<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY
INTERNATIONAL AGGRESSIVE
GROWTH FUND
--------------------------------------------------------------------------------
CLASSIC SERIES | ANNUAL REPORT | OCTOBER 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
--------------------------------------------------------------------------------
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
--------------------------------------------------------------------------------
<PAGE>
[GRAPHIC] Classic Series
Annual Report . October 31, 2000
SMITH BARNEY
INTERNATIONAL AGGRESSIVE
GROWTH FUND
[PHOTO]
JAMES B. CONHEADY,
JEFFREY J. RUSSELL,
Portfolio Managers
--------------------------------------------------------------------------------
JEFFREY J. RUSSELL
--------------------------------------------------------------------------------
Jeffrey J. Russell, CFA, has more than 19 years of securities business experi-
ence and has been co-managing the Fund since its inception.
Education: BS from the Massachusetts Institute of Technology, MBA from the
University of Pennsylvania's Wharton School of Finance.
--------------------------------------------------------------------------------
JAMES B. CONHEADY
--------------------------------------------------------------------------------
James B.Conheady has more than 39 years of securities business experience and
has been co-managing the Fund since its inception.
Education: BSS from Georgetown
University
--------------------------------------------------------------------------------
FUND OBJECTIVE
--------------------------------------------------------------------------------
The Fund seeks total return on its assets from growth of capital and income by
investing principally in a diversified portfolio of equity securities of
established non-U.S. issuers.
--------------------------------------------------------------------------------
FUND FACTS
--------------------------------------------------------------------------------
FUND INCEPTION
--------------------------------------------------------------------------------
February 21, 1995
MANAGER TENURE
--------------------------------------------------------------------------------
Since Inception
MANAGER INVESTMENT
INDUSTRY EXPERIENCE
--------------------------------------------------------------------------------
19 Years (Jeffrey J. Russell)
39 Years (James B. Conheady)
CLASS 1 CLASS A CLASS B CLASS L
--------------------------------------------------------------------------------
NASDAQ CSQIX CSQAX CSQBX N/A
--------------------------------------------------------------------------------
INCEPTION 8/8/96 2/21/95 2/21/95 9/13/00
Average Annual Total Returns as of October 31, 2000
Without Sales Charges/(1)/
Class 1 Class A/(2)/ Class B/(2)/ Class L
--------------------------------------------------------------------------------
One-Year 31.53% 31.00% 30.04% N/A
--------------------------------------------------------------------------------
Five-Year N/A 24.96 24.06 N/A
--------------------------------------------------------------------------------
Since Inception+ 26.20 25.19 24.28 (9.80)%++
--------------------------------------------------------------------------------
With Sales Charges/(3)/
Class 1 Class A/(2)/ Class B/(2)/ Class L
--------------------------------------------------------------------------------
One-Year 20.33% 24.44% 25.04% N/A
--------------------------------------------------------------------------------
Five-Year N/A 23.69 23.97 N/A
--------------------------------------------------------------------------------
Since Inception+ 23.57 24.05 24.28 (11.60)%++
--------------------------------------------------------------------------------
/(1)/Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of all
applicable sales charges with respect to Class 1, A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
/(2)/For the purpose of calculating performance, the Fund's inception date is
March 17,1995 (date the Fund's investment strategy was implemented).
/(3)/Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the maximum sales charges of 8.50%, 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is incurred.
