000 Avon Products, Inc. (a).............................. 3,115,000
13,000 The Coca-Cola Co. ................................... 746,688
50,000 Delhaize America, Inc., Class B Shares............... 768,750
10,000 H.J. Heinz Co. ...................................... 437,500
40,000 Hormel Foods Corp. .................................. 672,500
6,000 McDonald's Corp. .................................... 197,625
8,000 PepsiCo, Inc. ....................................... 355,500
45,000 Ralston Purina Group................................. 897,187
------------
7,638,875
------------
Energy -- 10.1%
25,000 Amerada Hess Corp. (a)............................... 1,543,750
30,436 BP Amoco PLC......................................... 1,721,536
41,482 Exxon Mobil Corp. ................................... 3,256,337
50,000 Halliburton Co. ..................................... 2,359,375
16,000 Royal Dutch Petroleum Co.-NY Shares.................. 985,000
20,000 Schlumberger Ltd. ................................... 1,492,500
60,000 Suncor Energy Inc. .................................. 1,398,750
12,000 Texaco Inc. ......................................... 639,000
------------
13,396,248
------------
Financial Services -- 2.8%
30,000 The Allstate Corp. .................................. 667,500
9,000 Bank of America Corp. ............................... 387,000
18,000 The Chubb Corp. ..................................... 1,107,000
20,000 First Union Corp. ................................... 496,250
30,000 FleetBoston Financial Corp. ......................... 1,020,000
------------
3,677,750
------------
Healthcare -- 6.1%
30,000 American Home Products Corp. (a)..................... 1,762,500
26,000 Bausch & Lomb Inc. .................................. 2,011,750
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
--------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
--------------------------------------------------------------------------------
Healthcare -- 6.1% (continued)
11,800 Johnson & Johnson.................................... $ 1,202,125
8,000 Merck & Co., Inc. ................................... 613,000
30,000 Pfizer Inc. ......................................... 1,440,000
21,900 Pharmacia Corp. ..................................... 1,131,956
------------
8,161,331
------------
Real Estate Investment Trust -- 7.2%
67,500 Arden Realty, Inc. .................................. 1,586,250
35,000 Bedford Property Investors, Inc. .................... 649,688
55,000 Brandywine Realty Trust.............................. 1,051,875
45,000 Duke-Weeks Realty Corp. ............................. 1,006,875
65,000 Glenborough Realty Trust Inc. ....................... 1,133,438
15,250 JDN Realty Corp. .................................... 155,359
75,000 Mid-Atlantic Realty Trust............................ 750,000
84,000 New Plan Excel Realty Trust.......................... 1,092,000
18,000 Prentiss Properties Trust............................ 432,000
35,000 Reckson Associates Realty Corp. ..................... 831,250
28,000 Sun Communities, Inc. ............................... 936,250
------------
9,624,985
------------
Technology -- 2.8%
31,000 International Business Machines Corp. (a)............ 3,396,438
15,000 Xerox Corp. ......................................... 311,250
------------
3,707,688
------------
Transportation -- 2.0%
40,000 Canadian National Railway Co. ....................... 1,167,500
30,000 Union Pacific Corp. ................................. 1,115,625
6,200 United Parcel Services, Inc., Class B Shares......... 365,800
------------
2,648,925
------------
Utilities -- 1.6%
40,000 Edison International................................. 820,000
45,000 Reliant Energy, Inc. ................................ 1,330,312
------------
2,150,312
------------
TOTAL COMMON STOCK
(Cost -- $62,082,554)................................ 64,985,813
------------
CONVERTIBLE PREFERRED STOCK -- 3.4%
Basic Industries -- 0.5%
10,000 International Paper Capital Trust, 5.250%............ 376,250
1,800 LTV Corp., 8.250% (c)................................ 76,050
3,200 LTV Corp., Series A, 8.250%.......................... 135,200
------------
587,500
------------
Communications -- 0.5%
12,500 ICG Funding LLC, 6.750%.............................. 651,563
------------
Consumer Cyclicals -- 0.5%
15,000 Wendy's Financing Series, 5.000%..................... 675,000
------------
Energy -- 1.5%
25,000 Kerr-McGee Corp., 5.500%............................. 1,243,750
25,000 Tesoro Petroleum Corp., 7.250%....................... 271,875
10,000 Tosco Financing Trust, 5.750%........................ 477,500
------------
1,993,125
------------
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Shares Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Transportation -- 0.4%
12,500 Canadian National Railway Co., 5.250%............... $ 562,499
TCR Holding Corp. (b):
321 Class B Shares...................................... 3
177 Class C Shares...................................... 2
466 Class D Shares...................................... 5
964 Class E Shares...................................... 9
------------
562,518
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(Cost -- $4,387,621)................................ 4,469,706
------------
<CAPTION>
Rights
----------
<C> <S> <C>
RIGHTS -- 0.0%
Real Estate Investment Trust -- 0.0%
70,000 Excel Realty Trust, Inc., Expire 5/1/08............. 0
65,000 Glenborough Realty Trust Inc., Expire 7/20/08....... 0
------------
TOTAL RIGHTS
(Cost -- $0)........................................ 0
------------
<CAPTION>
Face
Amount
----------
<C> <S> <C>
CORPORATE BONDS -- 14.5%
Basic Industries -- 1.6%
$ 200,000 Berry Plastics Corp., 12.250% due 4/15/04........... 190,750
125,000 Breed Technologies Inc., 9.250% due 4/15/08 (b)(d).. 1,406
250,000 Federal-Mogul Co., 7.500% due 1/15/09............... 171,562
125,000 Hexcel Corp., 9.750% due 1/15/09.................... 111,875
125,000 Indesco International Inc., 9.750% due 4/15/08...... 46,875
125,000 P&L Coal Holdings Corp., 9.625% due 5/15/08......... 116,563
200,000 Radnor Holdings Inc., 10.000% due 12/1/03........... 180,000
1,000,000 Raytheon Co., 6.150% due 11/1/08.................... 888,750
400,000 USX Corp., 7.200% due 2/15/04....................... 393,500
------------
2,101,281
------------
Capital Goods -- 0.1%
125,000 Jordan Industries Inc., 10.375% due 8/1/07.......... 115,000
------------
Consumer Cyclicals -- 0.9%
115,000 Cole National Group Inc., 8.625% due 8/15/07........ 76,475
100,000 Collins & Aikman Floor Coverings Inc., Series B,
10.000% due 1/15/07................................ 97,750
125,000 Daimlerchrysler NA Holding Corp., 7.750% due
5/27/03............................................ 125,938
250,000 HMH Properties, 7.875% due 8/1/08................... 225,625
50,000 Revlon Consumer Products, 8.625% due 2/1/08......... 25,500
675,000 Wal-Mart Stores, 7.550% due 2/15/30................. 691,875
------------
1,243,163
------------
Consumer Non-Cyclicals -- 1.9%
100,000 American Safety Razor Co., 9.875% due 8/1/05........ 96,500
250,000 B&G Foods Inc., 9.625% due 8/1/07................... 176,250
250,000 Delta Beverage Group Inc., 9.750% due 12/15/03...... 237,187
800,000 Fremont General Corp., 7.700% due 3/17/04........... 340,000
125,000 French Fragrances Inc., 10.375% due 5/15/07......... 120,625
125,000 Harrah's Operating Co., Inc., 7.875% due 12/15/05... 117,813
130,000 Hines Horticulture, Inc., 11.750% due 10/15/05...... 130,650
250,000 Home Interiors & Gifts Inc., 10.125% due 6/1/08..... 143,750
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 1.9% (continued)
$ 250,000 North Atlantic Trading Co., 11.000% due 6/15/04..... $ 226,875
250,000 Park Place Entertainment Corp., 7.875% due
12/15/05........................................... 235,625
125,000 Simmons Co., Series B, 10.250% due 3/15/09.......... 111,563
650,000 Spieker Properties, Inc., 7.250% due 5/1/09......... 606,125
------------
2,542,963
------------
Energy -- 0.5%
200,000 Benton Oil & Gas Co., 11.625% due 5/1/03............ 129,000
150,000 Clark R&M Inc., 8.875% due 11/15/07................. 96,750
425,000 Union Oil Co. of California, 7.350% due 6/15/09..... 413,313
------------
639,063
------------
Financial/Leasing -- 3.0%
ContiFinancial Corp.:
125,000 7.500% due 3/15/02.................................. 15,625
125,000 8.125% due 4/1/08................................... 15,625
1,000,000 Countrywide Home Loan Corp., 6.250% due 4/15/09..... 876,250
325,000 DVI Inc., 9.875% due 2/1/04......................... 297,375
700,000 Morgan Stanley Dean Witter & Co., 7.750% due
6/15/05............................................ 704,375
250,000 Motors & Gears, Inc., 10.750% due 11/15/06.......... 241,875
1,075,000 PaineWebber Group Inc., 7.625% due 12/1/09.......... 1,017,219
850,000 Sears Roebuck Acceptance Corp., 7.000% due 6/15/07.. 803,250
------------
3,971,594
------------
Healthcare -- 0.1%
100,000 Fresensius Medical Care Capital Trust I, 9.000% due
12/1/06............................................ 95,250
------------
Housing Related -- 0.2%
250,000 CB Richard Ellis Services., 8.875% due 6/1/06....... 213,750
------------
Manufacturing -- 0.5%
250,000 Axiohm Transaction Solution, Inc., 9.750% due
10/1/07 (b)(d)..................................... 51,875
250,000 High Voltage Engineering Inc., 10.500% due 8/15/04.. 173,750
250,000 Navistar International Corp., 8.000% due 2/1/08..... 230,625
250,000 Polymer Group, Inc., 9.000% due 7/1/07.............. 213,750
------------
670,000
------------
Media -- 3.6%
1,725,000 A.H. Belo Corp., 7.250% due 9/15/27................. 1,418,813
200,000 Adelphia Communications, 10.500% due 7/15/04........ 201,000
150,000 Century Communications, zero coupon due 1/15/08..... 62,250
200,000 CSC Holdings, Inc., 10.500% due 5/15/16............. 213,500
250,000 Diamond Cable Communications PLC, (zero coupon until
12/15/00, 11.750% thereafter) due 12/15/05......... 238,438
250,000 FrontierVision Holdings, 11.000% due 10/15/06....... 253,750
850,000 GTE Corp., 6.940% due 4/15/28+...................... 753,313
250,000 Hollinger International Publishing, 9.250% due
3/15/07............................................ 247,500
125,000 ICG Holdings Inc., (zero coupon until 9/15/00,
13.500% thereafter) due 9/15/05.................... 121,563
125,000 Intermedia Communication Inc., 8.600% due 6/1/08.... 116,250
250,000 Metronet Communications, (zero coupon until 6/15/03,
9.950% thereafter) due 6/15/08..................... 203,750
400,000 NTL Inc., Series B, (zero coupon until 2/1/01,
11.500% thereafter) due 2/15/06.................... 371,000
250,000 Rogers Communications, Inc., 8.875% due 7/15/07..... 246,250
400,000 Sprint Capital Corp., 5.700% due 11/15/03........... 379,500
------------
4,826,877
------------
Services and Other -- 1.1%
250,000 Allied Waste Industries, Inc., 7.875% due 1/1/09.... 214,375
750,000 Cendant Corp., 7.750% due 12/1/03................... 724,688
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Services and Other -- 1.1% (continued)
$ 250,000 Loomis Fargo & Co., 10.000% due 1/15/04............. $ 241,250
250,000 Pierce Leahy Corp., 11.125% due 7/15/06............. 259,375
125,000 Safety-Kleen Corp., 9.250% due 6/1/08............... 10,625
