<PAGE>
<PAGE>
SALOMON BROTHERS
INVESTMENT SERIES
ANNUAL REPORT
DECEMBER 31, 1996
ASIA GROWTH FUND
CAPITAL FUND
INVESTORS FUND
TOTAL RETURN FUND
HIGH YIELD BOND FUND
STRATEGIC BOND FUND
U.S. GOVERNMENT
INCOME FUND
NATIONAL INTERMEDIATE
MUNICIPAL FUND
NEW YORK MUNICIPAL
BOND FUND
NEW YORK MUNICIPAL
MONEY MARKET FUND
CASH MANAGEMENT FUND
______________________________________
SALOMON BROTHERS ASSET MANAGEMENT
______________________________________
<PAGE>
<PAGE>
OUR MESSAGE TO YOU
DEAR SHAREHOLDERS:
The year 1996 was noteworthy for the U.S. financial markets and for the Salomon
Brothers Investment Series. The U.S. Stock market enjoyed excellent gains for
the second year in a row and we are delighted to report that each of the
equity-oriented mutual funds in the Investment Series achieved
better-than-average returns. While the fixed-income markets posted gains below
historical norms, several of the bond funds also outperformed portfolios with
similar objectives.
We are dedicated to achieving excellence in performance and in shareholder
service, and in 1996, we made solid progress toward both of these goals. Many of
our mutual funds (Class A Shares) received an "A" rating from Lipper Analytical
Services, a leading mutual fund ranking service organization.1 In addition, we
have taken steps to enhance shareholder support and strengthen research
capabilities, some of which are described below. For information on individual
fund performance and strategy, please see the following pages.
ECONOMIC AND MARKET TRENDS
Moderate growth, acceptable levels of inflation and interest rates provided an
environment for continued earnings growth. This overall climate was close to
ideal for U.S. stocks, and the Standard and Poor's Composite Index of 500 Stocks
("S&P 500") returned 23.0% for 1996, assuming dividends reinvested. Much of this
growth was propelled by the largest blue chip names, as evidenced by the Dow
Jones Industrial Average, made up of only 30 large-capitalization stocks, return
of 28.9% -- substantially higher than the broader S&P 500 Index. Small company
stocks had a good year on a relative and historical basis -- but lagged the
broader market, returning 16.5% as measured by the Russell 2,000.
Although the Federal Reserve was content with a neutral monetary policy,
misinterpretation of economic strength by investors caused interest rates
to spike up significantly during the early months of 1996 and the bond
markets never really recovered. The Salomon Brothers Broad Investment
Grade ("BIG") Bond Index returned a modest 3.6% for the year, lagging
historical norms substantially. One bright spot in the fixed-income market was
high-yield bonds, which produced a total return of 11.3% as measured by the
Salomon Brothers High-Yield Market Index.
European stocks were up 6.4% as measured by the Morgan Stanley Capital
International (EAFE) Index for 1996 in U.S. dollar-terms, as economies responded
to fiscal reform and falling interest rates. In Asia, the impact of Japan's
continuing economic malaise -- particularly in the banking and real estate
sectors, dampened stock markets in the Pacific.
See pages 24 and 25 for all footnotes.
1
<PAGE>
<PAGE>
With access to a global network of resources, including investment
professionals, advanced technology and research centers, Salomon Brothers Asset
Management stands poised to help clients manage today's financial opportunities.
"THE BEST KEPT SECRET
ON WALL STREET"
Salomon Brothers Inc, our affiliate, enjoys a well-deserved reputation for its
expertise and participation in global fixed-income markets. While we are proud
of this heritage, at Salomon Brothers Asset Management, we would also like to
highlight our roster of equity mutual funds. In the Investment Series, in
addition to five fixed income funds, we also offer three distinguished equity
funds, two of which were ranked in the top quartile by Lipper in their
respective categories. In addition, we also manage a balanced portfolio -- also
ranked in the top quartile by Lipper.(2) Also of note is a recent ranking by
Morningstar, another respected rating service which awarded the Salomon Brothers
Investors Fund (Class"O" Shares) a five-star rating. Morningstar noted that "the
Investors Fund has great trailing returns for every recent period and is near
the top of the large-blend category for the year."(3)
OUR GROWING FUND FAMILY
New funds were added to the Salomon Brothers Investment Series during 1996.
Recognizing the substantial opportunities represented by the emerging nations of
the Pacific Rim, we launched the Salomon Brothers Asia Growth Fund in May. While
many stock markets in this area generated negative returns in 1996, the
long-term prospects for developing Asian nations remain excellent; We believe
consumer growth, capital inflows and political reform will combine to create
very high growth potential, in this region, over time.
Our newest addition is the Salomon Brothers Capital Fund, which we made a part
of the Salomon Brothers Investment Series as of November 1, 1996. Accordingly,
the Fund implemented the multiple class pricing structure adopted by the Funds
in the Investment Series Family. The Capital Fund utilizes a bottom-up stock
picking approach; it looks at the universe of stocks from a somewhat different
perspective than most other equity funds and we believe it offers investors a
good way to tap the long-term potential of the U.S. stock market.
AS OTHERS SEE US
We received special recognition in the financial services industry during the
past year. As part of an extensive survey of Financial Advisers, Dalbar Inc., an
industry analytics firm, awarded Salomon Brothers Asset Management Inc very high
rankings, including a #1 ranking for overall marketing support, and #2 for
operations support. Dalbar surveys more than 3,000 financial professionals to
determine how mutual fund companies are viewed by those who sell their products.
In addition,
As Others See Us: 1996 was particularly noteworthy for Salomon Brothers Asset
Management and the professionals behind the Funds -- several of which were
recognized by Lipper Analytical Services for their investment performance
throughout the year. From left: Steven Guterman, Peter Wilby, Michael Hyland,
Marybeth Whyte, Charles Bardes, Roger Lavan. Seated: Tom Brock and Michael
Lipper. Missing: Allan R. White III.
[PHOTO]
See pages 24 and 25 for all footnotes.
2
<PAGE>
<PAGE>
[PHOTO]
the equity research team at Salomon Brothers Inc -- whose evaluation and
analysis are highly valued by our portfolio managers -- was ranked #4 by Zacks
Investment Research, a recognized industry research firm.
You'll learn more about these and other developments in the near future when we
launch our home page on the World Wide Web. The site is currently under
development and we are thrilled about adding a new means of communicating with
financial professionals and shareholders.
OUTLOOK
Although over the past two years, the S&P 500 has gained over 57.0%, such
performance is unlikely to continue. How ever, the price-earnings ratio for the
S&P 500 currently stands at about 20, far above the historical average, and
dividend yields are historically low at 2.0%. We believe stocks are capable of
further gains, but we are concerned about the historically high valuations of
many issues.
With inflation fears currently in check, we believe interest rates could ease a
bit in the year to come, restoring some vigor to the fixed-income markets.
Europe and Asia -- with the possible exception of Japan -- appear poised for
growth. We feel these regions merit strong consideration for investors who are
adding money to current portfolios or rebalancing assets after last year's
run-up in U.S. stocks.
To summarize, while there are no real indicators presaging high inflation or
outright recession in the United States, there are some clouds on the horizon.
The labor market is tight and rising oil prices could push up inflation rates.
Economic growth could be adversely impacted by consumer debt which is reaching
uncomfortable levels; and the rise in domestic exports could be slowed by the
rise in the U.S. dollar. Bearing these factors in mind, investors should
remember that prudent diversification and professional management are key
elements in any long-term investment program.
We appreciate your investment with the Salomon Brothers Investment Series and we
look forward to serving you in the future.
Sincerely,
[GRAPHIC OMITTED]
Michael S. Hyland
Chairman and President
3
<PAGE>
<PAGE>
THE SALOMON BROTHERS
ASIA GROWTH FUND
INVESTMENT OBJECTIVE
Long-term capital appreciation.
INVESTMENT STRATEGY
The Asia Growth Fund invests primarily in the equity and equity-related
securities of companies located in developing nations of the Pacific Rim
(ex-Japan). Areas considered for investment include, but are not limited to,
China, Hong Kong, Indonesia, Korea, Malaysia, The Philippines, Singapore and
Thailand. In seeking to capture high long-term returns with reduced volatility,
the Fund will allocate assets among countries and industries believed most
likely to benefit from regional economic trends.
PERFORMANCE
Since commencement of operations on May 6, 1996, the Asia Growth Fund (Class A
Shares) gained 5.2%.4 This compares favorably with the performance of the
regional index, the Morgan Stanley Capital International All Country Asia Free
ex-Japan Index, of negative 2.12% and the Lipper Asia Growth Average of 2.7%.
MARKET REVIEW
Asian ex-Japan Markets were not affected by the declining health of the Japanese
economy. However, a weakening yen will continue to put pressure on certain South
Asian markets, especially Thailand. Among the emerging nations of the area,
rising interest rates have troubled the Thai and South Korean stock markets,
while the Hong Kong, Taiwanese and Malaysian markets generated positive gains.
The largest emerging markets, India and China, were beneficiaries of lower
interest rates and easier investment liquidity conditions, which helped create
selective opportunities within key sectors.
HIGHLIGHTS
The Asia Growth Fund was able to outperform relevant benchmarks in 1996,
principally as a result of overweighting Hong Kong, Taiwan and India, while
particularly de-emphasizing Thailand. Hong Kong was a bright spot both for the
region and the Fund in 1996. The Fund benefited from selective investments in
companies like Cheung Kong Infrastructure, China Resources Enterprises and
Hutchinson Whampoa -- all listed on the Hong Kong stock exchange -- and we
believe companies like these are likely to remain attractive as Hong Kong is
re-integrated into the People's Republic of China.
Fund performance was also aided by overweighting Taiwan -- particularly the
electronics sector -- and India, where the Fund built up positions in financial,
automotive and cement stocks.
OUTLOOK
We believe that rising inter-regional trade and investment will continue to be
the main driving forces of the Asian economy. The opening of the Chinese
economy, the return of Hong Kong to China, and the possible resumption of direct
trade links between mainland China and Taiwan are among the many political and
economic factors that should lead to continued high GDP growth in the Pacific
Rim, especially North Asia. While successful long-term investing in Asia
requires selectivity and patience, we remain extremely bullish on opportunities
presented by the stock markets of the region and we remain focused on seeking to
capture this growth for our shareholders.
THE FUND MANAGER
[PHOTO]
Giampaolo G. Guarnieri, Director and Portfolio Manager of Salomon Brothers Asset
Management Asia Pacific Limited (SBAM AP), has 10 years of investment industry
experience. SBAM AP is an affiliate of Salomon Brothers Asset Management Inc and
serves as a sub-advisor to the Fund. Mr. Guarnieri is primarily responsible for
day-to-day Fund management.
See pages 24 and 25 for all footnotes.
4
<PAGE>
<PAGE>
The following graph depicts the performance of the Asia Growth Fund versus the
Morgan Stanley Capital International All Country Asia Free ex-Japan Index. It is
important to note that the Asia Growth Fund is a professionally managed mutual
fund while the index is not available for investment and is unmanaged. The
comparison is shown for illustrative purposes only.
ASIA GROWTH FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the Fund with MSCI AC Asia Free ex-Japan
Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- -------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- -------------------------------------------------------------------------------
Since Inception (5/6/96) 5.18% 0.17%
- -------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- -------------------------------------------------------------------------------
Since Inception (5/6/96) 4.65% -0.35%
- -------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- -------------------------------------------------------------------------------
Since Inception (5/6/96) 4.64% 3.64%
- -------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- -------------------------------------------------------------------------------
Since Inception (5/6/96) 5.31% 5.31%
- -------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
[GRAPH]
Common Stocks 95%
Cash/Cash Equivalents 5%
BREAKDOWN BY COUNTRY
- -------------------------------------------------------------------------------
Hong Kong 36%
- -------------------------------------------------------------------------------
Malaysia 15%
- -------------------------------------------------------------------------------
Taiwan 12%
- -------------------------------------------------------------------------------
India 10%
- -------------------------------------------------------------------------------
Singapore 9%
- -------------------------------------------------------------------------------
Korea 5%
- -------------------------------------------------------------------------------
Philippines 4%
- -------------------------------------------------------------------------------
Indonesia 3%
- -------------------------------------------------------------------------------
Thailand 4%
- -------------------------------------------------------------------------------
Pakistan 1%
- -------------------------------------------------------------------------------
Sri Lanka 1%
- -------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
5
<PAGE>
<PAGE>
THE SALOMON BROTHERS
CAPITAL FUND
INVESTMENT OBJECTIVE
Capital appreciation through investments primarily in common stocks or
securities convertible into common stock.
INVESTMENT STRATEGY
The Capital Fund seeks to achieve its investment objective through invest ments
in securities which are believed to have above-average price appreciation
potential. Such invest ments 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 will not invest more than 25% of its assets in any
particular industry.
PERFORMANCE
The Capital Fund (Class O shares) posted an attractive return of 33.3% in 1996.5
This compares with a return of 23.0% for the S&P 500 and 16.3% for the Lipper
Capital Appreciation Average.
MARKET REVIEW
Despite a rewarding year for the U.S. equity markets, the past twelve months
were not without pitfalls. A sharp rise in interest rates in February and a
severe stock market downdraft in July contributed to increased turbulence. While
few investors like volatility, it does offer portfolio managers an opportunity
to buy stocks at attractive prices. The Capital Fund -- which utilizes a
bottom-up stock picking approach -- was able to find a number of investments
which met its investment criteria of a balance of growth potential, valuation
and risk.
HIGHLIGHTS
Good stock selection was the primary reason why the Fund outdistanced other
comparable funds. Our stock-by-stock scrutiny of the equity markets -- including
everything from micro-caps to blue chips -- led us to a number of attractive
holdings which served to bolster portfolio returns.
Among energy stocks, we traded the large cap stocks but held core positions in
refineries like Holly and Ashland as well as domestic natural gas producers like
Devon Energy and Union Pacific Resources Group. In the consumer sector, the Fund
held core positions in retailers such as Sears, Roebuck and Price/Costco and
also in food retailers like Kroger and Food Lion. We also benefited from
investments in the financial sector, including Bank of New York, and Travelers
Group. Two small-cap stocks which served the portfolio well were Plantronics, a
leading manufacturer of telephone headsets, and Fine Host, a niche provider of
food service for stadiums and cafeterias.
OUTLOOK
We believe the stock market offers promise for the year ahead. Due to relatively
high current valuations, however, risk levels are also high. The narrow scope of
recent stock market gains has made the search for attractive risk/reward ratios
more difficult. In this environment, our ability to select individual stocks
will continue to be the primary determinant of our performance. For new ideas,
we continue to focus on stocks that are capable of outperforming the market over
a 12-18 month time horizon. Even if these stocks do not provide the "instant
gratification" favored by many of today's momentum-oriented investors, we
believe they are attractive investments for our shareholders. At the same time,
many of these stocks, as well as the new ideas from 1996, will provide
attractive returns in 1997, if we are correct in our assessments of their
business fundamentals and stock price valuations.
THE FUND MANAGER
[PHOTO]
Ross Margolies, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 15 years of investment industry experience in the equity,
convertible and high yield markets. Mr. Margolies is primarily responsible for
day-to-day Fund management.
See pages 24 and 25 for all footnotes.
6
<PAGE>
<PAGE>
CAPITAL FUND -- CLASS A, B, and C SHARES CAPITAL FUND -- CLASS 0 SHARES
Comparison of $10,000 Investment in the Comparison of $10,000 Investment
Fund with S&P 500 in the Fund with S&P 500
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
Past performance is not predictive of future performance.
The graphs above depict the Performance of the Capital Fund versus the S&P 500
Stock Index. It is important to note that the Capital Fund is a professionally
managed mutual fund while the index is not available for investment and is
unmanaged. The comparison is shown for illustrative purposes only.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A'SS' Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 7.73% 2.60%
- --------------------------------------------------------------------------------
Class B'SS' Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 7.63% 3.11%
- -------------------------------------------------------------------------------
Class C'SS' Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (11/1/96) 7.68% 6.78%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
10 year 12.00% 12.00%
5 year 13.63% 13.63%
1 year 33.34% 33.34%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
[GRAPH]
- --------------------------------------------------------------------------------
TOP HOLDINGS
- --------------------------------------------------------------------------------
Kroger Co
- --------------------------------------------------------------------------------
Sears, Roebuck
- --------------------------------------------------------------------------------
Union Pacific Resources Group
- --------------------------------------------------------------------------------
Food Lion
- --------------------------------------------------------------------------------
Plantronics
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS CAPITAL FUND
LIPPER CATEGORY: CAPITAL APPRECIATION FUNDS
1 YEAR TOTAL RETURN
12/31/95 -- 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
N/A 16.31% N/A
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
N/A N/A
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
N/A N/A
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
33.34% 1st Quartile
Top 3%
#5 of 189 funds
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
7
<PAGE>
<PAGE>
THE SALOMON BROTHERS
INVESTORS FUND
INVESTMENT OBJECTIVE
Long-term growth of capital. Current income is a secondary objective.
INVESTMENT STRATEGY
The Investors Fund invests primarily in common stocks listed on the New York
Stock Exchange and other U.S. exchanges. The port folio manager generally favors
large-capitalization stocks representing well-known companies with good growth
potential and reasonable share prices.
PERFORMANCE
The Investors Fund (Class A Shares) enjoyed an outstanding year in 1996,
returning 30.3%.6 This performance handily outpaced both the S&P 500 of 23.0%
and the return of 20.8% for the average Lipper Growth & Income Fund.
MARKET REVIEW
The stock market was propelled by near-ideal economic conditions in 1996,
including moderate growth and low inflation. Further octane was added to the
market in the form of demand generated by mutual fund buying, stock repurchases
by corporations and merger and acquisition activity. Corporate profits, which
many observers expected to falter after strong gains in 1995, came in stronger
than expected and the U.S. equity market enjoyed its second consecutive year of
double digit returns.
HIGHLIGHTS
The Fund was able to produce better-than-average gains in 1996 because it
concentrated investments in several attractive sectors while de-emphasizing a
number of underperforming industries. The financial sector was up substantially
during the year, and we benefited from core positions in companies like Bank of
New York, SunAmerica and Travelers Group. We also overweighted REITs (real
estate investment trusts) such as Starwood Lodging and Beacon Properties and
Canadian railways such as Canadian Pacific and Canadian National Railway. Fund
performance was further bolstered by underweighting technology stocks during the
turbulent first half of 1996, then later adding to selected positions in market
leaders like International Business Machines and Seagate Technology.
OUTLOOK
The near-ideal combination of moderate growth, low inflation and low interest
rates cannot persist indefinitely. Near term, there is some evidence that
consumer debt is reaching uncomfortable levels and that capital spending may be
trending lower. In order to justify currently high valuations, corporations must
continue to meet or exceed earnings expectations or the market may react
negatively.
During 1997, we expect to balance high-quality growth companies like First Data,
Columbia/HCA Healthcare, and Coca-Cola Enterprises with companies that offer
good relative value such as Canadian National Railway and Royal Dutch Petroleum.
We believe this emphasis on diversification and quality could help protect the
Fund from market turbulence even if overall corporate earnings begin to
decelerate.
THE FUND MANAGER
[PHOTO]
Allan R. White, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 15 years of investment industry experience in the
equity, convertible and fixed income markets. Mr. White is primarily responsible
for day-to-day Fund management.
See pages 24 and 25 for all footnotes.
8
<PAGE>
<PAGE>
INVESTORS FUND -- CLASS A, B, and C SHARES INVESTORS FUND -- CLASS 0 SHARES
Comparison of $10,000 Investment in the Comparison of $10,000 Investment
Fund with S&P 500 in the Fund with S&P 500
[DESCRIPTION TO COME] [DESCRIPTION TO COME]
Past performance is not predictive of future Past performance is not
performance. Performance above predictive of future
reflects returns after deduction of performance.
applicable maximum sales charge.
The graphs above depict the performance of the Investors Fund versus the S&P 500
Stock Index. It is important to note that the Investors Fund is a professionally
managed mutual fund while the index is not available for investment and is
unmanaged. The comparison is shown for illustrative purposes only.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 32.79% 29.59%
1 year 30.29% 24.09%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 31.84% 29.93%
1 year 29.22% 24.22%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 31.85% 31.85%
1 year 29.25% 28.25%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
10 year 14.12% 14.12%
5 year 16.65% 16.65%
1 year 30.56% 30.56%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
[GRAPH]
Stocks 95%
Convertible Securities 1%
Cash/Cash Equivalents 4%
- --------------------------------------------------------------------------------
TOP HOLDINGS
- --------------------------------------------------------------------------------
Columbia/HCAHealthcare
- --------------------------------------------------------------------------------
Canadian National Railway
- --------------------------------------------------------------------------------
Bank of New York
- --------------------------------------------------------------------------------
First Data
- --------------------------------------------------------------------------------
Travelers Group
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE++
SALOMON BROTHERS INVESTORS FUND
LIPPER CATEGORY: GROWTH & INCOME FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN
12/31/95 -- 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
30.29% 20.78% 1st Quartile
Top 3%
#15 of 522 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
29.22% 1st Quartile
Top 5%
#24
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
29.25% 1st Quartile
Top 5%
#23
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
30.56% 1st Quartile
Top 3%
#13
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
9
<PAGE>
<PAGE>
THE SALOMON BROTHERS
TOTAL RETURN FUND
INVESTMENT OBJECTIVE
The Total Return Fund seeks to obtain above-average income compared to a
portfolio that invests only in stocks. The Fund's secondary objective is to
seek growth of capital and income. The Fund seeks to achieve its objectives by
invest ing in a broad variety of asset classes including equities, fixed income
securities and short-term obligations.
INVESTMENT STRATEGY
The Fund seeks to increase income and provide for long-term growth. The Fund
invests primarily in large-capitalization stocks that are earning dividends
greater than the S&P 500 average. Fixed income assets tend to be allocated among
securities believed capable of achieving equity-like returns, such as high
yield bonds and convertible securities.
PERFORMANCE
It was a highly rewarding year for the Total Return Fund (Class A Shares). The
Fund generated a total return of 18.3%.(7) This substantially exceeded the
performance of a total return of 13.0% for a composite index of 50% Salomon
Brothers Broad Investment Grade Index and 50% S&P 500, and 13.8% for the Lipper
Balanced Average.
MARKET REVIEW
As a balanced fund, the performance of the Salomon Brothers Total Return Fund is
greatly impacted by trends affecting both stocks and bonds. U.S. equities
enjoyed a very strong year overall, led by large-capitalization blue chip
companies. Meanwhile, U.S. fixed-income securities lagged common stocks. Our mix
emphasizing high yield bonds and convertibles greatly enhanced the Fund's
return, with both the above areas outperforming high grade securities by
substantial margins.
HIGHLIGHTS
As we entered 1996, Fund management was somewhat apprehensive about high
valuations in the stock market, holding the equity allocation to approximately
45% of the portfolio. Despite this allocation, the equity portion of the
portfolio delivered handsome returns for the year due primarily to the Fund's
sector concentrations in energy stocks, real estate investment trusts (REITs)
and Canadian railroad stocks. On the fixed income side, our asset mix emphasized
high-yield bonds and convertible bonds, both of which outperformed investment
grade bonds by substantial margins.
For 1996, the Total Return Fund also provided attractive dividend distributions,
with a dividend payout of 4.3% compared to 2.7% for the average balanced fund as
measured by Lipper. Looking ahead, this dividend level could be expected to
decrease if the Fund emphasizes common stocks in future asset allocations.
OUTLOOK
For the past two years, stocks and high yield securities have enjoyed strong
returns while high grade bonds have languished. This disparity, in our view,
will not last indefinitely, especially with stocks at historically high
valuation levels, and we expect more subdued returns from equities in 1997. As
we move into the coming year, we intend to maintain our current portfolio mix of
45% stocks, 40% bonds, 10% convertibles and 5% cash-equivalents. In the
fixed-income area, we intend to maintain a blend of high-yield and investment
grade bonds, but are currently upgrading the credit quality of the high-yield
sector. On the equity side, we are currently emphasizing companies with
improving business prospects that also sell at attractive prices. Examples
include Canadian National Railway, Eastman Kodak and Suncor, a Canadian Oil
Company.
THE FUND MANAGER
[PHOTO]
Richard Dahlberg, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 36 years of investment industry experience in the
equity markets. Mr. Dahlberg is primarily responsible for day-to-day Fund
management.
See pages 24 and 25 for all footnotes.
10
<PAGE>
<PAGE>
The following graph depicts the performance of the Total Return Fund versus 50%
Standard and Poor's 500 Stock Index and 50% Salomon Brothers Broad Investment
Grade Bond Index. It is important to note that the Total Return Fund is a
professionally managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
TOTAL RETURN FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the
Fund with 50% S&P 500 SB Broad Investment
Grade Bond Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 19.44% 15.07%
1 year 18.32% 12.66%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 19.04% 15.41%
1 year 17.41% 12.41%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 18.67% 18.67%
1 year 17.46% 16.46%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (9/11/95) 20.19% 20.19%
1 year 19.03% 19.03%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
[GRAPH]
Stocks 46%
High Yield Securities 17%
Cash/Cash Equivalents 10%
U.S. Government & Mortgage-Backed Securities 13%
Investment Grade Debt 4%
Convertible Securities 10%
Portfolio holdings may vary.
TOP STOCK HOLDINGS
- --------------------------------------------------------------------------------
Canadian National Railway
- --------------------------------------------------------------------------------
Eastman Kodak
- --------------------------------------------------------------------------------
Suncor
- --------------------------------------------------------------------------------
Beacon Properties
- --------------------------------------------------------------------------------
Smithkline Beecham - ADR
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE++
SALOMON BROTHERS TOTAL RETURN FUND
LIPPER CATEGORY: BALANCED FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN
12/31/95 -- 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
18.32% 13.76% Top Quartile
Top 7%
#18 of 272 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
17.41% Top Quartile
Top 12%
#31
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
17.46% Top Quartile
Top 12%
#30
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
19.03% Top Quartile
Top 7%
#17
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
11
<PAGE>
<PAGE>
THE SALOMON BROTHERS
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVE
To maximize current income by investing primarily in a diversified portfolio of
high yield, fixed income securities rated in medium or lower categories. As a
secondary objective, the Fund seeks capital appreciation.
INVESTMENT STRATEGY
Under normal market conditions, the Fund intends to invest at least 65% of its
assets in securities rated Baa or lower by Moody's, or those rated BBB or lower
by Standard & Poor's. A key component of the overall strategy is to determine
the optimal asset allocation between domestic high yield bonds and foreign fixed
income securities such as Brady Bonds and lower-rated sovereign debt.
PERFORMANCE
1996 was a very strong year for the Salomon Brothers High Yield Bond Fund (Class
A Shares) which posted an attractive 21.9% return.8 This compares quite
favorably to the 11.3% return for the High Yield Bond Market, as measured by the
Salomon Brothers High-Yield Market Index and a 13.7% return for the Lipper High
Current Yield Bond Average.
MARKET REVIEW
The market's performance was driven by better than expected U.S. economic growth
during the year, which resulted in strong corporate performance and improved
credit quality among corporate bond issuers. The risk premium above U.S.
Treasuries, which the high yield market paid, on average, declined from 4.4%
above U.S. Treasuries to 3.2% above U.S. Treasuries over the course of the year,
as measured by the Salomon Brothers High-Yield Market Index.
Strong performing industries during the year included aerospace, electronics,
casino gaming and leisure and retail stores, all of which benefited from
cyclical strength in their underlying fundamentals. Lagging industries for the
year included cable television and other media, where companies are suffering
from intense competition. Machinery continues to suffer from cyclical pressures,
as well as restaurant companies, which are also facing a difficult competitive
environment.
Globally, the best performing fixed income market was the emerging markets debt
market, which returned 34.6% for 1996, as measured by the Salomon Brothers Brady
Bond Index. This market generally represents government or sovereign credit risk
of lower rated countries. The risk premium on these bonds has moved from 9.4% at
the beginning of 1996 to 4.9% at the end of 1996 due to global economic growth,
structural economic reforms, widening access to capital and improved credit
quality among many of the emerging market nations.
HIGHLIGHTS
The Salomon Brothers High Yield Bond's out-performance can be attributed to
astute industry weighting, strong individual company selection and an allocation
outside the United States to emerging market debt, which approximated 20% of the
Fund during the year.
Within the U.S. portion of the Fund, the portfolio was heavily overweighted in
the consumer driven industries, such as consumer products companies, food
companies and retail stores, all of which outperformed the market during the
year. Consumer oriented investments ranged from 31-38% of the U.S. portfolio
during the year, versus approximately 22% for the market in general. Also within
the U.S. portion, the Fund's average investment in the media sector ranged from
19-28% versus approximately 31% for the market. This underweighted sector
underperformed the market by about 3.5% in 1996.
In emerging markets, we continued to favor the Brady Bond market, with key
positions in Argentina, Brazil, Venezuela, and Ecuador. In addition, we also
favor investment in Morocco (not a Brady Bond). This sector performed very
strongly in 1996, especially the Latin American countries.
OUTLOOK
Our macroeconomic outlook is for continued moderate growth in the U.S., combined
with a pickup in growth in Europe and the emerging markets, in general.
Therefore, we feel corporate credit quality in the U.S. and sovereign quality in
emerging markets should continue to be strong. As a result, we currently see no
imminent change in strategy.
THE FUND MANAGER
[PHOTO]
Peter J. Wilby, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 13 years of investment industry experience in the high
yield and emerging debt markets. Mr. Wilby is primarily responsible for
day-to-day Fund management.
See pages 24 and 25 for all footnotes.
12
<PAGE>
<PAGE>
The following graph depicts the performance of the High-Yield Bond Fund versus
the Salomon Brothers High Yield Market Index.9 It is important to note that the
High Yield Bond Fund is a professionally managed mutual fund while the index is
not available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
HIGH YIELD BOND FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the Fund with Salomon Brothers
High-Yield Market Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 20.80% 17.67%
1 year 21.92% 16.08%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 19.93% 17.61%
1 year 21.16% 16.16%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 19.89% 19.89%
1 year 21.06% 20.06%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 20.97% 20.97%
1 year 22.03% 22.03%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
[GRAPH]
Emerging Markets Debt 23%
Cash/Cash Equivalents 11%
High Yield Securities 66%
- --------------------------------------------------------------------------------
TOP U.S. HIGH YIELD HOLDINGS
- --------------------------------------------------------------------------------
Revlon
- --------------------------------------------------------------------------------
NL Industries
- --------------------------------------------------------------------------------
Costilla Energy
- --------------------------------------------------------------------------------
Stroh Brewery
- --------------------------------------------------------------------------------
Cablevision
- --------------------------------------------------------------------------------
Delta Beverage
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS HIGH YIELD BOND FUND
LIPPER CATEGORY: HIGH CURRENT YIELD FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN
12/31/95 -- 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
21.92% 13.67% 1st Quartile
Top 5%
#7 of 148 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
21.16% 1st Quartile
Top 6%
#8
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
21.06% 1st Quartile
Top 6%
#9
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
22.03% 1st Quartile
Top 4%
#6
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
13
<PAGE>
<PAGE>
THE SALOMON BROTHERS
STRATEGIC BOND FUND
INVESTMENT OBJECTIVE
To seek a high level of current income. As a secondary objective, the Fund seeks
capital appreciation.
INVESTMENT STRATEGY
The Fund seeks to achieve its objective by investing in a globally diverse
portfolio of fixed income instruments. Assets of the Fund may be deployed among
various sectors of the global fixed income market, depending on the portfolio
managers' analysis of current economic and market conditions and the relative
risks and opportunities presented in various market segments.
PERFORMANCE
For the year ended December 31, 1996, the Strategic Bond Fund (Class A Shares)
posted a 14.1% return.10 This compares with a 3.6% return for the Salomon
Brothers Broad Investment Grade Bond Index and the Lipper Multi-sector Income
Average of 11.7%.
MARKET REVIEW
The Strategic Bond Fund's ability to rotate its assets among different global
fixed-income markets contributed significantly to its strong performance in
1996. On average, the Fund allocated 20% to the investment grade bond sector,
but more significantly 50% of its assets to the high yield sector, and 25% to
emerging markets debt (i.e., Brady Bonds) -- both of which responded positively
to the improving credit quality of their issuers. The remaining 5% of assets
were in global bonds. U.S. investment grade bond markets were dominated by the
rising trend in U.S. interest rates. The Salomon Brothers Broad Investment Grade
Index return of 3.6% reflects coupon income of approximately 7.3%. U.S. interest
rates rose because of higher than expected economic growth and the resultant
concerns that the U.S. Federal Reserve could be forced to raise short term
interest rates to prevent inflation from rising.
The U.S. high yield market performed strongly as a result of this economic
pickup. Credit risk premiums declined substantially with improved credit
quality. This performance resulted in return from both coupon income and bond
price appreciation.
THE FUND MANAGERS
[PHOTO]
Peter J. Wilby, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 13 years of investment industry experience in the high
yield and emerging debt markets. Mr. Wilby is primarily responsible for
day-to-day management of the high yield and sovereign bond portion of the Fund.
[PHOTO]
Steven Guterman, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 16 years of investment industry experience in the
fixed income markets. Mr. Guterman is primarily responsible for day-to-day
management of the mortgage-backed and U.S. Government securities portion of the
Fund.
[PHOTO]
David J. Scott, Director and Portfolio Manager at Salomon Brothers Asset
Management LTD, has 13 years of investment industry experience in the global
fixed income markets. Mr. Scott is primarily responsible for a portion of the
Fund's portfolio relating to currency transactions and investments in non-dollar
denominated securities.
See pages 24 and 25 for all footnotes.
14
<PAGE>
<PAGE>
Strong performing industries during the year were aerospace, electronics, casino
gaming and leisure and retail stores, all of which benefited from cyclical
strength in their underlying fundamentals. Lagging industries for the year
included cable television and other media, which suffered from intense
competition. Machinery continued to suffer from cyclical pressures; restaurant
companies also experienced a difficult competitive environment.