Class L shares also reflect the deduction of a 1.00% CDSC, which applies
if shares are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Inception date for Class 1 shares is August 8, 1996. Inception date for
Class A and B shares is February 21, 1995. Inception date for Class L
shares is September 13, 2000.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
--------------------------------------------------------------------------------
What's Inside
Your Investment in the Smith Barney International Aggressive Growth Fund .. 1
A Message from the Chairman ............................................... 2
Letter from the Portfolio Managers ........................................ 3
Historical Performance .................................................... 7
Smith Barney International Aggressive Growth Fund at a Glance ............. 9
Schedule of Investments ................................................... 10
Statement of Assets and Liabilities ....................................... 13
Statement of Operations ................................................... 14
Statements of Changes in Net Assets ....................................... 15
Notes to Financial Statements ............................................. 16
Financial Highlights ...................................................... 21
Independent Auditors' Report .............................................. 25
Additional Information .................................................... 26
Tax Information ........................................................... 27
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
<PAGE>
--------------------------------------------------------------------------------
YOUR INVESTMENT IN THE SMITH BARNEY INTERNATIONAL
AGGRESSIVE GROWTH FUND
--------------------------------------------------------------------------------
Ably guided by seasoned portfolio managers Jeff Russell and James Conheady, the
International Aggressive Growth Fund looks to offer investors total return on
its assets from the growth of capital and income by investing primarily in a
diversified portfolio of equity securities of established non-U.S. issuers.
[GRAPHIC] Overseas Companies Positioned for Rapid Growth
Jeff and James use a rigorous process in carefully evaluating
companies, seeking dynamic businesses that they believe demonstrate
a potential for consistent revenue and earnings growth. Jeff and
James also look to own companies they deem to be strategically
positioned to capitalize on the potential growth of the global
economy. In allocating assets among countries and regions, Jeff and
James carefully evaluate each region's economic stability and
potential prospects for economic growth, stable governments with
policies that encourage economic growth, and hands-on analysis of a
range of individual investment opportunities.
[GRAPHIC] A Pure Investment in the Overseas Markets
Jeff and James are firm believers that a world of opportunity
exists beyond the United States. While most global mutual funds may
allocate a substantial portion of assets to the U.S. markets, Jeff
and James invest most of the Fund's assets in countries other than
the U.S.
[GRAPHIC] Portfolio Manager-Driven Funds--The Classic Series
The Classic Series is a selection of Smith Barney Mutual Funds that
invest across asset classes and sectors, utilizing a range of
strategies in order to achieve their objectives. Classic Series
funds enable investors to participate in a mutual fund for which
investment decisions are determined by portfolio managers, based on
each fund's investment objectives and guidelines.
[GRAPHIC] A Distinguished History of Managing Your Serious Money
Founded in 1873 and 1892, respectively, the firms of Charles D.
Barney and Edward B. Smith were among the earliest providers of
securities information, research and transactions. Merged in 1937,
Smith Barney & Co. offered its clients a powerful, blue-chip
investment capability able to provide timely information, advice
and insightful asset management. Today, SSB Citi Asset Management
Group ("SSB Citi") unites the distinguished history of Smith Barney
with the unparalleled global reach of its parent, Citigroup.
At SSB Citi, you gain access to blue-chip management delivered
professionally. We are proud to offer you, the serious investor, a
variety of managed solutions.
1 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN
--------------------------------------------------------------------------------
[PHOTO]
HEATH B. MCLENDON
CHAIRMAN
The world's economies, so far in the new millennium, have faced a number of
challenges, such as the elimination of trade barriers and the deregulation of
international labor markets.
Over the past few months, the global economy has become more balanced. While the
U.S. economy has experienced a cooling period, other countries' economies such
as Brazil and China have been strong performers. Recently, we have also seen the
rationalization of stock prices, especially in the technology sector. Investor
enthusiasm over e-commerce and "New Economy"/1/ stocks has subsided, resulting
in what we believe are generally more reasonable valuations.
As the global economy becomes more balanced and the U.S. markets are marked by
higher volatility and concerns that the bull market in stocks may be running out
of steam, we at SSB Citi Asset Management Group ("SSB Citi") believe it has
become more important than ever to remain globally diversified. Despite the
tremendous returns of the U.S. stock market in the past few years, the U.S. has
yet to be the top-performing market in any one year over the last two decades.
Of course there are certain risks in international investing, which may pose a
greater risk than investing in the U.S., such risks include currency
fluctuations, different accounting standards and less financial regulation and
social and economic instability.