------------
1,450,313
------------
Telecommunication and Utilities -- 0.7%
250,000 Calpine Corp., 8.750% due 7/15/07................... 244,063
750,000 Duke Energy Corp., Series D, 7.375% due 3/1/10...... 738,750
------------
982,813
------------
Transportation -- 0.3%
250,000 Enterprise Shipholding Inc., 8.875% due 5/1/08...... 141,250
200,000 Holt Group, 9.750% due 1/15/06...................... 20,000
150,000 Teekay Shipping Corp., 8.320% due 2/1/08............ 138,750
265,000 TFM (zero coupon until 6/15/02, 11.750% thereafter)
due 6/15/09........................................ 182,188
------------
482,188
------------
TOTAL CORPORATE BONDS
(Cost -- $22,536,555)............................... 19,334,255
------------
CONVERTIBLE CORPORATE BONDS -- 8.5%
Consumer Cyclicals -- 0.5%
750,000 Costco Wholesale Corp., zero coupon due 8/19/17..... 617,813
------------
Consumer Non-Cyclicals -- 0.9%
Interpublic Group Co. Inc.:
250,000 1.870% due 6/1/06 (c)............................... 242,500
250,000 1.870% due 6/1/06................................... 242,500
2,000,000 Network Associates Inc., zero coupon due 2/13/18.... 712,500
------------
1,197,500
------------
Data Technology/Information Services -- 2.1%
750,000 Cypress Semiconductor Corp., 4.000% due 2/1/05...... 870,937
750,000 Integrated Process Equipment, 6.250% due 9/15/04
(c)................................................ 593,438
1,000,000 Quantum Corp., 7.000% due 8/1/04.................... 790,630
500,000 Redback Networks Inc., 5.000% due 4/1/07 (c)........ 567,500
------------
2,822,505
------------
Energy -- 1.5%
600,000 Diamond Offshore Drilling, 3.750% due 2/15/07....... 625,500
1,000,000 Friede Goldman Halter, 4.500% due 9/15/04........... 606,250
400,000 Kerr-McGee Corp., 7.500% due 5/15/14................ 385,500
500,000 Pogo Producing Co., 5.500% due 6/15/06.............. 419,375
------------
2,036,625
------------
Financial Services -- 0.6%
750,000 Credit Suisse First Boston Corp., 1.000% due
4/7/05............................................. 761,250
------------
Healthcare -- 0.9%
400,000 HEALTHSOUTH Corp., 3.250% due 4/1/03 (c)............ 316,000
500,000 Invitrogen Corp., 5.500% due 3/1/07 (c)............. 530,625
750,000 Roche Holdings Inc., zero coupon due 5/16/12 (c).... 349,687
------------
1,196,312
------------
Manufacturing -- 0.2%
Mark IV Industries:
200,000 4.750% due 11/1/04 (c).............................. 185,750
150,000 4.750% due 11/1/04.................................. 139,312
------------
325,062
------------
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
Media and Telecommunications -- 1.3%
$ 500,000 DSC Communications Corp., 7.000% due 8/1/04......... $ 571,875
700,000 Juniper Networks Inc., 4.750% due 3/15/07........... 777,000
500,000 NTL Inc., 5.750% due 12/15/09 (c)................... 399,375
------------
1,748,250
------------
Technology -- 0.5%
1,000,000 Solectron Corp., zero coupon due 5/8/20............. 635,000
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $11,207,074)............................... 11,340,317
------------
U.S. GOVERNMENT AGENCIES AND OBLIGATIONS -- 14.9%
U.S. Treasury Notes:
1,500,000 6.500% due 2/28/02.................................. 1,500,465
1,200,000 5.750% due 8/15/03.................................. 1,179,744
2,100,000 6.625% due 2/15/27 (a).............................. 2,227,302
Federal Home Loan Mortgage Corporation (FHLMC):
1,522,000 6.250% due 7/15/04.................................. 1,482,047
589,187 8.000% due 7/1/20................................... 598,573
202,862 6.500% due 3/1/26................................... 191,640
2,500,000 6.500% due 8/13/27 (e)(f)........................... 2,360,150
197,940 Gold, 6.500% due 3/1/26............................. 186,990
286,818 Gold, 6.500% due 5/1/26............................. 270,951
Federal National Mortgage Association (FNMA):
22,733 6.500% due 10/1/10.................................. 21,930
150,106 6.500% due 10/1/11.................................. 144,804
391,650 6.500% due 4/1/13................................... 377,818
225,538 6.500% due 5/1/13................................... 217,572
432,807 6.500% due 7/1/13................................... 417,520
684,902 9.000% due 1/1/24................................... 705,017
58,442 7.000% due 9/1/25................................... 56,433
121,943 6.500% due 12/1/25.................................. 115,007
170,922 7.000% due 3/1/26................................... 165,046
349,294 6.500% due 6/1/26................................... 329,426
252,382 7.000% due 3/1/27................................... 243,705
70,805 7.000% due 11/1/28.................................. 68,370
535,588 7.000% due 2/1/29................................... 517,174
44,130 7.000% due 3/1/29................................... 42,599
888,861 7.000% due 4/1/29................................... 858,026
2,340,000 6.000% due 9/1/30 (e)(f)............................ 2,140,351
3,355,000 8.000% due 11/1/30 (e)(f)........................... 3,368,621
------------
TOTAL U.S. GOVERNMENT AGENCIES AND OBLIGATIONS
(Cost -- $20,240,410)............................... 19,787,281
------------
ASSET-BACKED SECURITIES -- 3.4%
Financial/Leasing -- 3.4%
864,893 Contimortgage Home Equity Loan Trust, Series 1998-2,
Class A3, 6.130% due 3/15/13....................... 860,525
739,156 Green Tree Financial Corp., Series 1997-6, Class A8,
7.070% due 1/15/29................................. 698,503
1,100,000 LB Commercial Conduit Mortgage Trust, Series 1998-
C1, Class A2, 6.780% due 4/15/09................... 1,053,520
1,100,000 NationsBank Credit Card Master Trust, Series 1995-I,
Class A, 6.450% due 4/15/03........................ 1,099,406
825,000 Soundview Home Equity Loan Trust, Series 2000-1,
Class A1F, 8.640% due 5/25/30...................... 832,239
------------
TOTAL ASSET-BACKED SECURITIES
(Cost -- $4,602,085)................................ 4,544,193
------------
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
Schedules of Investments
(unaudited) (continued)
Salomon Brothers Balanced Fund
<TABLE>
-------------------------------------------------------------------------------
<CAPTION>
Face
Amount Security Value
<C> <S> <C>
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.4%
$8,533,000 SBC Warburg Dillon Read Inc., 6.550% due 7/3/00;
Proceeds at maturity -- $8,537,658; (Fully
collateralized by U.S. Treasury Bonds, 7.250% due
8/15/22; Market value -- $8,703,680) (Cost --
$8,533,000)....................................... $ 8,533,000
------------
TOTAL INVESTMENTS -- 100%
(Cost -- $133,589,299*)............................. $132,994,565
============
</TABLE>
------
(a) All or part of the security is segregated as collateral for mortgage dollar
rolls.
(b) Non-income producing security.
(c) 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.
(d) Security is in default.
(e) Mortgage dollar roll.
(f) Security is issued on a to-be-announced ("TBA") basis.
++ Security valued in accordance with fair valuation procedures .
+ On July 3, 2000, Bell Atlantic Corp. and GTE Corp. merged. The surviving
company was renamed Verizon Communications.
* 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.
51
<PAGE>
Statements of Assets and Liabilities
June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Asia International
Growth Equity
Fund Fund
-------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at cost............................... $18,291,051 $20,614,181
=========== ===========
Investments, at value.............................. $21,253,885 $20,872,648
Foreign currency, at value ++...................... -- 141
Cash............................................... 263,224 4,776,346
Receivable for securities and options sold......... 296,187 --
Receivable for Fund shares sold.................... 10,894 44,862
Dividends and interest receivable.................. 30,354 31,328
Receivable for open forward foreign currency
contracts......................................... 16,013 --
Receivable from manager............................ 50,991 --
Deferred organization costs........................ 19,043 --
Other assets....................................... -- --
----------- -----------
Total Assets....................................... 21,940,591 25,725,325
----------- -----------
LIABILITIES:
Payable for Fund shares purchased.................. 46,418 31,719
Service and distribution fees payable.............. 12,429 11,186
Administration fees payable........................ 1,963 2,344
Management fees payable............................ -- 1,790
Payable for securities and options purchased....... 657,458 --
Payable for open forward foreign currency
contracts......................................... 6,415 --
Dividends payable.................................. -- --
Payable for foreign currency, at value ++.......... 84,268 --
Accrued expenses................................... 20,539 61,102
Other liabilities.................................. 11,059 --
----------- -----------
Total Liabilities.................................. 840,549 108,141
----------- -----------
Total Net Assets.................................... $21,100,042 $25,617,184
=========== ===========
NET ASSETS:
Par value of shares of capital stock............... $ 1,842 $ 2,265
Capital paid in excess of par value................ 20,464,572 25,581,476
Undistributed (overdistributed) net investment
income............................................ -- --
Accumulated net investment loss.................... (154,038) (84,204)
Accumulated net realized gain (loss) from security
transactions, options and foreign currencies...... (2,185,472) (140,954)
Net unrealized appreciation (depreciation) of
investments, options and foreign currencies....... 2,973,138 258,601
----------- -----------
Total Net Assets................................... $21,100,042 $25,617,184
=========== ===========
Shares Outstanding:
Class A............................................. 571,915 1,103,717
=========== ===========
Class B............................................. 809,400 525,062
=========== ===========
Class 2............................................. 354,075 531,076
=========== ===========
Class O............................................. 106,359 105,265
=========== ===========
Net Asset Value:
Class A Shares
Net asset value*................................... $11.63 $11.34
=========== ===========
Maximum offering price per share (based on maximum
sales charge of 5.75%)............................ $12.34 $12.03
=========== ===========
Class B Shares
Net asset value and offering price per share*...... $11.35 $11.28
=========== ===========
Class 2 Shares
Net asset value*................................... $11.34 $11.27
=========== ===========
Maximum offering price per share (based on maximum
sales charge of 1.00%)............................ $11.45 $11.38
=========== ===========
Class O Shares
Net asset value, offering price and redemption
price per share................................... $11.72 $11.35
=========== ===========
</TABLE>
++Foreign currency at cost for the Asia Growth and International Equity Funds
is $(71,022) and $142, respectively.
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See Notes to Financial Statements.