Globally, the best performing fixed income market was the emerging market debt
market, which returned 34.6% for 1996, as measured by the Salomon Brothers Brady
Bond Index. This market generally represents government or sovereign credit risk
of lower rated countries. The risk premium on these bonds has moved from 9.4% at
the beginning of 1996, to 4.9% at the end of 1996 due to global economic growth,
structural economic reforms, widening access to capital and improved credit
quality among many of the emerging nations.
HIGHLIGHTS
During 1996, the Fund allocated assets among the U.S. high yield sector, U.S.
investment grade sector, emerging markets debt and non-dollar government bonds.
Our strategy for U.S. investment grade securities was to overweight mortgage
pass-throughs and underweight U.S. Treasuries. The higher interest rates
experienced at mid-year reduced the incentive for homeowners to refinance
mortgages, making mortgage-backed securities attractive relative to Treasuries.
Within the U.S. portion of the Fund, the portfolio was heavily overweighted in
the consumer driven industries. Consumer products companies, food companies and
retail stores all outperformed the market during the year. Consumer oriented
investments ranged from 31-38% of the U.S. port folio during the year, versus
23% for the market in general. Also, within the U.S. portion, the Fund's average
investment in the media sector ranged from 19-28% compared to 31% for the
market. This underweighted sector under-performed the market by about 3.5% in
1996.
In emerging markets, we continued to favor the Brady Bond market, with key
positions in Argentina, Brazil, Venezuela, and Ecuador. We also favor investment
in Morocco (not Brady Bond). This sector performed very strongly in 1996,
especially the Latin American countries.
In the non-dollar segment of the Fund, we favored government bonds of Germany,
Denmark, Ireland, United Kingdom, Canada and Australia. Progress toward the
European Monetary Union dominated the European bond market in 1996, and
prospects improved for a prompt start to the single currency on January 1, 1999.
OUTLOOK
While our outlook on the U.S. investment grade market is cautious over the short
term, we are optimistic about the prospects for high yield corporate bonds due
to what we believe will be moderate U.S. economic growth and favorable
supply/demand characteristics. We also believe that emerging markets debt will
be attractive, as favorable monetary and fiscal policies by local governments
remain a positive influence. On the whole, we anticipate subdued inflation and
slow-but-steady growth for the coming year. These factors may provide the
conditions for the global fixed-income market to be a promising investment
arena.
(continued)
15
<PAGE>
<PAGE>
The following graph depicts the performance of the Strategic Bond Fund versus
the Salomon Brothers Broad Investment Grade Bond Index.11 It is important to
note that the Strategic Bond Fund is a professionally managed mutual fund while
the index is not available for investment and is unmanaged. The comparison is
shown for illustrative purposes only.
STRATEGIC BOND FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the Fund with Salomon Brothers
Broad Investment Grade Bond Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 16.68% 13.66%
1 year 14.05% 8.59%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 15.72% 13.32%
1 year 12.96% 7.96%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 15.74% 15.74%
1 year 13.07% 12.07%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 16.88% 16.88%
1 year 14.21% 14.21%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
[GRAPH]
Emerging Markets Debt 19%
High Yield Securities 45%
U.S. Government & Mortgage-Backed Securities 25%
Investment Grade Debt 2%
Non U.S. Investment Grade 3%
Cash/Cash Equivalents 6%
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS STRATEGIC BOND FUND
LIPPER CATEGORY: MULTI-SECTOR INCOME FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN 12/31/95 - 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
14.05% 11.74% 1st Quartile
Top 14%
#7 of 51 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
12.96% 2nd Quartile
Top 34%
#17
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
13.07% 2nd Quartile
Top 28%
#14
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
14.21% 1st Quartile
Top 8%
#4
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
16
<PAGE>
<PAGE>
[This page intentionally left blank]
17
<PAGE>
<PAGE>
THE SALOMON BROTHERS
U.S. GOVERNMENT
INCOME FUND
INVESTMENT OBJECTIVE
To obtain a high level of current income.
INVESTMENT STRATEGY
Under normal conditions the Fund invests 100% of its net assets in debt
obligations and mortgage-backed securities issued by or guaranteed by the U.S.
government, its agencies or instrumentalities. The Fund expects to maintain an
average portfolio duration of three to five years.
PERFORMANCE
The U.S. Government Income Fund (Class A Shares) posted a 3.6% return.12
This compares favorably versus the Lipper Short-Intermediate U.S. Government
Bond Average return of 3.5% for the year. The Salomon Brothers
1-5 year Treasury Bond index returned 4.6%.
MARKET REVIEW
After a strong performance in 1995, returns for U.S. Government bonds in 1996
were disappointing. Long term interest rates began 1996 at 6.0% and ended the
year at 6.6%. The year began with expectations for further declines in interest
rates as many economists forecasted sluggish first half growth and market
participants were optimistic that Congress and the White House would agree upon
a plan to balance the budget within seven years. Contrary to these expectations,
the budget negotiations failed in early January. Chairman Greenspan gave an
upbeat assessment on the economy at the Humphrey Hawkins testimony in February,
dashing hopes for monetary easing. The biggest blow to the bond market came in
early March with the release of an exceptionally strong job growth for February.
Instead of falling as expected, interest rates rose quickly. By mid-year, bond
yields had risen 133 basis points from their January lows to 7.3%. Economic
activity in the second half of 1996 was more favorable to the bond market and
bond prices rallied and recouped some of their losses. Shorter issues
outperformed longer issues in 1996. The 30-year Treasury bond returned negative
4.6% for the year, while the two-year Treasury posted a gain of 4.8%.
HIGHLIGHTS
The Fund began 1996 positioned for lower interest rates with an overweighting in
Treasuries versus mortgage securities. Early in the second quarter, we became
much less optimistic on the market and repositioned the Fund accordingly. Longer
Treasuries were swapped into shorter Treasuries and mortgage-backed securities.
This reduced the Fund's duration -- a measure of the portfolio's interest rate
sensitivity -- and helped protect the Fund's assets during the volatile second
quarter. Moving into the third quarter, we anticipated that economic growth
would slow, and lengthened the duration of the Fund -- helping to enhance
second-half Fund performance.
OUTLOOK
As we enter 1997, the Fund is structuring a conservative course, with an average
duration of approximately 3 years. Fourth quarter GDP growth -- which averaged
4.7% on an annualized basis -- was greater than anticipated. The labor market is
showing some tightness and bonds could experience some volatility in the months
ahead. However, we do not believe inflation poses a significant long-term threat
and we anticipate that interest rates will trend modestly lower during the
coming year. We expect mortgage-backed securities to perform well over the next
few months and will continue to overweight them in the Fund.
THE FUND MANAGERS
[PHOTO]
Steven Guterman, Managing Director and Portfolio Manager at Salomon Brothers
Asset Management Inc, has 16 years of investment industry experience in the
fixed income markets. Mr. Guterman is responsible for day-to-day Fund
management.
[PHOTO]
Roger Lavan, Director and Portfolio Manager at Salomon Brothers Asset Management
Inc, has 9 years of investment industry experience in the fixed income markets.
Mr. Lavan assists in day-to-day Fund management.
See pages 24 and 25 for all footnotes.
18
<PAGE>
<PAGE>
The following graph depicts the performance of the U.S. Govern ment Income Fund
versus the Salomon Brothers 1-5 Year Treasury Bond Index.13 It is important to
note that the U.S. Government Income Fund is a professionally managed mutual
fund while the index is not available for investment and is unmanaged. The
comparison is shown for illustrative purposes only.
U.S. GOVERNMENT INCOME FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the Fund with Salomon Brothers
1-5 Year Treasury Bond Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 7.00% 4.23%
1 year 3.59% -1.29%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.14% 3.56%
1 year 2.69% -2.18%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.14% 6.14%
1 year 2.69% 1.71%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed+ Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 7.20% 7.20%
1 year 3.73% 3.73%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
[GRAPH]
Mortgage Backed Securities 45%
U.S. Government Securities 46%
Cash/Cash Equivalents 9%
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS U.S. GOVERNMENT INCOME FUND
LIPPER CATEGORY: SHORT/INTERMEDIATE U.S. GOVERNMENT FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN 12/31/95 - 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
3.59% 4.37% 2nd Quartile
#39 of 89 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
2.69% 4th Quartile
#74
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
2.69% 4th Quartile
#74
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
3.73% 2nd Quartile
#35
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
19
<PAGE>
<PAGE>
THE SALOMON BROTHERS
NATIONAL INTERMEDIATE
MUNICIPAL FUND
INVESTMENT OBJECTIVE
To achieve a high level of current income exempt from regular federal income
taxes. All or a portion of the Fund's income may be subject to the federal
alternative minimum tax.
INVESTMENT STRATEGY
Under normal circum stances, at least 80% of the Fund's net assets will be
invested in municipal obligations, the interest on which is exempt from regular
federal income tax.*
PERFORMANCE
For the year ended December 31, 1996, the National Intermediate Municipal Fund
(Class A Shares) achieved a total return of 4.2%.14 The Fund's performance
compared favorably with the 3.7% gain posted by the Lipper Analytical Services
Intermediate Municipal Debt Average and placed the Fund in the top quartile of
this category. The Fund's performance slightly lagged the 4.3% return generated
by Lehman Brothers Municipal Bond 1 to 10 Year Index.
MARKET REVIEW
Municipal bonds outperformed their taxable counterparts last year as strong
demand from property and casualty insurance companies and individuals buoyed the
market. Property and casualty insurance companies, flush with funds due to their
increased profitability, were the major buyers of tax-exempt bonds during 1996.
Individual investors also had available funds during 1996 from bond calls,
maturities and coupon payments. As fears of a flat tax abated early last year,
individual investors were no longer hesitant to participate in the municipal
bond market. While municipals faced stiff competition from a soaring stock
market, individuals were periodic buyers of tax-exempts when intermediate
maturity interest rates rose to at least 5% and long maturity interest rates
approached the 6% level.
HIGHLIGHTS
Fund performance in 1996 was aided by two key actions on the part of Fund
management. During the early part of the year, anticipating increased volatility
in the municipal bond market, we added to our higher-coupon position. These
securities purchased at a premium are more defensive than discount or current
coupon bonds.
As we became less concerned about higher interest rates during the second half
of the year, we began to add securities to the portfolio that would benefit from
lower interest rates. Our major focus has been to purchase bonds in the five to
ten year part of the yield curve.
OUTLOOK
We expect that new issue supply for 1997 will be similar to the $183 billion
issued in 1996. Tax-exempts are likely to benefit from increased price
volatility in the equity market and nominal bond yields that attract individual
investors to the municipal bond market. The Fund will continue to maintain a
well-diversified tax-exempt portfolio while seeking to maintain the Fund's
average credit quality of AA or better.
THE FUND MANAGER
[PHOTO]
Marybeth Whyte, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 12 years of investment industry experience in the municipal
securities market. Ms. Whyte is responsible for day-to-day Fund management.
See pages 24 and 25 for all footnotes.
20
<PAGE>
<PAGE>
The following graph depicts the performance of the National Inter mediate
Municipal Fund versus the Lehman Brothers 1-10 Year Municipal Bond Index.15 It
is important to note that the National Intermediate Municipal Fund is a
professionally managed mutual fund while the index is not available for
investment and is unmanaged. The comparison is shown for illustrative purposes
only.
NATIONAL INTERMEDIATE MUNICIPAL FUND -- CLASS A, B, C and O SHARES
Comparison of $10,000 Investment in the Fund with Lehman Muni
1-10 Year (Mkt Wtd) Index
[DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.93% 4.16%
1 year 4.18% -0.77%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.08% 3.49%
1 year 3.36% -1.60%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 6.08% 6.08%
1 year 3.36% 2.37%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (2/22/95) 7.13% 7.13%
1 year 4.32% 4.32%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
New York 27%
- --------------------------------------------------------------------------------
Indiana 13%
- --------------------------------------------------------------------------------
Illinois 9%
- --------------------------------------------------------------------------------
Pennsylvania 8%
- --------------------------------------------------------------------------------
South Carolina 7%
- --------------------------------------------------------------------------------
Texas 6%
- --------------------------------------------------------------------------------
Louisiana 5%
- --------------------------------------------------------------------------------
New Jersey 4%
- --------------------------------------------------------------------------------
Mississippi 4%
- --------------------------------------------------------------------------------
Massachusetts 4%
- --------------------------------------------------------------------------------
California 3%
- --------------------------------------------------------------------------------
Hawaii 2%
- --------------------------------------------------------------------------------
Ohio 2%
- --------------------------------------------------------------------------------
Wyoming 2%
- --------------------------------------------------------------------------------
Florida 2%
- --------------------------------------------------------------------------------
Cash 2%
- --------------------------------------------------------------------------------
QUALITY BREAKDOWN
- --------------------------------------------------------------------------------
[GRAPH]
AAA 46%
AA 14%
A 20%
BBB 20%
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
LIPPER CATEGORY: INTERMEDIATE MUNICIPAL DEBT FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN
12/31/95 -- 12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
4.18% 3.70% 1st Quartile
#34 of 136 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
3.36% 3rd Quartile
#97
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
3.36% 3rd Quartile
#97
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
4.32% 1st Quartile
Top 18%
#24
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
21
<PAGE>
<PAGE>
THE SALOMON BROTHERS
NEW YORK MUNICIPAL BOND FUND
INVESTMENT OBJECTIVE
To achieve a high level of current income exempt from regular federal income
taxes and New York State and New York City personal income taxes, consistent
with the preservation of capital.
INVESTMENT STRATEGY
Under normal market conditions, the Fund will invest at least 65% of its net
assets in obligations the interest on which is exempt from personal income taxes
of New York State and New York City, and at least 80% of its net assets in
obligations the interest on which is exempt from regular federal income taxes.
All or a portion of the Fund's income may be subject to the federal alternative
minimum tax.
PERFORMANCE
For the year ended December 31, 1996, the Salomon Brothers New York Municipal
Bond Fund (Class A Shares) achieved a total return of 3.0%.(16) The Fund's
performance modestly lagged both the Lehman 7 Year-Long Muni Bond Index and the
Lipper Analytical Services New York State Municipal Debt Fund average of 3.2%.
Although the SEC requires the Fund to be compared against an index, there are no
indexes that are similar to the way in which the Fund is managed. The Fund seeks
to achieve a high level of current income which is exempt from regular federal
income taxes and New York State and New York City personal income taxes,
consistent with the preservation of capital.
MARKET REVIEW
Municipal bonds outperformed taxable fixed-income bonds last year as strong
demand from property and casualty insurance companies and individuals buoyed the
market. Property and casualty insurance companies, armed with cash due to their
increased profitability, were the major buyers of tax-exempt bonds in 1996.
Individual investors also had cash during 1996 from bond calls, maturities and
coupon payments. Although municipals faced stiff competition from a soaring
stock market, individuals were periodic buyers of tax-exempts when intermediate
maturity interest rates rose to at least 5% and long maturity interest rates
approached the 6% level.
HIGHLIGHTS
The Fund's performance was hindered by a relatively large cash position
resulting from investor subscriptions during the first half of the year. During
that time interest rates were volatile and there was a lack of New York issues
available to deploy the cash in a diversified manner. The portfolio was more
fully invested during the second half of the year.
OUTLOOK
New issue supply for 1997 is expected to be similar to the $183 billion issued
in 1996. The Fund will continue to maintain a well diversified New York exempt
portfolio while seeking to maintain the Fund's average credit quality of single
A or better.
THE FUND MANAGER
[PHOTO]
Marybeth Whyte, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 12 years of investment industry experience in the municipal
securities market. Ms. Whyte is responsible for day-to-day Fund management.
See pages 24 and 25 for all footnotes.
22
<PAGE>
<PAGE>
NY MUNICIPAL BOND FUND -- CLASS A, B, and C NY MUNICIPAL FUND--CLASS 0 SHARES
SHARES Comparison of $10,000 Investment in Comparison of $10,000 Investment
the Fund with Lehman 7 Year-Long Muni in the Fund with Lehman 7 Year-
Bond Index Long Muni Bond Index
[DESCRIPTION TO COME] [DESCRIPTION TO COME]
Past performance is not predictive of future performance. Performance above
reflects returns after deduction of applicable maximum sales charge.
Past performance is not predictive of future performance.
The graphs above depict the performance of the New York Municipal Bond Fund
versus the Lehman Brothers 7 Year-Long Municipal Bond Index. It is important
to note that the New York Municipal Bond Fund is a professionally managed mutual
fund while the index is not available for investment and is unmanaged. The
comparison is shown for illustrative purposes only.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
Class A Net Asset Value'D' Public Offering Price*
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 10.11% 7.45%
1 year 3.03% -1.82%
- --------------------------------------------------------------------------------
Class B Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 9.37% 7.06%
1 year 2.28% -2.62%
- --------------------------------------------------------------------------------
Class C Return If Not Redeemed'D' Return If Redeemed**
- --------------------------------------------------------------------------------
Since Inception (1/3/95) 9.37% 9.37%
1 year 2.28% 1.30%
- --------------------------------------------------------------------------------
Class O Return If Not Redeemed'D' Return If Redeemed***
- --------------------------------------------------------------------------------
Since Inception (2/1/93) 5.29% 5.29%
1 year 3.39% 3.39%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
Composition of portfolio as of
December 31,1996
- --------------------------------------------------------------------------------
[GRAPH]
New York 94%
Cash 3%
Puerto Rico 3%
- --------------------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE'DD'
SALOMON BROTHERS NEW YORK MUNICIPAL BOND FUND
LIPPER CATEGORY: NEW YORK MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
1 YEAR TOTAL RETURN
12/31/95 --12/31/96
- --------------------------------------------------------------------------------
Class A Shares Lipper Average Ranking
- --------------------------------------------------------------------------------
3.03% 3.15% 3rd Quartile
#59 of 96 funds
- --------------------------------------------------------------------------------
Class B Shares Ranking
- --------------------------------------------------------------------------------
2.28% 4th Quartile
#85
- --------------------------------------------------------------------------------
Class C Shares Ranking
- --------------------------------------------------------------------------------
2.28% 3rd Quartile
#85
- --------------------------------------------------------------------------------
Class O Shares Ranking
- --------------------------------------------------------------------------------
3.39% 2nd Quartile
#41
- --------------------------------------------------------------------------------
Portfolio holdings may vary.
See pages 24 and 25 for all footnotes.
23
<PAGE>
<PAGE>
FOOTNOTES
(1) The ratings from Lipper Analytical Services are based upon the aggregate
total returns among all funds in the same asset category for the one year period
ended 12/31/96. Twenty percent of the top performing funds in a Lipper
investment category receive an "A" rating. See "General Performance and Ranking
Notes" on page 25.
(2) The Salomon Brothers Investors Fund (Class "A" Shares), Capital Fund (Class
"O" Shares), and the Total Return Fund (Class "A" Shares) were ranked in the top
quartile by Lipper for their respective 1-year performance. The Investors Fund
(Class "A" Shares) was ranked #15 of 522 funds in the Growth and Income
category; the Capital Fund (Class "O" Shares) was ranked #5 of 189 funds in the
Capital Appreciation category, and the Total Return Fund (Class "A" Shares) was
ranked #18 of 272 funds in the Balanced Fund category. See footnote "++" and
"General Performance and Ranking Notes" below. Class "O" Shares are available
only to existing Class "O" shareholders. The Capital Fund is now available to
investors through "A",."B" and "C" share pricing, which includes higher
expenses. Please see a current prospectus for details.
(3) Salomon Brothers Investors Fund: In the Growth and Income category, for the
three- and five-year periods ending 12/31/96, the Fund received a Five-star
ranking by Morningstar. The Fund received a Four-star ranking for the 10-year
performance ending 12/31/96. Please note that Salomon Brothers Asset Management
Inc began managing this Fund May 1, 1990. Prior to this period, the Fund was
managed by another investment advisor.
Morningstar ratings reflect risk-adjusted performance, are subject to change
monthly and are calculated from the subject funds' three-, five- and ten-year
average annual total returns in excess of the return on 90-day Treasury bills.
Average annual total returns include changes in share price and reinvestment of
dividends and distributions. Ten percent of the top performing funds in a
Morningstar investment category receive five stars. Information provided by
Morningstar Mutual Funds publication, December 6, 1996.
(4) See the chart on page 5 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain different expenses, which
causes the performance to vary among the classes. Please note that Salomon
Brothers Asset Management Inc began managing this Fund May 1, 1990. Prior to
this period, the Fund was managed by another investment advisor.
(5) See the chart on page 7 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain different expenses,
which causes the performance to vary among the classes.
(6) See the chart on page 9 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
(7) See the chart on page 11 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
(8) See the chart on page 13 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
(9) The Salomon Brothers High Yield Market Index is valued at month-end only. As
a result, while the Fund's total return calculations used in this comparison are
for the period February 22, 1995 through December 31, 1996, the Index returns
are for the period March 1, 1996 through December 31, 1996.
(10) See the chart on page 16 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
(11) The Salomon Brothers Broad Investment Grade Bond Index is valued at
month-end only. As a result, while the Fund's total return calculations used
in this comparison are for the period February 22, 1995 through December 31,
1996, the Index returns are for the period March 1, 1996 through
December 31, 1996.
(12) See the chart on page 19 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
24
<PAGE>
<PAGE>
(13) The Salomon Brothers 1-5 Treasury Bond Index is valued at month-end only.
As a result, while the Fund's total return calculations used in this comparison
are for the period February 22, 1995 through December 31, 1996, the Index
returns are for the period March 1, 1996 through December 31, 1996.
(14) See the chart on page 21 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
(15) The Lehman Brothers 1-10 year Municipal Bond Index is the weighted average
of the 1,3,5,7, and 10 year indices. The Lehman Brother 1-10 year Municipal
Bond Index is valued at month-end only.
(16) See the chart on page 23 for complete information on the performance of all
the Fund's classes of shares. Each class bears certain expenses, which causes
the performance to vary among the classes.
'D' Return does not reflect the deduction of any sales charge.
'DD' Lipper Analytical Services, an industry recognized analysis company,
calculates rankings based on total return performance of funds within each
category. Lipper rankings change monthly and do not reflect the effects of sales
charges. Accordingly, the results in this table for the Class A, Class B and
Class C shares of each Fund do not reflect the effect of the sales charges
applicable to each Class, which are described in the footnotes below. Lipper
performance results represent changes in net asset value, adjusted to reflect
reinvestment of dividends and capital gains. Class A shares are subject to an
annual 12b-1 service fee of .25% of the value of the average daily net assets.
Class B and Class C shares are subject to an annual 12b-1 service and
distribution fee of 1.00%. Class O shares are not subject to an annual 12-b-1
fee.
* Maximum sales charge for Class A shares is 4.75% of the public offering price.
Class A shares bear an ongoing annual 12b-1 service fee of .25%.
** Maximum contingent deferred sales charge for Class B and C shares are 5% and
1%, respectively, and is reduced to 0% after 6 years and 1 year, respectively.
Class B and Class C shares are subject to annual 12b-1 service and distribution
fees in an aggregate amount of 1.00%.
*** Each Fund offers Class O shares to existing Class O shareholders in the
Investment Series. Class O shares do not have initial or contingent deferred
sales charges or ongoing distribution and services fees.
'SS' Total Returns are not annualized.
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 the contingent deferred sales charge (Class B and C). The average annual
return for a period less than one year has not been annualized. 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 reflect a voluntary expense cap (except for
Investors and Capital Fund) imposed by SBAM to limit total Fund operating
expenses. Absent this expense cap, Fund expenses would be higher and returns
lower. As a result, the expense caps had a material effect on the ranking of
each Class of each Fund in its relevant Lipper category. In addition, the
expense caps had a material effect on how each Class of each Fund performed
relative to the relevant index.
25
<PAGE>
<PAGE>
[This page intentionally left blank]
26
<PAGE>
<PAGE>
Portfolio of Investments (December 31, 1996)
SALOMON BROTHERS ASIA GROWTH FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks -- 91.7%
Hong Kong -- 32.3%
53,600 Asia Satellite Telecommunications Holdings*....................................$ 124,393
116,000 ASM Pacific Technology......................................................... 89,986
15,800 Bank of East Asia Hong Kong.................................................... 70,272
14,000 Cheung Kong.................................................................... 124,442
59,000 Cheung Kong Infrastructure*.................................................... 156,377
162,000 China Overseas Land & Investment............................................... 82,210
85,000 China Resources Beijing Land*.................................................. 53,850
78,000 China Resources Enterprises.................................................... 175,474
70,000 Cosco Pacific.................................................................. 81,453
19,000 Dickson Concepts International................................................. 71,239
48,000 First Pacific.................................................................. 62,370
62,000 Giordano Holdings.............................................................. 52,906
86,000 Guang Nan Holdings............................................................. 73,941
4,900 Guangdong Tannery*............................................................. 1,235
3,000 HSBC Holdings.................................................................. 64,193
20,000 Hutchison Whampoa.............................................................. 157,088
36,000 Hysan Development.............................................................. 143,358
115,000 Kerry Properties*.............................................................. 315,211
17,000 New World Development.......................................................... 114,843
150,000 Qingling Motors................................................................ 82,908
18,000 Shanghai Industrial Holdings*.................................................. 65,628
290,000 Shanghai Petrochemical......................................................... 88,112
172,000 USI Holdings................................................................... 80,057
----------
2,331,546
----------
India -- 9.9%
22,300 Arvind Mills-- GDR............................................................. 101,465
7,200 Ashok Leyland-- GDR............................................................ 67,680
8,000 Gujarat Ambuja Cements-- GDR................................................... 68,800
6,000 Industrial Credit & Investment-- GDR........................................... 58,500
10,000 Mahindra & Mahindra-- GDR...................................................... 117,500
5,100 Reliance Industries-- GDR...................................................... 61,200
7,950 State Bank of India-- GDR...................................................... 138,092
9,400 Tata Engineering & Locomotive-- GDR............................................ 99,875
----------
713,112
----------
Indonesia -- 3.2%
37,500 Lippo Karawaci (a)*............................................................ 42,866
50,000 PT Inti Indorayon Utama (a).................................................... 37,045
78,000 PT Lippo Life Insurance (a).................................................... 71,825
44,000 PT Telekomunikasion (a)........................................................ 75,910
----------
227,646
----------
Korea -- 4.7%
3,800 Dong Ah Construction........................................................... 80,947
1,500 Hanwha Chemical................................................................ 11,627
4,532 Korea Mobile Telecommunications--ADR*.......................................... 58,350
4,800 LG Electronics................................................................. 60,781
1,400 LG Information & Communication................................................. 89,467
2,740 Shinhan Bank................................................................... 37,290
----------
338,462
----------
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS ASIA GROWTH FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Malaysia -- 14.3%
13,000 Ekran..........................................................................$ 54,563
26,000 IJM, Class A................................................................... 61,255
67,000 IOI............................................................................ 102,934
12,000 Kian Joo Can Factory........................................................... 66,521
25,000 Land & General Holdings........................................................ 59,889
35,000 Leader Universal Holdings...................................................... 73,451
14,000 Malakoff....................................................................... 68,739
40,000 MBM Resources.................................................................. 85,528
76,000 Pernas International Holdings.................................................. 92,687
16,000 Rashid Hussein................................................................. 105,801
63,000 Renong......................................................................... 111,756
17,000 United Engineers............................................................... 153,475
----------
1,036,599
----------
Pakistan -- 0.4%
4,420 Pakistan State Oil............................................................. 28,562
----------
Philippines -- 3.6%
137,000 Ayala Land, Series B........................................................... 156,275
125,000 Belle*......................................................................... 34,696
78,000 Pilipino Telephone............................................................. 65,989
----------
256,960
----------
Singapore -- 8.1%
8,000 Cycle & Carriage............................................................... 97,763
13,000 Hong Leong Finance (a)......................................................... 45,151
20,000 Sembawang...................................................................... 105,767
2,500 Singapore Press Holdings (a)................................................... 49,310
15,000 United Overseas Bank (a)....................................................... 167,226
42,000 Wing Tai Holdings.............................................................. 120,060
----------
585,277
----------
Sri Lanka -- 0.5%
162,800 Asia Capital*.................................................................. 22,240
26,000 United Motors Lanka............................................................ 12,661
----------
34,901
----------
Taiwan -- 10.9%
31,000 Accton Technology*............................................................. 110,473
23,000 Cathay Life Insurance.......................................................... 146,364
63,000 China Steel.................................................................... 59,105
54,843 First International Computer*.................................................. 104,700
30,000 Formosa Plastics............................................................... 75,273
28,000 International Commercial Bank China............................................ 85,527
133,000 Pacific Construction*.......................................................... 113,655
71,690 Yang Ming Marine Transport..................................................... 94,891
----------
789,988
----------
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
<PAGE>
SALOMON BROTHERS ASIA GROWTH FUND (concluded)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Thailand -- 3.8%
13,650 Bangkok Bank...................................................................$ 101,659
18,000 Dhana Siam Finance (a)......................................................... 42,814
15,000 Property Perfect............................................................... 14,915
16,800 Thai Farmers Bank.............................................................. 81,884
41,000 Thai Telephone & Telecommunications (a)*....................................... 36,770
----------
278,042
----------
Total Common Stocks
(cost $6,667,747)............................................................ 6,621,095
----------
Warrants* -- 2.6%
370,000 China Resources, expires 08/28/97.............................................. 53,578
126,000 Credit Lyonnais Finance, expires 10/23/97...................................... 36,654
2,050,000 Guandong Investments Call, expires 11/27/97.................................... 51,419
800,000 Lai Sun Call, expires 11/13/97................................................. 22,755
120,000 Shanghai & Shenzen, expires 11/20/97........................................... 25,680
----------
Total Warrants
(cost $116,053).............................................................. 190,086
----------
Contracts
- ---------
Purchased Options* -- 0.8%
48,000 Hysan Call (expiring 01/17/97, exercise price $25.3575)........................ 33,822
401 Hang Seng Index OTC Put (expiring 4/2/97, exercise price 13,500 HKD)........... 26,441
----------
Total Purchased Options
(cost $34,452)............................................................... 60,263
----------
Total Investments -- 95.1%
(cost $6,818,252)............................................................ 6,871,444
Other assets in excess of liabilities -- 4.9%.................................. 353,924
----------
Net Assets -- 100.0% ..........................................................$7,225,368
==========
</TABLE>
* Non-income producing security.
(a) Foreign Shares
Abbreviations used in this statement:
ADR American Depository Receipt
GDR Global Depository Receipt
HKD Hong Kong Dollar
OTC Over The Counter
See accompanying notes to financial statements
29
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS CAPITAL FUND INC
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Common Stock -- 93.6%
Basic Industries -- 5.0%
25,000 Guilford Mills............................................................... $ 665,625
65,000 Nalco Chemical............................................................... 2,348,125
60,000 OM Group..................................................................... 1,620,000
40,000 Steel Dynamics *............................................................. 765,000
30,000 Union Camp................................................................... 1,432,500
-----------
6,831,250
-----------
Capital Goods -- 6.2%
45,000 Fluor........................................................................ 2,823,750
55,000 Gulfstream Aerospace *....................................................... 1,333,750
50,000 Lear *....................................................................... 1,706,250
50,000 Tyco International........................................................... 2,643,750
-----------
8,507,500
-----------
Consumer Cyclicals -- 16.7%
20,000 Eastman Kodak................................................................ 1,605,000
40,000 Federated Department Stores *................................................ 1,365,000
125,000 Fine Host *.................................................................. 2,406,250
60,000 Ford Motor................................................................... 1,912,500
25,000 General Motors............................................................... 1,393,750
192,500 Hollinger.................................................................... 1,780,625
20,000 Hollinger International...................................................... 230,000
30,000 Magna International, Class A................................................. 1,672,500
40,000 Omnicom Group................................................................ 1,830,000
140,000 Price/Costco *............................................................... 3,517,500
30,000 Quality Dining *............................................................. 536,250
100,000 Sears, Roebuck............................................................... 4,612,500
-----------
22,861,875
-----------
Consumer Non-Cyclicals -- 16.6%
75,000 Coca-Cola Enterprises........................................................ 3,637,500
400,000 Food Lion.................................................................... 4,050,000
100,000 Hormel Foods................................................................. 2,700,000
100,000 Kroger *..................................................................... 4,650,000
15,000 Loews........................................................................ 1,413,750
75,000 Penn Traffic *............................................................... 271,875
15,000 Philip Morris Companies...................................................... 1,689,375
60,000 Pittston Brink's Group....................................................... 1,620,000
30,000 Ryland Group................................................................. 412,500
100,000 Whitman...................................................................... 2,287,500
-----------
22,732,500
-----------
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
<PAGE>
SALOMON BROTHERS CAPITAL FUND INC (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Energy -- 15.3%
15,000 Amoco........................................................................ $ 1,207,500
40,000 Ashland...................................................................... 1,755,000
45,000 Devon Energy................................................................. 1,563,750
75,000 Holly........................................................................ 2,006,250
20,000 Nuevo Energy *............................................................... 1,040,000
10,000 Oryx Energy Company *........................................................ 247,500
80,000 Sun.......................................................................... 1,950,000
20,000 Tejas Gas *.................................................................. 952,500
75,000 Ultramar Diamond Shamrock.................................................... 2,371,875
150,000 Union Pacific Resources Group................................................ 4,387,500
90,000 Williams Companies........................................................... 3,375,000
-----------
20,856,875
-----------
Financial Services -- 10.2%
20,000 Bank of Boston............................................................... 1,285,000
100,000 Bank of New York............................................................. 3,375,000
15,000 Chase Manhattan Bank......................................................... 1,338,750
100,000 Dime Bancorp *............................................................... 1,475,000
30,000 Glendale Federal Bank *...................................................... 697,500
15,000 Long Island Bancorp.......................................................... 525,000
40,000 Mercantile Bankshares........................................................ 1,280,000
20,000 MGIC Investment ............................................................. 1,520,000
55,000 Travelers Group.............................................................. 2,495,625
-----------
13,991,875
-----------
Health Care -- 8.4%
35,000 Aetna........................................................................ 2,800,000
90,000 Columbia/HCA Healthcare...................................................... 3,667,500
20,000 Rhone-Poulenc Rorer.......................................................... 1,562,500
50,000 SmithKline Beecham-- ADR..................................................... 3,400,000
-----------
11,430,000
-----------
Technology -- 8.4%
20,000 BA Merchant Services, Class A *.............................................. 357,500
62,000 Electric Fuel *.............................................................. 434,000
45,000 First Data................................................................... 1,642,500
10,000 International Business Machines.............................................. 1,510,000
90,000 Plantronics *................................................................ 4,050,000
100,000 S3 *......................................................................... 1,625,000
75,000 Silicon Graphics *........................................................... 1,912,500
-----------
11,531,500
-----------
Telecommunications & Utilities -- 2.6%
80,000 AT&T......................................................................... 3,480,000
-----------
Transportation -- 4.2%
75,000 Canadian National Railway.................................................... 2,850,000
110,000 Canadian Pacific............................................................. 2,915,000
-----------
5,765,000
-----------
Total Common Stocks
(cost $106,691,533)........................................................ 127,988,375
-----------
</TABLE>
See accompanying notes to financial statements
31
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS CAPITAL FUND INC (concluded)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Convertible Preferred Stocks -- 2.2%
Capital Goods--1.1%
30,000 Crown Cork & Seal 4.50%...................................................... $1,560,000
-----------
Consumer Cyclicals--1.1%
125,000 Hollinger International 9.75%................................................ 1,437,500
-----------
Total Convertible Preferred Stocks
(cost $2,549,313).......................................................... 2,997,500
-----------
Principal
Amount
- ---------
Corporate Bonds--1.5%
Consumer Non-Cyclicals--1.5%
$ 3,500,000 Penn Traffic, 9.625%, due 04/15/05 (cost $1,963,300)......................... 2,021,250
-----------
Contracts
- ----------
Purchased Options*--0.1%
50 S&P Midcap Index Call
(expiring January 1997, exercise price $240)............................... 76,875
100 S&P Midcap Index Call
(expiring January 1997, exercise price $265)............................... 6,875
100 S&P 500 Index Call
(expiring January 1997, exercise price $800)............................... 3,750
-----------
Total Purchased Options
(cost $148,250)........................................................... 87,500
-----------
Total Investments--97.4%
(cost $111,352,396)...................................................... 133,094,625
Principal
Amount
- ---------
Repurchase Agreement--2.7%
$ 3,667,000 Repurchase Agreement, 6.75%, due 01/02/97, dated
12/31/96, with UBS Securities, collateralized by
$3,029,000 U.S. Treasury Bonds, 8.75%, due
05/15/17 valued at $3,740,815; proceeds: $3,668,375
(cost $3,667,000).......................................................... 3,667,000
Liabilities in excess of other assets--(0.1%).............................. (126,255)
------------
Net Assets--100.0%..................................................... $136,635,370
============
</TABLE>
* Non-income producing security.