52
<PAGE>
<TABLE>
<CAPTION>
Small Cap Investors
Growth Capital Large Cap Value Balanced
Fund Fund Growth Fund Fund Fund
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$285,196,346 $427,403,451 $12,513,523 $662,219,439 $133,589,299
============ ============ =========== ============ ============
$356,902,787 $490,739,755 $13,643,175 $842,045,749 $132,994,565
-- -- -- -- --
692 333 471,199 128 752
15,278,056 894,802 148,847 -- --
165,712 4,995,758 30,688 4,756,982 50,226
159,391 461,788 6,299 1,791,460 1,011,939
-- -- -- -- --
-- -- 14,667 -- --
-- -- -- -- 3,778
-- 4,255 -- -- --
------------ ------------ ----------- ------------ ------------
372,506,638 497,096,691 14,314,875 848,594,319 134,061,260
------------ ------------ ----------- ------------ ------------
2,572,435 191,430 20,000 383,311 438,835
173,075 155,476 8,599 92,404 87,298
31,112 -- 1,142 -- 11,036
234,059 270,345 -- 1,148,988 21,941
8,023,658 3,804,336 -- 1,283,100 7,842,358
-- -- -- -- --
-- 572,948 -- 2,349,991 356,697
-- -- -- -- --
131,003 118,184 36,675 179,022 154,505
190,123 -- -- -- 4,002
------------ ------------ ----------- ------------ ------------
11,355,465 5,112,719 66,416 5,436,816 8,916,672
------------ ------------ ----------- ------------ ------------
$361,151,173 $491,983,972 $14,248,459 $843,157,503 $125,144,588
============ ============ =========== ============ ============
$ 19,876 $ 17,822 $ 1,328 $ 39,134,469 $ 9,682
198,107,912 377,653,916 13,908,533 544,287,864 115,785,018
-- (161,429) -- 1,542,839 292,308
(1,237,562) -- (67,025) -- --
92,554,506 51,137,359 (724,029) 78,366,021 9,652,314
71,706,441 63,336,304 1,129,652 179,826,310 (594,734)
------------ ------------ ----------- ------------ ------------
$361,151,173 $491,983,972 $14,248,459 $843,157,503 $125,144,588
============ ============ =========== ============ ============
10,695,071 2,210,579 215,346 2,475,406 2,049,810
============ ============ =========== ============ ============
8,169,961 4,683,328 700,694 3,662,749 6,224,815
============ ============ =========== ============ ============
982,359 2,174,149 238,340 937,715 1,294,008
============ ============ =========== ============ ============
28,237 8,753,651 173,199 32,058,599 113,216
============ ============ =========== ============ ============
$18.32 $27.72 $10.77 $21.60 $12.96
============ ============ =========== ============ ============
$19.44 $29.41 $11.43 $22.92 $13.75
============ ============ =========== ============ ============
$17.99 $27.19 $10.71 $21.30 $12.91
============ ============ =========== ============ ============
$18.02 $27.23 $10.72 $21.33 $12.94
============ ============ =========== ============ ============
$18.20 $27.51 $10.83 $21.55 $13.07
============ ============ =========== ============ ============
$18.42 $27.89 $10.79 $21.57 $13.04
============ ============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
Statements of Operations
For the Six Months Ended June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Asia International
Growth Equity
Fund Fund
---------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends...................................... $ 170,572 $ 108,375
Interest....................................... -- 36,251
Less:Foreign withholding tax................... (13,994) (11,811)
Interest expense............................... (6,223) --
----------- -----------
Total Investment Income........................ 150,355 132,815
----------- -----------
EXPENSES:
Management fees (Note 2)....................... 92,440 74,464
Distribution and service fees (Note 2)......... 81,933 57,213
Shareholder and system servicing fees.......... 43,134 20,400
Audit and legal................................ 37,686 10,000
Custody........................................ 25,575 17,150
Registration fees.............................. 19,525 27,750
Amortization of deferred organization costs.... 11,217 --
Shareholder communications..................... 9,100 18,000
Administration fees (Note 2)................... 5,778 4,137
Directors' fees................................ 1,456 1,500
Other.......................................... 3,932 1,750
----------- -----------
Total Expenses................................. 331,776 232,364
Less: Management fee waivers and expense
reimbursements (Note 2).......................... (135,447) (51,044)
----------- -----------
Net Expenses................................... 196,329 181,320
----------- -----------
Net Investment Income (Loss).................... (45,974) (48,505)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS AND FOREIGN CURRENCIES
(NOTES 1 AND 4):
Realized Gain (Loss) From:
Security transactions.......................... 2,532,883 (75,495)
Options written................................ -- --
Options purchased.............................. -- --
Foreign currency transactions.................. (108,064) (35,699)
----------- -----------
Net Realized Gain (Loss)....................... 2,424,819 (111,194)
----------- -----------
Change in Net Unrealized Appreciation
(Depreciation) of:
Security transactions.......................... (4,314,910) (1,403,372)
Options purchased.............................. -- --
Foreign currency transactions.................. 92,771 159
----------- -----------
Change in Net Unrealized Appreciation
(Depreciation)................................ (4,222,139) (1,403,213)
----------- -----------
Net Gain (Loss) on Investments, Options and
Foreign Currencies............................. (1,797,320) (1,514,407)
----------- -----------
Increase (Decrease) in Net Assets From
Operations..................................... $(1,843,294) $(1,562,912)
=========== ===========
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
<TABLE>
<CAPTION>
Small Cap Large Cap Investors
Growth Capital Growth Value Balanced
Fund Fund Fund Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 584,873 $ 2,338,382 $ 46,380 $ 6,221,273 $ 1,284,453
1,075,566 1,106,074 13,313 1,498,979 2,233,173
-- (7,120) -- (63,418) (10,964)
-- -- -- -- --
------------ ----------- --------- ------------ -----------
1,660,439 3,437,336 59,693 7,656,834 3,506,662
------------ ----------- --------- ------------ -----------
1,374,293 1,500,561 49,215 2,195,814 375,573
1,014,922 729,776 47,974 525,395 561,836
202,286 140,954 11,648 259,532 141,612
24,957 37,943 4,962 51,883 28,574
15,137 13,218 13,292 18,200 5,970
50,643 61,487 21,294 15,576 20,442
-- -- -- -- 9,535
115,706 42,435 13,195 52,416 43,680
85,893 -- 3,281 -- 34,143
1,456 35,252 445 42,185 2,002
12,708 34,442 673 28,359 15,345
------------ ----------- --------- ------------ -----------
2,898,001 2,596,068 165,979 3,189,360 1,238,712
-- -- (39,261) -- (198,874)
------------ ----------- --------- ------------ -----------
2,898,001 2,596,068 126,718 3,189,360 1,039,838
------------ ----------- --------- ------------ -----------
(1,237,562) 841,268 (67,025) 4,467,474 2,466,824
------------ ----------- --------- ------------ -----------
93,483,525 51,657,322 (715,775) 78,154,223 9,667,164
(323,955) 558,467 -- (858,383) --
330,951 (181,651) -- 1,385,062 --
-- -- -- -- --
------------ ----------- --------- ------------ -----------
93,490,521 52,034,138 (715,775) 78,680,902 9,667,164
------------ ----------- --------- ------------ -----------
(29,935,825) 12,102,143 330,957 (14,376,547) (5,975,035)
-- (352,708) -- 1,723,389 --
-- -- -- -- --
------------ ----------- --------- ------------ -----------
(29,935,825) 11,749,435 330,957 (12,653,158) (5,975,035)
------------ ----------- --------- ------------ -----------
63,554,696 63,783,573 (384,818) 66,027,744 3,692,129
------------ ----------- --------- ------------ -----------
$ 62,317,134 $64,624,841 $(451,843) $ 70,495,218 $ 6,158,953
============ =========== ========= ============ ===========
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
Statements of Changes in Net Assets
For the Six Months Ended June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
Asia International
Growth Equity
Fund Fund
------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)...................... $ (45,974) $ (48,505)
Net realized gain (loss).......................... 2,424,819 (111,194)
Change in net unrealized appreciation
(depreciation)................................... (4,222,139) (1,403,213)
----------- -----------
Increase (Decrease) in Net Assets From
Operations....................................... (1,843,294) (1,562,912)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income............................. -- --
Net realized gains................................ -- --
----------- -----------
Decrease in Net Assets From Distributions to
Shareholders..................................... -- --
----------- -----------
FUND SHARE TRANSACTIONS (NOTE 3):
Net proceeds from sale of shares.................. 10,351,515 20,123,438
Net asset value of shares issued for reinvestment
of dividends..................................... -- --
Cost of shares reacquired......................... (10,744,354) (3,047,321)
----------- -----------
Increase (Decrease) in Net Assets From Fund Share
Transactions..................................... (392,839) 17,076,117
----------- -----------
Increase (Decrease) in Net Assets.................. (2,236,133) 15,513,205
NET ASSETS:
Beginning of period............................... 23,336,175 10,103,979
----------- -----------
End of period*.................................... $21,100,042 $25,617,184
=========== ===========
* Includes undistributed (overdistributed)
net investment income of: ....................... -- --
=========== ===========
* Includes accumulated net investment loss of:..... $(154,038) $(84,204)
=========== ===========
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
<TABLE>
<CAPTION>
Small Cap Large Cap Investors
Growth Capital Growth Value Balanced
Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (1,237,562) $ 841,268 $ (67,025) $ 4,467,474 $ 2,466,824
93,490,521 52,034,138 (715,775) 78,680,902 9,667,164
(29,935,825) 11,749,435 330,957 (12,653,158) (5,975,035)
------------ ------------ ----------- ------------ ------------
62,317,134 64,624,841 (451,843) 70,495,218 6,158,953
------------ ------------ ----------- ------------ ------------
-- (1,002,697) -- (4,404,896) (2,354,188)
(43,479,226) (26,844,676) (33,254) (32,999,250) (2,459,041)
------------ ------------ ----------- ------------ ------------
(43,479,226) (27,847,373) (33,254) (37,404,146) (4,813,229)
------------ ------------ ----------- ------------ ------------
139,741,866 126,895,013 4,794,517 58,560,087 2,831,997
40,448,870 24,744,869 25,624 27,518,512 3,720,070
(144,070,182) (46,063,809) (1,551,009) (70,719,560) (38,285,384)
------------ ------------ ----------- ------------ ------------
36,120,554 105,576,073 3,269,132 15,359,039 (31,733,317)
------------ ------------ ----------- ------------ ------------
54,958,462 142,353,541 2,784,035 48,450,111 (30,387,593)
306,192,711 349,630,431 11,464,424 794,707,392 155,532,181
------------ ------------ ----------- ------------ ------------
$361,151,173 $491,983,972 $14,248,459 $843,157,503 $125,144,588
============ ============ =========== ============ ============
-- $(161,429) -- $1,542,839 $292,308
============ ============ =========== ============ ============
$(1,237,562) -- $(67,025) -- --
============ ============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
Statements of Changes in Net Assets
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Asia International
Growth Equity
Fund Fund(a)
--------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss)....................... $ (71,025) $ (23,047)
Net realized gain (loss)........................... 5,127,645 (52,565)
Increase (decrease) in net unrealized
appreciation...................................... 6,484,841 1,661,814
----------- -----------
Increase in Net Assets From Operations............. 11,541,461 1,586,202
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 1):
Net investment income.............................. -- --
Net realized gains................................. -- --
----------- -----------
Decrease in Net Assets From Distributions to
Shareholders...................................... -- --
----------- -----------
FUND SHARE TRANSACTIONS (NOTE 3):
Net proceeds from sale of shares................... 10,011,999 8,572,752
Net asset value of shares issued in connection with
the transfer of the
Smith Barney Special Equities Fund's net assets
(Note 7).......................................... -- --
Net asset value of shares issued for reinvestment
of dividends...................................... -- --
Cost of shares reacquired.......................... (11,502,640) (54,975)
----------- -----------
Increase (Decrease) in Net Assets From Fund Share
Transactions...................................... (1,490,641) 8,517,777
----------- -----------
Increase (Decrease) in Net Assets................... 10,050,820 10,103,979
NET ASSETS:
Beginning of year.................................. 13,285,355 --
----------- -----------
End of year*....................................... $23,336,175 $10,103,979
=========== ===========
* Includes undistributed net investment income of:.. -- --
=========== ===========
</TABLE>
------
(a) For the period from October 25, 1999 (commencement of operations) to Decem-
ber 31, 1999.
See Notes to Financial Statements.
58
<PAGE>
<TABLE>
<CAPTION>
Small Cap Large Cap Investors
Growth Capital Growth Value Balanced
Fund Fund Fund(a) Fund Fund
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ (1,030,544) $ 1,823,833 $ (9,856) $ 8,333,288 $ 5,945,392
59,817,958 52,670,243 31,908 116,593,621 5,686,848
11,271,260 5,860,636 798,695 (36,442,188) (6,394,670)
------------ ------------- ----------- ------------- ------------
70,058,674 60,354,712 820,747 88,484,721 5,237,570
------------ ------------- ----------- ------------- ------------
-- (1,849,337) -- (6,828,571) (5,885,312)
(15,769,257) (31,567,292) -- (130,292,981) (3,078,669)
------------ ------------- ----------- ------------- ------------
(15,769,257) (33,416,629) -- (137,121,552) (8,963,981)
------------ ------------- ----------- ------------- ------------
60,948,260 160,442,564 10,678,278 165,971,086 22,079,863
240,911,211 -- -- -- --
14,807,084 30,557,033 -- 107,998,294 7,468,826
(73,356,791) (103,368,446) (34,601) (225,363,002) (73,529,930)
------------ ------------- ----------- ------------- ------------
243,309,764 87,631,151 10,643,677 48,606,378 (43,981,241)
------------ ------------- ----------- ------------- ------------
297,599,181 114,569,234 11,464,424 (30,453) (47,707,652)
8,593,530 235,061,197 -- 794,737,845 203,239,833
------------ ------------- ----------- ------------- ------------
$306,192,711 $ 349,630,431 $11,464,424 $ 794,707,392 $155,532,181
============ ============= =========== ============= ============
-- -- -- $1,480,261 $179,672
============ ============= =========== ============= ============
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
Notes to Financial Statements
(unaudited)
1. Organization and Significant Accounting Policies
The Salomon Brothers Investment Series ("Investment Series") consists of cer-
tain portfolios of the Salomon Brothers Series Funds Inc ("Series Fund"), the
Salomon Brothers Investors Value Fund Inc ("Investors Value Fund"), formerly
known as Salomon Brothers Investors Fund Inc, and the Salomon Brothers Capital
Fund Inc ("Capital Fund").
Salomon Brothers Asia Growth Fund ("Asia Growth Fund"), Salomon Brothers Inter-
national Equity Fund ("International Equity Fund"), Salomon Brothers Small Cap
Growth Fund ("Small Cap Growth Fund"), Salomon Brothers Large Cap Growth Fund
("Large Cap Growth Fund") and Salomon Brothers Balanced Fund ("Balanced Fund"),
formerly known as Salomon Brothers Total Return Fund, are separate investment
portfolios of the Series Fund, an open-end management investment company, in-
corporated in Maryland on April 17, 1990. The Series Funds consist of these
portfolios and seven other separate investment portfolios: Salomon Brothers
High Yield Bond Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers
National Intermediate Municipal Fund, Salomon Brothers U.S. Government Income
Fund, Salomon Brothers New York Municipal Money Market Fund, Salomon Brothers
Cash Management Fund and Salomon Brothers Institutional Money Market Fund. The
financial statements and financial highlights for the other portfolios are pre-
sented in separate shareholder reports.
The Investors Value Fund is a diversified open-end management investment com-
pany incorporated in Maryland on April 2, 1958 and the Capital Fund is 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:
<TABLE>
<CAPTION>
Fund: Objective
<S> <C>
Asia Growth Fund........ To seek long-term capital appreciation.
International Equity To seek long-term capital growth.
Fund...................
Small Cap Growth Fund... To obtain long-term growth of capital.
Capital Fund............ 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.
Large Cap Growth Fund... To seek long-term growth of capital.
Investors Value Fund.... To seek long-term growth of capital. Secondarily to seek current income.
Balanced Fund........... To obtain above average income (compared to a portfolio entirely
invested in equity securities). Secondarily to take advantage of
opportunities for growth of capital and income.
</TABLE>
Costs incurred in connection with certain Fund's organization, which were
payable to Salomon Brothers Asset Management Inc ("SBAM"), have been deferred
and are being amortized by such Funds over a 60 month period from the date the
Fund commenced investment operations. A summary of those expenditures that
remain as of June 30, 2000 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Expiration of Amortization Amount
--------------------------------------------------------------------------------
<S> <C> <C>
Asia Growth Fund............................. May 2001 $19,043
Balanced Fund................................ September 2000 $ 3,778
</TABLE>
The following is a summary of significant accounting policies followed by the
Funds 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.
60
<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 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.
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. Certain Funds 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 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 Balanced Fund may enter into mortgage "dollar rolls"
in which the 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 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, 2000 was approximately
$7,834,000, for the Balanced Fund.
61
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
(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. The Funds did not enter
into any transactions in reverse repurchase agreements during the six months
ended June 30, 2000.
(g) Foreign Currency Translation. The accounting records of each Fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities 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. Certain Funds 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.
At June 30, 2000, the Asia Growth Fund had the following open forward currency
contracts:
<TABLE>
<CAPTION>
Settlement Local Market Unrealized
Asia Growth Fund Date Currency Value Gain (Loss)
------------------ ---------- ------------- ----------- -----------
To Sell:
<S> <C> <C> <C> <C>
Hong Kong Dollar 10/26/00 20,028,750 $ 2,571,223 $(1,194)
South Korean Won 8/3/00 2,701,980,000 2,403,487 15,908
Singapore Dollar 7/31/00 2,450,485 1,422,587 (5,221)
New Taiwan Dollar 8/3/00 51,023,350 1,656,605 105
-------
$ 9,598
=======
</TABLE>
(i) Loan Participations. The Balanced 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").
In connection with purchasing loan participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against 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 partic-
ipation. In the event of the insolvency of the lender selling the participa-
tion, 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.
62
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
(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 for the Balanced 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 Value 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 Funds 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
service and 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.
2. Management Fee and Other Agreements
Each Fund retains SBAM, a wholly owned subsidiary of Salomon Smith Barney Hold-
ings, Inc. ("SSBH"), to act as investment manager of each Fund, subject to the
supervision by the Board of Directors of each Fund. SBAM furnishes the Invest-
ment Series with office space and certain services and facilities required for
conducting the business of the Investment Series and pays the compensation of
its officers. The management fee for these services for each Fund (except the
Capital Fund and Investors Value Fund) is payable monthly and is based on the
following annual percentages of each Fund's average daily net assets: 0.90% for
the International Equity Fund, 0.80% for the Asia Growth Fund and Small Cap
Growth Fund, 0.55% for the Balanced Fund and 0.75% for the Large Cap Growth
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%; ex-
cess over $400 million-0.50%. SBAM Ltd., an affiliate of SBAM, provides certain
advisory and administrative services for the benefit of Asia Growth Fund. SBAM
Ltd. is compensated by SBAM at no additional expense to the Asia Growth Fund.
SBAM has retained Salomon Brothers 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 expense to the Asia Growth Fund. SBAM has retained
Citibank, N.A., ("Citibank") as sub-adviser to the International Equity Fund
and the Large Cap Growth Fund.
63
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
The Investors Value Fund pays SBAM a base fee subject to an increase or de-
crease depending on the extent, if any, to which the investment performance of
the Investors Value 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 Value 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 Value 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 adjust-
ment is 0.10% which would occur if the Investors Value Fund's performance ex-
ceeds or is exceeded by the S&P 500 Index by ten or more percentage points. For
the rolling six months periods ended March 31 and June 30, 2000, the S&P 500
Index exceeded the Investors Value Fund's performance by approximately 3.75%
and 2.46%, respectively. As a result, base management fees were decreased, in
aggregate, by $124,836 for the six months ended June 30, 2000.
For the six months ended June 30, 2000, SBAM waived management fees of $92,440,
$51,044, $39,261 and $198,874, for the Asia Growth Fund, International Equity
Fund, Large Cap Growth Fund and Balanced Fund, respectively, and voluntarily
absorbed expenses of $43,007 for the Asia Growth Fund.
SBAM also acts as administrator for each of the Funds. SBAM has delegated its
responsibilities as administrator to SSB Citi Fund Management LLC ("SSBC"), an
affiliate of SBAM, pursuant to a Sub-Administration Agreement between SBAM and
SSBC.
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 is
authorized 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,"
collectively, 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 appli-
cable 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 respect to Class B and Class 2 shares of each Fund at a rate of 0.75% of
the value of the average net assets of the respective class. Class O shares are
not subject to a service and distribution plan fee.
For the six months ended June 30, 2000, total service and distribution plan
fees were as follows:
<TABLE>
<CAPTION>
Class A Class B Class 2
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Asia Growth Fund.................................... $ 8,988 $ 51,373 $ 21,572
International Equity Fund........................... 6,501 27,700 23,012
Small Cap Growth Fund............................... 233,783 698,772 82,367
Capital Fund........................................ 51,099 490,215 188,462
Large Cap Growth Fund............................... 2,822 35,349 9,803
Investors Value Fund................................ 49,647 384,125 91,623
Balanced Fund....................................... 37,928 432,079 91,829
</TABLE>
64
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
SSB received $1,248,586 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,
2000. In addition, contingent deferred sales charges of $1,058,126 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, 2000.
Brokerage commissions of $1,194 and $3,222 were paid by the Capital Fund and
Investors Value Fund, respectively, to SSB.
3. Capital Stock
At June 30, 2000, the Series Funds had 10,000,000,000 shares of authorized cap-
ital stock, par value $0.001 per share. The Investors Value 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 authorized capital stock, par value $0.001 per share.
At June 30, 2000, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class A Class B Class 2 Class O
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asia Growth Fund............. $ 7,472,360 $ 8,723,022 $ 3,425,136 $ 845,896
International Equity Fund.... 12,620,988 5,906,557 5,996,796 1,059,400
Small Cap Growth Fund........ 97,213,651 84,432,903 15,958,653 522,581
Capital Fund................. 55,475,868 114,174,255 54,569,171 153,452,444
Large Cap Growth Fund........ 2,255,384 7,418,948 2,502,354 1,733,175
Investors Value Fund......... 49,468,948 77,409,233 19,554,778 436,989,374
Balanced Fund................ 21,943,679 76,566,813 16,565,221 718,987
</TABLE>
65
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
Transactions in Fund shares for the periods indicated were as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares
---------------------------------------------------- --------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 2000 December 31, 1999 June 30, 2000 December 31, 1999
------------------------- ------------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asia Growth Fund
Shares sold..... 693,787 $ 8,380,240 820,575 $ 6,496,399 106,390 $ 1,347,384 248,887 $ 2,263,544
Shares issued as
reinvestment... -- -- -- -- -- -- -- --
Shares
redeemed....... (683,006) (8,415,207) (933,537) (7,350,231) (155,771) (1,912,687) (208,794) (1,808,793)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 10,781 $ (34,967) (112,962) $ (853,832) (49,381) $ (565,303) 40,093 $ 454,751
========== ============= ========== ============= ========== ============ ========== ============
International
Equity Fund++
Shares sold..... 1,082,417 $ 12,475,340 206,248 $ 2,188,694 268,912 $ 3,217,534 311,181 $ 3,331,375
Shares issued as
reinvestment... -- -- -- -- -- -- -- --
Shares
redeemed....... (181,857) (2,006,141) (3,091) (34,984) (53,620) (621,849) (1,411) (16,452)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase.... 900,560 $ 10,469,199 203,157 $ 2,153,710 215,292 $ 2,595,685 309,770 $ 3,314,923
========== ============= ========== ============= ========== ============ ========== ============
Small Cap Growth
Fund
Shares sold..... 7,060,325 $ 127,954,509 3,555,893 $ 51,019,503 493,494 $ 9,172,611 524,385 $ 7,351,719
Shares issued as
reinvestment... 1,184,041 21,644,271 526,908 8,114,385 931,767 16,753,045 393,936 5,995,706
Shares
redeemed....... (7,257,374) (132,194,929) (4,086,563) (59,269,935) (576,821) (10,301,454) (903,160) (12,735,817)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 986,992 $ 17,403,851 (3,762) $ (136,047) 848,440 $ 15,624,202 15,161 $ 611,608
========== ============= ========== ============= ========== ============ ========== ============
Capital Fund
Shares sold..... 1,638,681 $ 44,051,154 2,967,781 $ 72,928,143 1,619,550 $ 42,449,209 2,285,827 $ 54,969,564
Shares issued as
reinvestment... 85,533 2,304,624 94,159 2,307,965 211,273 5,579,491 234,097 5,627,409
Shares
redeemed....... (692,567) (18,634,313) (2,381,429) (58,529,687) (352,212) (9,079,942) (300,374) (7,193,379)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 1,031,647 $ 27,721,465 680,511 $ 16,706,421 1,478,611 $ 38,948,758 2,219,550 $ 53,403,594
========== ============= ========== ============= ========== ============ ========== ============
Large Cap Growth
Fund**
Shares sold..... 126,315 $ 1,359,601 185,594 $ 1,886,240 177,525 $ 1,889,103 559,621 $ 5,918,430
Shares issued as
reinvestment... 438 4,617 -- -- 1,497 15,706 -- --
Shares
redeemed....... (96,612) (990,175) (389) (4,223) (37,376) (396,917) (573) (6,199)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase.... 30,141 $ 374,043 185,205 $ 1,882,017 141,646 $ 1,507,892 559,048 $ 5,912,231
========== ============= ========== ============= ========== ============ ========== ============
Investors Value
Fund
Shares sold..... 2,066,784 $ 44,060,104 5,354,430 $ 123,724,267 228,687 $ 4,664,616 1,026,823 $ 22,981,206
Shares issued as
reinvestment... 81,740 1,725,243 224,846 4,752,407 131,984 2,749,614 563,323 11,763,229
Shares
redeemed....... (1,258,800) (26,594,453) (6,305,947) (145,389,814) (699,272) (14,069,067) (1,026,065) (22,477,257)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net increase
(decrease)..... 889,724 $ 19,190,894 (726,671) $ (16,913,140) (338,601) $ (6,654,837) 564,081 $ 12,267,178
========== ============= ========== ============= ========== ============ ========== ============
Balanced Fund
Shares sold..... 73,943 $ 943,429 399,441 $ 5,355,740 99,935 $ 1,281,743 953,569 $ 12,729,518
Shares issued as
reinvestment... 68,971 886,455 143,632 1,891,102 179,594 2,301,155 342,656 4,494,019
Shares
redeemed....... (855,827) (10,978,781) (1,705,708) (22,625,269) (1,705,789) (21,695,335) (2,884,560) (37,918,767)
---------- ------------- ---------- ------------- ---------- ------------ ---------- ------------
Net decrease.... (712,913) $ (9,148,897) (1,162,635) $ (15,378,427) (1,426,260) $(18,112,437) (1,588,335) $(20,695,230)
========== ============= ========== ============= ========== ============ ========== ============
</TABLE>
* Effective September 14, 1998, Class C shares of each Fund were redesignated
as Class 2 shares.