Abbreviation used in this statement:
ADR American Depository Receipt
See accompanying notes to financial statements
32
<PAGE>
<PAGE>
SALOMON BROTHERS INVESTORS FUND INC
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks--94.7%
Basic Industries--8.3%
90,700 Crown Cork & Seal............................................................ $ 4,931,813
96,000 Du Pont (E.I.) de Nemours.................................................... 9,060,000
7,800 Millennium Chemicals......................................................... 138,450
150,000 Nalco Chemical............................................................... 5,418,750
318,000 OM Group..................................................................... 8,586,000
265,000 Praxair...................................................................... 12,223,125
100,000 Union Camp................................................................... 4,775,000
-----------
45,133,138
-----------
Capital Goods--8.5%
100,000 AlliedSignal................................................................. 6,700,000
115,500 Deere........................................................................ 4,692,188
77,500 General Electric............................................................. 7,662,813
385,000 Gulfstream Aerospace *....................................................... 9,336,250
225,000 Tyco International........................................................... 11,896,875
100,000 York International........................................................... 5,587,500
-----------
45,875,626
-----------
Consumer Cyclicals--11.4%
100,000 Eastman Kodak................................................................ 8,025,000
140,000 Federated Department Stores *................................................ 4,777,500
72,000 Ford Motor................................................................... 2,295,000
80,000 General Motors............................................................... 4,460,000
366,500 Host Marriott *.............................................................. 5,864,000
195,000 Lear *....................................................................... 6,654,375
70,000 Magna International, Class A................................................. 3,902,500
300,000 Price/Costco *............................................................... 7,537,500
168,200 Sears, Roebuck............................................................... 7,758,225
105,000 Sherwin-Williams............................................................. 5,880,000
132,200 U.S. Industries *............................................................ 4,544,375
-----------
61,698,475
-----------
Consumer Non-Cyclicals--9.5%
191,700 Coca-Cola Enterprises........................................................ 9,297,450
105,000 ConAgra...................................................................... 5,223,750
70,000 Estee Lauder Companies, Class A.............................................. 3,561,250
175,400 Hormel Foods................................................................. 4,735,800
209,200 Kroger *..................................................................... 9,727,800
50,000 Loews........................................................................ 4,712,500
99,000 Penn Traffic *............................................................... 358,875
60,500 Philip Morris Companies...................................................... 6,813,813
250,000 Pittston Brink's Group....................................................... 6,750,000
-----------
51,181,238
-----------
</TABLE>
See accompanying notes to financial statements
33
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS INVESTORS FUND INC (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Energy--11.8%
113,500 Amoco........................................................................ $ 9,136,750
85,000 Chevron...................................................................... 5,525,000
75,000 Dresser Industries........................................................... 2,325,000
92,700 Mobil........................................................................ 11,332,575
69,000 Royal Dutch Petroleum, 5 Guilder............................................. 11,781,750
150,000 Suncor....................................................................... 6,206,250
133,557 TOTAL-- ADR.................................................................. 5,375,669
131,613 Union Pacific Resources Group................................................ 3,849,663
215,700 Williams Companies........................................................... 8,088,750
-----------
63,621,407
-----------
Financial Services--14.8%
57,500 ADVANTA, Class B............................................................. 2,350,313
85,600 American Express............................................................. 4,836,400
78,300 Associates First Capital..................................................... 3,454,988
157,500 Bank of Boston............................................................... 10,119,375
414,400 Bank of New York............................................................. 13,986,000
29,000 Chase Manhattan Bank......................................................... 2,588,250
146,000 Dime Bancorp *............................................................... 2,153,500
73,500 Federal Home Loan Mortgage Corporation....................................... 8,094,188
57,500 Federal National Mortgage Association........................................ 2,141,875
110,000 Long Island Bancorp.......................................................... 3,850,000
82,500 MGIC Investment.............................................................. 6,270,000
175,000 SunAmerica................................................................... 7,765,625
277,686 Travelers Group.............................................................. 12,599,999
-----------
80,210,513
-----------
Health Care--11.6%
106,500 Aetna........................................................................ 8,520,000
120,000 American Home Products....................................................... 7,035,000
210,000 Astra AB, Class A............................................................ 10,378,126
360,000 Columbia/HCA Healthcare...................................................... 14,670,000
125,000 Rhone-Poulenc Rorer.......................................................... 9,765,625
180,000 SmithKline Beecham-- ADR..................................................... 12,240,000
-----------
62,608,751
-----------
Real Estate Investment Trusts--5.2%
235,000 Arden Realty Group........................................................... 6,521,250
112,000 Beacon Properties............................................................ 4,102,000
150,000 Highwoods Properties......................................................... 5,062,500
149,500 Patriot American Hospitality................................................. 6,447,188
178,100 Sun Communities.............................................................. 6,144,450
-----------
28,277,388
-----------
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
<PAGE>
SALOMON BROTHERS INVESTORS FUND INC (concluded)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Technology--7.4%
80,000 BA Merchant Services, Class A *.............................................. $ 1,430,000
162,500 Ceridian *................................................................... 6,581,250
35,500 DST Systems *................................................................ 1,113,813
379,000 First Data................................................................... 13,833,500
16,000 First USA Paymentech *....................................................... 542,000
46,000 International Business Machines.............................................. 6,946,000
30,000 National Data................................................................ 1,305,000
56,600 Plantronics *................................................................ 2,547,000
90,239 Seagate Technology *......................................................... 3,564,441
75,500 Silicon Graphics *........................................................... 1,925,250
-----------
39,788,254
-----------
Telecommunications & Utilities--1.3%
156,400 AT&T......................................................................... 6,803,400
-----------
Transportation--4.9%
375,000 Canadian National Railway.................................................... 14,250,000
365,000 Canadian Pacific............................................................. 9,672,500
45,000 Union Pacific................................................................ 2,705,625
-----------
26,628,125
-----------
Total Common Stocks
(cost $341,266,581)........................................................ 511,826,315
-----------
Convertible Preferred Stocks--0.5%
Financial Services--0.5%
65,000 SunAmerica $3.188 (cost $2,437,500)...................................... 2,746,250
-----------
Principal
Amount
- --------
Convertible Corporate Bonds--0.9%
Consumer Cyclicals--0.4%
$ 2,000,000 Federated Department Stores, 5.00%, due 10/01/03 ......................... 2,295,000
-----------
Financial Services--0.5%
2,500,000 National Data, 5.00%, due 11/01/03........................................ 2,593,750
-----------
Total Convertible Corporate Bonds
(cost $4,522,368)....................................................... 4,888,750
-----------
Total Investments--96.1%
(cost $348,226,449).................................................... 519,461,315
Repurchase Agreement--3.9%
21,222,000 Repurchase Agreement, 6.75%, due 01/02/97, dated 12/31/96,
with UBS Securities, collateralized by $18,191,000
U.S. Treasury Bonds, 8.125%, due 8/15/19,
valued at $21,647,290; proceeds: $21,229,958
(cost $21,222,000)........................................................ 21,222,000
Liabilities in excess of other assets--(0.0%)............................ (25,489)
------------
Net Assets--100.0%....................................................... $540,657,826
============
</TABLE>
* Non-income producing security.
Abbreviation used in this statement:
ADR American Depository Receipt
See accompanying notes to financial statements
35
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS TOTAL RETURN FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Common Stocks--44.7%
Basic Industries--6.5%
5,000 Aluminum Company of America.................................................. $ 318,750
4,600 Dow Chemical................................................................. 360,525
7,000 Du Pont (E.I.) de Nemours.................................................... 660,625
10,000 Monsanto..................................................................... 388,750
16,000 Nalco Chemical............................................................... 578,000
11,000 Petrolite.................................................................... 528,000
12,000 Union Camp................................................................... 573,000
-----------
3,407,650
-----------
Capital Goods--2.4%
4,800 Boeing....................................................................... 510,600
8,000 Deere........................................................................ 325,000
5,000 Raytheon..................................................................... 240,625
2,200 Textron...................................................................... 207,350
-----------
1,283,575
-----------
Consumer Cyclicals--5.3%
13,000 Eastman Kodak................................................................ 1,043,250
14,000 Ford Motor................................................................... 446,250
5,000 General Motors............................................................... 278,750
9,100 May Department Stores........................................................ 425,425
7,499 Price/Costco *............................................................... 188,412
10,000 Ryland Group................................................................. 137,500
5,700 Sears, Roebuck............................................................... 262,913
-----------
2,782,500
-----------
Consumer Non-Cyclicals--2.5%
75,000 Food Lion.................................................................... 759,375
5,000 Philip Morris Companies...................................................... 563,125
-----------
1,322,500
-----------
Energy--8.5%
6,500 Amoco........................................................................ 523,250
16,000 Dresser Industries........................................................... 496,000
4,000 Exxon........................................................................ 392,000
2,000 Mobil........................................................................ 244,500
2,000 Royal Dutch Petroleum, 5 Guilder............................................. 341,500
12,500 Sun.......................................................................... 304,688
20,000 Suncor....................................................................... 827,500
3,000 Texaco....................................................................... 294,375
17,000 USX-Marathon Group........................................................... 405,875
18,000 Williams Companies........................................................... 675,000
-----------
4,504,688
-----------
Financial Services--5.1%
8,000 Allstate..................................................................... 463,000
10,000 Bay View Capital............................................................. 423,750
2,500 Cigna........................................................................ 341,563
5,300 Citicorp..................................................................... 545,900
10,000 First Virginia Banks......................................................... 478,750
6,000 UNUM......................................................................... 433,500
-----------
2,686,463
-----------
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
<PAGE>
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Value
Shares Description (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Health Care--3.4%
6,000 Aetna........................................................................ $ 480,000
9,000 American Home Products....................................................... 527,625
11,200 SmithKline Beecham--ADR....................................................... 761,600
-----------
1,769,225
-----------
Real Estate Investment Trusts--5.9%
20,000 Arden Realty Group........................................................... 555,000
21,000 Beacon Properties............................................................ 769,125
22,000 Highwoods Properties......................................................... 742,500
15,000 Patriot American Hospitality................................................. 646,875
18,000 Prentiss Properties Trust *.................................................. 450,000
-----------
3,163,500
-----------
Telecommunications & Utilities--2.8%
6,000 American Electric Power...................................................... 246,750
5,000 Ameritech.................................................................... 303,125
10,000 AT&T......................................................................... 435,000
11,000 GTE.......................................................................... 500,500
-----------
1,485,375
-----------
Transportation--2.3%
32,000 Canadian National Railway.................................................... 1,216,000
-----------
Total Common Stocks
(cost $19,765,803)......................................................... 23,621,476
-----------
Convertible Preferred Stocks--4.7%
Basic Industries--0.8%
3,000 AK Steel Holdings 7.00%...................................................... 105,750
4,000 Boise Cascade $1.58.......................................................... 104,500
4,000 Crown Cork & Seal 4.50%...................................................... 208,000
-----------
418,250
-----------
Consumer Cyclicals--0.5%
15,000 Hollinger International 9.75%................................................ 172,500
2,000 Host Marriott 6.75%.......................................................... 107,250
-----------
279,750
-----------
Consumer Non-Cyclicals--0.2%
2,000 James River $3.50............................................................ 103,500
-----------
Energy--2.0%
2,500 Ashland $3.125............................................................... 171,563
6,500 Enron 6.25%.................................................................. 156,000
30,000 Mesa 8.00% (a)............................................................... 191,250
7,500 Sun $1.80.................................................................... 188,438
3,000 Tosco 5.75%.................................................................. 154,500
2,000 Ultramar Diamond Shamrock 5.00%.............................................. 123,000
2,500 USX 6.75%.................................................................... 65,938
-----------
1,050,689
-----------
</TABLE>
See accompanying notes to financial statements
37
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Interest Maturity Value
Shares Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Financial Services--0.6%
2,500 Finova Finance Trust 5.50%................................................... $131,250
3,000 Glendale Federal Bank 8.75%.................................................. 176,250
-----------
307,500
-----------
Health Care--0.3%
2,000 Aetna 6.25%.................................................................. 158,750
-----------
Technology--0.3%
2,000 Microsoft $2.196............................................................. 160,250
-----------
Total Convertible Preferred Stocks
(cost $2,284,669).......................................................... 2,478,689
-----------
Principal
Amount
- --------
Corporate Bonds--21.5%
Basic Industries--3.9%
$100,000 Algoma Steel............................... 12.375% 07/15/05 108,000
200,000 Alvey Systems.............................. 11.375 01/31/03 208,500
200,000 Clark-Schwebel............................. 10.500 04/15/06 214,000
100,000 Crown Paper................................ 11.000 09/01/05 94,000
100,000 Foamex..................................... 11.875 10/01/04 106,750
200,000 Four M..................................... 12.000 06/01/06 208,000
200,000 Norcal Waste Systems....................... 13.000 11/15/05 221,000
375,000 Pohang Iron & Steel........................ 7.500 08/01/02 385,586
100,000 Renco Metals............................... 11.500 07/01/03 104,500
200,000 Southdown.................................. 10.000 03/01/06 211,000
200,000 Specialty Equipment........................ 11.375 12/01/03 218,500
-----------
2,079,836
-----------
Consumer Cyclicals--3.2%
50,000 Continental Homes Holding.................. 6.875 11/01/02 52,938
150,000 Finlay Fine Jewelry........................ 10.625 05/01/03 150,750
100,000 Guitar Center Management................... 11.000 07/01/06 106,000
100,000 Herff Jones................................ 11.000 08/15/05 107,500
200,000 Hines Horticulture......................... 11.750 10/15/05 214,000
100,000 Jitney-Jungle Stores....................... 12.000 03/01/06 105,750
200,000 Revlon Worldwide (b)....................... 10.379 03/15/98 172,000
100,000 Speedy Muffler King........................ 10.875 10/01/06 106,625
380,000 Stand Credit Card Master Trust............. 7.850 02/07/02 395,675
50,000 U.S. Home.................................. 4.875 11/01/05 44,250
200,000 Wyndham Hotel.............................. 10.500 05/15/06 213,000
-----------
1,668,488
-----------
</TABLE>
See accompanying notes to financial statements
38
<PAGE>
<PAGE>
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Non-Cyclicals--4.8%
$100,000 American Safety Razor...................... 9.875% 08/01/05 $ 106,250
100,000 Americold.................................. 12.875 05/01/08 103,500
200,000 Berry Plastics............................. 12.250 04/15/04 221,000
100,000 Borg-Warner................................ 9.125 05/01/03 98,000
100,000 Carr-Gottstein Foods....................... 12.000 11/15/05 106,750
100,000 Cobb Theatres.............................. 10.625 03/01/03 105,750
150,000 Doane Products............................. 10.625 03/01/06 159,750
150,000 Eyecare Centers of America................. 12.000 10/01/03 162,750
100,000 Iron Mountain.............................. 10.125 10/01/06 106,000
200,000 Jordan Industries.......................... 10.375 08/01/03 197,000
200,000 Radnor Holdings............................ 10.000 12/01/03 204,000
200,000 Rayovac.................................... 10.250 11/01/06 206,000
200,000 Remington Product.......................... 11.000 05/15/06 171,000
100,000 Samsonite.................................. 11.125 07/15/05 109,500
100,000 Selmer..................................... 11.000 05/15/05 108,000
200,000 Stroh Brewery.............................. 11.100 07/01/06 209,500
200,000 Trump Atlantic City........................ 11.250 05/01/06 198,000
-----------
2,572,750
-----------
Energy--0.8%
200,000 Cliffs Drilling............................ 10.250 05/15/03 212,750
200,000 National Energy Group...................... 10.750 11/01/06 208,000
-----------
420,750
-----------
Financial Services--4.2%
495,000 Associates N.A............................. 5.600 01/15/01 477,175
275,000 Commercial Credit.......................... 6.875 05/01/02 277,076
200,000 Dollar Financial........................... 10.875 11/15/06 207,000
525,000 Ford Motor Credit.......................... 6.250 12/08/05 497,427
250,000 Mellon Financial........................... 9.750 06/15/01 277,920
350,000 Nationsbank Credit Card Master Trust....... 6.450 04/15/03 351,313
100,000 USL Capital................................ 8.125 02/15/00 104,450
-----------
2,192,361
-----------
Health Care--0.8%
300,000 Aetna...................................... 7.625 08/15/26 302,502
100,000 Fresenius Medical Care..................... 9.000 12/01/06 101,750
-----------
404,252
-----------
Media--1.7%
200,000 American Media Operation................... 11.625 11/15/04 215,000
200,000 Cablevision Systems........................ 10.500 05/15/16 206,500
200,000 Diamond Cable
(Zero Coupon until 12/15/00, 11.75%
thereafter) (b).......................... 11.750 12/15/05 144,000
200,000 Marcus Cable
(Zero Coupon until 12/15/00, 14.125%
thereafter) (b).......................... 12.921 12/15/05 141,250
100,000 SFX Broadcasting........................... 10.750 05/15/06 105,500
150,000 United International Holdings (b).......... 13.187 11/15/99 106,500
-----------
918,750
-----------
</TABLE>
See accompanying notes to financial statements
39
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology--1.1%
$200,000 Exide Electronics Group, including 200 warrants 11.500% 03/15/06 $ 219,000
100,000 Talley Manufacturing & Technology.......... 10.750 10/15/03 103,250
100,000 UNC........................................ 11.000 06/01/06 107,500
150,000 Xilinx..................................... 5.250 11/01/02 149,250
-----------
579,000
-----------
Telecommunications & Utilities--1.0%
200,000 Arch Communications Group
(Zero Coupon until 03/15/01, 10.875%
thereafter) (b)........................ 10.875 03/15/08 114,000
125,000 ICG Holdings
(Zero Coupon until 09/15/00, 13.50%
thereafter) (b)......................... 12.725 09/15/05 88,125
150,000 International CableTel
(Zero Coupon until 02/01/01, 11.500%
thereafter) (b)......................... 11.804 02/01/06 102,000
200,000 Western Wireless.......................... 10.500 06/01/06 209,500
-----------
513,625
-----------
Total Corporate Bonds
(cost $11,125,665)....................... 11,349,812
-----------
Convertible Corporate Bonds--7.4%
Basic Industries--0.5%
150,000 Coeur D'Alene Mines........................ 6.375 01/31/04 140,250
100,000 Inco....................................... 5.750 07/01/04 123,000
-----------
263,250
-----------
Consumer Cyclicals--2.4%
100,000 Charming Shoppes........................... 7.500 07/15/06 99,500
150,000 Federated Department Stores................ 5.000 10/01/03 172,125
125,000 Guilford Mills............................. 6.000 09/15/12 126,875
750,000 Hollinger (b).............................. 6.607 10/05/13 266,250
200,000 Home Depot................................. 3.250 10/01/01 195,000
150,000 Magna International........................ 5.000 10/15/02 172,125
75,000 Price/Costco............................... 5.500 02/28/12 78,750
150,000 Waban...................................... 6.500 07/01/02 163,875
-----------
1,274,500
-----------
Consumer Non-Cyclicals--0.8%
450,000 Texas Instruments.......................... 6.125 02/01/06 424,665
-----------
Energy--0.6%
200,000 Baker Hughes (b)........................... 3.246 05/05/08 151,000
150,000 Pennzoil................................... 4.750 10/01/03 175,500
-----------
326,500
-----------
Financial Services--0.7%
75,000 First Financial Management................. 5.000 12/15/99 129,281
200,000 Sandoz Capital............................. 2.000 10/06/02 216,000
-----------
345,281
-----------
</TABLE>
See accompanying notes to financial statements
40
<PAGE>
<PAGE>
SALOMON BROTHERS TOTAL RETURN FUND (concluded)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Technology--1.6%
$200,000 Data General............................... 7.750% 06/01/01 $206,000
50,000 General Signal............................. 5.750 06/01/02 54,750
150,000 National Data.............................. 5.000 11/01/03 155,625
75,000 Quantum.................................... 5.000 03/01/03 104,531
150,000 S3......................................... 5.750 10/01/03 168,000
300,000 Silicon Graphics (b)....................... 3.836 11/02/13 157,875
-----------
846,781
-----------
Telecommunications & Utilities--0.5%
750,000 U.S. Cellular (b).......................... 5.573 06/15/15 250,313
-----------
Transportation--0.3%
150,000 Continental Airlines....................... 6.750 04/15/06 165,000
-----------
Total Convertible Corporate Bonds
(cost $3,820,099)........................ 3,896,290
-----------
U.S. Government & Agency--11.4%
295,188 Federal Home Loan Mortgage Corporation..... 6.500 03/01/26 282,637
298,440 Federal Home Loan Mortgage Corporation..... 6.500 03/01/26 285,663
250,000 Federal National Mortgage Association (c).. 7.000 ** 244,766
250,000 Federal National Mortgage Association...... 7.000 ** 244,765
44,838 Federal National Mortgage Association...... 6.500 10/01/10 44,181
297,977 Federal National Mortgage Association...... 6.500 10/01/11 292,948
102,927 Federal National Mortgage Association...... 7.500 08/01/23 103,230
96,652 Federal National Mortgage Association...... 7.000 09/01/25 94,603
89,578 Federal National Mortgage Association...... 6.500 12/01/25 85,573
293,575 Federal National Mortgage Association...... 7.000 03/01/26 287,611
503,209 Federal National Mortgage Association...... 6.500 06/01/26 480,082
94,917 Government National Mortgage Association... 7.500 01/15/23 95,772
202,380 Government National Mortgage Association... 7.500 03/15/26 202,760
200,000 U.S. Treasury Bond......................... 7.625 02/15/25 222,156
710,000 U.S. Treasury Note......................... 6.625 07/31/01 721,317
540,000 U.S. Treasury Note......................... 6.250 10/31/01 540,508
950,000 U.S. Treasury Note......................... 5.750 08/15/03 921,496
325,000 U.S. Treasury Note (d)..................... 7.000 07/15/06 337,646
525,000 U.S. Treasury Note......................... 6.500 10/15/06 527,872
-----------
Total U.S. Government & Agency
(cost $6,029,146)........................ 6,015,586
-----------
Total Investments--89.7%
(cost $43,025,382)....................... 47,361,853
Repurchase Agreements--9.5%
4,996,000 Repurchase Agreement dated 12/31/96, with J.P.
Morgan Securities, collateralized by $4,053,000
U.S. Treasury Bonds, 8.75%, due 08/15/20 valued
at $5,121,979; proceeds: $4,997,832
(cost $4,996,000)......................... 6.600 01/02/97 4,996,000
Other assets in excess of liabilities--0.8%. 450,898
-----------
Net Assets--100.0%.......................... $52,808,751
===========
</TABLE>
* Non-income producing security.
** To be announced.
(a) Security pays payment-in-kind dividends through 09/30/00.
(b) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(c) Mortgage Dollar Roll. See Note 1.
(d) Security segregated for mortgage dollar roll.
Abbreviation used in this statement:
ADR American Depository Receipt
See accompanying notes to financial statements
41
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds -- 73.8%
Basic Industries -- 15.1%
1,000,000 Algoma Steel............................... 12.375% 07/15/05 $1,080,000
1,500,000 Alvey Systems.............................. 11.375 01/31/03 1,563,750
500,000 Asia Pulp & Paper International Finance.... 11.750 10/01/05 536,250
1,500,000 Clark Materials............................ 10.750 11/15/06 1,560,000
1,000,000 Clark-Schwebel............................. 10.500 04/15/06 1,070,000
1,000,000 Commonwealth Aluminum...................... 10.750 10/01/06 1,030,000
1,000,000 Crown Paper................................ 11.000 09/01/05 940,000
500,000 Doman Industries Limited................... 8.750 03/15/04 467,500
1,500,000 Foamex..................................... 11.875 10/01/04 1,601,250
500,000 Forest Oil................................. 11.250 09/01/03 527,500
1,000,000 Freedom Chemical........................... 10.625 10/15/06 1,050,000
1,000,000 ISP Holdings............................... 9.000 10/15/03 1,015,000
1,000,000 Mesa Operating............................. 10.625 07/01/06 1,085,000
3,350,000 NL Industries
(Zero Coupon until 10/15/98, 13.00%
thereafter)(b)........................... 11.777 10/15/05 2,881,000
1,000,000 Norcal Waste Systems *..................... 13.000 11/15/05 1,105,000
1,000,000 Pierce Leahy............................... 11.125 07/15/06 1,092,500
1,000,000 Plastic Containers......................... 10.000 12/15/06 1,040,000
1,000,000 Renco Metals............................... 11.500 07/01/03 1,045,000
500,000 Repap Wisconsin............................ 9.875 05/01/06 510,000
1,000,000 Sequa...................................... 9.375 12/15/03 1,020,000
500,000 Southdown.................................. 10.000 03/01/06 527,500
1,250,000 Specialty Equipment........................ 11.375 12/01/03 1,365,625
1,000,000 Spinnaker Industries....................... 10.750 10/15/06 1,045,000
500,000 Terex...................................... 13.250 05/15/02 542,500
1,500,000 Texas Petrochemical........................ 11.125 07/01/06 1,612,500
1,000,000 Valcor..................................... 9.625 11/01/03 945,000
-----------
28,257,875
-----------
Consumer Cyclicals -- 13.9%
1,000,000 AmeriKing.................................. 10.750 12/01/06 1,040,000
1,500,000 Cinemark USA............................... 9.625 08/01/08 1,500,000
1,300,000 Cole National Group........................ 9.875 12/31/06 1,339,000
1,500,000 CSK Auto................................... 11.000 11/01/06 1,575,000
2,000,000 Delta Beverage............................. 9.750 12/15/03 2,052,500
1,500,000 E & S Holdings............................. 10.375 10/01/06 1,571,250
1,000,000 Guitar Center Management................... 11.000 07/01/06 1,060,000
1,000,000 Herff Jones................................ 11.000 08/15/05 1,075,000
500,000 Hines Horticulture......................... 11.750 10/15/05 535,000
1,000,000 Hollinger International Publishing......... 9.250 02/01/06 990,000
1,800,000 Lamar Advertising.......................... 9.625 12/01/06 1,872,000
1,000,000 Newport News Shipbuilding.................. 9.250 12/01/06 1,025,000
3,500,000 Revlon Worldwide(b)........................ 11.494 03/15/98 3,010,000
1,000,000 Safelite Glass............................. 9.875 12/15/06 1,032,500
1,500,000 Scholastic Brands.......................... 11.000 01/15/07 1,526,250
500,000 Simmons.................................... 10.750 04/15/06 522,500
500,000 Specialty Retailers........................ 11.000 08/15/03 515,000
1,000,000 Speedy Muffler King........................ 10.875 10/01/06 1,066,250
1,500,000 Universal Outdoor.......................... 9.750 10/15/06 1,548,750
1,000,000 Wyndham Hotel.............................. 10.500 05/15/06 1,065,000
-----------
25,921,000
-----------
</TABLE>
See accompanying notes to financial statements
42
<PAGE>
<PAGE>
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer Non-Cyclicals -- 15.1%
500,000 Americold.................................. 12.875% 05/01/08 $ 517,500
1,500,000 Berry Plastics............................. 12.250 04/15/04 1,657,500
1,000,000 Big V Supermarkets......................... 11.000 12/15/04 920,000
500,000 Borg-Warner................................ 9.125 05/01/03 490,000
1,000,000 Carr-Gottstein Foods....................... 12.000 11/15/05 1,067,500
500,000 Cobb Theatres.............................. 10.625 03/01/03 528,750
1,000,000 Dade International......................... 11.125 05/01/06 1,085,000
1,500,000 Doane Products............................. 10.625 03/01/06 1,597,500
1,000,000 Ekco Group................................. 9.250 04/01/06 980,000
750,000 Harvey Casinos............................. 10.625 06/01/06 791,250
1,000,000 Hills Stores............................... 12.500 07/01/03 887,500
250,000 Hollywood Casino........................... 12.750 11/01/03 240,000
1,300,000 IMED....................................... 9.750 12/01/06 1,322,750
1,000,000 Iron Mountain.............................. 10.125 10/01/06 1,060,000
1,000,000 Jordan Industries.......................... 10.375 08/01/03 985,000
250,000 Jordan Industries
(Zero Coupon until 08/01/98, 11.75%
thereafter)(b)............................ 14.013 08/01/05 198,750
1,000,000 Majestic Star Casino....................... 12.750 05/15/03 1,072,500
1,000,000 Penn Traffic............................... 9.625 04/15/05 577,500
1,000,000 Plastic Specialties........................ 11.250 12/01/03 1,040,000
2,000,000 Radnor Holdings............................ 10.000 12/01/03 2,040,000
1,500,000 Rayovac.................................... 10.250 11/01/06 1,545,000
1,500,000 Remington Product.......................... 11.000 05/15/06 1,282,500
800,000 Rose Hills................................. 9.500 11/15/04 822,000
500,000 Selmer..................................... 11.000 05/15/05 540,000
1,000,000 Smiths Food & Drug......................... 11.250 05/15/07 1,105,000
250,000 Specialty Foods............................ 11.125 10/01/02 237,500
2,000,000 Stroh Brewery.............................. 11.100 07/01/06 2,095,000
1,000,000 Trump Atlantic City........................ 11.250 05/01/06 990,000
500,000 Twin Laboratories.......................... 10.250 05/15/06 515,000
-----------
28,191,000
-----------
Energy -- 4.2%
500,000 Benton Oil & Gas........................... 11.625 05/01/03 553,750
1,500,000 Cliffs Drilling............................ 10.250 05/15/03 1,595,625
2,000,000 Costilla Energy............................ 10.250 10/01/06 2,090,000
750,000 Flores & Rucks............................. 9.750 10/01/06 795,000
1,500,000 National Energy Group...................... 10.750 11/01/06 1,560,000
1,250,000 Parker Drilling............................ 9.750 11/15/06 1,318,750
-----------
7,913,125
-----------
Financial Services -- 4.0%
1,000,000 Aames Financial............................ 9.125 11/01/03 1,017,500
1,000,000 Dollar Financial........................... 10.875 11/15/06 1,035,000
1,000,000 First Nationwide Escrow.................... 10.625 10/01/03 1,080,000
1,400,000 HMH Properties............................. 9.500 05/15/05 1,456,000
1,000,000 Intertek Finance PLC....................... 10.250 11/01/06 1,040,000
2,000,000 Tembec Finance............................. 9.875 09/30/05 1,870,000
-----------
7,498,500
-----------
</TABLE>
See accompanying notes to financial statements
43
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal
Value Interest Maturity
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Health Care -- 1.1%
1,000,000 Fresenius Medical Care..................... 9.000% 12/01/06 $1,017,500
1,000,000 Maxxim Medical............................. 10.500 08/01/06 1,045,000
-----------
2,062,500
-----------
Media -- 7.1%
2,000,000 Adelphia Communications.................... 12.500 05/15/02 2,050,000
500,000 American Media Operation................... 11.625 11/15/04 537,500
2,000,000 Cablevision Systems........................ 10.500 05/15/16 2,065,000
1,500,000 Chancellor Broadcasting.................... 9.375 10/01/04 1,515,000
1,500,000 Diamond Cable
(Zero Coupon until 12/15/00, 11.75%
thereafter)(b)........................... 11.732 12/15/05 1,080,000
2,750,000 Marcus Cable
(Zero Coupon until 06/15/00, 14.125%
thereafter)(b)........................... 13.068 12/15/05 1,942,188
1,000,000 Rogers Cable Systems....................... 10.000 03/15/05 1,072,500
1,500,000 SFX Broadcasting........................... 10.750 05/15/06 1,582,500
1,750,000 United International Holdings(b)........... 12.392 11/15/99 1,242,500
250,000 Wireless One............................... 13.000 10/15/03 242,500
-----------
13,329,688
-----------
Technology -- 2.9%
1,000,000 Exide Electronics Group.................... 11.500 03/15/06 1,065,000
1,000,000 Mettler Toledo............................. 9.750 10/01/06 1,050,000
1,500,000 Talley Manufacturing & Technology ......... 10.750 10/15/03 1,548,750
500,000 Telex Communications....................... 12.000 07/15/04 557,500
1,000,000 UNC........................................ 11.000 06/01/06 1,075,000
-----------
5,296,250
-----------
Telecommunications & Utilities -- 7.8%
1,000,000 AES........................................ 10.250 07/15/06 1,080,000
1,500,000 AES China Generating....................... 10.125 12/15/06 1,567,500
900,000 Arch Communications Group
(Zero Coupon until 03/15/01, 10.875%
thereafter)(b)........................... 10.875 03/15/08 513,000
500,000 El Paso Electric........................... 9.400 05/01/11 530,000
2,500,000 ICG Holdings
(Zero Coupon until 09/15/00, 13.50%
thereafter)(b)........................... 11.712 09/15/05 1,762,500
1,000,000 Intermedia Commission of Florida
(Zero Coupon until 05/15/01, 12.50%
thereafter)(b)............................ 12.271 05/15/06 680,000
2,250,000 International CableTel
(Zero Coupon until 02/01/01, 11.500%
thereafter)(b)............................ 11.416 02/01/06 1,530,000
1,810,000 Jacor Communications....................... 9.750 12/15/06 1,846,200
1,000,000 Nextlink................................... 12.500 04/15/06 1,065,000
2,000,000 Paging Network............................. 10.000 10/15/08 2,032,500
1,500,000 Western Wireless........................... 10.500 06/01/06 1,571,250
600,000 Winstar Communications
(Zero Coupon until 10/15/00, 14.00%
thereafter)(b)............................ 14.000 10/15/05 370,500
-----------
14,548,450
-----------
</TABLE>
See accompanying notes to financial statements
44
<PAGE>
<PAGE>
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transportation -- 2.6%
500,000 Airplanes Pass Through Trust ................. 10.875% 03/15/19 $ 556,250
2,000,000 Central Transport Rental Group ............... 9.500 04/30/03 1,900,000
250,000 Petro PSC Properties.......................... 12.500 06/01/02 255,000
1,300,000 Ryder TRS..................................... 10.000 12/01/06 1,355,250
890,000 Venture Holdings Trust........................ 9.750 04/01/04 818,800
-----------
4,885,300
-----------
Total Corporate Bonds
(cost $133,998,075)......................... 137,903,688
-----------
Convertible Corporate Bonds -- 0.1%
Telecommunications & Utilities -- 0.1%
300,000 Winstar Communications
(Zero Coupon until 10/15/00, 14.00%
thereafter)(b) (cost $180,024).............. 14.000 10/15/05 198,000
-----------
Sovereign Bonds -- 17.5%
Argentina -- 2.7%
3,675,000 Republic of Argentina FRB *................... 6.625 03/31/05 3,201,844
ARP 684,712 Republic of Argentina, BOCON, Pre 1 *(c)...... 3.576 04/01/01 593,952
1,044,668 Republic of Argentina, BOCON, Pre 2 *(c)...... 5.375 04/01/01 990,000
250,000 Republic of Argentina, Par Bond, Series L*.... 5.250 03/31/23 157,656
-----------
4,943,452
-----------
Brazil -- 3.7%
7,984,933 Federal Republic of Brazil,
Capitalization Bond(c) ..................... 4.500 04/15/14 5,893,876
1,500,000 Federal Republic of Brazil,
Investment (Exit) Bond ..................... 6.000 09/15/13 1,074,375
-----------
6,968,251
-----------
Bulgaria -- 0.8%
3,000,000 Republic of Bulgaria FLIRB, Series A * ....... 2.250 07/28/12 1,153,125
750,000 Republic of Bulgaria, Discount Bond,
Tranche A * ................................ 6.688 07/28/24 426,094
-----------
1,579,219
-----------
Ecuador -- 2.6%
6,714,429 Republic of Ecuador, PDI Bond *(c)............ 6.500 02/27/15 4,129,374
1,057,404 Republic of Ecuador, Registered PDI Bond *(c). 6.500 02/27/15 650,304
-----------
4,779,678
-----------
Mexico -- 2.7%
2,000,000 United Mexico States, Global Bond............. 11.500 05/15/26 2,115,000
4,000,000 United Mexico States, Par Bonds, Series A,
including 4,000,000 attached warrants....... 6.250 12/31/19 2,932,500
-----------
5,047,500
-----------
</TABLE>
See accompanying notes to financial statements
45
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Panama -- 2.3%
4,000,000 Government of Panama IRB *................. 3.500% 07/17/14 $2,770,000
2,000,000 Government of Panama, PDI Bond *........... 4.000 07/17/16 1,562,500
-----------
4,332,500
-----------
Poland -- 0.1%
350,000 Republic of Poland, RSTA Bond *............ 3.250 10/27/24 219,625
-----------
Russia -- 0.7%
2,000,000 Russian Government IAN(d).................. -- 12/29/49 1,388,750
-----------
Venezuela -- 1.9%
3,000,000 Republic of Venezuela FLIRB, Series B *.... 6.438 03/31/07 2,681,250
1,000,000 Republic of Venezuela FLIRB, Series A *.... 6.625 03/31/07 893,750
-----------
3,575,000
-----------
Total Sovereign Bonds
(cost $30,135,267)....................... 32,833,975
-----------
Loan Participations -- 4.2%
Morocco -- 3.3%
7,500,000 Kingdom of Morocco, Tranche A *(e)
(Chase Manhattan Bank, N.A. and
Morgan Guaranty Trust Company)........... 6.375 01/01/09 6,192,188
-----------
Russia -- 0.9%
2,000,000 Russian Bank of Foreign Economic Affairs(e)(f)
(Merrill Lynch International)............ -- 12/29/49 1,590,000
-----------
Total Loan Participations (cost $7,092,194) 7,782,188
-----------
Shares
- ------
Warrants -- 0.0%
500 Exide Electronics Group, expires 03/15/06.. 15,000
900 In Flight Phone, expires 08/31/02.......... 0
2,000 Terex, expires 05/15/02.................... 0
750 Wireless One, expires 10/19/00............. 0
-----------
Total Warrants
(cost $50,391)........................... 15,000
-----------
Total Investments -- 95.6%
(cost $171,455,951)...................... 178,732,851
</TABLE>
See accompanying notes to financial statements
46
<PAGE>
<PAGE>
SALOMON BROTHERS HIGH YIELD BOND FUND (concluded)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal
Amount(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreement -- 10.6%
19,870,000 Repurchase Agreement dated 12/31/96, with J.P.