++ Inception date for Class A, Class B, Class 2 and Class O shares is October
25, 1999.
** Inception date for Class A, Class B, and Class 2 shares is October 25,
1999. Inception date for Class O shares is October 26, 1999.
66
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
<TABLE>
<CAPTION>
Class 2 Shares* Class O Shares
---------------------------------------------- --------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 2000 December 31, 1999 June 30, 2000 December 31, 1999
---------------------- ---------------------- ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
46,013 $ 584,179 147,895 $ 1,200,786 3,196 $ 39,711 5,260 $ 51,271
-- -- -- -- -- -- -- --
(32,682) (392,258) (164,067) (1,326,680) (2,097) (24,201) (106,929) (1,016,937)
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
13,331 $ 191,921 (16,172) $ (125,894) 1,099 $ 15,510 (101,669) $ (965,666)
========= =========== ======== ============ ========== ============ ========== ============
371,275 $ 4,373,103 196,159 $ 2,041,831 4,899 $ 57,461 101,012 $ 1,010,852
-- -- -- -- -- -- -- --
(36,061) (411,462) (297) (3,539) (646) (7,869) -- --
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
335,214 $ 3,961,641 195,862 $ 2,038,292 4,253 $ 49,592 101,012 $ 1,010,852
========= =========== ======== ============ ========== ============ ========== ============
121,154 $ 2,177,199 197,644 $ 2,531,764 22,385 $ 437,547 3,013 $ 45,274
111,803 2,014,685 45,657 695,814 2,008 36,869 76 1,179
(88,865) (1,573,799) (93,401) (1,289,080) -- -- (5,000) (61,959)
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
144,092 $ 2,618,085 149,900 $ 1,938,498 24,393 $ 474,416 (1,911) $ (15,506)
========= =========== ======== ============ ========== ============ ========== ============
1,186,314 $31,222,184 730,331 $ 17,642,431 348,689 $ 9,172,466 610,678 $ 14,902,426
80,336 2,124,103 73,155 1,761,747 543,284 14,736,651 845,836 20,859,912
(89,708) (2,326,140) (87,015) (2,073,040) (604,695) (16,023,414) (1,472,035) (35,572,340)
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
1,176,942 $31,020,147 716,471 $ 17,331,138 287,278 $ 7,885,703 (15,521) $ 189,998
========= =========== ======== ============ ========== ============ ========== ============
142,467 $ 1,526,984 112,907 $ 1,158,608 1,799 $ 18,829 171,394 $ 1,715,000
499 5,240 -- -- 6 61 -- --
(15,229) (163,917) (2,304) (24,179) -- -- -- --
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
127,737 $ 1,368,307 110,603 $ 1,134,429 1,805 $ 18,890 171,394 $ 1,715,000
========= =========== ======== ============ ========== ============ ========== ============
159,018 $ 3,256,553 255,985 $ 5,813,731 1,273,150 $ 6,578,813 559,610 $ 13,451,882
32,825 684,634 126,655 2,649,796 99,037 22,359,022 4,176,379 88,832,862
(128,004) (2,607,940) (316,659) (6,892,616) (1,326,973) (27,448,100) (2,240,548) (50,603,315)
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
63,839 $ 1,333,247 65,981 $ 1,570,911 45,214 $ 1,489,735 2,495,441 $ 51,681,429
========= =========== ======== ============ ========== ============ ========== ============
45,225 $ 578,193 292,789 $ 3,937,309 2,205 $ 28,632 4,263 $ 57,296
37,499 481,613 76,114 1,000,856 3,931 50,847 6,257 82,849
(432,574) (5,530,793) (971,905) (12,812,858) (6,313) (80,475) (12,693) (173,036)
--------- ----------- -------- ------------ ---------- ------------ ---------- ------------
(349,850) $(4,470,987) (603,002) $ (7,874,693) (177) $ (996) (2,173) $ (32,891)
========= =========== ======== ============ ========== ============ ========== ============
</TABLE>
67
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
At June 30, 2000, Salomon Brothers Holding Co., Inc. owned approximately the
following percentages of total shares outstanding of the following Funds:
<TABLE>
<S> <C>
Asia Growth Fund............................................................ 27%
Balanced Fund............................................................... 5%
International Equity Fund................................................... 4%
Large Cap Growth Fund....................................................... 13%
</TABLE>
4. Investments
During the six months ended June 30, 2000, 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..................................... $ 21,177,625 $ 21,432,765
============ ============
International Equity Fund............................ $ 14,152,937 $ 130,903
============ ============
Small Cap Growth Fund................................ $242,659,311 $243,394,260
============ ============
Capital Fund......................................... $257,565,429 $181,653,895
============ ============
Large Cap Growth Fund................................ $ 9,051,827 $ 5,945,275
============ ============
Investors Value Fund................................. $260,018,747 $264,445,516
============ ============
Balanced Fund:
U.S. Government Securities.......................... $ 1,491,270 $ 4,598,727
Other Investments................................... 23,392,537 62,721,604
------------ ------------
$ 24,883,807 $ 67,320,331
============ ============
</TABLE>
At June 30, 2000, 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...................... $ 4,457,041 $ (1,494,207) $ 2,962,834
International Equity Fund............. 2,134,023 (1,875,556) 258,467
Small Cap Growth Fund................. 92,305,787 (20,599,346) 71,706,441
Capital Fund.......................... 96,242,496 (32,906,192) 63,336,304
Large Cap Growth Fund................. 1,796,784 (667,132) 1,129,652
Investors Value Fund.................. 214,182,672 (34,356,362) 179,826,310
Balanced Fund......................... 12,908,286 (13,503,020) (594,734)
</TABLE>
68
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
Written call options transactions for the Small Cap Growth Fund that occurred
during the six months ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received (Paid)
--------- ---------------
<S> <C> <C>
Options written, outstanding at December 31, 1999... 1,010 $419,036
Options written during the six months ended June 30,
2000............................................... -- --
Options terminated in closing purchase
transactions....................................... (725) (190,884)
Options expired..................................... (25) (4,300)
Options exercised................................... (260) (223,852)
----- --------
Options written, outstanding at June 30, 2000....... -- $ 0
===== ========
</TABLE>
The following written put option transactions for the Capital Fund which oc-
curred during the six months ended June 30, 2000:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received (Paid)
--------- ---------------
<S> <C> <C>
Options written, outstanding at December 31, 1999... -- $ 0
Options written during the six months ended June 30,
2000............................................... 250 999,217
Options terminated in closing purchase
transactions....................................... (250) (999,217)
---- ---------
Options written, outstanding at June 30, 2000....... -- $ 0
==== =========
</TABLE>
In addition, the written call option transactions for the Investors Value Fund
which occurred during the six months ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
Number of Premiums
Contracts Received (Paid)
--------- ---------------
<S> <C> <C>
Options written, outstanding at December 31, 1999... 4,556 $ 2,433,389
Options written during the six months ended June 30,
2000............................................... -- --
Options exercised................................... (1,100) (910,919)
Options terminated in closing purchase
transactions....................................... (3,456) (1,522,470)
------ -----------
Options written, outstanding at June 30, 2000....... -- $ 0
====== ===========
</TABLE>
69
<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.
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.
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.
70
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
6. Tax Information
At December 31, 1999, the Asia Growth Fund had, for Federal income tax
purposes, a capital loss carry forward of approximately $4,701,000 available to
offset future capital gains through December 31, 2006. To the extent that these
carry forward losses are used to offset capital gains, it is probable that any
gains so offset will not be distributed.
The character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At December 31, 1999, reclassifications were made to the
capital accounts of the Asia Growth Fund, International Equity Fund, Large Cap
Growth Fund, Investors Value Fund and Balanced Fund to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. A portion of overdistributed net investment income
amounting to $131,850 and $2,948 was reclassified to paid-in capital for the
Asia Growth Fund and Large Cap Growth Fund, respectively. In addition, a
portion of accumulated net investment loss and accumulated net realized gain
amounting to $10,153 and $154,985 was reclassified to paid-in capital for the
International Equity Fund and Small Cap Growth Fund, respectively. Net
investment income, net realized gains and net assets were not affected by these
changes.
7. Transfer of Net Assets
On July 16, 1999, the Small Cap Growth Fund acquired the assets and certain li-
abilities of the Smith Barney Special Equities Fund Portfolio ("Special Equi-
ties Fund") pursuant to a plan of reorganization approved by Special Equities
Fund shareholders on May 28, 1999. Total shares issued by the Small Cap Growth
Fund and the total net assets of the Special Equities Fund and Small Cap Growth
Fund on the date of the transfer were as follows.
<TABLE>
<CAPTION>
Total Net Total Net
Shares Issued Assets of Assets of
by the the Special the Small
Small Cap Equities Cap Growth
Acquired Fund Growth Fund Fund Fund
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Special Equities Fund.................... 16,980,004 $240,911,211 $13,358,236
</TABLE>
The total net assets of the Special Equities Fund before acquisition included
appreciation of $88,789,026. Total net assets of the Small Cap Growth Fund im-
mediately after the transfer were $254,269,447. The transaction was structured
to qualify as a tax-free reorganization under the Internal Revenue Code of
1986, as amended.
71
<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
------------------------------------------------
2000(1) 1999 1998 1997 1996(2)
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $12.67 $6.50 $7.48 $10.32 $10.00
------ ------- ------ ------ ------
Income (Loss) From
Operations:
Net investment income
(3).................... 0.02 -- 0.10 0.03 0.05
Net realized and
unrealized gain
(loss)................. (1.06) 6.17 (1.08) (2.59) 0.47
------ ------- ------ ------ ------
Total Income (Loss) From
Operations.............. (1.04) 6.17 (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.................. $11.63 $12.67 $6.50 $7.48 $10.32
====== ======= ====== ====== ======
Total Return (4)......... (8.2)%++ 94.9%++ (13.1)% (25.6)% 5.2%++
Net Assets, End of Period
(000s).................. $6,651 $7,108 $4,385 $6,491 $3,693
Ratios to Average Net
Assets:
Expenses................ 1.24%+ 1.24% 1.24% 1.24% 1.24%+
Net investment income
(loss)................. 0.28%+ (0.01)% 1.48% 0.27% 0.90%+
Portfolio Turnover Rate.. 95% 248% 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 (3).............. $(0.15) $(0.12) $(0.07) $(0.23) $(0.18)
Expense ratio........... 2.41%+ 2.62% 3.79% 3.81% 5.50%+
Asia Growth Fund
-----------------------------------------------------------------------------
<CAPTION>
Class B Shares
-------------------------------------
2000(1) 1999 1998 1997 1996(2)
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $12.41 $6.42 $7.44 $10.31 $10.00
------ ------- ------ ------ ------
Income (Loss) From
Operations:
Net investment income
(loss) (3)............. (0.05) (0.06) 0.05 (0.05) 0.01
Net realized and
unrealized gain
(loss)................. (1.01) 6.05 (1.07) (2.57) 0.46
------ ------- ------ ------ ------
Total Income (Loss) From
Operations.............. (1.06) 5.99 (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.................. $11.35 $12.41 $6.42 $7.44 $10.31
====== ======= ====== ====== ======
Total Return (4)......... (8.5)%++ 93.3% (13.7)% (26.1)% 4.7%++
Net Assets, End of Period
(000s).................. $9,185 $10,658 $5,256 $5,738 $3,163
Ratios to Average Net
Assets:
Expenses................ 1.99%+ 1.99% 1.99% 1.99% 1.99%+
Net investment income
(loss)................. (0.85)%+ (0.74)% 0.77% (0.48)% 0.20%+
Portfolio Turnover Rate.. 95% 248% 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 (3).............. $(0.19) $(0.12) $(0.11) $(0.30) $(0.23)
Expense ratio........... 3.17%+ 3.39% 4.55% 4.56% 6.25%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from May 6, 1996 (inception date) to December 31, 1996.
(3) Per share amounts have been calculated using the average shares method.
(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.
72
<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
------------------------------------
2000(1) 1999 1998(2) 1997 1996(3)
------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $12.41 $ 6.42 $ 7.44 $10.30 $10.00
------ ------ ------ ------ ------
Income (Loss) From
Operations:
Net investment income
(loss) (4)............. (0.04) (0.06) 0.05 (0.05) 0.01
Net realized and
unrealized gain
(loss)................. (1.03) 6.05 (1.07) (2.56) 0.45
------ ------ ------ ------ ------
Total Income (Loss) From
Operations.............. (1.07) 5.99 (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.................. $11.34 $12.41 $ 6.42 $ 7.44 $10.30
====== ====== ====== ====== ======
Total Return (5)......... (8.6)%++ 93.3% (13.7)% (26.0)% 4.6%++
Net Assets, End of Period
(000s).................. $4,017 $4,227 $2,291 $1,643 $246
Ratios to Average Net
Assets:
Expenses................ 1.99%+ 1.99% 1.99% 1.99% 2.00%+
Net investment income
(loss)................. (0.65)%+ (0.76)% 0.80% (0.47)% 0.08%+
Portfolio Turnover Rate.. 95% 248% 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 (4).............. $(0.19) $(0.11) $(0.11) $(0.30) $(0.20)
Expense ratio........... 3.17%+ 3.37% 4.55% 4.56% 6.26%+
Asia Growth Fund
----------------------------------------------------------------------------
<CAPTION>
Class O Shares
------------------------------------
2000(1) 1999 1998 1997 1996(3)
------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $12.76 $ 6.54 $ 7.50 $10.32 $10.00
------ ------ ------ ------ ------
Income (Loss) From
Operations:
Net investment income
(4).................... 0.02 0.02 0.12 0.05 0.07
Net realized and
unrealized gain
(loss)................. (1.06) 6.20 (1.08) (2.59) 0.46
------ ------ ------ ------ ------
Total Income (Loss) From
Operations.............. (1.04) 6.22 (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.................. $11.72 $12.76 $ 6.54 $ 7.50 $10.32
====== ====== ====== ====== ======
Total Return (5)......... (8.2)%++ 95.1% (12.8)% (25.3)% 5.3%++
Net Assets, End of Period
(000s).................. $1,247 $1,343 $1,354 $412 $124
Ratios to Average Net
Assets:
Expenses................ 0.99%+ 0.97% 0.99% 0.99% 0.99%+
Net investment income... 0.26%+ 0.23% 1.90% 0.51% 1.21%+
Portfolio Turnover Rate.. 95% 248% 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 (4).............. $(0.14) $(0.11) $(0.04) $(0.20) $(0.18)
Expense ratio........... 2.16%+ 2.32% 3.55% 3.56% 5.25%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) On September 14, 1998, Class C shares were renamed Class 2 shares.
(3) For the period from May 6, 1996 (inception date) to December 31, 1996.
(4) Per share amounts have been calculated using the average shares method.
(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.
73
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
International Equity Fund
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Class A Shares Class B Shares
<S> <C> <C> <C> <C>
---------------- ----------------
<CAPTION>
2000(1) 1999(2) 2000(1) 1999(2)
<S> <C> <C> <C> <C>
---------------- ----------------
Net Asset Value, Beginning of Period... $12.49 $10.00 $12.47 $10.00
------- ------ ------ ------
Income (Loss) From Operations:
Net investment loss (3)............... (0.01) (0.03) (0.05) (0.04)
Net realized and unrealized gain
(loss)............................... (1.14) 2.52 (1.14) 2.51
------- ------ ------ ------
Total Income (Loss) From Operations.... (1.15) 2.49 (1.19) 2.47
------- ------ ------ ------
Less Distributions From:
Net investment income................. -- -- -- --
Net realized gains.................... -- -- -- --
------- ------ ------ ------
Total Distributions.................... -- -- -- --
------- ------ ------ ------
Net Asset Value, End of Period......... $11.34 $12.49 $11.28 $12.47
======= ====== ====== ======
Total Return (4)++..................... (9.2)% 24.9% (9.5)% 24.7%
Net Assets, End of Period (000s)....... $12,517 $2,538 $5,922 $3,863
Ratios to Average Net Assets+:
Expenses.............................. 1.75% 1.75% 2.50% 2.50%
Net investment loss................... (0.12)% (1.39)% (0.93)% (2.30)%
Portfolio Turnover Rate................ 1% 1% 1% 1%
Before applicable waiver of management
fee and expenses absorbed by SBAM, net
investment loss per share and expense
ratios would have been:
Net investment loss per share (3)..... $(0.03) $(0.08) $(0.08) $(0.09)
Expense ratio+........................ 2.37% 4.36% 3.12% 5.11%
International Equity Fund
------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares Class O Shares
<S> <C> <C> <C> <C>
---------------- ----------------
<CAPTION>
2000(1) 1999(2) 2000(1) 1999(2)
<S> <C> <C> <C> <C>
---------------- ----------------
Net Asset Value, Beginning of Period... $12.46 $10.00 $12.49 $10.00
------- ------ ------ ------
Income (Loss) From Operations:
Net investment loss (3)............... (0.04) (0.04) (0.00)* (0.02)
Net realized and unrealized gain
(loss)............................... (1.15) 2.50 (1.14) 2.51
------- ------ ------ ------
Total Income (Loss) From Operations.... (1.19) 2.46 (1.14) 2.49
------- ------ ------ ------
Less Distributions From:
Net investment income................. -- -- -- --
Net realized gains.................... -- -- -- --
------- ------ ------ ------
Total Distributions.................... -- -- -- --
------- ------ ------ ------
Net Asset Value, End of Period......... $11.27 $12.46 $11.35 $12.49
======= ====== ====== ======
Total Return (4)++..................... (9.6)% 24.6% (9.1)% 24.9%
Net Assets, End of Period (000s)....... $5,983 $2,441 $1,195 $1,262
Ratios to Average Net Assets:
Expenses.............................. 2.50% 2.50% 1.50% 1.50%
Net investment loss................... (0.85)% (2.13)% (0.02)% (0.83)%
Portfolio Turnover Rate................ 1% 1% 1% 1%
Before applicable waiver of management
fee and expenses absorbed by SBAM, net
investment loss per share and expense
ratios would have been:
Net investment loss per share (3)..... $(0.07) $(0.09) $(0.03) $(0.07)
Expense ratio+........................ 3.12% 5.09% 2.12% 4.05%
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from October 25, 1999 (inception date) to December 31, 1999.
(3) Per share amounts have been calculated using the average shares method.
(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.
* Amount represents less than $0.01.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
74
<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
--------------------------------
2000(1) 1999 1998(2)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $17.23 $11.59 $10.00
-------- -------- ------
Income (Loss) From Operations:
Net investment loss (3)................ (0.03) (0.07) (0.02)
Net realized and unrealized gain....... 3.55 6.63 1.61
-------- -------- ------
Total Income From Operations............ 3.52 6.56 1.59
-------- -------- ------
Less Distributions From:
Net investment income.................. -- -- --
Net realized gains..................... (2.43) (0.92) --
-------- -------- ------
Total Distributions..................... (2.43) (0.92) --
-------- -------- ------
Net Asset Value, End of Period.......... $18.32 $17.23 $11.59
======== ======== ======
Total Return (4)........................ 20.5%++ 57.5% 15.9%++
Net Assets, End of Period (000s)........ $195,985 $167,281 $3,205
Ratios to Average Net Assets:
Expenses............................... 1.35%+ 1.37% 1.50%+
Net investment loss.................... (0.38)%+ (0.52)% (0.51)%+
Portfolio Turnover Rate................. 78% 142% 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 (3)...... N/A $(0.08) $(0.06)
Expense ratio.......................... N/A 1.40% 2.30%+
Small Cap Growth Fund
------------------------------------------------------------------------------
<CAPTION>
Class B Shares
--------------------------------
2000(1) 1999 1998(2)
--------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $17.01 $11.55 $10.00
-------- -------- ------
Income (Loss) From Operations:
Net investment loss (3)................ (0.10) (0.17) (0.06)
Net realized and unrealized gain....... 3.51 6.55 1.61
-------- -------- ------
Total Income From Operations............ 3.41 6.38 1.55
-------- -------- ------
Less Distributions From:
Net investment income.................. -- -- --
Net realized gains..................... (2.43) (0.92) --
-------- -------- ------
Total Distributions..................... (2.43) (0.92) --
-------- -------- ------
Net Asset Value, End of Period.......... $17.99 $17.01 $11.55
======== ======== ======
Total Return (4)........................ 20.1%++ 56.2% 15.5%++
Net Assets, End of Period (000s)........ $146,942 $124,560 $3,850
Ratios to Average Net Assets:
Expenses............................... 2.10%+ 2.12% 2.25%+
Net investment loss.................... (1.13)%+ (1.23)% (1.21)%+
Portfolio Turnover Rate................. 78% 142% 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 (3)...... N/A $(0.17) $(0.10)
Expense ratio.......................... N/A 2.15% 3.05%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from July 1, 1998 (inception date) to December 31, 1998.
(3) Per share amounts have been calculated using the average shares method.
(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.
75
<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 2 Shares
-----------------------------
2000(1) 1999 1998(2)(3)
-----------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $17.04 $11.56 $10.00
------- ------- ------
Income (Loss) From Operations:
Net investment loss (4)..................... (0.10) (0.17) (0.06)
Net realized and unrealized gain............ 3.51 6.57 1.62
------- ------- ------
Total Income From Operations................. 3.41 6.40 1.56
------- ------- ------
Less Distributions From:
Net investment income....................... -- -- --
Net realized gains.......................... (2.43) (0.92) --
------- ------- ------
Total Distributions.......................... (2.43) (0.92) --
------- ------- ------
Net Asset Value, End of Period............... $18.02 $17.04 $11.56
======= ======= ======
Total Return (5)............................. 20.0%++ 56.3% 15.6%++
Net Assets, End of Period (000s)............. $17,704 $14,285 $1,471
Ratios to Average Net Assets:
Expenses.................................... 2.10%+ 2.14% 2.25%+
Net investment loss......................... (1.13)%+ (1.22)% (1.35)%+
Portfolio Turnover Rate...................... 78% 142% 96%
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 loss per share (4)........... N/A $(0.17) $(0.10)
Expense ratio............................... N/A 2.18% 3.05%+
Small Cap Growth Fund
------------------------------------------------------------------------------
<CAPTION>
Class O Shares
-----------------------------
2000(1) 1999 1998(2)
-----------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 17.29 $ 11.60 $10.00
------- ------- ------
Income (Loss) From Operations:
Net investment loss (4)..................... (0.02) (0.06) (0.01)
Net realized and unrealized gain............ 3.58 6.67 1.61
------- ------- ------
Total Income From Operations................. 3.56 6.61 1.60
------- ------- ------
Less Distributions From:
Net investment income....................... -- -- --
Net realized gains.......................... (2.43) (0.92) --
------- ------- ------
Total Distributions.......................... (2.43) (0.92) --
------- ------- ------
Net Asset Value, End of Period............... $18.42 $17.29 $11.60
======= ======= ======
Total Return (5)............................. 20.7%++ 57.9% 16.0%++
Net Assets, End of Period (000s)............. $ 520 $ 67 $ 67
Ratios to Average Net Assets:
Expenses.................................... 1.14%+ 1.24% 1.25%+
Net investment loss......................... (0.24)%+ (0.49)% (0.18)%+
Portfolio Turnover Rate...................... 78% 142% 96%
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 loss per share (4)........... N/A $(0.06) $(0.05)
Expense ratio............................... N/A 1.27% 2.05%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from July 1, 1998 (inception date) to December 31, 1998.
(3) On September 14, 1998, Class C shares were renamed Class 2 shares.
(4) Per share amounts have been calculated using the average shares method.
(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.