Morgan Securities, collateralized by $16,117,000
U.S. Treasury Bonds, 8.750%, due 08/15/20,
valued at $20,367,859; proceeds: $19,877,286
(cost $19,870,000)(g).................... 6.600 01/02/97 19,870,000
Liabilities in excess of other assets -- (6.2%) (11,704,562)
-----------
Net Assets-- 100.0%........................ $186,898,289
===========
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(c) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(d) When and if issued. Security issued pursuant to Russia's Brady Plan debt
restructuring. The investment advisor believes that the Brady Plan will be
finalized and the related bonds issued. Accordingly, the Fund has
marked-to-market its investment in this security at year end.
(e) Participation interest was acquired through the financial institutions
indicated parenthetically.
(f) Security is in default.
(g) Held in segregated account as collateral for when and if issued securities.
Abbreviations used in this statement:
ARP Argentinean Peso
FLIRB Front-Loaded Interest Reduction Bonds
FRB Floating Rate Bonds
IAN Interest Arrears Notes
IRB Interest Reduction Bonds
PDI Past Due Interest
RSTA Revolving Short-Term Agreement
See accompanying notes to financial statements
47
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS STRATEGIC BOND FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds--44.0%
Basic Industries--8.9%
250,000 Algoma Steel............................... 12.375% 07/15/05 $ 270,000
250,000 Alvey Systems.............................. 11.375 01/31/03 260,625
250,000 Clark-Schwebel............................. 10.500 04/15/06 267,500
250,000 Crown Paper................................ 11.000 09/01/05 235,000
250,000 Foamex..................................... 11.875 10/01/04 266,875
200,000 Forest Oil................................. 11.250 09/01/03 211,000
400,000 International Semi-Technology
(Zero Coupon until 08/15/00, 11.50%
thereafter)(b)........................... 11.737 08/15/03 258,000
250,000 NL Industries
(Zero Coupon until 10/15/98, 13.00%
thereafter)(b)........................... 12.619 10/15/05 215,000
250,000 Norcal Waste Systems *..................... 13.000 11/15/05 276,250
250,000 Terex...................................... 13.250 05/15/02 271,250
250,000 Valcor..................................... 9.625 11/01/03 236,250
----------
2,767,750
----------
Consumer Cyclicals--4.4%
250,000 Hines Horticulture......................... 11.750 10/15/05 267,500
300,000 Revlon Worldwide (b)....................... 11.105 03/15/98 258,000
250,000 Speedy Muffler King........................ 10.875 10/01/06 266,563
150,000 Universal Outdoor.......................... 9.750 10/15/06 154,875
200,000 U.S. Leasing International................. 8.450 01/25/05 216,276
200,000 Wyndham Hotel.............................. 10.500 05/15/06 213,000
----------
1,376,214
----------
Consumer Non-Cyclicals-- 14.1%
250,000 Americold.................................. 12.875 05/01/08 258,750
250,000 Berry Plastics............................. 12.250 04/15/04 276,250
250,000 Cobb Theatres.............................. 10.625 03/01/03 264,375
250,000 Dade International......................... 11.125 05/01/06 271,250
250,000 Doane Products............................. 10.625 03/01/06 266,250
200,000 Dole Foods................................. 6.750 07/15/00 199,696
250,000 Ekco Group................................. 9.250 04/01/06 245,000
250,000 Eyecare Centers of America................. 12.000 10/01/03 271,250
125,000 Hollywood Casino........................... 12.750 11/01/03 120,000
250,000 Iron Mountain.............................. 10.125 10/01/06 265,000
250,000 Jordan Industries
(Zero Coupon until 08/01/98, 11.75%
thereafter)(b)........................... 14.013 08/01/05 198,750
250,000 Radnor Holdings............................ 10.000 12/01/03 255,000
250,000 Rayovac.................................... 10.250 11/01/06 257,500
250,000 Remington Product.......................... 11.000 05/15/06 213,750
250,000 Selmer..................................... 11.000 05/15/05 270,000
250,000 Smiths Food & Drug......................... 11.250 05/15/07 276,250
250,000 Stroh Brewery.............................. 11.100 07/01/06 261,875
200,000 Twin Laboratories.......................... 10.250 05/15/06 206,000
----------
4,376,946
----------
Energy--3.3%
200,000 Arkla...................................... 8.875 07/15/99 210,088
250,000 Benton Oil & Gas........................... 11.625 05/01/03 276,875
250,000 Cliffs Drilling............................ 10.250 05/15/03 265,938
250,000 National Energy Group...................... 10.750 11/01/06 260,000
----------
1,012,901
----------
</TABLE>
See accompanying notes to financial statements
48
<PAGE>
<PAGE>
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Services--0.7%
60,000 Mellon Financial........................... 9.750% 06/15/01 $ 66,701
150,000 Paine Webber Group......................... 7.000 03/01/00 151,031
----------
217,732
----------
Media--6.1%
150,000 Adelphia Communications.................... 12.500 05/15/02 153,750
250,000 American Media Operation................... 11.625 11/15/04 268,750
250,000 Cablevision Systems........................ 10.500 05/15/16 258,125
375,000 Diamond Cable
(Zero Coupon until 12/15/00, 11.75%
thereafter)(b)........................... 11.087 12/15/05 270,000
500,000 Marcus Cable
(Zero Coupon until 06/15/00, 14.125%
thereafter)(b) ......................... 12.813 12/15/05 353,125
350,000 People's Choice TV
(Zero Coupon until 06/01/00, 13.125%
thereafter)(b)........................... 13.125 06/01/04 147,000
250,000 SFX Broadcasting........................... 10.750 05/15/06 263,750
250,000 United International Holdings(b)........... 13.893 11/15/99 177,500
----------
1,892,000
----------
Technology--2.2%
250,000 Exide Electronics Group.................... 11.500 03/15/06 266,250
150,000 Quest Diagnostic........................... 10.750 12/15/06 157,500
250,000 Talley Manufacturing & Technology.......... 10.750 10/15/03 258,125
----------
681,875
----------
Telecommunications & Utilities--2.6%
300,000 Arch Communications Group
(Zero Coupon until 03/15/01, 10.875%
thereafter)(b)........................... 10.875 03/15/08 171,000
350,000 ICG Holdings
(Zero Coupon until 09/15/00, 13.50%
thereafter)(b)........................... 11.459 09/15/05 246,750
200,000 Jacor Communications....................... 9.750 12/15/06 204,000
300,000 Winstar Communications
(Zero Coupon until 10/15/00, 14.00%
thereafter)(b)........................... 14.000 10/15/05 185,250
----------
807,000
----------
Transportation -- 1.7%
250,000 Airplanes Pass Through Trust............... 10.875 03/15/19 278,125
250,000 Central Transport Rental Group............. 9.500 04/30/03 237,500
----------
515,625
----------
Total Corporate Bonds
(cost $13,253,361)....................... 13,648,043
----------
</TABLE>
See accompanying notes to financial statements
49
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Convertible Corporate Bonds -- 0.3%
Telecommunications & Utilities -- 0.3%
$150,000 Winstar Communications
(Zero Coupon until 10/15/00, 14.00%
thereafter)(b) (cost $90,011)...... 14.000% 10/15/05 $ 99,000
----------
Sovereign Bonds -- 21.2%
Argentina -- 2.1%
522,334 Republic of Argentina, BOCON, Pre 2*(c) 5.375 04/01/01 495,000
250,000 Republic of Argentina, Par Bond, Series L* 5.250 03/31/23 157,656
----------
652,656
----------
Australia -- 0.1%
AUD 20,000 Government of Australia.............. 6.750 11/15/06 15,191
----------
Brazil -- 3.5%
1,486,850 Federal Republic of Brazil,
Capitalization Bond(c)............. 4.500 04/15/14 1,097,481
----------
Bulgaria -- 1.7%
1,000,000 Republic of Bulgaria FLIRB, Series A* 2.250 07/28/12 384,375
250,000 Republic of Bulgaria, Discount Bond,
Tranche A* .......................... 6.688 07/28/24 142,031
----------
526,406
----------
Canada -- 1.9%
CAD 430,000 Government of Canada................. 6.500 08/01/99 328,314
CAD 190,000 Government of Canada................. 7.500 09/01/00 149,613
CAD 160,000 Government of Canada................. 7.000 09/01/01 124,255
----------
602,182
----------
Denmark -- 0.3%
DKK 560,000 Kingdom of Denmark................... 8.000 11/15/01 105,531
----------
Ecuador -- 0.9%
600,000 Republic of Ecuador, Par Bond*....... 6.500 02/28/25 279,750
----------
Germany -- 0.4%
DEM 100,000 Government of Germany................ 7.500 11/11/04 72,557
DEM 50,000 Government of Germany................ 8.250 09/20/01 37,164
----------
109,721
----------
Ireland -- 0.7%
IEP 70,000 Irish Gilts.......................... 6.500 10/18/01 120,786
IEP 60,000 Irish Gilts.......................... 6.250 04/01/99 102,209
----------
222,995
----------
Korea -- 1.4%
400,000 Korea Development Bank............... 9.600 12/01/00 440,444
----------
Mexico -- 1.8%
750,000 United Mexico States, Series B,
including 750,000 attached warrants 6.250 12/31/19 549,837
----------
</TABLE>
See accompanying notes to financial statements
50
<PAGE>
<PAGE>
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount(a) Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Panama -- 0.6%
250,000 Government of Panama IRB *................. 3.500% 07/17/14 $ 173,125
----------
Poland -- 1.0%
500,000 Republic of Poland, RSTA Bond*............. 3.250 10/27/24 313,750
----------
Russia -- 3.4%
1,500,000 Russian Government IAN (d)................. -- 12/29/49 1,041,563
----------
Venezuela -- 1.4%
250,000 Republic of Venezuela DCB, Series DL*...... 6.500 12/18/07 220,625
250,000 Republic of Venezuela FLIRB Series B*...... 6.438 03/31/07 223,438
----------
444,063
----------
Total Sovereign Bonds
(cost $6,097,858)........................ 6,574,695
----------
Loan Participation -- 4.0%
Morocco -- 4.0%
1,500,000 Kingdom of Morocco, Tranche A * (e)
(Chase Manhattan Bank, N.A. and
Morgan Guaranty Trust Company)
(cost $1,151,408)........................ 6.375 01/01/09 1,238,438
----------
U.S. Government & Agency -- 24.6%
19,897 Federal Home Loan Mortgage Corporation..... 6.000 10/01/10 19,233
540,493 Federal Home Loan Mortgage Corporation..... 7.000 07/01/11 540,369
288,697 Federal Home Loan Mortgage Corporation..... 10.000 05/15/20 309,717
200,000 Federal National Mortgage Association(f)... 7.000 ** 195,813
28,523 Federal National Mortgage Association...... 13.000 11/15/15 33,684
117,446 Federal National Mortgage Association...... 10.400 04/25/19 126,694
99,201 Federal National Mortgage Association...... 6.500 02/01/26 94,642
969,571 Federal National Mortgage Assaociation..... 6.500 03/01/26 926,222
2,000,000 U.S. Treasury Bond......................... 5.750 12/31/98 1,995,320
80,000 U.S. Treasury Bond (g)..................... 6.750 08/15/26 80,600
60,000 U.S. Treasury Note......................... 6.125 05/31/97 60,169
510,000 U.S. Treasury Note......................... 5.625 02/28/01 499,882
600,000 U.S. Treasury Note (g)..................... 6.250 04/30/01 601,314
100,000 U.S. Treasury Note......................... 6.500 08/31/01 101,094
750,000 U.S. Treasury Note......................... 6.125 12/31/01 747,188
250,000 U.S. Treasury Note (g)..................... 5.875 11/15/05 241,055
480,000 U.S. Treasury Note (g)..................... 6.875 05/15/06 494,626
550,000 U.S. Treasury Note......................... 6.500 10/15/06 553,009
----------
Total U.S. Government & Agency
(cost $7,596,161)........................ 7,620,631
----------
</TABLE>
See accompanying notes to financial statements
51
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Interest Maturity Value
Shares Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warrants -- 0.0%
250 Exide Electronics Group, expires 03/15/06.. $ 7,500
400 In Flight Phone, expires 08/31/02.......... 0
1,000 Terex, expires 05/15/02.................... 0
----------
Total Warrants
(cost $22,396)........................... 7,500
----------
Total Investments -- 94.1%
(cost $28,211,195)....................... 29,188,307
----------
Principal
Amount(a)
- ---------
Repurchase Agreements -- 22.2%
3,446,000 Repurchase Agreement dated 12/31/96,
with J.P. Morgan Securities,
collateralized by $2,866,000
U.S. Treasury Bonds, 8.500%,
due 02/15/20valued at $3,532,345;
proceeds: $3,447,264 ......................... 6.600% 01/02/97 3,446,000
3,447,000 Repurchase Agreement dated 12/31/96,
with Merrill Lynch, Pierce, Fenner & Smith,
collateralized by $2,750,000 U.S. Treasury
Bonds, 8.875%, due 02/15/19, valued at
$3,516,563; proceeds: $3,448,245.............. 6.500 01/02/97 3,447,000
----------
Total Repurchase Agreements
(cost $6,893,000).............................. 6,893,000
----------
Liabilities in excess of other assets--(16.3%) (5,053,861)
----------
Net Assets-- 100.0%........................ $31,027,446
==========
</TABLE>
See accompanying notes to financial statements
52
<PAGE>
<PAGE>
SALOMON BROTHERS STRATEGIC BOND FUND (concluded)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Maturity Contracts to In Exchange Contracts at Appreciation
Dates Receive/Deliver for Value (Depreciation)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases
01/22/97 DEM 2,696,748 $1,774,086 $1,755,127 $(18,959)
01/22/97 DKK 200,634 33,720 34,097 377
01/22/97 IEP 519,731 858,216 880,373 22,157
01/22/97 NZD 663,350 466,534 467,520 986
Sales
01/22/97 AUD 19,327 15,268 15,342 (74)
01/22/97 CAD 839,558 626,986 613,681 13,305
01/22/97 DEM 2,695,607 1,760,970 1,754,384 6,586
01/22/97 DKK 808,055 138,913 137,325 1,588
01/22/97 IEP 651,650 1,064,055 1,103,830 (39,775)
01/22/97 NZD 663,350 468,375 467,520 855
--------
$(12,954)
========
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
** To be announced.
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(c) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(d) When and if issued. Security issued pursuant to Russia's Brady Plan debt
restucturing. The investment advisor believes that the Brady Plan will be
finalized and the related bonds issued. Accordingly, the Fund has
marked-to-market its investment in this security at year end.
(e) Participation interest was acquired through the financial institutions
indicated parenthetically.
(f) Mortgage Dollar Roll. See Note 1.
(g) Segregated as collateral for mortgage dollar rolls and when and if issued
security.
Abbreviations used in this statement:
DCB Debt Conversion Bonds
FLIRB Front-Loaded Interest Reduction Bonds
IAN Interest Arrears Notes
IRB Interest Reduction Bonds
RSTA Revolving Short-Term Agreement
AUD Australian Dollar
CAD Canadian Dollar
IEP Irish Punt
DEM German Deutschemark
DKK Danish Krone
NZD New Zealand Dollar
See accompanying notes to financial statements
53
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- ---------------------------------------------------------------------------------------------------------
U.S. Treasury Notes -- 46.2%
<S> <C> <C> <C>
$3,350,000 U.S. Treasury Note (a) 6.125% 05/31/97 $3,359,414
550,000 U.S. Treasury Note 6.625 07/31/01 558,767
500,000 U.S. Treasury Note 6.500 08/15/05 503,205
150,000 U.S. Treasury Note 5.875 11/15/05 144,633
575,000 U.S. Treasury Note 7.000 07/15/06 597,373
500,000 U.S. Treasury Note 6.500 10/15/06 502,735
----------
Total U.S. Treasury Notes
(cost $5,662,963)................. 5,666,127
----------
U.S. Government Agency -- 45.5%
100,000 Federal Home Loan Bank 5.940 06/13/00 99,047
34,574 Federal Home Loan Mortgage Corporation 6.000 07/01/10 33,562
37,145 Federal Home Loan Mortgage Corporation 11.750 01/01/11 40,943
198,439 Federal Home Loan Mortgage Corporation 7.000 05/01/11 198,394
488,099 Federal Home Loan Mortgage Corporation 7.000 07/01/11 487,986
769,039 Federal Home Loan Mortgage Corporation 7.000 07/01/11 768,862
375,975 Federal Home Loan Mortgage Corporation 7.000 08/01/11 375,888
917 Federal Home Loan Mortgage Corporation 11.750 06/01/14 991
24,905 Federal Home Loan Mortgage Corporation 11.750 12/01/14 27,976
35,390 Federal Home Loan Mortgage Corporation 11.750 07/01/15 39,753
13,857 Federal Home Loan Mortgage Corporation 11.750 01/01/16 15,637
298,190 Federal Home Loan Mortgage Corporation 8.250 04/01/17 308,522
316,220 Federal National Mortgage Association 6.500 12/01/03 314,009
1,300,000 Federal National Mortgage Association(b) 7.000 ** 1,272,781
50,512 Federal National Mortgage Association 14.500 11/01/14 62,304
23,500 Federal National Mortgage Association 12.500 08/01/15 27,602
103,547 Federal National Mortgage Association 12.500 09/01/15 119,694
114,092 Federal National Mortgage Association 13.000 11/15/15 134,735
40,499 Federal National Mortgage Association 12.000 01/01/16 47,472
34,658 Federal National Mortgage Association 11.500 04/01/19 39,521
199,072 Federal National Mortgage Association 11.500 02/01/20 227,004
245,235 Federal National Mortgage Association 10.500 08/01/20 272,133
65,319 Federal National Mortgage Association 6.500 04/01/26 62,317
416,772 Federal National Mortgage Association 6.500 04/01/26 398,138
200,000 Government National Mortgage Association(b) 7.000 01/22/26 195,938
----------
Total U.S. Government Agency
(cost $5,526,754) 5,571,209
----------
Total Investments -- 91.7%
(cost $11,189,717) 11,237,336
----------
Repurchase Agreements -- 18.9%
1,156,000 Repurchase Agreement dated 12/31/96, with
Merrill Lynch, Pierce, Fenner & Smith,
collateralized by $925,000 U.S. Treasury Bonds,
8.875%, due 02/15/19, valued at $1,182,844;
proceeds: $1,156,417 6.500 01/02/97 1,156,000
1,156,000 Repurchase Agreement dated 12/31/96, with
J.P. Morgan Securities, collateralized
by $938,000 U.S. Treasury Bonds, 8.75%,
due 08/15/20 valued at $1,185,398;
proceeds: $1,156,424 6.600 01/02/97 1,156,000
----------
Total Repurchase Agreements
(cost $2,312,000)........................... 2,312,000
----------
Liabilities in excess of other assets -- (10.6%) (1,298,919)
----------
Net Assets-- 100.0% $12,250,417
============
</TABLE>
(a) A portion of the security held is segregated as collateral for mortgage
dollar rolls.
(b) Mortgage Dollar Roll. See Note 1.
** To be announced.
See accompanying notes to financial statements
54
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Securities -- 95.9%
California -- 2.6%
$285,000 Los Angeles, California AMBAC.............. 6.000% 08/01/03 $306,224
----------
Florida -- 1.6%
180,000 Florida Housing Finance Agency............. 6.150 07/01/06 184,012
----------
Hawaii -- 2.2%
250,000 Hawaii State Department of Budget & Finance 5.600 07/01/06 256,291
----------
Illinois -- 8.6%
300,000 Chicago, Illinois Metropolitan Water GO.... 5.900 12/01/06 322,839
250,000 Chicago, Illinois O'Hare International Airport 5.000 01/01/02 253,750
400,000 Illinois Student Assistance Commission..... 6.400 03/01/04 423,960
----------
1,000,549
----------
Indiana -- 12.9%
500,000 Indiana Health Facilities Finance Authority 5.800 08/15/06 499,595
300,000 Indiana Secondary Market for Education AMBAC 5.550 12/01/05 303,771
650,000 Indiana Transportation Finance Authority... 6.250 11/01/03 694,668
----------
1,498,034
----------
Louisiana -- 4.9%
100,000 Ascension Parish, Louisiana Pollution
Authority VR............................. 5.100 01/02/97 100,000
450,000 Louisiana Public Facilities Authority...... 6.750 09/01/06 473,837
----------
573,837
----------
Massachusetts -- 3.8%
400,000 Commonwealth of Massachusetts
Health & Educational Facilities Authority. 6.500 12/01/05 437,064
----------
Mississippi -- 4.0%
460,000 Mississippi Higher Education............... 6.050 09/01/07 470,704
----------
New Jersey -- 4.0%
450,000 Passaic Valley, New Jersey
Sewer Commission AMBAC.................... 5.750 12/01/07 471,821
----------
New York -- 26.7%
450,000 New York City, New York GO................. 6.500 02/01/02 475,979
500,000 New York State Dormitory Authority......... 6.000 07/01/06 520,185
700,000 New York State Dormitory Authority MBIA.... 5.600 07/01/06 729,309
400,000 New York State Dormitory Authority
(State University of New York)........... 6.625 07/01/04 451,568
500,000 New York State Mortgage Agency............. 5.900 10/01/06 504,815
400,000 New York State Thruway Authority MBIA...... 6.000 01/01/04 430,716
----------
3,112,572
----------
Ohio -- 2.2%
250,000 Miami County, Ohio Hospital Facilities..... 5.600 05/15/02 252,323
----------
Pennsylvania -- 8.0%
400,000 Geisinger Authority, Pennsylvania Health
System.................................... 6.000 07/01/01 421,368
500,000 Monroeville, Pennsylvania Hospital Authority 5.750 10/01/05 510,175
----------
931,543
----------
</TABLE>
See accompanying notes to financial statements
55
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND (concluded)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
South Carolina -- 7.1%
$750,000 South Carolina State
Public Service Authority FGIC............ 6.500% 01/01/05 $829,680
----------
Texas -- 5.6%
500,000 Austin, Texas Airport Systems MBIA......... 6.500 11/15/05 553,935
100,000 Lubbock, Texas Health Facilities VR........ 5.000 01/02/97 100,000
----------
653,935
----------
Wyoming -- 1.7%
200,000 Uinta County, Wyoming Pollution Control VR. 5.000 01/02/97 200,000
----------
Total Investments -- 95.9%
(cost $10,832,716)....................... 11,178,589
Other assets in excess of liabilities-- 4.1%
473,862
----------
Net Assets-- 100.0%........................ $11,652,451
==========
</TABLE>
Abbreviations used in this statement:
AMBAC Insured as to principal and interest by the American Municipal Bond
Assurance Corporation. FGIC Insured as to principal and interest by the
Financial Guaranty Insurance Corporation.
GO General Obligation.
MBIA Insured as to principal and interest by the MBIA Insurance Corporation.
VR Variable Rate Demand Note. Maturity date shown is the date of next
interest rate change.
See accompanying notes to financial statements
56
<PAGE>
<PAGE>
SALOMON BROTHERS NEW YORK MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Principal Interest Maturity Value
Amount Description Rate Date (Note 1a)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Securities -- 97.1%
New York -- 93.9%
$150,000 Grand Central District Management
Association ............................. 5.250% 01/01/22 $ 139,556
150,000 Metropolitan Transportation Authority
New York FSA ............................ 5.700 07/01/24 149,586
200,000 Nassau County, New York GO FGIC............ 5.200 08/01/12 196,598
300,000 New York City, New York GO................. 7.375 08/15/13 332,643
300,000 New York City, New York GO................. 6.750 10/01/17 311,115
100,000 New York City, New York
Industrial Development Agency VR......... 5.050 01/02/97 100,000
300,000 New York City, New York
Municipal Water Finance Authority........ 6.000 06/15/17 304,122
150,000 New York State Dormitory Authority......... 6.250 07/01/13 152,709
150,000 New York State Dormitory Authority......... 5.875 08/01/16 151,684
150,000 New York State Dormitory Authority......... 5.500 07/01/25 140,984
150,000 New York State Dormitory Authority......... 5.500 05/15/23 138,629
100,000 New York State Dormitory Authority
(City University System of New York)..... 5.750 07/01/18 99,148
140,000 New York State Dormitory Authority
. (State University Educational Facilities). 6.000 05/15/17 138,690
200,000 New York State GO.......................... 6.000 03/15/20 208,738
200,000 New York State Energy Research &
Development Authority MBIA .............. 5.500 01/01/21 196,600
100,000 New York State Energy Research &
Development Authority VR ................ 4.400 01/02/97 100,000
100,000 New York State Energy Research &
Development Authority VR ................ 4.750 01/02/97 100,000
250,000 New York State
Local Government Assistance Corporation.. 6.000 04/01/18 254,230
100,000 New York State Medical Care Facilities
Finance Agency MBIA ..................... 5.900 02/15/21 101,969
200,000 New York State Mortgage Agency............. 6.500 04/01/13 209,574
150,000 New York State Thruway Authority........... 6.000 04/01/10 151,382
150,000 New York State
Urban Development Corporation............ 5.500 01/01/14 145,967
150,000 New York State
Urban Development Corporation............ 5.500 01/01/19 143,907
200,000 Port Authority of New York & New Jersey.... 5.500 09/01/13 198,690
150,000 Triborough Bridge & Tunnel Authority
New York ................................ 5.500 01/01/17 151,455
200,000 Western Nassau County, New York
Water Authority AMBAC.................... 5.500 05/01/16 198,106
----------
4,516,082
----------
Puerto Rico -- 3.2%
150,000 Commonwealth of Puerto Rico GO............. 6.000 07/01/14 152,168
----------
Total Investments -- 97.1%
(cost $4,560,814)........................ 4,668,250
Other assets in excess of liabilities-- 2.9% 138,141
----------
Net Assets-- 100.0%........................ $4,806,391
==========
</TABLE>
Abbreviations used in this statement:
AMBAC Insured as to principal and interest by the American Municipal Bond
Assurance Corporation.
FGIC Insured as to principal and interest by the Financial Guaranty Insurance
Corporation.
FSA Insured as to principal and interest by the Financial Security Assurance
Corporation.
GO General Obligation.
MBIA Insured as to principal and interest by the MBIA Insurance Corporation.