76
<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
--------------------------------------------
2001(1) 1999 1998 1997 1996(2)
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $25.29 $22.92 $21.15 $19.88 $21.98
------- ------- ------- ------ ------
Income From Operations:
Net investment income........ 0.05* 0.15* 0.14 -- 0.01*
Net realized and unrealized
gain........................ 4.27 4.99 4.64 5.10 1.54
------- ------- ------- ------ ------
Total Income From Operations.. 4.32 5.14 4.78 5.10 1.55
------- ------- ------- ------ ------
Less Distributions From:
Net investment income........ (0.07) (0.18) (0.18) -- (0.15)
Net realized gains........... (1.82) (2.59) (2.83) (3.83) (3.50)
------- ------- ------- ------ ------
Total Distributions........... (1.89) (2.77) (3.01) (3.83) (3.65)
------- ------- ------- ------ ------
Net Asset Value, End of
Period....................... $27.72 $25.29 $22.92 $21.15 $19.88
======= ======= ======= ====== ======
Total Return (3).............. 17.3%++ 23.1% 23.7% 26.4% 7.7%++
Net Assets, End of Period
(000s)....................... $61,283 $29,814 $11,425 $5,589 $344
Ratios to Average Net Assets:
Expenses..................... 1.17%+ 1.27% 1.34% 1.46% 1.88%+
Net investment income
(loss)...................... 0.52%+ 0.61% 0.81% (0.10)% 0.18%+
Portfolio Turnover Rate....... 47% 126% 141% 159% 191%
</TABLE>
Capital Fund
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Class B Shares
------------------------------------------
2000(1) 1999 1998 1997 1996(2)
------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................. $24.86 $22.63 $21.01 $19.90 $21.98
-------- ------- ------- ------ ------
Income (Loss) From
Operations:
Net investment income
(loss).................... (0.02)* (0.04)* 0.09 (0.07) (0.02)*
Net realized and unrealized
gain...................... 4.17 4.92 4.45 5.01 1.56
-------- ------- ------- ------ ------
Total Income From
Operations................. 4.15 4.88 4.54 4.94 1.54
-------- ------- ------- ------ ------
Less Distributions From:
Net investment income...... -- (0.06) (0.09) -- (0.12)
Net realized gains......... (1.82) (2.59) (2.83) (3.83) (3.50)
-------- ------- ------- ------ ------
Total Distributions......... (1.82) (2.65) (2.92) (3.83) (3.62)
-------- ------- ------- ------ ------
Net Asset Value, End of
Period..................... $27.19 $24.86 $22.63 $21.01 $19.90
======== ======= ======= ====== ======
Total Return (3)............ 16.9%++ 22.2% 22.6% 25.6% 7.6%++
Net Assets, End of Period
(000s)..................... $127,339 $79,678 $22,294 $3,820 $219
Ratios to Average Net
Assets:
Expenses................... 1.93%+ 2.02% 2.09% 2.20% 2.73%+
Net investment income
(loss).................... (0.23)%+ (0.16)% 0.17% (0.94)% (0.66)%+
Portfolio Turnover Rate..... 47% 126% 141% 159% 191%
</TABLE>
------
(1) For the six months ended June 30, 2000 (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 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.
* Per share amounts have been calculated using the average shares method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
77
<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
--------------------------------------------
2000(1) 1999 1998(2) 1997 1996(3)
--------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $24.90 $22.69 $21.02 $19.91 $21.98
------- ------- ------ ------ ------
Income (Loss) From
Operations:
Net investment income
(loss)..................... (0.02)* (0.04)* 0.07 (0.06) (0.02)*
Net realized and unrealized
gain....................... 4.17 4.91 4.47 5.00 1.57
------- ------- ------ ------ ------
Total Income From
Operations.................. 4.15 4.87 4.54 4.94 1.55
------- ------- ------ ------ ------
Less Distributions From:
Net investment income....... -- (0.07) (0.04) (3.83) (0.12)
Net realized gains.......... (1.82) (2.59) (2.83) -- (3.50)
------- ------- ------ ------ ------
Total Distributions.......... (1.82) (2.66) (2.87) (3.83) (3.62)
------- ------- ------ ------ ------
Net Asset Value, End of
Period...................... $27.23 $24.90 $22.69 $21.02 $19.91
======= ======= ====== ====== ======
Total Return (4)............. 16.9%++ 22.2% 22.6% 25.6% 7.7%++
Net Assets, End of Period
(000s)...................... $59,201 $24,830 $6,369 $2,385 $130
Ratios to Average Net Assets:
Expenses.................... 1.92%+ 2.02% 2.09% 2.21% 2.45%+
Net investment income
(loss)..................... (0.23)%+ (0.18)% 0.09% (0.91)% (0.50)%+
Portfolio Turnover Rate...... 47% 126% 141% 159% 191%
</TABLE>
Capital Fund
<TABLE>
---------------------------------------------------------------------------------------
<CAPTION>
Class O Shares
------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $25.43 $22.99 $21.23 $19.88 $18.67 $15.62
-------- -------- -------- -------- -------- --------
Income From Operations:
Net investment income.. 0.10* 0.22* 0.21 0.05 0.13* 0.14
Net realized and
unrealized gain ...... 4.28 5.00 4.62 5.13 5.70 5.27
-------- -------- -------- -------- -------- --------
Total Income From
Operations............. 4.38 5.22 4.83 5.18 5.83 5.41
-------- -------- -------- -------- -------- --------
Less Distributions From:
Net investment income.. (0.10) (0.19) (0.24) -- (0.15) (0.14)
Net realized gains..... (1.82) (2.59) (2.83) (3.83) (4.47) (2.22)
-------- -------- -------- -------- -------- --------
Total Distributions..... (1.92) (2.78) (3.07) (3.83) (4.62) (2.36)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $27.89 $25.43 $22.99 $21.23 $19.88 $18.67
======== ======== ======== ======== ======== ========
Total Return (4)........ 17.5%++ 23.4% 23.8% 26.8% 33.3% 34.9%
Net Assets, End of
Period (000s).......... $244,161 $215,308 $194,973 $175,470 $135,943 $102,429
Ratios to Average Net
Assets:
Expenses............... 0.93%+ 1.01% 1.08% 1.22% 1.38% 1.36%
Net investment income.. 0.78%+ 0.91% 0.96% 0.26% 0.67% 0.74%
Portfolio Turnover
Rate................... 47% 126% 141% 159% 191% 217%
</TABLE>
------
(1) For the six months ended June 30, 2000 (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 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.
* Per share amounts have been calculated using the average shares method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
78
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Large Cap Growth Fund
<TABLE>
------------------------------------------------------------------------------
<CAPTION>
Class A Shares Class B Shares
----------------- -----------------
2000(1) 1999(2) 2000(1) 1999(2)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $11.18 $10.00 $11.17 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment loss (4)............... (0.03) (0.01) (0.07) (0.02)
Net realized and unrealized gain
(loss)............................... (0.36) 1.19 (0.37) 1.19
------ ------ ------ ------
Total Income (Loss) From Operations.... (0.39) 1.18 (0.44) 1.17
------ ------ ------ ------
Less Distributions From:
Net realized gains.................... (0.02) -- (0.02) --
------ ------ ------ ------
Total Distributions.................... (0.02) -- (0.02) --
------ ------ ------ ------
Net Asset Value, End of Period......... $10.77 $11.18 $10.71 $11.17
====== ====== ====== ======
Total Return (5)++..................... (3.4)% 11.8% (3.9)% 11.7%
Net Assets, End of Period (000s)....... $2,318 $2,070 $7,506 $6,243
Ratios to Average Net Assets+:
Expenses.............................. 1.45% 1.44% 2.20% 2.21%
Net investment loss................... (0.54)% (0.37)% (1.29)% (1.17)%
Portfolio Turnover Rate................ 47% 10% 47% 10%
Before applicable waiver of management
fee and expenses absorbed by SBAM, net
investment loss per share and expense
ratios would have been:
Net investment loss per share (4)..... $(0.06) $(0.07) $(0.10) $(0.08)
Expense ratio+........................ 2.05% 4.02% 2.80% 4.73%
Large Cap Growth Fund
------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares Class O Shares
----------------- -----------------
2000(1) 1999(2) 2000(1) 1999(3)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $11.16 $10.00 $11.18 $10.00
------ ------ ------ ------
Income (Loss) From Operations:
Net investment loss (4)............... (0.07) (0.02) (0.02) (0.00)*
Net realized and unrealized gain
(loss)............................... (0.35) 1.18 (0.35) 1.18
------ ------ ------ ------
Total Income (Loss) From Operations.... (0.42) 1.16 (0.37) 1.18
------ ------ ------ ------
Less Distributions From:
Net realized gains.................... (0.02) -- (0.02) --
------ ------ ------ ------
Total Distributions.................... (0.02) -- (0.02) --
------ ------ ------ ------
Net Asset Value, End of Period......... $10.72 $11.16 $10.79 $11.18
====== ====== ====== ======
Total Return (5)++..................... (3.7)% 11.6% (3.3)% 11.8%
Net Assets, End of Period (000s)....... $2,556 $1,234 $1,868 $1,917
Ratios to Average Net Assets+:
Expenses.............................. 2.20% 2.19% 1.20% 1.21%
Net investment loss................... (1.31)% (1.14)% (0.28)% (0.11)%
Portfolio Turnover Rate................ 47% 10% 47% 10%
Before applicable waiver of management
fee and expenses absorbed by SBAM, net
investment loss per share and expense
ratios would have been:
Net investment loss per share (4)..... $(0.10) $(0.08) $(0.04) $(0.07)
Expense ratio+........................ 2.79% 4.71% 1.80% 3.88%
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from October 25, 1999 (inception date) to December 31, 1999.
(3) For the period from October 26, 1999 (inception date) to December 31, 1999.
(4) Per share amounts have been calculated using the average shares method.
(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.
* Amount represents less than $0.01 per share.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
79
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Investors Value Fund
<TABLE>
----------------------------------------------------------------------------------
<CAPTION>
Class A Shares
=====================================================
<CAPTION>
2000(1) 1999 1998 1997 1996 1995(2)
<S> <C> <C> <C> <C> <C> <C>
=====================================================
Net Asset Value,
Beginning of Period.... $20.70 $22.04 $21.11 $18.89 $16.62 $13.61
------- ------- ------- ------- ------- ------
Income From Operations:
Net investment income
(3)................... 0.10 0.21 0.19 0.16 0.19 0.19
Net realized and
unrealized gain....... 1.76 2.29 2.91 4.64 4.63 4.55
------- ------- ------- ------- ------- ------
Total Income From
Operations............. 1.86 2.50 3.10 4.80 4.82 4.74
------- ------- ------- ------- ------- ------
Less Distributions From:
Net investment income.. (0.09) (0.13) (0.17) (0.21) (0.22) (0.23)
Net realized gains..... (0.87) (3.71) (2.00) (2.37) (2.33) (1.50)
------- ------- ------- ------- ------- ------
Total Distributions..... (0.96) (3.84) (2.17) (2.58) (2.55) (1.73)
------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $21.60 $20.70 $22.04 $21.11 $18.89 $16.62
======= ======= ======= ======= ======= ======
Total Return (4)........ 9.1%++ 11.5% 15.2% 26.2% 30.3% 35.3%++
Net Assets, End of
Period (000s).......... $53,479 $32,817 $50,953 $57,105 $10,905 $441
Ratios to Average Net
Assets:
Expenses............... 0.95%+ 0.87% 0.88% 0.95% 1.06% 0.94%+
Net investment income
...................... 1.01%+ 0.90% 0.87% 0.86% 0.94% 1.41%+
Portfolio Turnover
Rate................... 34% 66% 74% 62% 58% 86%
<CAPTION>
Class B Shares
<S> <C> <C> <C> <C> <C> <C>
=====================================================
<CAPTION>
2001(1) 1999 1998 1997 1996 1995(2)
<S> <C> <C> <C> <C> <C> <C>
=====================================================
Net Asset Value,
Beginning of Period.... $20.43 $21.87 $21.00 $18.86 $16.61 $13.61
------- ------- ------- ------- ------- ------
Income From Operations:
Net investment income
(3)................... 0.02 0.04 0.05 0.04 0.08 0.10
Net realized and
unrealized gain....... 1.74 2.26 2.85 4.58 4.60 4.54
------- ------- ------- ------- ------- ------
Total Income From
Operations............. 1.76 2.30 2.90 4.62 4.68 4.64
------- ------- ------- ------- ------- ------
Less Distributions From:
Net investment income.. (0.02) (0.03) (0.03) (0.11) (0.10) (0.14)
Net realized gains..... (0.87) (3.71) (2.00) (2.37) (2.33) (1.50)
------- ------- ------- ------- ------- ------
Total Distributions..... (0.89) (3.74) (2.03) (2.48) (2.43) (1.64)
------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $21.30 $20.43 $21.87 $21.00 $18.86 $16.61
======= ======= ======= ======= ======= ======
Total Return (4)........ 8.7%++ 10.6% 14.3% 25.3% 29.2% 34.5%++
Net Assets, End of
Period (000s).......... $78,005 $81,759 $75,189 $49,786 $9,433 $716
Ratios to Average Net
Assets:
Expenses............... 1.69%+ 1.61% 1.63% 1.70% 1.82% 1.71%+
Net investment income
...................... 0.24%+ 0.16% 0.18% 0.12% 0.21% 0.63%+
Portfolio Turnover
Rate................... 34% 66% 74% 62% 58% 86%
</TABLE>
Investors Value Fund
--------------------------------------------------------------------------------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from January 3, 1995 (inception date) to December 31, 1995.