VR Variable Rate Demand Note. Maturity date shown is the date of next
interest rate change.
See accompanying notes to financial statements
57
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Securities -- 99.4%
New York -- 96.8%
$ 90,000 Albany County, New York
Industrial Development Agency VR......... 4.400% 01/02/97 $ 90,000
2,265,000 Albany, New York
Industrial Development Agency PUT........ 4.200 07/01/97 2,265,000
2,185,000 Amherst, New York
Industrial Development Agency VR......... 4.550 01/02/97 2,185,000
3,100,000 Amherst, New York
Industrial Development Agency PUT........ 3.650 05/01/97 3,100,000
1,550,000 Auburn, New York
Industrial Development Agency VR......... 4.550 01/01/97 1,550,000
725,000 Babylon, New York
Industrial Development Agency VR......... 4.550 01/02/97 725,000
1,700,000 Broome County, New York
Industrial Development Agency VR......... 4.400 01/02/97 1,700,000
1,300,000 Buffalo, New York GO RAN................... 3.600 07/15/97 1,304,430
2,100,000 Chautauqua County, New York
Industrial Development Agency VR......... 4.550 01/01/97 2,100,000
1,990,000 Chemung County, New York
Industrial Development Agency VR......... 4.400 01/02/97 1,990,000
710,000 Colonie, New York
Housing Development Corporation VR....... 3.650 01/01/97 710,000
540,000 Colonie, New York
Industrial Development Agency VR......... 4.400 01/02/97 540,000
1,000,000 Delhi, New York
Central School District BAN.............. 3.900 06/27/97 1,002,788
1,150,000 Dutchess County, New York
Industrial Development Agency VR......... 4.400 01/02/97 1,150,000
5,000,000 Erie County, New York GO RAN............... 3.600 11/19/97 5,027,644
1,180,000 Erie County, New York
Industrial Development Agency VR......... 4.400 01/02/97 1,180,000
410,000 Erie County, New York
Industrial Development Agency VR......... 4.400 01/02/97 410,000
326,000 Erie County, New York
Industrial Development Agency VR......... 4.400 01/02/97 326,000
300,000 Erie County, New York
Industrial Development Agency VR......... 4.400 01/02/97 300,000
1,805,000 Fulton County, New York
Industrial Development Agency VR......... 4.300 01/02/97 1,805,000
390,000 Geneva, New York
Industrial Development Authority VR...... 4.300 01/02/97 390,000
2,950,000 Islip, New York
Industrial Development Authority VR...... 4.400 01/02/97 2,950,000
1,690,000 Monroe County, New York
Industrial Development Agency PUT........ 3.700 06/01/97 1,690,000
700,000 Monroe County, New York
Industrial Development Agency PUT........ 4.050 06/15/97 700,000
2,700,000 Monroe County, New York
Industrial Development Agency VR......... 4.300 01/02/97 2,700,000
3,925,000 Monroe County, New York
Industrial Development Agency VR......... 4.400 01/02/97 3,925,000
</TABLE>
See accompanying notes to financial statements
58
<PAGE>
<PAGE>
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1,640,000 Monroe County, New York
Industrial Development Agency VR......... 4.400% 01/02/97 $1,640,000
6,500,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/01/97 6,500,000
3,325,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 3,325,000
3,140,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 3,140,000
2,190,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 2,190,000
1,535,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 1,535,000
1,420,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 1,420,000
885,000 Monroe County, New York
Industrial Development Agency VR......... 4.550 01/02/97 885,000
1,800,000 Monroe County, New York
Industrial Development Agency VR.......... 4.600 01/01/97 1,800,000
2,200,000 Municipal Assistance Corporation,
New York City, New York................... 3.800 07/01/97 2,202,845
2,000,000 Municipal Assistance Corporation,
New York City, New York................... 3.800 07/01/97 2,029,888
450,000 Nassau County, New York
Industrial Development Agency VR.......... 4.400 01/02/97 450,000
2,000,000 New York City, New York GO P/R............. 3.670 11/01/97 2,111,442
5,235,000 New York City, New York GO VR.............. 4.500 01/02/97 5,235,000
400,000 New York City, New York GO VR.............. 4.500 01/02/97 400,000
6,200,000 New York City, New York GO VR.............. 5.000 01/02/97 6,200,000
2,200,000 New York City, New York GO VR.............. 5.000 01/02/97 2,200,000
700,000 New York City, New York GO VR.............. 5.000 01/02/97 700,000
500,000 New York City, New York GO VR.............. 5.000 01/02/97 500,000
500,000 New York City, New York GO VR.............. 5.000 01/02/97 500,000
500,000 New York City, New York GO VR.............. 5.000 01/02/97 500,000
400,000 New York City, New York GO VR.............. 5.000 01/02/97 400,000
2,000,000 New York City, New York GO VR FGIC......... 4.500 01/02/97 2,000,000
10,000,000 New York City, New York
Housing Development Corporation VR........ 4.000 01/02/97 10,000,000
3,500,000 New York City, New York
Housing Development Corporation VR........ 4.250 01/02/97 3,500,000
15,200,000 New York City, New York
Housing Development Corporation VR........ 4.300 01/02/97 15,200,000
400,000 New York City, New York
Housing Development Corporation VR........ 4.300 01/02/97 400,000
2,000,000 New York City, New York
Housing Development Corporation VR........ 4.350 01/02/97 2,000,000
1,600,000 New York City, New York
Industrial Development Agency VR.......... 4.000 01/01/97 1,600,000
200,000 New York City, New York
Industrial Development Agency VR.......... 4.100 01/01/97 200,000
2,000,000 New York City, New York.
Industrial Development Agency VR.......... 4.200 01/02/97 2,000,000
965,000 New York City, New York
Industrial Development Agency VR.......... 4.300 01/02/97 965,000
See accompanying notes to financial statements
</TABLE>
59
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,535,000 New York City, New York
Industrial Development Agency VR........ 4.550% 01/02/97 $ 1,535,000
700,000 New York City, New York
Industrial Development Agency VR........ 4.550 01/02/97 700,000
500,000 New York City, New York
Industrial Development Agency VR........ 4.550 01/02/97 500,000
325,000 New York City, New York
Industrial Development Agency VR........ 4.700 01/02/97 325,000
1,600,000 New York City, New York
Industrial Development Agency VR........ 4.800 01/02/97 1,600,000
12,500,000 New York City, New York
Industrial Development Agency VR........ 5.050 01/02/97 12,500,000
2,205,000 New York City, New York
Municipal Water Finance Authority P/R.... 3.75-3.80 06/15/97 2,299,323
1,000,000 New York City, New York
Municipal Water Finance Authority TECP... 5.000 01/02/97 1,000,000
500,000 New York City, New York
Municipal Water Finance Authority VR FGIC 4.700 01/02/97 500,000
5,000,000 New York City, New York TECP.............. 5.000 01/02/97 5,000,000
9,259,000 New York State, Dormitory Authority TECP.. 4.000 02/12/97 9,259,000
2,500,000 New York State,
Dormitory Authority VR................... 4.000 01/02/97 2,500,000
10,500,000 New York State, Energy Research &
Development Authority VR ................ 4.700 01/01/97 10,500,000
3,400,000 New York State,
Energy Research & Development
Authority VR ............................ 4.750 01/01/97 3,400,000
1,020,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 1,020,000
820,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 820,000
675,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 675,000
535,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 535,000
315,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 315,000
85,000 New York State,
Job Development Authority VR............. 3.600 01/02/97 85,000
1,390,000 New York State,
Job Development Authority VR.............. 3.750 01/02/97 1,390,000
1,160,000 New York State,
Job Development Authority VR.............. 3.750 01/02/97 1,160,000
700,000 New York State,
Job Development Authority VR.............. 5.000 01/02/97 700,000
500,000 New York State,
Job Development Authority VR.............. 5.000 01/02/97 500,000
255,000 New York State,
Job Development Authority VR.............. 5.000 01/02/97 255,000
100,000 New York State,
Job Development Authority VR.............. 5.000 01/02/97 100,000
4,700,000 New York State,
Local Government Assistance
Corporation VR ........................... 4.000 01/01/97 4,700,000
</TABLE>
See accompanying notes to financial statements
60
<PAGE>
<PAGE>
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 2,700,000 New York State, Local
Government Assistance Corporation VR .... 4.000% 01/01/97 $ 2,700,000
2,000,000 New York State, Local Government
Assistance Corporation VR ............... 4.000 01/01/97 2,000,000
1,400,000 New York State, Local Government
Assistance Corporation VR ............... 4.000 01/02/97 1,400,000
2,000,000 New York State,
Medical Care Facilities P/R.............. 3.800 08/15/97 2,099,948
5,000,000 Niagara County, New York
Industrial Development Agency TECP....... 3.750 01/08/97 5,000,000
3,400,000 Niagara County, New York
Industrial Development Agency TECP....... 3.900 01/10/97 3,400,000
16,000,000 Niagara County, New York
Industrial Development Agency TECP....... 3.900 02/05/97 16,000,000
10,000,000 Niagara County, New York
Industrial Development Agency VR......... 4.450 01/01/97 10,000,000
1,045,000 Niagara County, New York
Industrial Development Agency VR......... 4.550 01/02/97 1,045,000
400,000 Oneida County, New York
Industrial Development Agency VR......... 4.250 01/02/97 400,000
1,760,000 Oneida County, New York
Industrial Development Agency VR......... 4.550 01/02/97 1,760,000
3,800,000 Onondaga County, New York
Industrial Development Agency VR......... 4.500 01/01/97 3,800,000
1,400,000 Onondaga County, New York
Industrial Development Agency VR......... 4.500 01/01/97 1,400,000
3,500,000 Ontario County, New York
Industrial Development Agency VR......... 5.000 01/02/97 3,500,000
1,000,000 Port Authority of New York & New
Jersey VR. .............................. 4.850 01/02/97 1,000,000
1,500,000 Rockland County, New York
Industrial Development Agency VR......... 4.550 01/02/97 1,500,000
260,000 Schoharie County, New York
Industrial Development Agency VR......... 4.250 01/02/97 260,000
2,500,000 St. Lawrence County, New York
Industrial Development Agency VR......... 4.550 01/02/97 2,500,000
1,450,000 Syracuse, New York
Industrial Development Agency PUT........ 4.050 06/15/97 1,450,000
3,550,000 Syracuse, New York
Industrial Development Agency VR......... 4.600 01/01/97 3,550,000
1,000,000 Triborough Bridge & Tunnel
Authority New York ...................... 3.700 01/01/97 1,000,000
1,460,000 Warren & Washington Counties, New York
Industrial Development Agency VR......... 4.300 01/02/97 1,460,000
310,000 Wyoming County, New York
Industrial Development Agency VR......... 4.400 01/02/97 310,000
6,330,000 Wyoming County, New York
Industrial Development Agency VR......... 4.550 01/02/97 6,330,000
1,315,000 Yates County, New York
Industrial Development Agency VR......... 4.300 01/02/97 1,315,000
920,000 Yonkers, New York
Industrial Development Agency VR......... 4.400 01/02/97 920,000
-----------
265,518,308
-----------
</TABLE>
See accompanying notes to financial statements
61
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (concluded)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Puerto Rico -- 2.6%
$7,100,000 Puerto Rico Industrial,
Tourist, Educational, Medical
& Environmental Control
Facilities VR .................... 4.100% 01/01/97 $ 7,100,000
------------
Total Investments -- 99.4%
(cost $272,618,308)............... 272,618,308
Other assets in excess
of liabilities-- 0.6% ............ 1,525,727
------------
Net Assets-- 100%.................. $274,144,035
============
</TABLE>
* Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR) and Put Bonds, whose yields are determined on date of
the last interest rate change. For Variable Rate Demand Notes and Put Bonds,
maturity date shown is the date of next interest rate change.
Abbreviations used in this statement:
BAN Bond Anticipation Note.
FGIC Insured as to principal and interest by the Financial Guaranty
Insurance Corporation.
GO General Obligation.
P/R Prerefunded in U.S. Government Securities.
PUT Optional or mandatory put. Maturity date shown is the put date as
well as the date of the next interest rate change.
RAN Revenue Anticipation Note.
TECP Tax Exempt Commercial Paper.
See accompanying notes to financial statements
62
<PAGE>
<PAGE>
SALOMON BROTHERS CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Certificates of Deposit -- 9.3%
Banks -- 9.3%
$1,000,000 Bank Austria............................................ 5.380% 01/21/97 $1,000,005
1,000,000 Mellon Bank N.A......................................... 5.750 02/18/97 1,000,126
500,000 Rabobank................................................ 5.530 02/10/97 500,000
----------
Total Certificates of Deposit
(cost $2,500,131)..................................... 2,500,131
----------
Commercial Paper -- 58.5%
Aerospace & Defense -- 3.7%
1,000,000 AlliedSignal............................................ 5.600 01/27/97 995,956
----------
Banks -- 14.7%
800,000 ANZ Delaware............................................ 5.280 05/12/97 784,628
800,000 BBL North America....................................... 5.340 01/07/97 799,288
570,000 Commerzbank U.S. Finance................................ 5.350 01/31/97 567,459
800,000 Nordbanken N.A.......................................... 5.380 02/28/97 793,066
1,000,000 UBS Finance............................................. 5.550 01/21/97 996,917
----------
3,941,358
----------
Chemicals -- 3.7%
1,000,000 Air Products & Chemicals................................ 5.400 03/28/97 987,100
----------
Communications -- 3.7%
1,000,000 Lucent Technologies..................................... 5.370 04/07/97 985,680
----------
Education -- 3.0%
800,000 Regents of the University of California................. 5.330 01/17/97 798,105
----------
Financial Services -- 6.6%
1,000,000 General Electric Capital................................ 5.340 06/23/97 974,338
800,000 Metlife Funding......................................... 5.300 01/27/97 796,938
----------
1,771,276
----------
Food -- 3.0%
800,000 Heinz (H.J.)............................................ 5.400 01/22/97 797,480
----------
Heavy Machinery -- 3.0%
800,000 Cooperative Association of Tractor Dealers.............. 5.550 01/23/97 797,287
----------
Household Products -- 3.7%
1,000,000 Clorox.................................................. 5.350 04/22/97 983,504
----------
Municipal -- 4.5%
400,000 De Kalb County, Georgia Development Authority........... 5.500 02/04/97 400,000
400,000 Methodist Hospital (Houston, Texas)..................... 5.450 04/01/97 400,000
400,000 New York City, New York GO.............................. 5.550 02/19/97 400,000
----------
1,200,000
----------
Office Equipment -- 3.0%
800,000 Xerox................................................... 5.300 01/14/97 798,469
----------
Securities Brokers -- 2.9%
800,000 Goldman Sachs Group..................................... 5.340 02/14/97 794,779
----------
</TABLE>
See accompanying notes to financial statements
63
<PAGE>
<PAGE>
Portfolio of Investments (continued)
SALOMON BROTHERS CASH MANAGEMENT FUND (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Transportation -- 3.0%
$800,000 Daimler-Benz NA.......................................... 5.320% 01/13/97 $ 798,581
----------
Total Commercial Paper
(cost $15,649,575)..................................... 15,649,575
----------
Floating Rate Notes -- 17.3%
California -- 1.5%
400,000 Pasadena, California Certificates of Participation VR ... 5.800 01/07/97 400,000
----------
Florida -- 1.5%
400,000 Florida Housing Finance Agency VR........................ 5.880 01/01/97 400,000
----------
Michigan -- 0.7%
200,000 Genesis Health Systems VR................................ 5.950 01/01/97 200,000
----------
New Jersey -- 1.9%
285,000 New Jersey Economic Development Authority VR ............ 6.230 01/06/97 285,000
230,000 New Jersey Economic Development Authority VR ............ 6.110 01/06/97 230,000
----------
515,000
----------
New York -- 5.8%
390,000 Fulton County, New York Industrial Development Agency VR.. 6.050 01/02/97 390,000
400,000 Health Insurance Plan, Greater New York VR. 5.800 01/01/97 400,000
350,000 New York City, New York Industrial Development Agency VR . 6.000 01/01/97 350,000
100,000 New York City, New York Industrial Development Agency VR . 6.000 01/01/97 100,000
300,000 Syracuse, New York GO VR.................................. 6.200 01/01/97 300,000
----------
1,540,000
----------
North Carolina -- 1.5%
390,000 Greensboro, North Carolina GO VR.......................... 5.950 01/01/97 390,000
----------
Tennessee -- 1.5%
400,000 Community Health Systems VR............................... 5.900 01/01/97 400,000
----------
Texas -- 1.4%
375,000 Texas State GO VR......................................... 5.880 01/01/97 375,000
----------
Virginia -- 1.5%
400,000 Virginia State, Housing Development Authority VR ......... 5.800 01/01/97 400,000
----------
Total Floating Rate Notes
(cost $4,620,000)....................................... 4,620,000
----------
Total Investments -- 85.1%
(cost $22,769,706)...................................... 22,769,706
----------
</TABLE>
See accompanying notes to financial statements
64
<PAGE>
<PAGE>
SALOMON BROTHERS CASH MANAGEMENT FUND (concluded)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Yield to
Principal Maturity on Date Maturity Value
Amount Description of Purchase* Date (Note 1a)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Repurchase Agreements -- 14.6%
$1,947,134 Repurchase Agreement dated
12/31/96 with J.P.
Morgan Securities, collateralized by $1,962,000
U.S. Treasury Bonds, 6.375%, due 05/15/99
valued at $1,996,335; proceeds: $1,947,848 .......... 6.600% 01/02/97 $ 1,947,134
1,947,134 Repurchase Agreement dated 12/31/96 with
UBS Securities, collateralized by $1,554,000
U.S. Treasury Bonds, 8.875%, due 02/15/19
valued at $1,987,178; proceeds: $1,947,837 .......... 6.500 01/02/97 1,947,134
----------
Total Repurchase Agreements
(cost $3,894,268)..................................... 3,894,268
----------
Other assets in excess of liabilities -- 0.3% 91,407
----------
Net Assets-- 100.0% ................................... $26,755,381
==========
</TABLE>
* Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR), whose yields are determined on date of last interest
rate change. For Variable Rate Demand Notes, maturity date shown is the
date of next interest rate change.
Abbreviations used in this statement:
GO General Obligation.
See accompanying notes to financial statements
65
<PAGE>
<PAGE>
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
Asia Capital Investors
Growth Fund Fund Fund
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note A) ............................. $ 6,871,444 $ 133,094,625 $ 519,461,315
Repurchase agreements, at value and cost ................... -- 3,667,000 21,222,000
Cash (including foreign currency) .......................... 353,589 969 737
Receivable for securities sold ............................. -- 771,904 --
Receivable for Fund shares sold ............................ 39,181 514,657 396,076
Interest and dividends receivable .......................... 4,079 204,143 600,215
Receivable from investment advisor ......................... 132,687 -- --
Deferred organization expense .............................. 86,584 -- --
------------- ------------- -------------
Total assets ............................................... 7,487,564 138,253,298 541,680,343
------------- ------------- -------------
LIABILITIES:
Payable for:
Securities purchased ..................................... 72,323 1,382,706 --
Fund shares redeemed ..................................... 11 5,605 29,995
Dividends and distributions declared ..................... 92,494 -- --
Affiliate transactions: .................................. -- -- --
Management fees ........................................ -- 106,287 688,509
Service and distribution fees .......................... 9,880 258 25,178
Net unrealized depreciation of forward foreign currency
contracts ................................................ -- -- --
Accrued expenses and other liabilities ..................... 87,488 123,072 278,835
------------- ------------- -------------
Total liabilities .......................................... 262,196 1,617,928 1,022,517
------------- ------------- -------------
Net assets ................................................. $ 7,225,368 $ 136,635,370 $ 540,657,826
============= ============= =============
Net assets consist of:
Paid-in capital ............................................ $ 6,960,358 $ 112,317,524 $ 363,551,636
Undistributed net investment income or (distributions in
excess of net investment income) ......................... 10,809 (333) 2,113
Accumulated net realized gain (loss) on investments,
options and foreign currency transactions ................ 201,064 2,575,978 5,869,408
Net unrealized appreciation on investments, foreign
currency transactions and other assets ................... 53,137 21,742,201 171,234,669
------------- ------------- -------------
Net assets ................................................. $ 7,225,368 $ 136,635,370 $ 540,657,826
============= ============= =============
Class A .................................................... $ 3,693,002 $ 343,683 $ 10,904,980
============= ============= =============
Class B .................................................... $ 3,162,606 $ 218,901 $ 9,433,023
============= ============= =============
Class C .................................................... $ 246,067 $ 130,007 $ 1,958,792
============= ============= =============
Class O .................................................... $ 123,693 $ 135,942,779 $ 518,361,031
============= ============= =============
Shares outstanding:
Class A .................................................... 357,945 17,288 577,173
============= ============= =============
Class B .................................................... 306,685 11,001 500,214
============= ============= =============
Class C .................................................... 23,879 6,531 103,835
============= ============= =============
Class O .................................................... 11,983 6,839,481 27,430,775
============= ============= =============
Net asset value:
Class A shares
Net asset value and redemption price per share ............. $ 10.32 $ 19.88 $ 18.89
============= ============= =============
Maximum offering price per share (based on maximum sales
charge of 4.75%, except Cash Management Fund and New
York Municipal Money Fund)................................ $ 10.83 $ 20.87 $ 19.83
============= ============= =============
Class B shares
Net asset value and offering price per share*............... $ 10.31 $ 19.90 $ 18.86
============= ============= =============
Class C shares
Net asset value and offering price per share*............... $ 10.30 $ 19.91 $ 18.86
============= ============= =============
Class O shares
Net asset value, offering price and redemption price per
share..................................................... $ 10.32 $ 19.88 $ 18.90
============= ============= =============
Note A: Cost of investments................................. $ 6,818,252 $ 111,352,396 $ 348,226,449
============= ============= =============
</TABLE>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes to financial statements
66
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
U.S. National New York New York Cash
Total High Yield Strategic Government Intermediate Municipal Municipal Management
Return Fund Bond Fund Bond Fund Income Fund Municipal Fund Bond Fund Money Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 47,361,853 $ 178,732,851 $ 29,188,307 $ 11,237,336 $ 11,178,589 $ 4,668,250 $ 272,618,308 $ 22,769,706
4,996,000 19,870,000 6,893,000 2,312,000 -- -- -- 3,894,268
103 40 959 451 80,247 30,738 83,818 --
22,540 2,974,633 1,265,920 503,393 -- -- -- --
517,104 2,757,082 544,013 40 106,079 -- 752,568 111,727
418,702 3,301,417 384,866 103,414 206,205 90,029 1,195,185 67,372
102,651 -- -- 85,462 83,959 25,063 -- 13,646
70,680 92,615 92,944 76,025 73,438 13,855 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
53,489,633 207,728,638 38,370,009 14,318,121 11,728,517 4,827,935 274,649,879 26,856,719
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
492,280 19,052,322 7,016,787 1,983,715 -- -- -- --
11,027 49,719 55,939 10 -- -- 238,521 42,403
26,957 1,011,711 196,961 69,780 65,933 7,296 11,529 41,058
-- -- -- -- -- -- -- --
-- 374,129 1,835 -- -- -- 49,967 --
78,250 265,252 39,302 4,361 2,937 2,510 -- --
-- -- 12,954 -- -- -- -- --
72,368 77,216 18,785 9,838 7,196 11,738 205,827 17,877
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
680,882 20,830,349 7,342,563 2,067,704 76,066 21,544 505,844 101,338
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 52,808,751 $ 186,898,289 $ 31,027,446 $ 12,250,417 $ 11,652,451 $ 4,806,391 $ 274,144,035 $ 26,755,381
============= ============= ============= ============= ============= ============= ============= =============
$ 48,297,802 $ 179,492,801 $ 30,045,780 $ 12,197,017 $ 11,296,354 $ 5,311,298 $ 274,368,811 $ 26,757,505
33,205 -- (9,936) -- 1,574 4,786 -- --
139,592 159,677 27,427 5,781 8,650 (617,129) (224,776) (2,124)
4,338,152 7,245,811 964,175 47,619 345,873 107,436 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 52,808,751 $ 186,898,289 $ 31,027,446 $ 12,250,417 $ 11,652,451 $ 4,806,391 $ 274,144,035 $ 26,755,381
============= ============= ============= ============= ============= ============= ============= =============
$ 21,108,539 $ 65,934,945 $ 8,344,667 $ 1,187,796 $ 696,228 $ 792,077 $ 359,918 $ 8,175,114
============= ============= ============= ============= ============= ============= ============= =============
$ 28,042,598 $ 106,796,993 $ 14,290,631 $ 1,266,160 $ 702,385 $ 539,449 $ 25,000 $ 3,920,077
============= ============= ============= ============= ============= ============= ============= =============
$ 3,444,600 $ 13,773,078 $ 4,574,873 $ 421,662 $ 467,863 $ 281,799 $ 25,000 $ 434,883
============= ============= ============= ============= ============= ============= ============= =============
$ 213,014 $ 393,273 $ 3,817,275 $ 9,374,799 $ 9,785,975 $ 3,193,066 $ 273,734,117 $ 14,225,307
============= ============= ============= ============= ============= ============= ============= =============
1,785,577 5,712,605 770,669 118,004 67,273 79,813 359,913 8,175,118
============= ============= ============= ============= ============= ============= ============= =============
2,373,141 9,266,321 1,321,002 125,880 67,998 54,372 25,000 3,920,078
============= ============= ============= ============= ============= ============= ============= =============
290,767 1,195,228 422,727 41,966 45,282 28,400 25,000 434,883
============= ============= ============= ============= ============= ============= ============= =============
17,932 34,107 352,949 932,104 946,252 321,703 273,959,755 14,227,426
============= ============= ============= ============= ============= ============= ============= =============
$ 11.82 $ 11.54 $ 10.83 $ 10.07 $ 10.35 $ 9.92 $ 1.00 $ 1.00
============= ============= ============= ============= ============= ============= ============= =============
$ 12.41 $ 12.12 $ 11.37 $ 10.57 $ 10.87 $ 10.41 $ 1.00 $ 1.00
============= ============= ============= ============= ============= ============= ============= =============
$ 11.82 $ 11.53 $ 10.82 $ 10.06 $ 10.33 $ 9.92 $ 1.00 $ 1.00
============= ============= ============= ============= ============= ============= ============= =============
$ 11.85 $ 11.52 $ 10.82 $ 10.05 $ 10.33 $ 9.92 $ 1.00 $ 1.00
============= ============= ============= ============= ============= ============= ============= =============
$ 11.88 $ 11.53 $ 10.82 $ 10.06 $ 10.34 $ 9.93 $ 1.00 $ 1.00
============= ============= ============= ============= ============= ============= ============= =============
$ 43,025,382 $ 171,455,951 $ 28,211,195 $ 11,189,717 $ 10,832,716 $ 4,560,814 $ 272,618,308 $ 22,769,706
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
67
<PAGE>
<PAGE>
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Asia
Growth Capital Investors
Fund* Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Interest ............................................................... $ 18,814 $ 514,027 $ 1,523,972
Dividends (Note A) ..................................................... 64,177 1,913,899 8,551,401
--------- ----------- ------------
82,991 2,427,926 10,075,373
Expenses:
Management fee ......................................................... 30,723 1,143,084 2,455,501
Registration and filing fees ........................................... 2,450 40,000 40,001
Custody and administration fees ........................................ 126,686 62,524 68,889
Legal .................................................................. 1,267 130,000 89,999
Printing ............................................................... 5,798 38,500 285,001
Shareholder services ................................................... 14,500 45,000 393,000
Amortization of organization expenses .................................. 13,416 -- --
Audit and tax return preparation fees .................................. 3,356 77,000 86,001
Directors' fees and expenses ........................................... 1,951 67,725 77,998
Other .................................................................. 1,500 31,000 110,000
--------- ----------- ------------
201,647 1,634,833 3,606,390
Management fee waived and expenses absorbed by investment advisor ...... (163,410) -- --
Credits earned from custodian on cash balances ......................... (219) (69) (242)
--------- ----------- ------------
38,018 1,634,764 3,606,148
Distribution and service fees:
Class A Shares ......................................................... 4,842 45 9,375
Class B Shares ......................................................... 17,196 105 28,496
Class C Shares ......................................................... 1,125 108 7,296
--------- ----------- ------------
Net expenses ........................................................... 61,181 1,635,022 3,651,315
--------- ----------- ------------
Net investment income .................................................. 21,810 792,904 6,424,058
========= =========== ============
Realized and unrealized gain (loss): Net realized gain (loss) on:
Investments (Note B) ................................................... 319,467 22,843,163 52,051,879
Options written ........................................................ 319 19,754 --
Foreign currency transactions .......................................... (5,493) (165) (36)
--------- ----------- ------------
314,293 22,862,752 52,051,843
--------- ----------- ------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................ 53,192 10,601,638 70,016,706
Foreign currency transactions and other assets ......................... (55) (28) (197)
--------- ----------- ------------
53,137 10,601,610 70,016,509
--------- ----------- ------------
Net realized and unrealized gain (loss) ................................ 367,430 33,464,362 122,068,352
--------- ----------- ------------
Net increase in net assets from operations ............................. $ 389,240 $34,257,266 $128,492,410
========= =========== ============
Note A: Net of foreign withholding tax of: ............................. $ 6,183 $ 29,513 $ 158,622
========= =========== ============
Note B: Net of foreign withholding tax of: ............................. $ 2,237 $ -- $ --
========= =========== ============
</TABLE>
* Fund's commencement of investment operations was May 6, 1996.
See accompanying notes to financial statements
68
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
U.S. National New York New York Cash
Total High Yield Strategic Government Intermediate Municipal Municipal Management
Return Fund Bond Fund Bond Fund Income Fund Municipal Fund Bond Fund Money Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$1,325,501 $ 7,951,108 $1,847,036 $ 680,165 $ 604,683 $239,208 $7,434,967 $1,014,725
539,726 -- -- -- -- -- -- --
---------- ----------- ---------- --------- --------- -------- ---------- ----------
1,865,227 7,951,108 1,847,036 680,165 604,683 239,208 7,434,967 1,014,725
184,118 565,248 146,387 66,682 56,186 21,043 393,078 36,898
37,968 69,000 27,234 27,000 27,000 7,002 2,500 35,001
65,358 88,500 43,029 26,573 19,554 11,315 236,311 33,909
17,301 3,899 333 -- -- -- 53,700 3,602
17,601 26,502 10,300 6,300 5,100 -- 87,000 7,901
75,000 86,000 52,500 49,000 49,000 2,900 110,001 12,600
19,175 29,894 29,998 24,603 23,780 14,040 -- --
24,401 50,000 14,500 7,000 7,000 3,500 130,001 12,701
1,739 1,903 1,929 1,929 1,929 2,430 2,811 2,811
11,532 17,000 12,000 9,800 9,100 7,000 32,737 6,601
---------- ----------- ---------- --------- --------- -------- ---------- ----------
454,193 937,946 338,210 218,887 198,649 69,230 1,048,139 152,024
(286,769) (191,119) (144,551) (152,144) (140,145) (46,106) -- (50,544)
(44) (700) (429) (61) (2,317) (2,080) (2,477) (9)
---------- ----------- ---------- --------- --------- -------- ---------- ----------
167,380 746,127 193,230 66,682 56,187 21,044 1,045,662 101,471
31,644 72,432 7,229 1,712 1,550 1,659 -- --
147,557 404,316 63,712 7,971 5,978 5,193 -- --
19,472 45,496 15,131 2,780 3,418 2,715 -- --
---------- ----------- ---------- --------- --------- -------- ---------- ----------
366,053 1,268,371 279,302 79,145 67,133 30,611 1,045,662 101,471
---------- ----------- ---------- --------- --------- -------- ---------- ----------
1,499,174 6,682,737 1,567,734 601,020 537,550 208,597 6,389,305 913,254
========== =========== ========== ========= ========= ======== ========== ==========
540,093 1,779,535 467,146 88,860 23,657 6,816 2,563 (10)
(4) -- 83,360 -- -- -- -- --
---------- ----------- ---------- --------- --------- -------- ---------- ----------
540,089 1,779,535 550,506 88,860 23,657 6,816 2,563 (10)
---------- ----------- ---------- --------- --------- -------- ---------- ----------
3,888,005 6,815,932 410,629 (277,785) (78,007) (43,124) -- --
-- (18,249) 3,258 -- -- -- -- --
---------- ----------- ---------- --------- --------- -------- ---------- ----------
3,888,005 6,797,683 413,887 (277,785) (78,007) (43,124) -- --
---------- ----------- ---------- --------- --------- -------- ---------- ----------
4,428,094 8,577,218 964,393 (188,925) (54,350) (36,308) 2,563 (10)
$5,927,268 $15,259,955 $2,532,127 $ 412,095 $ 483,200 $172,289 $6,391,868 $ 913,244
========== =========== ========== ========= ========= ======== ========== ==========
$ 5,576 $ -- $ -- $ -- $ -- $ -- $ -- $ --
========== =========== ========== ========= ========= ======== ========== ==========
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
========== =========== ========== ========= ========= ======== ========== ==========
</TABLE>
69
<PAGE>
<PAGE>
Statements of Changes in Net Assets
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Asia
Growth Capital Investors
Fund* Fund Fund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ......................................... $ 21,810 $ 792,904 $ 6,424,058
Net realized gain (loss) on investments, options, and
foreign currency transactions ................................. 314,293 22,862,752 52,051,843
Net change in unrealized appreciation (depreciation) on
investments, options, foreign currency transactions
and other assets .............................................. 53,137 10,601,610 70,016,509
------------- ------------- -------------
Net increase in net assets from operations .................... 389,240 34,257,266 128,492,410
------------- ------------- -------------
Dividends and distributions to shareholders:
Dividends from net investment income:
Class A ..................................................... (16,828) (233) (52,117)
Class B ..................................................... (1,406) (120) (15,140)
Class C ..................................................... (329) (120) (3,893)
Class O ..................................................... (728) (797,069) (6,351,142)
------------- ------------- -------------
(19,291) (797,542) (6,422,292)
------------- ------------- -------------
Dividends in excess of net investment income:
Class A ..................................................... -- -- --
Class B ..................................................... -- -- --
Class C ..................................................... -- -- --
Class O ..................................................... -- -- --
------------- ------------- -------------
-- -- --
------------- ------------- -------------
Distributions from net realized gains:
Class A ..................................................... (53,543) (6,217) (766,906)
Class B ..................................................... (46,007) (3,992) (609,635)
Class C ..................................................... (3,591) (3,992) (111,830)
Class O ..................................................... (1,798) (25,587,085) (59,558,730)
------------- ------------- -------------
(104,939) (25,601,286) (61,047,101)
------------- ------------- -------------
Net fund capital share transactions:
Class A ..................................................... 3,549,887 342,420 10,214,466
Class B ..................................................... 3,050,781 218,589 8,511,239
Class C ..................................................... 237,212 130,425 1,554,480
Class O ..................................................... 117,478 25,656,871 28,941,018
------------- ------------- -------------
Net increase in net assets derived from share transactions . 6,955,358 26,348,305 49,221,203
------------- ------------- -------------
Net increase in net assets ...................................... 7,220,368 34,206,743 110,244,220
Net assets:
Beginning of period ........................................... 5,000 102,428,627 430,413,606
------------- ------------- -------------
End of period (a) ............................................. $ 7,225,368 $ 136,635,370 $ 540,657,826
============= ============= =============
(a) Including undistributed net investment income or
distributions in excess of net investment income of: ........ $ 2,519 $ (111,168) $ 1,766
============= ============= =============
</TABLE>
* Fund's commencement of investment operations was May 6, 1996.
See accompanying notes to financial statements
70
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
U.S. National New York New York Cash
Total High Yield Strategic Government Intermediate Municipal Municipal Management
Return Fund Bond Fund Bond Fund Income Fund Municipal Fund Bond Fund Money Fund Fund
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1,499,174 $ 6,682,737 $ 1,567,734 $ 601,020 $ 537,550 $ 208,597 $ 6,389,305 $ 913,254
540,089 1,779,535 550,506 88,860 23,657 6,816 2,563 (10)
3,888,005 6,797,683 413,887 (277,785) (78,007) (43,124) -- --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
5,927,268 15,259,955 2,532,127 412,095 483,200 172,289 6,391,868 913,244
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
(608,681) (2,693,853) (223,497) (35,750) (28,388) (32,335) (802) (264,829)
(585,187) (3,488,256) (463,295) (35,916) (23,706) (21,617) (142) (137,835)
(76,316) (390,999) (103,804) (12,551) (13,552) (11,310) (142) (13,718)
(195,785) (138,093) (812,077) (516,803) (474,259) (141,908) (6,388,219) (496,872)
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
(1,465,969) (6,711,201) (1,602,673) (601,020) (539,905) (207,170) (6,388,219) (913,254)
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
-- -- (1,487) -- -- -- -- --
-- -- (3,010) -- -- -- -- --
-- -- (706) -- -- -- -- --
-- -- (4,733) -- -- -- -- --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
-- -- (9,936) -- -- -- -- --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
(152,704) (611,200) (125,860) (4,728) (1,449) -- -- --
(203,017) (942,499) (218,299) (5,771) (1,467) -- -- --
(25,301) (118,077) (67,806) (2,179) (976) -- -- --
(28,599) (10,856) (58,871) (65,419) (20,439) -- -- --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
(409,621) (1,682,632) (470,836) (78,097) (24,331) -- -- --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
15,969,336 52,531,457 7,803,194 914,633 131,024 252,823 359,913 6,419,571
20,798,943 93,129,376 12,296,600 707,635 271,514 21,121 25,000 1,681,592
2,758,002 12,100,036 4,143,135 157,310 198,788 20,592 25,000 252,342
(4,743,447) (7,754,436) (6,230,578) 62,922 185,121 712,785 47,182,964 7,541,082
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
34,782,834 150,006,433 18,012,351 1,842,500 786,447 1,007,321 47,592,877 15,894,587
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
38,834,512 156,872,555 18,461,033 1,575,478 705,411 972,440 47,595,440 15,894,577
13,974,239 30,025,734 12,566,413 10,674,939 10,947,040 3,833,951 226,548,595 10,860,804
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
$ 52,808,751 $186,898,289 $31,027,446 $12,250,417 $11,652,451 $4,806,391 $274,144,035 $26,755,381
============ ============ =========== =========== =========== ========== ============ ===========
$ 33,205 $ (395,860) $ (212,591) $ (61,032) $ 1,574 $ 4,786 $ -- $ --
- ------------ ------------ ----------- ----------- ----------- ---------- ------------ -----------
</TABLE>
See accompanying notes to financial statements
71
<PAGE>
<PAGE>
Statements of Changes in Net Assets
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Asia
Growth Capital Investors
Fund(a) Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income........................................... $ -- $ 702,996 $ 6,537,153
Net realized gain (loss) on investments, options, and foreign
curency transactions.......................................... -- 20,581,764 49,873,168
Net change in unrealized appreciation (depreciation) on
investments, options, foreign currency transactions and
other assets................................................... -- 7,415,877 62,151,251
----------- ---------- --------------
Net increase in net assets from operations...................... -- 28,700,637 118,561,572
----------- ---------- --------------
Dividends and distributions to shareholders:
Dividends from net investment income:
Class A........................................................ -- -- (4,087)
Class B........................................................ -- -- (2,179)
Class C........................................................ -- -- (1,577)
Class O........................................................ -- (698,526) (6,529,373)
----------- ----------- --------------
-- (698,526) (6,537,216)
----------- ------------- --------------
Distributions from net realized gains:
Class A........................................................ -- -- (37,569)
Class B........................................................ -- -- (61,264)
Class C........................................................ -- -- (26,879)
Class O........................................................ -- (11,082,177) (36,419,464)
----------- ------------- --------------
-- (11,082,177) (36,545,176)
----------- ------------- --------------
Distributions in excess of net realized gains:
Class A........................................................ -- -- --
Class B........................................................ -- -- --
Class C........................................................ -- -- --
Class O........................................................ -- -- --
----------- ------------- -------------
-- -- --
----------- ------------- -------------
Net fund capital share transactions:
Class A........................................................ -- -- 396,175
Class B........................................................ -- -- 675,659
Class C........................................................ -- -- 264,858
Class O........................................................ -- (1,195,665) 5,383,498
----------- -------------- -------------
Net increase (decrease) in net assets derived from share
transactions.................................................. -- (1,195,665) 6,720,190
----------- -------------- -------------
Net increase (decrease) in net assets............................ -- 15,724,269 82,199,370
Net assets:
Beginning of period............................................ -- 86,704,358 348,214,236
----------- -------------- -------------
End of period *................................................ -- $102,428,627 $430,413,606
=========== =============== =============
* Including undistributed net investment income or
distributions in excess of net investment income of: $ -- $ 4,470 $ --
========== ================ =============
</TABLE>
(a) Fund's commencement of investment operations was May 6, 1996.
(b) Fund's commencement of investment operations was September 11, 1995.
(c) Fund's commencement of investment operations was February 22, 1995.
See accompanying notes to financial statements
72
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
U.S. National New York New York Cash
Total High Yield Strategic Government Intermediate Municipal Municipal Management
Return Fund(b) Bond Fund(c) Bond Fund(c) Income Fund(c) Municipal Fund(c) Bond Fund Money Fund Fund
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 132,091 $ 1,503,286 $ 912,394 $ 517,510 $ 430,514 $ 202,366 $ 8,261,332 $ 695,618
24,049 472,003 278,481 110,378 39,589 (65,526) 27,905 --
450,147 448,128 550,288 325,404 423,880 481,771 -- --
- ------------ ------------- ------------- ------------- --------------- -------------- ------------- ------------
606,287 2,423,417 1,741,163 953,292 893,983 618,611 8,289,237 695,618
- ------------ ------------- ------------- ------------- --------------- -------------- ------------- ------------
(35,724) (428,959) (30,591) (12,734) (17,376) (11,538) -- (40,161)
(47,121) (212,975) (59,198) (16,038) (11,207) (12,739) -- (26,516)
(3,465) (42,228) (23,725) (10,967) (8,442) (9,206) -- (2,693)
(45,781) (790,660) (804,713) (477,771) (389,560) (165,524) (8,261,332) (626,248)
- ------------ ------------ ------------- -------------- --------------- -------------- ------------ ------------
(132,091) (1,474,822) (918,227) (517,510) (426,585) (199,007) (8,261,332) (695,618)
- ------------ ------------ ------------- -------------- --------------- -------------- ------------ ------------
(3,900) (146,101) (11,724) (2,801) (1,569) -- -- --
5,711) (137,393) (42,853) (4,374) (1,193) -- -- --
(469) (17,451) (9,338) (2,795) (749) -- -- --
(4,845) (108,284) (226,037) (100,408) (26,754) -- -- --
- ------------ -------------- ------------- -------------- --------------- -------------- ----------- ------------
(14,925) (409,229) (289,952) (110,378) (30,265) -- -- --
- ----------- -------------- ------------- -------------- --------------- -------------- ----------- ------------
-- -- -- (216) -- -- -- --
-- -- -- (1,765) -- -- -- --
-- -- -- (174) -- -- -- --
-- -- -- (2,827) -- -- -- --
- ----------- -------------- ------------ -------------- -------------- -------------- ----------- ------------
-- -- -- (4,982) -- -- -- --
- ----------- -------------- ------------ -------------- -------------- -------------- ----------- ------------
3,580,176 10,746,292 498,371 269,838 551,191 528,982 -- 1,755,547
5,255,708 10,103,804 1,866,229 561,475 417,842 504,427 -- 2,238,486
424,084 1,264,713 397,920 265,054 260,067 250,059 -- 182,541
4,250,000 7,371,479 9,270,829 9,258,070 9,280,727 (1,202,551) (43,267,305) (12,442,586)
- ----------- -------------- ------------ -------------- -------------- -------------- ----------- -----------
13,509,968 29,486,288 12,033,349 10,354,437 10,509,827 80,917 (43,267,305) (8,266,012)
- ----------- -------------- ------------ -------------- -------------- -------------- ----------- -----------
13,969,239 30,025,654 12,566,333 10,674,859 10,946,960 500,521 (43,239,400) (8,266,012)
5,000 80 80 80 80 3,333,430 269,787,995 19,126,816
- ----------- -------------- ------------- -------------- -------------- -------------- ------------ ------------
$13,974,239 $ 30,025,734 $12,566,413 $10,674,939 $ 10,947,040 $ 3,833,951 $226,548,595 $ 10,860,804
=========== ============== ============= ============== ============== ============== ============ ============
$ -- $ 28,464 $ (29,376) $ -- $ 3,929 $ 3,359 $ -- $ --
=========== ============== ============= ============== ============== ============== ============ ============
</TABLE>
See accompanying notes to financial statements
73
<PAGE>
<PAGE>
Notes to Financial Statements
1. Organization and Significant Accounting Policies
The Salomon Brothers Investment Series (the "Investment Series") consists of
certain portfolios of the Salomon Brothers Series Funds Inc (the "Series
Funds"), as indicated below, the Salomon Brothers Investors Fund Inc (the
"Investors Fund") and the Salomon Brothers Capital Fund Inc (the "Capital
Fund"). The Series Funds were incorporated in Maryland on April 17, 1990 as an
open-end management investment company, and currently operate as a series
company comprised of ten portfolios: Salomon Brothers Cash Management Fund (the
"Cash Management Fund"), Salomon Brothers New York Municipal Money Market Fund
(the "New York Municipal Money Fund"), Salomon Brothers Institutional Money
Market Fund (the "Institutional Money Market Fund"), Salomon Brothers New York
Municipal Bond Fund (the "New York Municipal Bond Fund"), Salomon Brothers
National Intermediate Municipal Fund (the "National Intermediate Municipal
Fund"), Salomon Brothers U.S. Government Income Fund (the "U.S. Government
Income Fund"), Salomon Brothers High Yield Bond Fund (the "High Yield Bond
Fund"), Salomon Brothers Strategic Bond Fund (the "Strategic Bond Fund"),
Salomon Brothers Total Return Fund (the "Total Return Fund"), and Salomon
Brothers Asia Growth Fund (the "Asia Growth Fund"). Separate financial
statements are prepared for the Institutional Money Market Fund which is not
part of the Investment Series. All of the other portfolios of the Series Funds
are included in the Investment Series, which also includes the Investors Fund, a
diversified open-end management investment company incorporated in Maryland on
April 2, 1958 and the Capital Fund, a non-diversified open-end management
investment company incorporated in Maryland on August 23, 1976. The Investment
Series operates under a multiple class pricing structure, with each portfolio of
the Investment Series (individually, a "Fund") offering Class A, Class B, Class
C, and Class O shares, each with their own expense structure. Each Fund has a
specific investment objective: the Cash Management Fund's and New York Municipal
Money Fund's objective is to seek as high a level of current income as is
consistent with liquidity and the stability of principal; the New York Municipal
Bond Fund's objective is to achieve a high level of current income which is
exempt from regular federal income taxes and New York State and New York City
personal income taxes, consistent with the preservation of capital; the National
Intermediate Municipal Fund's objective is to seek a high level of current
income which is exempt from regular federal income taxes; the U.S. Government
Income Fund's objective is to seek a high level of current income; the High
Yield Bond Fund's primary objective is to maximize current income; the Strategic
Bond Fund's primary objective is to seek a high level of current income; the
Total Return Fund's primary objective is to obtain above-average income
(compared to a portfolio entirely invested in equity securities); the Asia
Growth Fund's objective is to seek long-term capital appreciation; the Investors
Fund's primary objective is to seek long-term growth of capital; the Capital
Fund's objective is to seek capital appreciation.
74
<PAGE>
<PAGE>
Certain costs incurred in connection with each Fund's organization, which were
payable to Salomon Brothers Asset Management Inc ("SBAM") have been deferred and
are being amortized by the Funds over a 60 month period from the date each Fund
commenced investment operations. A summary of those expenditures that remain as
of December 31, 1996 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Expiration of Amortization Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
New York Municipal Bond Fund............................. February 1998 $13,855
National Intermediate Municipal Fund..................... February 2000 $73,438
U.S. Government Income Fund.............................. February 2000 $76,025
High Yield Bond Fund..................................... February 2000 $92,615
Strategic Bond Fund...................................... February 2000 $92,944
Total Return Fund........................................ September 2000 $70,680
Asia Growth Fund......................................... May 2001 $86,584
</TABLE>
The following is a summary of significant accounting policies followed by the
Investment Series in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles ("GAAP"). The
preparation of financial statements in accordance with GAAP requires management
to make estimates of certain reported amounts in the financial statements.
Actual amounts could differ from those estimates.
(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 will be valued at amortized cost which
approximates market value. If a Fund, other than the Cash Management Fund
and New York Municipal Money Fund, acquires such securities with more than
60 days remaining to maturity, they will be valued at current market value,
until the 60th day prior to maturity, and will then be valued on an
amortized cost basis.
Portfolio securities for the Cash Management Fund and the New York
Municipal Money Fund are valued using the amortized cost method, which
involves initially valuing an investment at its cost and thereafter
assuming a constant amortization to maturity of any premium or discount.
This method results in a value approximating market value.
Prior governmental approval for foreign investments may be required
under certain circumstances in some emerging market countries, and the
extent of foreign investment in domestic companies may be subject to
limitation in other emerging market countries. Foreign ownership
limitations also may be imposed by the charters of individual companies in
emerging market countries to prevent, among other things, violation of
foreign investment limitations. As a result, an additional class of shares
(identified as "Foreign Shares" in the Portfolio of Investments) may be
created and offered for investment by such companies. The "local" and
"foreign" shares' market values may differ.
Foreign securities quoted in a foreign currency are translated into
U.S. dollars using exchange rates at 2:30 p.m.
75
<PAGE>
<PAGE>
Notes to Financial Statements (continued)
Eastern time (12:30 p.m. for the Asia Growth Fund), or at such other
rates as SBAM may determine to be appropriate in computing net asset value.
Securities for which reliable quotations or prices from pricing
services are not readily available (as may be the case for securities of
limited marketability) and all other assets are valued at their respective
fair value as determined in good faith by, or under procedures established
by, the Board of Directors.
(b) Futures Contracts. The New York Municipal Bond Fund, National
Intermediate Municipal Fund, High Yield Bond Fund, Strategic Bond Fund,
Total Return Fund, Asia Growth Fund, Investors Fund and Capital Fund may
enter into futures contracts, which involves paying or receiving variation
margin, which will be recorded as unrealized gain or loss until the
contract is closed. When the contract is closed, a realized gain or loss
will be recognized. Outstanding contracts may involve elements of market
risk in excess of amounts reported in the financial statements.
(c) Option Contracts. When a Fund writes or purchases a call or a put
option, an amount equal to the premium received or paid by the Fund is
recorded as a liability or asset, the value of which is marked-to-market
daily to reflect the current market value of the option. When the option
expires, the Fund realizes a gain or loss equal to the amount of the
premium received or paid. When the Fund exercises an option or enters into
a closing transaction by purchasing or selling an offsetting option, it
realizes a gain or loss without regard to any unrealized gain or loss on
the underlying security. When a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
When a written put option is exercised, the amount of the premium received
reduces the cost of the security that the Fund purchased upon exercise of
the option.
(d) Mortgage Rolls. The U.S. Government Income Fund, Strategic Bond
Fund and Total Return Fund may enter into mortgage "dollar rolls" in which
a Fund sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date. The Fund
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
daily balance of dollar rolls outstanding during the year ended December
31, 1996 was approximately $1,181,000, $334,000 and $471,000 for the U.S.
Government Income Fund, Strategic Bond Fund and Total Return Fund,
respectively.
(e) Repurchase Agreements. When entering into repurchase agreements, it
is each Fund's policy that the Fund take possession, through its custodian,
of the underlying collateral and monitor the collateral's value at the time
the agreement is entered into and on a daily basis during the term of the
repurchase agreement to ensure that it always 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) Foreign Currency Translation. The accounting records of each Fund
are maintained in U.S. dollars. Investment securities and other assets and
liabilities of the High Yield Bond Fund, Strategic Bond Fund, Total Return
Fund, Asia Growth Fund, Investors Fund and Capital Fund denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates
of exchange each day. Purchases and sales of securities, income receipts
and expense payments are translated into U.S. dollars at the prevailing
exchange rate on the respective dates of the transactions. Net realized
gains and losses on foreign currency transactions represent net gains and
losses from sales and maturities
76
<PAGE>
<PAGE>
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.
(g) Forward Foreign Currency Contracts. The High Yield Bond Fund,
Strategic Bond Fund, Total Return Fund, Asia Growth Fund and Investors Fund
may enter into forward foreign currency contracts. A forward foreign
currency contract is an agreement between two parties to buy and sell a
currency at a set price on a future date. The contract is marked-to-market
daily and the change in value is recorded by the Fund as an unrealized gain
or loss. When a forward foreign currency contract is extinguished, through
either delivery or offset by entering into another forward foreign currency
contract, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
of the contract at the time it was extinguished or offset.
(h) Loan Participations. The High Yield Bond Fund, Strategic Bond Fund,
Total Return Fund and Asia Growth Fund may invest in fixed and floating
rate loans arranged through private negotiations between a foreign
sovereign entity and one or more financial institutions ("lender"). The
market values of the High Yield Bond Fund and the Strategic Bond Fund's
loan participations at December 31, 1996 were $7,782,188 and $1,238,438,
respectively.
(i) Federal Income Taxes. Each Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its income, including any net
realized gains, to shareholders. Therefore, no Federal income tax or excise
tax provision is required.
The Asia Growth Fund may be subject to taxes imposed by countries in
which it invests. Such taxes are generally based on income and/or capital
gains earned or repatriated. Taxes are accrued and applied to net
investment income, net realized gains and net unrealized appreciation as
such income and/or gains are earned.
(j) Dividends and Distributions to Shareholders. Dividends from net
investment income on the shares of each of the Funds (except the Asia
Growth Fund, Investors Fund, and Capital 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 and the Capital Fund will be declared on an annual basis. Dividends
from net investment income for the Investors Fund are declared on a
quarterly basis. Distributions of net realized gains to shareholders of
each Fund, if any, are declared at least annually. Dividends and
distributions to shareholders of each Fund are recorded on the ex-dividend
date and are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles due primarily to
differences in the treatment of foreign currency gains/losses, deferral of
wash sales, and post-October losses incurred by each Fund. Permanent
book/tax differences are reclassified within the capital accounts based on
their federal income tax basis treatment; temporary differences do not
require reclassifications. Dividends and distributions which exceed net
investment income and net realized gains for financial reporting purposes
but not for tax purposes are reported as distributions in excess of net
investment income and distributions in excess of net realized capital
gains.
(k) 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
77
<PAGE>
<PAGE>
Notes to Financial Statements (continued)
per share dividend rates are generally due to differences in separate class
expenses.
(l) Expenses. Direct expenses are charged to the Fund that incurred
them, and general expenses of the Investment Series are allocated to the
Funds based on each Fund's relative net assets.
(m) Other. Investment transactions are recorded as of the trade date.
Dividend income is recorded on the ex-dividend date (except for the Asia
Growth Fund, where certain dividends may be recorded as soon as the Fund is
informed of such dividends). Interest income, including the accretion of
discounts or amortization of premiums, is recognized when earned. Gains or
losses on sales of securities are calculated for financial accounting and
Federal income tax purposes on the identified cost basis. Net investment
income (other than distribution fees) and 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, an indirect wholly owned subsidiary of Salomon Inc, to
act as investment manager of each Fund, subject to the supervision by the Board
of Directors of each Fund. SBAM furnishes the Investment 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 Investors Fund and
Capital Fund) is payable monthly and is based on the following annual
percentages of each Fund's average daily net assets: .20% for the Cash
Management Fund and New York Municipal Money Fund, .50% for the New York
Municipal Bond Fund and the National Intermediate Municipal Fund, .60% for the
U.S. Government Income Fund, .75% for the High Yield Bond Fund and Strategic
Bond Fund, .55% for the Total Return Fund and .80% for the Asia 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--.75% ; next $200 million--.625%; excess over
$400 million--.50%. SBAM Limited, an affiliate of SBAM, provides certain
advisory services to SBAM for the benefit of the Strategic Bond Fund, as well
as, certain administrative services for the Asia Growth Fund. SBAM Limited is
compensated by SBAM at no additional expense to the Strategic Bond and Asia
Growth Fund. SBAM has retained 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.
The Investors Fund pays SBAM a base fee subject to an increase or decrease
depending on the extent, if any, to which the investment performance of the
Investors 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.................................................................... .500%
Next $150 million.................................................................... .400%
Next $250 million.................................................................... .375%
Next $250 million.................................................................... .350%
Over $1 billion...................................................................... .300%
</TABLE>
The performance adjustment is paid quarterly based on a rolling one year period.
A performance adjustment will only be made after the investment performance of
the Investors Fund exceeds or is exceeded by the investment record of the S&P
500 Index by at least one percentage point. For each percentage point by which
the investment performance of the
78
<PAGE>
<PAGE>
Investors Fund exceeds or is exceeded by the investment record of the S&P 500
Index, the base fee will be adjusted upward or downward by .01% (annualized).
The maximum annual adjustment is .10% which would occur if the Investors Fund's
performance exceeds or is exceeded by the S&P 500 Index by ten or more
percentage points. For the rolling one-year periods, ended March 31, 1996, June
30, 1996, September 30, 1996 and December 31, 1996 the Investors Fund's
performance exceeded the investment record of the S&P Index by approximately
two, three, six, and six percent, respectively. As a result, base management
fees were increased in aggregate by $199,931 for the year ended December 31,
1996.
For the year ended December 31, 1996, SBAM waived management fees of $36,898,
$21,043, $56,186, $66,682, $191,119, $144,551, $184,118 and $30,723 for the Cash
Management Fund, New York Municipal Bond Fund, National Intermediate Municipal
Fund, U.S. Government Income Fund, High Yield Bond Fund, Strategic Bond Fund,
Total Return Fund, and Asia Growth Fund, respectively, and voluntarily absorbed
expenses of $13,646, $25,063, $83,959, $85,462, $102,651 and $132,687 for the
Cash Management Fund, New York Municipal Bond Fund, National Intermediate
Municipal Fund, U.S. Government Income Fund, Total Return Fund and Asia Growth
Fund, respectively.
Investors Bank & Trust Company serves as custodian and administrator for each
Fund, which includes performing certain administrative services in connection
with the operation of each Fund. During the year ended December 31, 1996,
credits earned on outstanding cash balances were used to reduce custodian fees.
Each Fund has an agreement with Salomon Brothers Inc ("Salomon Brothers"), an
affiliate of the Investment Adviser, to distribute its shares pursuant to a
multiple pricing system. Each class (except for Class O) of each Fund (except
for the Cash Management Fund and New York Municipal Money Fund) is authorized
pursuant to a services and distribution plan applicable to that class of shares
(the "Class A Plan," the "Class B Plan," and the "Class C Plan," collectively,
the "Plans") adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), to pay Salomon Brothers an annual service fee
with respect to Class A, Class B, and Class C shares of the applicable Funds at
the rate of .25% of the value of the average daily net assets of the respective
class. Salomon Brothers is also paid an annual distribution fee with respect to
Class B and Class C shares of each Fund (except for the Cash Management Fund and
New York Municipal Money Fund) at the rate of .75% of the value of the average
daily net assets of the respective class. Class O shares are not subject to a
services and distribution plan fee.
Brokerage commissions of $1,758, $59,316 and $29,772 were paid by the Total
Return Fund, Investors Fund and Capital Fund, respectively, to Salomon Brothers,
the Funds' distributor and an indirect wholly-owned subsidiary of Salomon Inc,
for transactions executed on behalf of the Funds for the year ended December 31,
1996.
Salomon Brothers received $20,462 as its portion of the front-end sales charge
on sales of Class A shares of the Funds during the year ended December 31, 1996.
In addition, contingent deferred sales charges of $160,530 were paid to Salomon
Brothers in connection with redemptions of certain Class B and Class C shares of
the Funds during the year ended December 31, 1996.