(3) Per share amounts have been calculated using the average shares method.
(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.
80
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Investors Value Fund
<TABLE>
-----------------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares
---------------------------------------------------------
2000(1) 1999 1998(2) 1997 1996 1995(3)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $20.46 $21.88 $21.01 $18.86 $16.61 $13.61
-------- -------- -------- -------- -------- --------
Income From Operations:
Net investment income.. 0.03* 0.03* 0.05 0.04 0.07 0.09
Net realized and
unrealized gain....... 1.73 2.30 2.84 4.59 4.60 4.55
-------- -------- -------- -------- -------- --------
Total Income From
Operations............. 1.76 2.33 2.89 4.63 4.67 4.64
-------- -------- -------- -------- -------- --------
Less Distributions From:
Net investment income.. (0.02) (0.04) (0.02) (0.11) (0.09) (0.14)
Net realized gains..... (0.87) (3.71) (2.00) (2.37) (2.33) (1.50)
-------- -------- -------- -------- -------- --------
Total Distributions..... (0.89) (3.75) (2.02) (2.48) (2.42) (1.64)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $21.33 $20.46 $21.88 $21.01 $18.86 $16.61
======== ======== ======== ======== ======== ========
Total Return (4)........ 8.7%++ 10.7% 14.3% 25.2% 29.3% 34.5%++
Net Assets, End of
Period (000s).......... $20,001 $17,883 $17,680 $11,701 $1,959 $306
Ratios to Average Net
Assets:
Expenses............... 1.70%+ 1.61% 1.63% 1.70% 1.80% 1.68%+
Net investment income.. 0.25%+ 0.15% 0.18% 0.13% 0.23% 0.66%+
Portfolio Turnover
Rate................... 34% 66% 74% 62% 58% 86%
Investors Value Fund
-----------------------------------------------------------------------------------------
<CAPTION>
Class O Shares
---------------------------------------------------------
2000(1) 1999 1998 1997 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $20.69 $22.05 $21.13 $18.90 $16.61 $13.63
-------- -------- -------- -------- -------- --------
Income From Operations:
Net investment income.. 0.13* 0.26* 0.25 0.24 0.25 0.27
Net realized and
unrealized gain....... 1.75 2.31 2.90 4.60 4.62 4.48
-------- -------- -------- -------- -------- --------
Total Income From
Operations............. 1.88 2.57 3.15 4.84 4.87 4.75
-------- -------- -------- -------- -------- --------
Less Distributions From:
Net investment income.. (0.13) (0.22) (0.23) (0.24) (0.25) (0.27)
Net realized gains..... (0.87) (3.71) (2.00) (2.37) (2.33) (1.50)
-------- -------- -------- -------- -------- --------
Total Distributions..... (1.00) (3.93) (2.23) (2.61) (2.58) (1.77)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $21.57 $20.69 $22.05 $21.13 $18.90 $16.61
======== ======== ======== ======== ======== ========
Total Return (4)........ 9.2%++ 11.7% 15.4% 26.5% 30.6% 35.4%
Net Assets, End of
Period (000s).......... $691,672 $662,248 $650,916 $608,401 $518,361 $428,950
Ratios to Average Net
Assets:
Expenses............... 0.69%+ 0.63% 0.63% 0.69% 0.76% 0.69%
Net investment income.. 1.23%+ 1.16% 1.15% 1.15% 1.36% 1.67%
Portfolio Turnover
Rate................... 34% 66% 74% 62% 58% 86%
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) On September 14, 1998, Class C shares were renamed Class 2 shares.
(3) For the period from January 3, 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.
* Per share amounts have been calculated using the average shares method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
81
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31. except where noted:
Balanced Fund
<TABLE>
-----------------------------------------------------------------------------------
<CAPTION>
Class A Shares
------------------------------------------------
2000(1) 1999 1998 1997 1996 1995(2)
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $12.81 $13.11 $13.13 $11.82 $10.55 $10.00
------- ------- -------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income
(3)................... 0.27 0.50 0.56 0.55 0.54 0.15
Net realized and
unrealized gain
(loss)................ 0.38 (0.08) 0.26 1.65 1.35 0.52
------- ------- -------- ------- ------- ------
Total Income From
Operations............. 0.65 0.42 0.82 2.20 1.89 0.67
------- ------- -------- ------- ------- ------
Less Distributions From:
Net investment income.. (0.25) (0.50) (0.55) (0.53) (0.52) (0.11)
Net realized gains..... (0.25) (0.22) (0.29) (0.36) (0.10) (0.01)
------- ------- -------- ------- ------- ------
Total Distributions..... (0.50) (0.72) (0.84) (0.89) (0.62) (0.12)
------- ------- -------- ------- ------- ------
Net Asset Value, End of
Period................. $12.96 $12.81 $13.11 $13.13 $11.82 $10.55
======= ======= ======== ======= ======= ======
Total Return (4)........ 5.2%++ 3.2% 6.4% 19.1% 18.3% 6.7%++
Net Assets, End of
Period (000s).......... $26,571 $35,386 $51,443 $53,024 $21,109 $3,658
Ratios to Average Net
Assets:
Expenses............... 0.95%+ 0.95% 0.85% 0.77% 0.75% 0.74%+
Net investment income.. 4.19%+ 3.79% 4.17% 4.29% 4.81% 4.82%+
Portfolio Turnover
Rate................... 18% 34% 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 (3)......... $0.29 $0.47 $0.51 $0.49 $0.44 $0.13
Expense ratio.......... 1.24%+ 1.17% 1.17% 1.24% 1.61% 1.45%+
Balanced Fund
-----------------------------------------------------------------------------------
<CAPTION>
Class B Shares
------------------------------------------------
2000(1) 1999 1998 1997 1996 1995(2)
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $12.76 $13.08 $13.12 $11.82 $10.54 $10.00
------- ------- -------- ------- ------- ------
Income (Loss) From
Operations:
Net investment income
(3)................... 0.22 0.40 0.45 0.45 0.45 0.13
Net realized and
unrealized gain
(loss)................ 0.39 (0.08) 0.26 1.65 1.35 0.51
------- ------- -------- ------- ------- ------
Total Income From
Operations............. 0.61 0.32 0.71 2.10 1.80 0.64
------- ------- -------- ------- ------- ------
Less Distributions From:
Net investment income.. (0.21) (0.42) (0.46) (0.44) (0.42) (0.09)
Net realized gains..... (0.25) (0.22) (0.29) (0.36) (0.10) (0.01)
------- ------- -------- ------- ------- ------
Total Distributions..... (0.46) (0.64) (0.75) (0.80) (0.52) (0.10)
------- ------- -------- ------- ------- ------
Net Asset Value, End of
Period................. $12.91 $12.76 $13.08 $13.12 $11.82 $10.54
======= ======= ======== ======= ======= ======
Total Return (4)........ 4.8%++ 2.4% 5.5% 18.2% 17.4% 6.4%++
Net Assets, End of
Period (000s).......... $80,355 $97,656 $120,816 $87,549 $28,043 $5,378
Ratios to Average Net
Assets:
Expenses............... 1.70%+ 1.70% 1.60% 1.52% 1.50% 1.49%+
Net investment income.. 3.43%+ 3.03% 3.41% 3.54% 4.06% 4.06%+
Portfolio Turnover
Rate................... 18% 34% 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 (3)......... $0.24 $0.37 $0.41 $0.39 $0.36 $0.11
Expense ratio.......... 1.99%+ 1.92% 1.92% 1.99% 2.36% 2.19%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) For the period from September 11, 1995 (inception date) to December 31,
1995.
(3) Per share amounts have been calculated using the average shares method.
(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.
82
<PAGE>
Financial Highlights
(continued)
For a share of each class of capital stock outstanding throughout each year
ended December 31, except where noted:
Balanced Fund
<TABLE>
---------------------------------------------------------------------------------
<CAPTION>
Class 2 Shares
--------------------------------------------
2000(1) 1999 1998(2) 1997 1996 1995(3)
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $12.79 $13.11 $13.15 $11.85 $10.56 $10.00
------- ------- ------- ------- ------ ------
Income (Loss) From
Operations:
Net investment income
(4)................... 0.22 0.41 0.45 0.45 0.46 0.14
Net realized and
unrealized gain
(loss)................ 0.39 (0.09) 0.26 1.65 1.35 0.51
------- ------- ------- ------- ------ ------
Total Income From
Operations............. 0.61 0.32 0.71 2.10 1.81 0.65
------- ------- ------- ------- ------ ------
Less Distributions From:
Net investment income.. (0.21) (0.42) (0.46) (0.44) (0.42) (0.08)
Net realized gains..... (0.25) (0.22) (0.29) (0.36) (0.10) (0.01)
------- ------- ------- ------- ------ ------
Total Distributions..... (0.46) (0.64) (0.75) (0.80) (0.52) (0.09)
------- ------- ------- ------- ------ ------
Net Asset Value, End of
Period................. $12.94 $12.79 $13.11 $13.15 $11.85 $10.56
======= ======= ======= ======= ====== ======
Total Return (5)........ 4.8%++ 2.4% 5.5% 18.1% 17.5% 6.5%++
Net Assets, End of
Period (000s).......... $16,743 $21,030 $29,458 $21,085 $3,445 $445
Ratios to Average Net
Assets:
Expenses............... 1.70%+ 1.70% 1.60% 1.52% 1.50% 1.51%+
Net investment income.. 3.44%+ 3.04% 3.41% 3.52% 4.07% 4.26%+
Portfolio Turnover
Rate................... 18% 34% 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 (4)......... $0.24 $0.38 $0.41 $0.39 $0.36 $0.11
Expense ratio.......... 1.99%+ 1.92% 1.92% 1.99% 2.36% 2.22%+
Balanced Fund
---------------------------------------------------------------------------------
<CAPTION>
Class O Shares
--------------------------------------------
2000(1) 1999 1998 1997 1996 1995(3)
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $12.88 $13.18 $13.20 $11.88 $10.57 $10.00
------- ------- ------- ------- ------ ------
Income (Loss) From
Operations:
Net investment income
(4) .................. 0.29 0.54 0.59 0.59 0.57 0.17
Net realized and
unrealized gain
(loss)................ 0.39 (0.09) 0.26 1.65 1.39 0.52
------- ------- ------- ------- ------ ------
Total Income From
Operations............. 0.68 0.45 0.85 2.24 1.96 0.69
------- ------- ------- ------- ------ ------
Less Distributions From:
Net investment income.. (0.27) (0.53) (0.58) (0.56) (0.55) (0.11)
Net realized gains..... (0.25) (0.22) (0.29) (0.36) (0.10) (0.01)
------- ------- ------- ------- ------ ------
Total Distributions..... (0.52) (0.75) (0.87) (0.92) (0.65) (0.12)
------- ------- ------- ------- ------ ------
Net Asset Value, End of
Period................. $13.04 $12.88 $13.18 $13.20 $11.88 $10.57
======= ======= ======= ======= ====== ======
Total Return (5)........ 5.3%++ 3.4% 6.6% 19.3% 19.0% 6.9%++
Net Assets, End of
Period (000s).......... $1,476 $1,460 $1,523 $1,227 $213 $4,494
Ratios to Average Net
Assets:
Expenses............... 0.70%+ 0.70% 0.60% 0.52% 0.50% 0.51%+
Net investment income.. 4.44%+ 4.00% 4.41% 4.60% 5.13% 5.30%+
Portfolio Turnover
Rate................... 18% 34% 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 (4)......... $0.31 $0.51 $0.55 $0.53 $0.47 $0.15
Expense ratio.......... 0.99%+ 0.92% 0.92% 1.00% 1.36% 1.22%+
</TABLE>
------
(1) For the six months ended June 30, 2000 (unaudited).
(2) On September 14, 1998, Class C shares were renamed Class 2 shares.
(3) For the period from September 11, 1995 (inception date) to December 31,
1995.
(4) Per share amounts have been calculated using the average shares method.
(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.
83
<PAGE>
(This page intentionally left blank.)
<PAGE>
Salomon Brothers Investment Series
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
PFPC Global Fund Services
P.O. Box 9764
Providence, Rhode Island 02940-9764
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
Consultant, Colman Consulting
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,
SSB Citi Fund Management LLC 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 Value 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