3. Capital Stock
At December 31, 1996, the Series Funds had 10,000,000,000 shares of authorized
capital stock, par value $.001 per share, of which the Cash Management Fund, New
York Municipal Money Fund, New York Municipal Bond Fund, National Intermediate
Municipal Fund, U.S. Government Income Fund, High Yield Bond Fund, and Strategic
Bond Fund, each had 1,000,000,000 shares authorized. The Total Return Fund and
Asia Growth Fund had 999,999,992 and 1,000,000,008 shares authorized,
respectively. The Investors Fund had 50,000,000 shares of authorized capital
stock, par value $1.00 per share. The Capital Fund had 25,000,000 shares of
authorized capital stock, par value $.001 per share. Transactions in Fund shares
for the periods indicated were as follows:
79
<PAGE>
<PAGE>
Notes to Financial Statements (continued)
<TABLE>
<CAPTION>
Class A Class B
- -------------------------------------------------------------------------------------------------------------------------------
Period Ended Period Ended Period Ended Period Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Asia Growth Fund
Sold ................... 356,682 $ 3,537,272 -- -- 305,714 $ 3,042,058 -- --
Issued as reinvestment . 2,175 22,436 -- -- 846 8,723 -- --
Redeemed ............... (1,037) (9,821) -- -- -- -- -- --
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase ........... 357,820 $ 3,549,887 -- -- 306,560 $ 3,050,781 -- --
=========== ============ ========== ============ ========== =========== ========= ===========
Capital Fund
Sold ................... 17,551 $ 347,514 -- -- 11,001 $ 218,589 -- --
Issued as reinvestment . 121 2,304 -- -- -- -- -- --
Redeemed ............... (384) (7,398) -- -- -- -- -- --
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase (decrease) 17,288 $ 342,420 -- -- 11,001 $ 218,589 -- --
=========== ============ ========== ============ ========== =========== ========= ===========
Investors Fund
Sold ................... 557,317 $ 10,367,582 27,922 $ 420,791 473,935 $ 8,823,215 41,769 $ 654,082
Issued as reinvestment . 43,043 791,687 760 12,451 30,569 561,476 1,335 21,837
Redeemed ............... (49,750) (944,803) (2,119) (37,067) (47,379) (873,452) (15) (260)
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase ........... 550,610 $ 10,214,466 26,563 $ 396,175 457,125 $ 8,511,239 43,089 $ 675,659
=========== ============ ========== ============ ========== =========== ========= ===========
Total Return Fund
Sold ................... 1,634,908 $ 18,197,811 343,940 $ 3,552,510 1,941,522 $21,665,343 518,625 $ 5,342,405
Issued as reinvestment . 56,167 639,053 2,713 28,624 57,560 656,054 3,801 40,062
Redeemed ............... (252,184) (2,867,528) (93) (958) (136,340) (1,522,454) (12,152) (126,759)
----------- ------------ ---------- ---------- ---------- ----------- -------- --------
Net increase (decrease) 1,438,891 $ 15,969,336 346,560 $ 3,580,176 1,862,742 $20,798,943 510,274 $ 5,255,708
=========== ============ ========== ============ ========== =========== ========= ===========
High Yield Bond Fund
Sold ................... 5,579,873 $ 62,422,667 1,019,841 $ 10,701 8,434,142 $94,520,293 946,768 $ 9,961,848
Issued as reinvestment . 178,995 2,017,850 40,936 430,949 173,250 1,963,617 15,920 168,888
Redeemed ............... (1,070,460) (11,909,060) (36,582) (386,153) (301,187) (3,354,534) (2,574) (26,932)
----------- ------------ ---------- ---------- ---------- ----------- -------- --------
Net increase (decrease) 4,688,408 $ 52,531,457 1,024,195 $ 10,746,292 8,306,205 $93,129,376 960,114 $10,103,804
=========== ============ ========== ============ ========== =========== ========= ===========
Strategic Bond Fund
Sold ................... 749,039 $ 8,090,137 53,771 $ 551,616 1,214,882 $13,060,764 174,744 $ 1,827,448
Issued as reinvestment . 22,056 238,009 1,158 12,171 33,453 360,441 3,737 39,371
Redeemed ............... (49,131) (524,952) (6,226) (65,416) (105,759) (1,124,605) (57) (590)
----------- ------------ ---------- ---------- ---------- ----------- -------- --------
Net increase (decrease) 721,964 $ 7,803,194 48,703 $ 498,371 1,142,576 $12,296,600 178,424 $ 1,866,229
=========== ============ ========== ============ ========== =========== ========= ===========
U.S. Government Income
Fund
Sold ................... 117,000 $ 1,173,487 26,869 $ 269,137 114,615 $ 1,149,715 54,833 $ 554,953
Issued as reinvestment . 1,688 16,972 76 721 1,043 10,504 637 6,542
Redeemed ............... (27,629) (275,826) (2) (20) (45,248) (452,584) (2) (20)
----------- ------------ ---------- ---------- ---------- ----------- -------- --------
Net increase ........... 91,059 $ 914,633 26,943 $ 269,838 70,410 $ 707,635 55,468 $ 561,475
=========== ============ ========== ============ ========== =========== ========= ===========
National Intermediate
Municipal Fund
Sold ................... 30,133 $ 310,751 54,100 $ 546,146 45,974 $ 472,141 41,260 $ 416,180
Issued as reinvestment . 1,305 13,429 710 7,331 623 6,378 163 1,682
Redeemed ............... (18,756) (193,156) (221) (2,286) (20,022) (207,005) (2) (20)
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase ........... 12,682 $ 131,024 54,589 $ 551,191 26,575 $ 271,514 41,421 $ 417,842
=========== ============ ========== ============ ========== =========== ========= ===========
New York Municipal Bond
Fund
Sold ................... 36,597 $ 358,657 53,966 $ 528,846 1,615 $ 16,000 52,010 $ 502,220
Issued as reinvestment . 424 4,166 16 157 523 5,121 226 2,229
Redeemed ............... (11,188) (110,000) (2) (21) -- -- (2) (22)
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase (decrease) 25,833 $ 252,823 53,980 $ 528,982 2,138 $ 21,121 52,234 $ 504,427
=========== ============ ========== ============ ========== =========== ========= ===========
New York Municipal Money
Fund
Sold ................... 359,251 $ 359,251 -- -- 25,000 $ 25,000 -- --
Issued as reinvestment . 662 662 -- -- -- -- -- --
Redeemed ............... -- -- -- -- -- -- -- --
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase (decrease) 359,913 $ 359,913 -- -- 25,000 $ 25,000 -- --
=========== ============ ========== ============ ========== =========== ========= ===========
Cash Management Fund
Sold ................... 34,309,623 $ 34,309,623 8,291,614 $ 8,291,614 4,686,602 $ 4,686,602 3,213,151 $ 3,213,151
Issued as reinvestment . 59,295 59,295 4,672 4,672 111,779 111,779 24,262 24,262
Redeemed ............... (27,949,347) (27,949,347) (6,540,739) (6,540,739) (3,116,789) (3,116,789) (998,927) (998,927)
----------- ------------ ---------- ------------ ---------- ----------- --------- -----------
Net increase (decrease) 6,419,571 $ 6,419,571 1,755,547 $ 1,755,547 1,681,592 $ 1,681,592 2,238,486 $ 2,238,486
=========== ============ ========== ============ ========== =========== ========= ===========
See accompanying notes to financial statements
80
<PAGE>
<PAGE>
<CAPTION>
Class C Class O
- ----------------------------------------------------------------------------------------------------------------------------------
Period Ended Period Ended Period Ended Period Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
34,069 $ 333,338 -- -- 12,221 $ 123,183 -- --
19 190 -- -- 37 387 -- --
(10,334) (96,316) -- -- (400) (4,092) -- --
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
23,754 $ 237,212 -- -- 11,858 $ 117,478 -- --
========= ============ ======= =========== ========== ============= =========== =============
6,531 $ 130,425 -- -- 1,669,366 $ 33,303,396 1,609,281 $ 29,031,088
-- -- -- -- 1,304,403 24,802,608 600,042 11,026,944
-- -- -- -- (1,619,111) (32,449,133) (2,277,011) (41,253,697)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
6,531 $ 130,425 -- -- 1,354,658 $ 25,656,871 (67,688) $ (1,195,665)
========= ============ ======= =========== ========== ============= =========== =============
100,645 $ 1,851,974 18,595 $ 267,020 350,444 $ 6,256,570 245,958 $ 3,783,857
5,651 103,990 60 980 2,822,018 50,986,119 2,017,845 32,672,713
(20,916) (401,484) (200) (3,142) (1,570,151) (28,301,671) (1,987,122) (31,073,072)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
85,380 $ 1,554,480 18,455 $ 264,858 1,602,311 $ 28,941,018 276,681 $ 5,383,498
========= ============ ======= =========== ========== ============= =========== =============
278,826 $ 3,090,704 41,886 $ 423,053 17,355 $ 195,012 425,000 $ 4,250,000
7,242 82,831 99 1,041 456 5,295 -- --
(37,410) (415,533) (1) (10) (425,004) (4,943,754) -- --
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
248,658 $ 2,758,002 41,984 $ 424,084 (407,193) $ (4,743,447) 425,000 $ 4,250,000
========= ============ ======= =========== ========== ============= =========== =============
1,118,377 $ 12,586,569 124,291 $ 1,298,229 32,418 $ 371,211 926,518 $ 9,265,788
29,193 330,589 1,229 12,925 495 5,673 791 7,911
(73,411) (817,122) (4,453) (46,441) (744,326) (8,131,320) (181,791) (1,902,220)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
1,074,159 $ 12,100,036 121,067 $ 1,264,713 (711,413) $ (7,754,436) 745,518 $ 7,371,479
========= ============ ======= =========== ========== ============= =========== =============
425,748 $ 4,594,269 38,420 $ 391,367 1,757 $ 18,841 926,274 $ 9,263,323
13,409 144,660 625 6,573 59 642 754 7,526
(55,475) (595,794) (2) (20) (575,895) (6,250,061) (2) (20)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
383,682 $ 4,143,135 39,043 $ 397,920 (574,079) $ (6,230,578) 927,026 $ 9,270,829
========= ============ ======= =========== ========== ============= =========== =============
16,846 $ 170,867 27,164 $ 272,000 6,017 $ 60,175 925,200 $ 9,252,000
103 1,029 20 206 276 2,757 816 8,164
(1,471) (14,586) (698) (7,152) (1) (10) (206) (2,094)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
15,478 $ 157,310 26,486 $ 265,054 6,292 $ 62,922 925,810 $ 9,258,070
========= ============ ======= =========== ========== ============= =========== =============
18,942 $ 195,000 25,963 $ 260,000 18,217 $ 184,880 927,748 $ 9,278,117
368 3,788 9 87 24 241 263 2,630
-- -- (2) (20) -- -- (2) (20)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
19,310 $ 198,788 25,970 $ 260,067 18,241 $ 185,121 928,009 $ 9,280,727
========= ============ ======= =========== ========== ============= =========== =============
2,072 $ 20,000 26,263 $ 250,020 134,576 $ 1,300,860 14,323 $ 137,924
61 592 6 60 11,918 117,064 17,711 169,082
-- -- (2) (21) (71,444) (705,139) (156,388) (1,509,557)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
2,133 $ 20,592 26,267 $ 250,059 75,050 $ 712,785 (124,354) $ 1,202,550
========= ============ ======= =========== ========== ============= =========== =============
25,000 $ 25,000 -- -- 310,065,553 $ 310,065,553 298,776,320 $ 298,776,320
-- -- -- -- 6,167,495 6,167,495 7,924,931 7,924,931
-- -- -- -- (269,050,082) (269,050,082) (349,968,556) (349,968,556)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
25,000 $ 25,000 -- -- 47,182,964 $ 47,182,964 (43,267,305) $ (43,267,305)
========= ============ ======= =========== ========== ============= =========== =============
1,086,079 $ 1,086,079 180,044 $ 180,044 51,041,652 $ 51,041,652 47,254,877 $ 47,254,877
4,192 4,192 2,497 2,497 342,904 342,904 431,706 431,706
(837,929) (837,929) -- -- (43,843,474) (43,843,474) (60,129,169) (60,129,169)
--------- ------------ ------- ----------- ---------- ------------- ----------- -------------
252,342 $ 252,342 182,541 $ 182,541 7,541,082 $ 7,541,082 (12,442,586) $ (12,442,586)
========= ============ ======= =========== ========== ============= =========== =============
</TABLE>
See accompanying notes to financial statements
81
<PAGE>
<PAGE>
Notes to Financial Statements (continued)
At December 31, 1996, Salomon Brothers owned approximately the following
percentages of total shares outstanding of the following Funds:
<TABLE>
<S> <C>
New York Municipal Bond Fund........................................ 16%
National Intermediate Municipal Fund................................ 89%
U.S. Government Income Fund......................................... 80%
Strategic Bond Fund................................................. 12%
Asia Growth Fund.................................................... 71%
</TABLE>
4. Portfolio Activity
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
- -----------------------------------------------------------------------------
<S> <C> <C>
New York Municipal Bond Fund................ $ 1,796,965 $ 730,598
============= =============
National Intermediate Municipal Fund........ $ 2,450,323 $ 2,093,489
============= =============
U.S. Government Income Fund
U.S. Government Securities................ $ 37,700,042 $ 36,421,810
============= =============
High Yield Bond Fund........................ $202,131,817 $ 61,569,952
============= =============
Strategic Bond Fund
U.S. Government Securities................ $ 10,744,465 $ 4,812,199
Other Investments......................... 27,396,761 16,899,420
------------- -------------
$ 38,141,226 $ 21,711,619
============= =============
Total Return Fund
U.S. Government Securities................ $ 10,269,335 $ 6,137,663
Other Investments......................... 42,111,218 16,232,109
------------- -------------
$ 52,380,553 $ 22,369,771
============= =============
Asia Growth Fund............................ $ 13,109,300 $ 6,614,370
============= =============
Investors Fund.............................. $263,706,387 $275,088,241
============= =============
Capital Fund................................ $216,469,842 $212,131,218
============= =============
</TABLE>
82
<PAGE>
<PAGE>
Transactions in options written for the Funds during the year ended December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Asia Growth Fund Capital Fund
----------------------------------------------------
Number of Premiums Number of Premiums
Contracts Received Contracts Received
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1995...... -- -- -- --
Options written............................... (26,000) $(4,353) (245) $(41,326)
Options terminated in closing purchase
transactions................................ 26,000 4,353 245 41,326
------- ------- ---- --------
Options outstanding at December 31, 1996...... -- -- -- --
======= ======= ==== ========
</TABLE>
5. Portfolio Investment Risks
Credit and Market Risk. Funds that invest in high yield and emerging market
instruments are subject to certain credit and market risks. The yields of high
yield and emerging market debt obligations reflect, among other things,
perceived credit risk. The Funds' investment in securities rated below
investment grade typically involve risks not associated with higher rated
securities including, among others, greater risk of timely and ultimate payment
of interest and principal, greater market price volatility and less liquid
secondary market trading. The consequences of political, social, economic or
diplomatic changes may have disruptive effects on the market prices of
investments held by the Funds. The Funds' investment in non- dollar denominated
securities may also result in foreign currency losses caused by devaluations and
exchange rate fluctuations.
The Cash Management Fund and New York Municipal Money Fund invest in money
market instruments maturing in thirteen months or less whose short-term credit
ratings are within the highest ratings categories of two nationally recognized
statistical rating organizations ("NRSROs") or if rated by only one NRSRO, that
NRSRO, or, if not rated, are believed by the investment manager to be of
comparable quality. The New York Municipal Bond Fund and New York Municipal
Money Fund pursues their investment objectives by investing at least 80% of
their net assets in obligations that are exempt from regular federal income
taxes and at least 65% of their net assets in obligations that are exempt from
personal income taxes of the State and City of New York. Because the New York
Municipal Bond and the New York Municipal Fund invests primarily in obligations
of the State and City of New York, it is more susceptible to factors adversely
affecting issuers of such obligations than a fund that is more diversified.
Financial Instruments with Off-Balance Sheet Risk. Certain Funds enter into
forward foreign currency contracts ("forward contracts") to facilitate
settlement of foreign currency denominated portfolio transactions or to manage
foreign currency exposure associated with foreign currency denominated
securities. Forward contracts involve elements of market risk in excess of the
amounts reflected in the Statements of Assets and Liabilities. The Funds bear
the risk of an unfavorable change in the foreign exchange rate underlying the
forward contract. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
Funds that enter into mortgage dollar rolls are subject to the risk that the
market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a mortgage dollar roll files for bankruptcy or becomes
insolvent, the Fund's use of proceeds of the dollar roll may be restricted
83
<PAGE>
<PAGE>
Notes to Financial Statements (continued)
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, the High Yield Bond
Fund and the Strategic Bond Fund 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.
The risk in writing a covered 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.
6. Tax Information
At December 31, 1996, the New York Municipal Money Fund, Cash Management Fund
and New York Municipal Bond Fund had net capital loss carry-forwards available
to offset future capital gains as follows:
<TABLE>
<CAPTION>
New York New York
Municipal Cash Municipal
Year of Money Management Bond
Expiration Fund Fund Fund
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1999................................. $ 64,677 $ 894 --
2000................................. 94,778 396 --
2001................................. -- 409 --
2002................................. 65,321 415 $299,006
2003................................. -- -- 318,123
2004................................. -- 10 --
-------- ------ --------
$224,776 $2,124 $617,129
======== ====== ========
</TABLE>
During the year ended December 31, 1996, the New York Municipal Money Fund and
New York Municipal Bond Fund utilized capital loss carryforwards of $2,563 and
$6,816, respectively, to offset net realized capital gains. In addition, as
permitted under Federal income tax regulations, the High Yield Bond Fund and
Strategic Bond Fund have elected to defer $182,015 and $6,605, respectively, of
Post-October net capital losses to the next taxable year. The Asia Growth Fund,
Investors Fund and Capital Fund have also elected to defer to January 1, 1997,
Post-October net foreign currency losses of $1,390, $71 and $333, respectively.
84
<PAGE>
<PAGE>
At December 31, 1996, paid-in capital, undistributed net investment income and
accumulated net realized gain (loss) on investments have been adjusted for
current period permanent book/tax differences which arose principally from
differing book/tax treatments of foreign currency transactions and gains of
securities of certain corporations designated as "passive foreign investment
companies." The Strategic Bond Fund, Asia Growth Fund, Investors Fund and
Capital Fund reclassified $64,315, $8,290, $347 and $165, respectively, from
accumulated net realized gain (loss) on investments to undistributed net
investment income. Net investment income, net realized gain (loss) on
investments and net assets were not affected by this reclassification.
At December 31, 1996, the cost for Federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments held in each
Fund were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Aggregate Unrealized Unrealized Unrealized
Cost Appreciation (Depreciation)
Appreciation
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New York Municipal Bond Fund.......... $ 4,560,814 $ 123,494 $ (16,058) $ 107,436
National Intermediate Municipal Fund.. 10,832,716 349,615 (3,742) 345,873
U.S. Government Income Fund........... 13,507,302 82,435 (40,401) 42,034
High Yield Bond Fund.................. 191,372,174 7,975,293 (744,616) 7,230,677
Strategic Bond Fund................... 35,138,730 1,138,471 (195,894) 942,577
Total Return Fund..................... 48,046,839 4,637,625 (326,611) 4,311,014
Asia Growth Fund...................... 6,826,585 558,417 (513,558) 44,859
Investors Fund........................ 369,242,001 175,377,475 (3,936,161) 171,441,314
Capital Fund.......................... 115,034,839 22,886,941 (1,160,155) 21,726,786
</TABLE>
7. Subsequent Event
On January 28, 1997, pending shareholder approval, the Board of Directors of the
Investors Fund approved an increase in the base management fee payable to SBAM.
Information regarding this matter will be contained in a proxy statement to be
mailed to Investors Fund shareholders on or about March 7, 1997.
85
<PAGE>
<PAGE>
Financial Highlights
Selected data per share of capital stock outstanding throughout each period:
ASIA GROWTH FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class O
-------------------------------------------------------------
Period Ended December 31, 1996 (a)'SS'
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 10.00 $10.00 $ 10.00 $ 10.00
--------- --------- -------- --------
Net investment income .................................... 0.05 0.01 0.01 0.07
Net gain on investments
(both realized and unrealized) ........................ 0.47 0.46 0.45 0.46
--------- --------- -------- --------
Total from investment operations ...................... 0.52 0.47 0.46 0.53
--------- --------- -------- --------
Dividends from net investment income ..................... (0.05) (0.01) (0.01) (0.06)
Distributions from net realized gain on investments ...... (0.15) (0.15) (0.15) (0.15)
--------- --------- -------- --------
Total dividends and distributions ..................... (0.20) (0.16) (0.16) (0.21)
--------- --------- -------- --------
Net asset value, end of period ........................... $ 10.32 $ $10.31 $ 10.30 $ 10.32
========= ========= ======== ========
Net assets, end of period (thousands) .................... $ 3,693 $ 3,163 $ 246 $124
Total return* ............................................ +5.2 % +4.7 % +4.6 % +5.3 %
Ratios to average net assets:
Expenses .............................................. 1.24%** 1.99%** 2.00%** 0.99%**
Net investment income ................................. 0.90%** 0.20%** 0.08%** 1.21%**
Portfolio turnover rate .................................. 119% 119% 119% 119%
Average Broker Commission Rate ........................... $ 0.0052 $ 0.0052 $ 0.0052 $ 0.0052
Before waiver of management fee, expenses
absorbed by SBAM and credits earned on custodian
cash balances, net investment income per share and
expense ratios would have been:
Net investment income per share ....................... ($0.18) ($0.23) ($0.20) ($0.18)
Expense ratio ......................................... 5.50%** 6.25%** 6.26%** 5.25%**
</TABLE>
CAPITAL FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C
---------------------------------------------
Period Ended December 31, 1996 (b)'SS'
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 21.98 $ 21.98 $ 21.98
-------- -------- --------
Net investment income .................................... 0.01 (0.02) (0.02)
Net gain on investments
(both realized and unrealized) ........................ 1.54 1.56 1.57
-------- -------- --------
Total from investment operations ...................... 1.55 1.54 1.55
-------- -------- --------
Dividends from net investment income ..................... (0.15) (0.12) (0.12)
Distributions from net realized gain on investments ...... (3.50) (3.50) (3.50)
Distributions in excess of net realized gains ............ -- -- --
-------- -------- --------
Total dividends and distributions ..................... (3.65) (3.62) (3.62)
-------- -------- --------
Net asset value, end of period ........................... $ 19.88 $ 19.90 $ 19.91
======== ======== ========
Net assets, end of period (thousands) .................... $ 344 $ 219 $ 130
Total return* ............................................ +7.7 % +7.6 % +7.7 %
Ratios to average net assets:
Expenses .............................................. 1.88%** 2.73%** 2.45%**
Net investment income ................................. 0.18%** -0.66%** -0.05%**
Portfolio turnover rate .................................. 191% 191% 191%
Average Broker Commission Rate ........................... $ 0.0586 $ 0.0586 $ 0.0586
</TABLE>
(a) May 6, 1996, commencement of investment operations, through December 31,
1996.
(b) November 1, 1996, commencement of investment operations, through December
31, 1996.
'SS' Per share information calculated using the average shares outstanding
method, whch more accurately represents amounts.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period reported. Initial sales charge or contingent deferred sales
charge is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements
86
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Class O
- --------------------------------------------------------------------------------------------------------
Year Ended December 31,
- --------------------------------------------------------------------------------------------------------
1996'ss' 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 18.67 $ 15.62 $ 20.80 $ 19.64 $ 19.06
-------- -------- -------- -------- --------
0.13 0.14 0.03 0.028 0.10
5.70 5.27 (2.87) 3.242 0.80
-------- -------- -------- -------- --------
5.83 5.41 (2.84) 3.27 0.90
-------- -------- -------- -------- --------
(0.15) (0.14) (0.03) (0.035) (0.105)
(4.47) (2.22) (1.51) (2.075) (0.215)
-- -- (0.80) -- --
-------- -------- -------- -------- --------
(4.62) (2.36) (2.34) (2.11) (0.32)
-------- -------- -------- --------- --------
$ 19.88 $ 18.67 $ 15.62 $ 20.80 $ 19.64
======== ======== ======== ======== ========
$135,943 $102,429 $ 86,704 $113,905 $103,356
+33.3 % +34.9 % -14.2 % +17.2 % +4.7 %
1.38% 1.36% 1.30% 1.31% 1.34%
0.67% 0.74% 0.12% 0.13% 0.58%
191% 217% 152% 104% 41%
$ 0.0586 N/A N/A N/A N/A
</TABLE>
87
<PAGE>
<PAGE>
Financial Highlights (continued)
Selected data per share of capital stock outstanding throughout each period:
INVESTORS FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 16.62 $ 13.61 $ 16.61 $ 13.61
------- ------- ------- -------
Net investment income .................................... 0.19 0.19 0.08 0.10
Net gain (loss) on investments
(both realized and unrealized) ........................ 4.63 4.55 4.60 4.54
------- ------- ------- -------
Total from investment operations ...................... 4.82 4.74 4.68 4.64
------- ------- ------- -------
Dividends from net investment income ..................... (0.22) (0.23) (0.10) (0.14)
Distributions from net realized gain on investments ...... (2.33) (1.50) (2.33) (1.50)
------- ------- ------- -------
Total dividends and distributions ..................... (2.55) (1.73) (2.43) (1.64)
------- ------- ------- -------
Net asset value, end of period ........................... $ 18.89 $ 16.62 $ 18.86 $ 16.61
======= ======= ======= =======
Net assets, end of period (thousands) .................... $10,905 $ 441 $ 9,433 $ 716
Total return* ............................................ +30.3 % +35.3 % +29.2 % +34.5 %
Ratios to average net assets:
Expenses .............................................. 1.06% 0.94% 1.82% 1.71%
Net investment income ................................. 0.94% 1.41% 0.21% 0.63%
Portfolio turnover rate .................................. 58% 86% 58% 86%
Average Broker Commission Rate ........................... $0.0593 N/A $0.0593 N/A
</TABLE>
TOTAL RETURN FUND'SS'
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
-------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $ 10.55 $ 10.00 $ 10.54 $ 10.00
------- ------- ------- -------
Net investment income .................................... 0.54 0.15 0.45 0.13
Net gain on investments
(both realized and unrealized) ........................ 1.35 0.52 1.35 0.51
------- ------- ------- -------
Total from investment operations ...................... 1.89 0.67 1.80 0.64
------- ------- ------- -------
Dividends from net investment income ..................... (0.52) (0.11) (0.42) (0.09)
Distributions from net realized gain on investments ...... (0.10) (0.01) (0.10) (0.01)
------- ------- ------- -------
Total dividends and distributions ..................... (0.62) (0.12) (0.52) (0.10)
------- ------- ------- -------
Net asset value, end of period ........................... $ 11.82 $ 10.55 $ 11.82 $ 10.54
======= ======= ======= =======
Net assets, end of period (thousands) .................... $21,109 $ 3,658 $28,043 $ 5,378
Total return* ............................................ +18.3 % +6.7 % +17.4 % +6.4 %
Ratios to average net assets:
Expenses .............................................. 0.75% 0.74%** 1.50% 1.49%**
Net investment income ................................. 4.81% 4.82%** 4.06% 4.06%**
Portfolio turnover rate .................................. 76% 16% 76% 16%
Average Broker Commission Rate ........................... $0.0534 N/A $0.0534 N/A
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income
per share and expense ratios would have been:
Net investment income per share ....................... $ 0.44 $ 0.13 $ 0.36 $ 0.11
Expense ratio ......................................... 1.61% 1.45%** 2.36% 2.19%**
</TABLE>
(a) September 11, 1995, commencement of investment operations, through December
31, 1995.
'SS' Per share information calculated using the average shares outstanding
method, which more accurately represents amounts.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge
is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements
88
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Class C Class O
- --------------------------------------------------------------------------------------------------
Year Ended December 31,
- --------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$16.61 $13.61 $16.61 $13.63 $15.60 $16.10 $17.10
-------- -------- -------- -------- -------- -------- --------
0.07 0.09 0.25 0.27 0.27 0.32 0.41
4.60 4.55 4.62 4.48 (0.48) 2.03 0.79
-------- -------- -------- -------- -------- -------- --------
4.67 4.64 4.87 4.75 (0.21) 2.35 1.20
-------- -------- -------- -------- -------- -------- --------
(0.09) (0.14) (0.25) (0.27) (0.27) (0.33) (0.41)
(2.33) (1.50) (2.33) (1.50) (1.49) (2.52) (1.79)
-------- -------- -------- -------- -------- -------- --------
(2.42) (1.64) (2.58) (1.77) (1.76) (2.85) (2.20)
-------- -------- -------- -------- -------- -------- --------
$18.86 $16.61 $18.90 $16.61 $13.63 $15.60 $16.10
======== ======== ======== ======== ======== ======== ========
$1,959 $306 $518,361 $428,950 $348,214 $386,147 $370,350
+29.3 % +34.5 % +30.6 % +35.4 % -1.3 % +15.1 % +7.4 %
1.80% 1.68% 0.76% 0.69% 0.69% 0.68% 0.68%
0.23% 0.66% 1.36% 1.67% 1.75% 1.90% 2.47%
58% 86% 58% 86% 66% 79% 48%
$0.0593 N/A $0.0593 N/A N/A N/A N/A
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class C Class O
- ----------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$10.56 $10.00 $10.57 $10.00
------- ------- ------- -------
0.46 0.14 0.57 0.17
1.35 0.51 1.39 0.52
------- ------- ------- -------
1.81 0.65 1.96 0.69
------- ------- ------- -------
(0.42) (0.08) (0.55) (0.11)
(0.10) (0.01) (0.10) (0.01)
------- ------- ------- -------
(0.52) (0.09) (0.65) (0.12)
------- ------- ------- -------
$11.85 $10.56 $11.88 $10.57
======= ======= ======= =======
$3,445 $445 $213 $4,494
+17.5 % +6.5 % +19.0 % +6.9 %
1.50% 1.51%** 0.50% 0.51%**
4.07% 4.26%** 5.13% 5.30%**
76% 16% 76% 16%
$0.0534 N/A $0.0534 N/A
$0.36 $0.11 $0.47 $0.15
2.36% 2.22%** 1.36% 1.22%**
</TABLE>
89
<PAGE>
<PAGE>
Financial Highlights (continued)
Selected data per share of capital stock outstanding throughout each period:
HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 10.53 $ 10.00 $ 10.53 $ 10.00
--------- --------- -------- --------
Net investment income......................... 1.10 0.92 1.02 0.85
Net gain on investments
(both realized and unrealized)............. 1.11 0.67 1.11 0.68
--------- --------- -------- --------
Total from investment operations........... 2.21 1.59 2.13 1.53
--------- --------- -------- --------
Dividends from net investment income.......... (1.10) (0.91) (1.03) (0.85)
Distributions from net realized gain on
investments................................ (0.10) (0.15) (0.10) (0.15)
--------- --------- -------- --------
Total dividends and distributions.......... (1.20) (1.06) (1.13) (1.00)
--------- --------- -------- --------
Net asset value, end of period................ $ 11.54 $ 10.53 $ 11.53 $ 10.53
========= ========= ======== ========
Net assets, end of period (thousands)......... $ 65,935 $ 10,789 $ 106,797 $ 10,108
Total return*................................. +21.9 % +16.6 % +21.2 % +15.7 %
Ratios to average net assets:
Expenses................................... 1.24% 1.24%** 1.99% 1.96%**
Net investment income...................... 9.38% 10.58%** 8.49% 9.53%**
Portfolio turnover rate....................... 85% 109% 85% 109%
Before waiver of management fee and credits earned on custodian
cash balances, net investment income per share and expense ratios
would have been:
Net investment income per share............ $ 1.09 $ 0.87 $ 1.01 $ 0.80
Expense ratio.............................. 1.50% 1.80%** 2.24% 2.51%**
</TABLE>
STRATEGIC BOND FUND
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Class A Class B
- -------------------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996'SS' 1995(a) 1996'SS' 1995(a)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 10.53 $ 10.00 $ 10.53 $ 10.00
------- ------- ------- -------
Net investment income......................... 0.87 0.84 0.79 0.76
Net gain on investments
(both realized and unrealized)............. 0.55 0.78 0.53 0.79
------- ------- ------- -------
Total from investment operations........... 1.42 1.62 1.32 1.55
------- ------- ------- -------
Dividends from net investment income.......... (0.94) (0.85) (0.85) (0.78)
Dividends in excess of net investment income.. (0.01) -- (0.01) --
Distributions from net realized gain on
investments................................ (0.17) (0.24) (0.17) (0.24)
------- ------- ------- -------
Total dividends and distributions.......... (1.12) (1.09) (1.03) (1.02)
------- ------- ------- -------
Net asset value, end of period................ $ 10.83 $ 10.53 $ 10.82 $ 10.53
======= ======= ======= =======
Net assets, end of period (thousands)......... $ 8,345 $ 513 $14,291 $ 1,879
Total return*................................. +14.1 % +16.8 % +13.0 % +16.1 %
Ratios to average net assets:
Expenses................................... 1.24% 1.23%** 1.98% 1.97%**
Net investment income...................... 8.09% 9.51%** 7.34% 8.75%**
Portfolio turnover rate....................... 122% 161% 122% 161%
Before waiver of management fee, expenses
absorbed by SBAM and credits earned on
custodian cash balances, net investment
income per share and expense ratios
would have been:
Net investment income per share............ $ 0.79 $ 0.76 $ 0.71 $ 0.69
Expense ratio.............................. 1.98% 2.11%** 2.73% 2.85%**
</TABLE>
(a) February 22, 1995, commencement of investment operations, through December
31, 1995.
'SS' Per share information calculated using the average shares outstanding
method, which more accurately represents amounts.
Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge
is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements
90
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class C Class O
- ----------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996'SS' 1995(a)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 10.53 $ 10.00 $ 10.54 $ 10.00
-------- -------- --------- --------
1.02 0.85 1.16 0.95
1.10 0.68 1.05 0.67
-------- -------- --------- --------
2.12 1.53 2.21 1.62
-------- -------- --------- --------
(1.03) (0.85) (1.12) (0.93)
(0.10) (0.15) (0.10) (0.15)
-------- -------- --------- --------
(1.13) (1.00) (1.22) (1.08)
-------- -------- --------- --------
$ 11.52 $ 10.53 $ 11.53 $ 10.54
======== ======== ========= ========
$ 13.773 $ 1,274 $ 393 $ 7,854
+21.1 % +15.8 % +22.0 % +16.8%
1.99% 1.98%** 0.99% 1.00%**
8.43% 9.61%** 10.64% 10.59%**
85% 109% 85% 109%
$ 1.01 $ 0.80 $ 1.13 $ 0.90
2.24% 2.54%** 1.24% 1.55%**
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class C Class O
- ----------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996'SS' 1995(a) 1996'SS' 1995(a)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 10.53 $ 10.00 $ 10.53 $ 10.00
-------- -------- -------- -------
0.78 0.77 0.92 0.87
0.54 0.78 0.51 0.77
-------- -------- -------- -------
1.32 1.55 1.43 1.64
-------- -------- -------- -------
(0.85) (0.78) (0.96) (0.87)
(0.01) -- (0.01) --
(0.17) (0.24) (0.17) (0.24)
-------- -------- --------- --------
(1.03) (1.02) (1.14) (1.11)
-------- -------- --------- --------
$ 10.82 $ 10.53 $ 10.82 $ 10.53
======== ======== ======== ========
$ 4,575 $ 411 $ 3,817 $ 9,763
+13.1% +16.1% +14.2% +17.0%
1.98% 1.99%** 1.00% 0.99%**
7.26% 8.77%** 8.65% 9.74%**
122% 161% 122% 161%
$ 0.70 $ 0.70 $ 0.84 $ 0.79
2.72% 2.87%** 1.74% 1.87%**
</TABLE>
91
<PAGE>
<PAGE>
Financial Highlights (continued)
Selected data per share of capital stock outstanding throughout each period:
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $10.32 $10.00 $10.32 $10.00
------ ------ ------ ------
Net investment income ....................................... 0.54 0.49 0.46 0.43
Net gain on investments
(both realized and unrealized) ........................... (0.19) 0.43 (0.20) 0.43
------ ------ ------ ------
Total from investment operations ......................... 0.35 0.92 0.26 0.86
------ ------ ------ ------
Dividends from net investment income ........................ (0.54) (0.49) (0.46) (0.43)
Distributions from net realized gain on investments ......... (0.06) (0.10) (0.06) (0.10)
Distributions in excess of net realized gain on investments . -- (0.01) -- (0.01)
------ ------ ------ ------
Total dividends and distributions ........................ (0.60) (0.60) (0.52) (0.54)
------ ------ ------ ------
Net asset value, end of period .............................. $10.07 $10.32 $10.06 $10.32
====== ====== ====== ======
Net assets, end of period (thousands) ....................... $1,188 $278 $1,266 $572
Total return* ............................................... +3.6 % +9.5 % +2.7 % +8.8 %
Ratios to average net assets:
Expenses ................................................. 0.84% 0.85%** 1.59% 1.60%**
Net investment income .................................... 5.22% 5.67%** 4.51% 4.85%**
Portfolio turnover rate ..................................... 365% 230% 365% 230%
Before applicable waiver of management fee,
expenses absorbed by SBAM and credits earned on
custodian cash balances, net investment income
per share and expense ratios would have been:
Net investment income per share ............................. $0.38 $0.40 $0.30 $0.34
Expense ratio ............................................... 2.21% 1.90%** 2.96% 2.64%**
</TABLE>
NATIONAL INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $10.43 $10.00 $10.42 $10.00
------ ------ ------ ------
Net investment income ....................................... 0.48 0.40 0.40 0.34
Net gain on investments
(both realized and unrealized) ........................... (0.06) 0.46 (0.06) 0.45
------ ------ ------ ------
Total from investment operations ......................... 0.42 0.86 0.34 0.79
------ ------ ------ ------
Dividends from net investment income ........................ (0.48) (0.40) (0.41) (0.34)
Distributions from net realized gain on investments ......... (0.02) (0.03) (0.02) (0.03)
------ ------ ------ ------
Total dividends and distributions ........................ (0.50) (0.43) (0.43) (0.37)
------ ------ ------ ------
Net asset value, end of period .............................. $10.35 $10.43 $10.33 $10.42
====== ====== ====== ======
Net assets, end of period (thousands) ....................... $696 $569 $702 $432
Total return* ............................................... +4.2 % +8.7 % +3.4 % +8.0 %
Ratios to average net assets:
Expenses ................................................. 0.75% 0.75%** 1.50% 1.50%**
Net investment income .................................... 4.62% 4.63%** 3.88% 3.85%**
Portfolio turnover rate ..................................... 19% 29% 19% 29%
Before applicable waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash balances,
net investment income per share
and expense ratios would have been:
Net investment income per share .......................... $0.35 $0.32 $0.27 $0.25
Expense ratio ........................................... 2.02% 1.71%** 2.77% 2.45%**
(a) February 22, 1995, commencement of investment operations, through December
31, 1995.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge
is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements
92
<PAGE>
<PAGE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class C Class O
- ----------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$10.32 $10.00 $10.32 $10.00
------ ------ ------ ------
0.46 0.43 0.56 0.52
(0.21) 0.43 (0.20) 0.42
------ ------ ------ ------
0.25 0.86 0.36 0.94
------ ------ ------ ------
(0.46) (0.43) (0.56) (0.52)
(0.06) (0.10) (0.06) (0.10)
-- (0.01) -- --
------ ------ ------ ------
(0.52) (0.54) (0.62) (0.62)
------ ------ ------ ------
$10.05 $10.32 $10.06 $10.32
====== ====== ====== ======
$422 $273 $9,375 $9,552
+2.7 % +8.8 % +3.7 % +9.7 %
1.60% 1.60%** 0.60% 0.60%**
4.51% 4.92%** 5.53% 5.92%**
365% 230% 365% 230%
$0.31 $0.34 $0.41 $0.42
2.97% 2.64%** 1.97% 1.64%**
- ----------------------------------------------------------------------------------------------
Class C Class O
- ----------------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996 1995(a) 1996 1995(a)
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$10.42 $10.00 $10.43 $10.00
------ ------ ------ ------
0.40 0.34 0.50 0.42
(0.06) 0.45 (0.07) 0.46
------ ------ ------ ------
0.34 0.79 0.43 0.88
------ ------ ------ ------
(0.41) (0.34) (0.50) (0.42)
(0.02) (0.03) (0.02) (0.03)
------ ------ ------ ------
(0.43) (0.37) (0.52) (0.45)
------ ------ ------ ------
$10.33 $10.42 $10.34 $10.43
====== ====== ====== ======
$468 $271 $9,786 $9,675
+3.4 % +8.0 % +4.3 % +9.0 %
1.50% 1.50%** 0.50% 0.50%**
3.88% 3.85%** 4.88% 4.86%**
19% 29% 19% 29%
$0.27 $0.25 $0.37 $0.34
2.77% 2.46%** 1.77% 1.46%**
</TABLE>
93
<PAGE>
<PAGE>
Financial Highlights (continued)
Selected data per share of capital stock outstanding throughout each period:
NEW YORK MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Class A Class B
- ----------------------------------------------------------------------------------------------------
Year Ended December 31,
- ----------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $10.11 $ 8.96 $10.11 $ 8.96
------ ------ ------ ------
Net investment income......................... 0.48 0.42 0.41 0.36
Net gain (loss) on securities and futures
(both realized and unrealized)............. (0.19) 1.14 (0.19) 1.14
------ ------ ------ ------
Total from investment operations........... 0.29 1.56 0.22 1.50
------ ------ ------ ------
Dividends from net investment income.......... (0.48) (0.41) (0.41) (0.35)
Distributions from net realized gain on
securities and futures..................... -- -- -- --
------ ------ ------ ------
Total dividends and distributions.......... (0.48) (0.41) (0.41) (0.35)
------ ------ ------ ------
Net asset value, end of period................ $ 9.92 $10.11 $ 9.92 $10.11
====== ====== ====== ======
Net assets, end of period (thousands)......... $ 792 $ 546 $ 539 $ 528
Total return*................................. +3.0 % +17.7 % +2.3 % +17.0 %
Ratios to average net assets:
Expenses................................... 0.75% 0.75% 1.50% 1.50%
Net investment income...................... 4.91% 5.12% 4.18% 4.30%
Portfolio turnover rate....................... 19% 22% 19% 22%
Before applicable waiver of management fee,
expenses absorbed by SBAM and credits
earned on custodian cash balances, net
investment income per share and expense
ratios would have been:
Net investment income per share............ $ 0.37 $ 0.24 $ 0.30 $ 0.17
Expense ratio.............................. 1.89% 2.96% 2.64% 3.74%
</TABLE>
NEW YORK MUNICIPAL MONEY FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Class A Class B Class C
- ------------------------------------------------------------------------------------------------------
Period ended December 31, 1996(b)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.......... $1.000 $1.000 $1.000
------ ------ ------
Net investment income......................... 0.006 0.006 0.006
Dividends from net investment income.......... (0.006) (0.006) (0.006)
------ ------ ------
Net asset value, end of period................ $1.000 $1.000 $1.000
====== ====== ======
Net assets, end of period (thousands)......... $ 360 $ 25 $ 25
Total return*................................. +0.6 % +0.6 % +0.6 %
Ratios to average net assets:
Expenses................................... 0.38 %** 0.40 %** 0.40 %**
Net investment income...................... 3.56 %** 3.40 %** 3.40 %**
Before applicable waiver of management fee
and credits earned on custodian cash
balances, net investment income per share
and expense ratios would have been:
Net investment income per share............ $0.006 $0.006 $0.006
Expense ratio.............................. 0.39 %** 0.41 %** 0.41 %**
</TABLE>
(a) February 1, 1993, commencement of investment operations, through December
31, 1993.
(b) November 1, 1996, commencement of investment operations, through December
31, 1996.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period reported. Initial sales charge or contingent deferred sales
charge is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements
94
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Class C Class O
- -----------------------------------------------------------------------------------------------------
Period Ended
Year Ended December 31, December 31,
- -----------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1994 1993(a)
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$10.11 $ 8.96 $10.11 $ 8.98 $10.44 $10.00
------ ------ ------ ------ ------ ------
0.41 0.36 0.50 0.53 0.55 0.46
(0.19) 1.14 (0.18) 1.12 (1.46) 0.46
------ ------ ------ ------ ------ ------
0.22 1.50 0.32 1.65 (0.91) 0.92
------ ------ ------ ------ ------ ------
(0.41) (0.35) (0.50) (0.52) (0.55) (0.46)
-- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
(0.41) (0.35) (0.50) (0.52) (0.55) (0.48)
------ ------ ------ ------ ------ ------
$ 9.92 $10.11 $ 9.93 $10.11 $ 8.98 $10.44
====== ====== ====== ====== ====== ======
$ 282 $ 266 $3,193 $2,494 $3,333 $8,364
+2.3 % +17.0 % +3.4 % +18.8 % -8.8 % +9.4 %
1.50% 1.50% 0.50% 0.50% 0.50% 0.50%**
4.19% 4.38% 5.19% 5.50% 5.72% 4.99%**
19% 22% 19% 22% 63% 24%
$ 0.30 $ 0.18 $ 0.40 $ 0.32 $ 0.49 $ 0.40
2.64% 3.71% 1.65% 2.71% 1.17% 1.24%**
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Class O
- ---------------------------------------------------------------------------------------------------
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- -------- -------- -------- --------
0.032 0.037 0.027 0.023 0.031
(0.032) (0.037) (0.027) (0.023) (0.031)
------- -------- -------- -------- --------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======== ======== ======== ========
$273,734 $226,549 $269,788 $262,413 $263,685
+3.3 % +3.7 % +2.7 % +2.3 % +3.1 %
0.53 % 0.43 % 0.41 % 0.41 % 0.42 %
3.25 % 3.67 % 2.63 % 2.31 % 3.07 %
$ 0.032 $ 0.037 -- -- --
0.53 % 0.45 % -- -- --
</TABLE>
95
<PAGE>
<PAGE>
Financial Highlights (concluded)
Selected data per share of capital stock outstanding throughout each period:
CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Class A Class B
- ------------------------------------------------------------------------------------------------------
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------
Net investment income.......................... 0.050 0.044 0.050 0.043
Dividends from net investment income........... (0.050) (0.044) (0.050) (0.043)
------ ------ ------ ------
Net asset value, end of period................. $1.000 $1.000 $1.000 $1.000
====== ====== ====== ======
Net assets, end of period (thousands).......... $8,175 $1,756 $3,920 $2,238
Total return*.................................. +5.1 % +4.5 % +5.1 % +4.4 %
Ratios to average net assets:
Expenses................................... 0.55 % 0.55 % 0.55 % 0.55 %
Net investment income...................... 4.95 % 5.42 % 4.95 % 5.38 %
Before applicable waiver of management fee,
expenses absorbed by SBAM and credits
earned on custodian cash balances, net
investment income per share and
expense ratios would have been:
Net investment income per share............ $0.047 $0.037 $0.047 $0.037
Expense ratio............................... 0.82 % 1.35 % 0.82 % 1.34 %
</TABLE>
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported.
See accompanying notes to financial statements
96
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Class C Class O
- -------------------------------------------------------------------------------------------------
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000 $1.000 $ 1.000 $1.000
------ ------ ------- ------ ------- ------- -------
0.050 0.043 0.050 0.055 0.038 0.027 0.033
(0.050) (0.043) (0.050) (0.055) (0.038) (0.027) (0.033)
------ ------ ------- ------ ------- ------- -------
$1.000 $1.000 $1.000 $1.000 $1.000 $ 1.000 $1.000
====== ====== ======= ====== ======= ======= =======
$ 435 $ 183 $14,225 $6,684 $19,127 $15,049 $11,613
+5.1 % +4.4 % +5.1 % +5.6 % +3.9 % +2.7 % +3.4 %
0.55 % 0.55 % 0.55 % 0.55 % 0.61 % 0.65 % 0.65 %
4.95 % 5.40 % 4.95 % 5.46 % 3.79 % 2.68 % 3.41 %
$0.047 $0.036 $ 0.047 $0.047 $ 0.036 $ 0.025 $0.030
0.82 % 1.34 % 0.82 % 1.34 % 0.81 % 0.85 % 0.85 %
</TABLE>
97
<PAGE>
<PAGE>
Report of Independent Accountants
To the Boards of Directors and Shareholders of
Salomon Brothers Cash Management Fund
Salomon Brothers New York Municipal Money Market Fund
Salomon Brothers New York Municipal Bond Fund
Salomon Brothers National Intermediate Municipal Fund
Salomon Brothers U.S. Government Income Fund
Salomon Brothers High Yield Bond Fund
Salomon Brothers Strategic Bond Fund
Salomon Brothers Total Return Fund
Salomon Brothers Asia Growth Fund
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Salomon Brothers Cash
Management Fund, Salomon Brothers New York Municipal Money Market Fund, Salomon
Brothers New York Municipal Bond Fund, Salomon Brothers National Intermediate
Municipal Fund, Salomon Brothers U.S. Government Income Fund, Salomon Brothers
High Yield Bond Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers
Total Return Fund, Salomon Brothers Asia Growth Fund (nine of the portfolios
constituting Salomon Brothers Series Funds Inc), Salomon Brothers Investors Fund
Inc and Salomon Brothers Capital Fund Inc (hereafter referred to as the "Funds")
at December 31, 1996, the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE, LLP
New York, New York
February 18, 1997
98
<PAGE>
<PAGE>
[This page intentionally left blank]
<PAGE>
<PAGE>
[This page intentionally left blank]
<PAGE>
<PAGE>
The Salomon Brothers Investment Series
<TABLE>
<S> <C>
INVESTMENT MANAGER Officers
Salomon Brothers Asset Management Inc
7 World Trade Center
New York , New York 10048 MICHAEL S. HYLAND
DISTRIBUTOR Chairman and President
Salomon Brothers Inc JAMES E. CRAIGE**
7 World Trade Center Executive Vice President
New York , New York 10048 RICHARD E. DAHLBERG
CUSTODIAN Executive Vice President
Investors Bank & Trust Company THOMAS K. FLANAGAN**
89 South Street Executive Vice President
Boston, Massachusetts 02111 GIAMPAOLO G. GUARNIERI**
DIVIDEND DISBURSING AND TRANSFER AGENT Executive Vice President
First Data Investor Services Group, Inc. STEVEN GUTERMAN**
53 State Street Executive Vice President
Boston, Massachusetts 02109-2873 ROSS S. MARGOLIES***
LEGAL COUNSEL Executive Vice President
Simpson Thacher & Bartlett MAUREEN O'CALLAGHAN**
425 Lexington Avenue Executive Vice President
New York, New York 10017 BETH SEMMEL**
INDEPENDENT ACCOUNTANTS Executive Vice President
Price Waterhouse LLP ALLAN R. WHITE, III*,***
1177 Avenue of the Americas Executive Vice President
New York, New York 10036 MARYBETH WHYTE**
Directors Executive Vice President
CHARLES F. BARBER PETER J. WILBY**
Consultant; formerly Chairman, ASARCO Incorporated Executive Vice President
ANDREW L. BREECH*,*** LAWRENCE H. KAPLAN
President, Dealer Operating Control Service Inc. Executive Vice President
THOMAS W. BROCK*,*** and General Counsel
Chairman and Chief Executive Officer, ELIZA LAU**
Salomon Brothers Asset Management Inc; Vice President
Managing Director, Salomon Brothers Inc PAMELA MILUNOVICH*
CAROL L. COLMAN Vice President
President, Colman Consulting Co., Inc. NANCY A. NOYES**
DANIEL P. CRONIN** Vice President
Vice President-General Counsel, ALAN M. MANDEL
Pfizer International Inc. Treasurer
WILLIAM R. DILL*,*** JENNIFER G. MUZZEY
President, Boston Architectural Center; Secretary
formerly President, Anna Maria College JANET S. TOLCHIN
MICHAEL S. HYLAND Assistant Treasurer
Chairman and President; President, Salomon Brothers REJI PAUL
Asset Management Inc; Managing Director, Assistant Treasurer
Salomon Brothers Inc NOEL B. DAUGHERTY
CLIFFORD M. KIRTLAND, JR.*,*** Assistant Secretary
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
LOUIS P. MATTIS*,***
Formerly Chairman and President;
Sterling Winthrop Inc.
THOMAS F. SCHLAFLY*,***
Of counsel to Peper, Martin, Jensen, Maichel & Hetlage
(law firm); President, The Saint Louis Brewery, Inc.
</TABLE>
- ---------------------------------------
*Only on the Salomon Brothers Investors Fund Inc
**Only on the Salomon Brothers Series Funds Inc
***Only on the Salomon Brothers Capital Fund Inc
<PAGE>
<PAGE>
- ----------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
--------------------------------------------------------
SEVEN WORLD TRADE CENTER NEW YORK, NEW YORK 10048
[RECYCLED SYMBOL]
PRINTED ON RECYCLED PAPER
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as ................... 'SS'
The dagger symbol shall be expressed as..................... 'D'
The double dagger symbol shall be expressed as.............. 'DD'
<PAGE>
<PAGE>
SALOMON BROTHERS
INSTITUTIONAL
MONEY MARKET FUND
ANNUAL REPORT
DECEMBER 31, 1996
[LOGO]
- ------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
--------------------------------------
Salomon Brothers Asset Management Inc
c/o Investors Bank & Trust Company
P.O. Box 1537
Boston, Massachusetts 02205-1537
<PAGE>
<PAGE>
Salomon Brothers
Institutional Money Market Fund
February 18, 1997
To Our Shareholders:
WE ARE PLEASED to provide this annual report of the Salomon Brothers
Institutional Money Market Fund which includes market commentary and financial
statements of the Fund for the year ended December 31, 1996.
PERFORMANCE
THE SALOMON BROTHERS Institutional Money Market Fund's annualized yield for the
seven days ended December 31, 1996 was 5.40%. For the same time period,
shareholders reinvesting their dividends earned a compounded effective
annualized yield of 5.54%.
ECONOMIC AND MARKET REVIEW
IT WAS A DIFFICULT year for the U.S. fixed income market, but money market
securities outperformed longer duration fixed income instruments, due to their
lower overall risk and shorter maturities. Forecasts for an economic downturn
and extensive Fed easing failed to materialize and long-maturity securities
posted negative returns for most of the year. At the beginning of the year,
investors anticipated that softness in the U.S. economy would lead to a series
of rate cuts by the Federal Reserve. While the Fed eased monetary policy by 25
basis points in January 1996, further cuts were not forthcoming. In fact, Fed
Chairman Alan Greenspan's optimistic Humphrey-Hawkins testimony in February 1996
forced a major realignment of Fed easing expectations. Any remaining
expectations vanished in March after non-farm payrolls posted their largest
one-month gain in 12 1/2 years. Yields continued to rise across the maturity
spectrum after subsequent employment reports also showed greater-than-expected
strength.
SIGNS OF SLOWER economic growth emerged during the third quarter, sparking a
spirited market rally and a flattening of the short-term yield curve. The
market's surge persisted through early December before sizable corporate
issuance and firming enconomic data triggered a sharp sell-off to close the
year. A warning from Fed Chairman Alan Greenspan regarding 'irrational
exuberance' in the U.S. equity market also tempered investors' expectations for
monetary easing in 1997.
OUTLOOK
THE FUND REMAINS relatively neutral on a duration basis, as economic growth
appears to be rebounding from the depressed rate of the third-quarter of 1996.
Corporate issuance also appears to be on the rise, but investors are optimistic
that a balanced budget agreement will be reached this year in Washington. At
present, monetary policy appears to be on hold,
<PAGE>
<PAGE>
though continued strength in the labor market may prompt the Fed to tighten
credit as soon as the second quarter of 1997.
ALL OF US at Salomon Brothers Asset Management Inc appreciate the confidence you
have demonstrated in the past and hope to continue to serve you in the future.
Please call us with any questions or to receive a prospectus containing more
complete information regarding the Fund at 212-783-7407. To receive assistance
regarding your personal account, please call Investors Bank & Trust at
1-800-347-6028.
Cordially,
MICHAEL S. HYLAND
MICHAEL S. HYLAND
Chairman and President
PAGE 2
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 16.3%
BANKS -- 16.3%
$6,000,000 Bank Austria............................................. 5.380% 01/21/97 $ 6,000,033
2,500,000 Barclay's Bank........................................... 5.550 01/06/97 2,500,000
5,000,000 Deutsche Bank............................................ 5.570 12/10/97 4,998,644
5,000,000 Mellon Bank N.A.......................................... 5.750 02/18/97 5,000,630
2,500,000 Rabobank................................................. 5.530 02/10/97 2,500,000
5,000,000 Societe Generale......................................... 5.450 02/10/97 5,000,138
------------
TOTAL CERTIFICATES OF DEPOSIT (COST $25,999,445)......... 25,999,445
------------
COMMERCIAL PAPER -- 68.2%
AEROSPACE & DEFENSE -- 4.5%
6,000,000 AlliedSignal............................................. 5.600 01/27/97 5,975,733
1,200,000 Lockheed Martin.......................................... 5.720 01/30/97 1,194,471
------------
7,170,204
------------
BANKS -- 6.8%
6,000,000 ANZ Delaware............................................. 5.280 05/12/97 5,884,720
5,000,000 BBL North America........................................ 5.340 01/07/97 4,995,550
------------
10,880,270
------------
BEVERAGES -- 5.3%
8,500,000 Seagram (Joseph E.) & Sons............................... 5.700 01/08/97 8,490,579
------------
CHEMICALS -- 3.8%
5,000,000 Air Products & Chemicals................................. 5.320 01/17/97 4,988,178
1,000,000 Praxair.................................................. 5.510 02/28/97 991,123
------------
5,979,301
------------
EDUCATION -- 3.8%
6,000,000 Regents of the University of California.................. 5.330 01/17/97 5,985,787
------------
FINANCIAL SERVICES -- 11.1%
4,000,000 BIL North America........................................ 5.320 01/31/97 3,982,266
7,500,000 General Electric Capital................................. 5.340 06/23/97 7,307,538
6,500,000 UBS Finance.............................................. 5.550 01/21/97 6,479,958
------------
17,769,762
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 3
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 68.2% (CONTINUED)
HEAVY MACHINERY -- 1.5%
$2,400,000 Cooperative Association of Tractor Dealers............... 5.400% 02/04/97 $ 2,387,760
------------
INSURANCE -- 5.3%
2,000,000 Great West Life & Annuity................................ 5.530 01/06/97 1,998,464
2,500,000 Safeco Credit............................................ 5.320 01/06/97 2,498,153
2,000,000 Transamerica Finance..................................... 5.420 03/03/97 1,981,632
2,000,000 Transamerica Finance..................................... 5.430 03/31/97 1,973,152
------------
8,451,401
------------
LODGING -- 0.6%
1,000,000 Hilton Hotels............................................ 5.700 01/31/97 995,250
------------
MEDICAL SUPPLIES -- 1.9%
3,000,000 Abbott Laboratories...................................... 5.250 01/16/97 2,993,437
------------
MUNICIPAL -- 0.9%
1,500,000 Methodist Hospital (Houston, Texas)...................... 5.450 04/01/97 1,500,000
------------
OIL COMPANIES -- 1.3%
1,000,000 Occidental Petroleum..................................... 5.700 02/14/97 993,033
1,031,000 Vastar Resources......................................... 5.800 01/17/97 1,028,343
------------
2,021,376
------------
RETAILERS -- 3.1%
5,000,000 Southland................................................ 5.340 01/27/97 4,980,717
------------
SECURITIES BROKERS -- 9.3%
3,500,000 BT Securities............................................ 5.570 01/10/97 3,495,127
3,500,000 Goldman Sachs Group...................................... 5.650 01/06/97 3,497,255
3,000,000 Goldman Sachs Group...................................... 5.350 05/21/97 2,937,583
5,000,000 Morgan Stanley Group..................................... 5.320 01/23/97 4,983,745
------------
14,913,710
------------
TECHNOLOGY -- 1.2%
1,900,000 Hitachi Credit America................................... 5.400 01/15/97 1,896,010
------------
TRANSPORTATION -- 2.5%
4,000,000 Daimler-Benz NA.......................................... 5.320 01/13/97 3,992,907
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 4
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 68.2% (CONTINUED)
<S> <C> <C> <C> <C>
UTILITIES-TELEPHONE -- 5.3%
$2,500,000 BellSouth Capital........................................ 5.420% 01/21/97 $ 2,492,468
6,000,000 US West Communications................................... 5.320 01/17/97 5,985,814
------------
8,478,282
------------
TOTAL COMMERCIAL PAPER (COST $108,886,753)............... 108,886,753
------------
ASSET-BACKED SECURITIES -- 5.1%
FINANCIAL SERVICES -- 5.1%
3,089,226 Capita Equipment Receivables Trust....................... 5.600 10/15/97 3,089,226
5,000,000 Olympic Auto Receivables Trust........................... 5.430 12/15/97 5,000,000
------------
TOTAL ASSET-BACKED SECURITIES (COST $8,089,226).......... 8,089,226
------------
FLOATING RATE NOTES -- 8.3%
CALIFORNIA -- 1.6%
2,600,000 Pasadena, California Certificates of Participation VR.... 5.800 01/07/97 2,600,000
------------
ILLINOIS -- 1.1%
1,800,000 Illinois Student Assistance Commission VR................ 5.850 01/01/97 1,800,000
------------
NEW YORK -- 0.6%
400,000 New York City, New York
Industrial Development Agency VR....................... 6.000 01/01/97 400,000
600,000 New York City, New York
Industrial Development Agency VR....................... 6.000 01/01/97 600,000
------------
1,000,000
------------
NORTH CAROLINA -- 3.7%
2,900,000 Community Health Systems VR.............................. 5.900 01/01/97 2,900,000
3,015,000 Greensboro, North Carolina GO VR......................... 5.950 01/01/97 3,015,000
------------
5,915,000
------------
TEXAS -- 1.3%
1,970,000 Texas State GO VR........................................ 5.880 01/01/97 1,970,000
------------
TOTAL FLOATING RATE NOTES (COST $13,285,000)............. 13,285,000
------------
TOTAL INVESTMENTS -- 97.9% (COST $156,260,424)........... 156,260,424
</TABLE>
See accompanying notes to financial statements.
PAGE 5
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------
Portfolio of Investments
December 31, 1996
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.0%
<S> <C> <C> <C> <C>
$3,162,000 Repurchase Agreement dated 12/31/96, with UBS Securities,
collateralized by $2,523,000 U.S. Treasury Bonds,
8.875%, due 02/15/19, valued at $3,226,286; proceeds:
$3,163,142 (cost $3,162,000)........................... 6.500% 01/02/97 $ 3,162,000
Other assets in excess of liabilities -- 0.1%............ 228,354
------------
NET ASSETS -- 100.0%..................................... $159,650,778
------------
------------
</TABLE>
* Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR), whose yields are determined on date of last interest rate
change. For Variable Rate Demand Notes, maturity date shown is the date of
next interest rate change.
Abbreviation used in this statement:
GO -- General Obligation
See accompanying notes to financial statements.
PAGE 6
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<S> <C>
ASSETS
Investment, at value (cost $156,260,424)...................................................... $156,260,424
Repurchase Agreement, at value (cost $3,162,000).............................................. 3,162,000
Cash.......................................................................................... 348
Receivable from investment manager............................................................ 23,847
Interest receivable........................................................................... 418,133
Other assets.................................................................................. 643
------------
Total assets.......................................................................... 159,865,395
------------
LIABILITIES
Dividend payable.............................................................................. 85,811
Payable for Fund shares repurchased........................................................... 50,649
Accrued expenses.............................................................................. 78,157
------------
Total liabilities..................................................................... 214,617
------------
NET ASSETS (equivalent to $1.00 per share on 159,650,135 shares of $.001 par value capital
stock outstanding).......................................................................... $159,650,778
------------
------------
</TABLE>
- ------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1996
<TABLE>
<S> <C> <C>
INCOME
Interest..................................................................................... $3,571,519
EXPENSES
Management fee.................................................................. $ 126,986
Custody, shareholder services and administration fees........................... 89,750
Legal........................................................................... 20,001
Audit and tax return preparation fees........................................... 20,000
Registration and filing fees.................................................... 20,000
Printing........................................................................ 15,001
Directors' fees and expenses.................................................... 2,767
Other........................................................................... 6,941
----------
301,446
Management fee waived and expenses absorbed by investment manager............... (150,833)
Credits earned on cash balances and fees waived by custodian.................... (20,267) 130,346
---------- ----------
Net investment income........................................................................ 3,441,173
NET REALIZED GAIN ON SECURITIES SOLD............................................................. 554
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS....................................................... $3,441,727
----------
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 7
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996(a) 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income....................................................... $ 3,441,173 $ 744,110
Net realized gain on securities sold........................................ 554 6,443
------------ -----------
Net increase in net assets from operations.................................. 3,441,727 750,553
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income........................................ (3,441,173) (744,110)
Distributions from net realized gains....................................... -- (959)
------------ -----------
(3,441,173) (745,069)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares............................................... 267,128,203 79,773,668
Net asset value of shares issued in reinvestment of dividends............... 2,994,052 555,617
Payment for redemption of shares............................................ (121,897,499) (96,624,438)
------------ -----------
Net increase (decrease) in net assets derived from share transactions....... 148,224,756 (16,295,153)
------------ -----------
Contribution from investment manager........................................ -- 48,447
------------ -----------
Net increase (decrease) in net assets....................................... 148,225,310 (16,241,222)
NET ASSETS
Beginning of year........................................................... 11,425,468 27,666,690
------------ -----------
End of year................................................................. $159,650,778 $11,425,468
------------ -----------
------------ -----------
</TABLE>
- -------------------------------------------
Financial Highlights
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996(a) 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- ------- ------- -------
Net investment income....................................... 0.050* 0.049* 0.036 0.028 0.034
Dividends from net investment income........................ (0.050) (0.049) (0.036) (0.028) (0.034)
-------- ------- ------- ------- -------
Net asset value, end of year................................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------- ------- ------- -------
-------- ------- ------- ------- -------
Net assets, end of year (thousands)......................... $159,651 $11,425 $27,667 $34,120 $50,554
Total investment return..................................... +5.1% +5.0% +3.6% +2.9% +3.4%
Ratios to average net assets:
Expenses................................................ 0.20%* 0.65%* 0.45% 0.35% 0.44%
Net investment income................................... 5.29% 4.89% 3.53% 2.83% 3.42%
</TABLE>
* Net investment income per share would have been $.048 and $.049 and the
expense ratios to average net assets would have been .46% and .70%,
respectively, for the years ended December 31, 1996 and 1995, before
applicable waiver of management fee, expenses absorbed by the investment
manager and credits earned from and fees waived by the custodian.
(a) The Fund changed its name and objective on April 29, 1996. See Note 1.
See accompanying notes to financial statements.
PAGE 8
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Salomon Brothers Series Funds Inc (the 'Company') was incorporated in Maryland
on April 17, 1990 as an open-end management investment company, and currently
operates as a series company comprised of ten portfolios. Only information with
respect to Salomon Brothers Institutional Money Market Fund (the 'Fund') is
included in this report. The other portfolios of the Company are reported in a
separate report and are not included herein. The Fund changed its name from
Salomon Brothers U.S. Treasury Securities Money Market Fund to its current name
on April 29, 1996. Prior to April 29, 1996, the Fund's objective was to seek a
high level of current income by investing only in short-term United States
government and government agency securities. The Fund's current objective is to
seek as high a level of current income as is consistent with liquidity and the
stability of principal.
Following is a summary of significant accounting policies followed by the Fund
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.
(A) SECURITIES VALUATION. Portfolio securities are valued using the
amortized cost method, which involves initially valuing an investment at
its cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value and does not include unrealized gains or losses.
(B) FEDERAL INCOME TAXES. The Fund has complied and intends to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies, including the distribution
requirements of the Tax Reform Act of 1986, and to distribute all of its
income, including any net realized gains, to shareholders. Therefore, no
Federal income tax or excise tax provision is required.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends on the
shares of the Fund are declared each business day to shareholders of record
at twelve noon (New York time) on that day, and paid on the last business
day of the month. Distributions of net realized gains to shareholders, if
any, are declared annually and recorded on the ex-dividend date. Dividends
and distributions are determined in accordance with income tax regulations,
which may differ from GAAP.
PAGE 9
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------
Notes to Financial Statements
(D) EXPENSES. Direct expenses are charged to the Fund, and general
expenses of the Company are allocated to the Fund based on relative average
net assets for the period the expense was incurred.
(E) OTHER. Investment transactions are recorded as of the trade date.
Interest income, including the accretion of discounts or the amortization
of premiums, is recognized when earned. Gains or losses on sales of
securities are calculated on the identified cost basis.
2. Management Fee and Other Agreements
The Company retains Salomon Brothers Asset Management Inc ('SBAM'), an indirect
wholly owned subsidiary of Salomon Inc, to act as investment manager of the
Fund, subject to the supervision by the Board of Directors of the Company. SBAM
furnishes the Company with office space and certain services and facilities
required for conducting the business of the Company and pays the compensation of
its officers. The management fee for these services is payable monthly and is
based on an annual rate of .20% of the Fund's average daily net assets. Prior to
April 29, 1996, the management fee was based on an annual rate of .10% of the
Fund's average daily net assets.
Under a voluntary agreement between SBAM and the Fund, SBAM has agreed to reduce
or otherwise limit the expenses of the Fund (exclusive of taxes, interest, and
extraordinary expenses such as litigation and indemnification expenses), on an
annualized basis to .18% of the Fund's average daily net assets for a period
from April 29, 1996 through April 29, 1997, and to no more than .25% thereafter.
For the year ended December 31, 1996, SBAM voluntarily waived management fees of
$126,986 and voluntarily absorbed $23,847 of expenses.
Investors Bank & Trust Company ('IBT') serves as custodian, administrator and
shareholder servicing agent for the Fund, which includes performing custodial
and certain administrative services in connection with the operation of the
Fund. IBT agreed to waive a portion of its custody fees through October 31,
1996. In addition, a credit is earned on outstanding cash balances held by the
custodian during each billing period. During the year ended December 31, 1996,
fees of $20,000 were waived by IBT and credits of $267 were earned on
outstanding cash balances of the Fund.
The Fund has an agreement with Salomon Brothers Inc, an affiliate of SBAM, to
distribute its shares.
PAGE 10
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
3. Capital Stock
At December 31, 1996, the Company had 10,000,000,000 shares of authorized
capital stock, par value $.001 per share, of which the Fund had 1,000,000,000
shares authorized.
Because the Fund has maintained a $1.00 net asset value per share from
inception, the number of shares sold, shares issued to shareholders in
reinvestment of dividends declared, and shares repurchased, are equal to the
dollar amount shown in the Statement of Changes in Net Assets for the
corresponding capital share transactions.
Net assets consist of:
<TABLE>
<S> <C>
Par value..................................................................................... $ 159,650
Paid-in capital in excess of par.............................................................. 159,490,485
Undistributed net investment income........................................................... 265
Accumulated net realized gain on investments.................................................. 378
------------
Net assets.................................................................................... $159,650,778
------------
------------
</TABLE>
4. Portfolio Activity
The Fund invests in money market instruments maturing in thirteen months or less
whose credit ratings are within the two highest ratings category of two
nationally recognized statistical rating organizations ('NRSROs') or if rated by
only one NRSRO, that NRSRO, or, if not rated, are believed by the investment
manager to be of comparable quality.
During the year ended December 31, 1996, the Fund utilized $176 of capital loss
carry-forwards to offset net realized capital gains.
PAGE 11
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ----------------------------------------------------------------
Report of Independent Accountants
To the Board of Directors and Shareholders of
Salomon Brothers Institutional Money Market Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Salomon Brothers Institutional
Money Market Fund (one of the portfolios constituting Salomon Brothers Series
Funds Inc, hereafter referred to as the 'Fund') at December 31, 1996, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 18, 1997
PAGE 12
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN
Vice President -- General Counsel,
Pfizer International Inc.
MICHAEL S. HYLAND
President,
Salomon Brothers Asset Management Inc;
Managing Director, Salomon Brothers Inc
- --------
OFFICERS
MICHAEL S. HYLAND
Chairman and President
JAMES E. CRAIGE
Executive Vice President
RICHARD E. DAHLBERG
Executive Vice President
THOMAS K. FLANAGAN
Executive Vice President
GIAMPAOLO G. GUARNIERI
Executive Vice President
STEVEN GUTERMAN
Executive Vice President
MAUREEN O'CALLAGHAN
Executive Vice President
BETH SEMMEL
Executive Vice President
MARYBETH WHYTE
Executive Vice President
PETER J. WILBY
Executive Vice President
LAWRENCE H. KAPLAN
Executive Vice President
and General Counsel
ELIZA LAU
Vice President
NANCY A. NOYES
Vice President
ALAN M. MANDEL
Treasurer
JENNIFER G. MUZZEY
Secretary
JANET S. TOLCHIN
Assistant Treasurer
REJI PAUL
Assistant Treasurer
NOEL B. DAUGHERTY
Assistant Secretary
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
7 World Trade Center
New York, New York 10048
1-800-SALOMON (1-800-725-6666)
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
DISTRIBUTOR
Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN, DIVIDEND DISBURSING AND TRANSFER
AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- ---------------------------------------------------
THE SALOMON BROTHERS INSTITUTIONAL INVESTMENT SERIES*
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND
FUND
The High Yield Bond Fund's investment objective is to maximize total returns.
The Fund seeks to achieve its objective by investing primarily in a portfolio of
high yield fixed-income securities that offer a yield above that generally
available on debt securities in the four highest rating categories of the
recognized rating services and which generally entail increased credit and
market risks.
SALOMON BROTHERS INSTITUTIONAL
EMERGING MARKETS DEBT FUND
The Emerging Market Debt Fund's objective is to maximize total return. The Fund
seeks to achieve its objective by investing at least 80% of its total assets in
debt securities of government, government-related and corporate issuers in
emerging market countries and of entities organized to restructure outstanding
debt of such issuers.
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH
FUND
The Asia Growth Fund's investment objective is to achieve long-term capital
appreciation. The Fund seeks to achieve its objective
by investing at least 65% of its assets in
equity and equity-related securities of 'Asian
Companies' (as defined in the prospectus).
- --------------------------------------------------------------------------------
* For more complete information about the Salomon Brothers Institutional
Investment Series, you may obtain a Prospectus by calling 1-800-SALOMON
(1-800-725-6666).
This report is submitted for the general information of the shareholders of
Salomon Brothers Institutional Investment Series. It is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus for the Funds, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent information.
<PAGE>