We believe that your serious money demands professional management. Since 1937,
Smith Barney has managed the serious money of individuals, their families and
their businesses. Today, with over $398.6 billion in assets under management,
/2/ we believe that SSB Citi offers choices and solutions, uniting the
distinguished history of Smith Barney with the unparalleled global reach of its
parent, Citigroup.
The Smith Barney Investment Series -- Smith Barney International Aggressive
Growth Fund ("Fund"), formerly known as Concert Investment Series --
International Equity Fund, provides you with the opportunity to participate in
foreign markets and capitalize on expanding overseas opportunities by investing
principally in a diversified portfolio of stocks, of established non-U.S.
issuers.
As international stock investors, portfolio managers Jeffrey Russell and James
Conheady look for promising companies that have experienced and effective
management teams that are committed to long-term growth, above average earnings
growth and competitive advantages. They believe that while a sector or region
may have winners and losers, great companies stand out for reasons of
marketplace strategy, leadership and management.
When you invest with SSB Citi you can do so with the confidence that your
interests come first, your investment success is paramount and that the ultimate
in resources is being committed to your financial success.
Thank you for your confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 27, 2000
----------
1 The New Economy represents those companies in the technology,
telecommunications and Internet sectors.
2 As of October 31, 2000. This figure represents SSB Citi's assets under
management for retail, institutional, money and separate accounts.
2 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
Dear Shareholder,
We are pleased to provide the annual report for the Smith Barney Investment
Series -- Smith Barney International Aggressive Growth Fund ("Fund") for the
year ended October 31, 2000. In this report we have summarized the period's
prevailing economic and market conditions and outlined our investment strategy.
A detailed summary of the Fund's performance can be found in the appropriate
sections that follow. We hope you find this report to be useful and informative.
Performance Update and Investment Strategy
The past twelve months included a series of extraordinary financial market
events that influenced significantly the net asset value ("NAV")/1/ per share of
the Fund. For the year ended October 31, 2000, the Fund's Class A shares,
without and with sales charges, returned 31.00% and 24.44%, respectively. In
comparison, the Morgan Stanley Capital International Europe, Australasia and Far
East Index ("MSCI EAFE")/2/ returned a negative 2.90% for the same period.
The Fund's fiscal year began with several months of strong appreciation as an
unquenchable appetite by investors for telecommunications, media and technology
(TMT) stocks drove a very sharp rally of global markets. Year 2000 technology
apprehensions and concerns of economic disruption were quickly dispelled. The
Y2K transition appeared to be a strong testament to the foresight of capital and
human resources dedicated to fix that potential technological nightmare.
--------------------------------------------------------------------------------
THE FUND'S TOP HOLDINGS ARE ILLUSTRATIVE
OF OUR GROWTH-ORIENTED STOCK/3/ SELECTION
CRITERIA, INCLUDING LARGE
BUSINESS OPPORTUNITIES AND STABLE
AND VISIONARY MANAGEMENTS.
--------------------------------------------------------------------------------
Overlooked by many during the favorable global capital markets environment of
late 1999, however, were several trends that unnerved many investors as 2000
progressed, such as:
. The U.S. Federal Reserve Board ("Fed") began a series of short-term
interest rate increases, designed to break the strong growth trajectory of
the U.S. economy and cool stock market euphoria;
. The new European currency, the euro,/4/ continued the trend of weakness
established early in 1999, cascading a further 19% versus the U.S. dollar
during the Fund's fiscal year. Moreover, the euro's fall caused corporate
earnings dislocations on both sides of the Atlantic;
. Energy prices rose dramatically, especially when denominated in euros,
raising inflationary expectations in Europe and dampening consumer
sentiment; and
----------
1 NAV is calculated by subtracting total liabilities from the closing value
of all securities held by the Fund (plus all other assets) and dividing the
result (total net assets) by the total number of shares outstanding for
each class of shares. The NAV fluctuates with changes in the value of the
securities in which the Fund has invested.
2 The MSCI EAFE is an unmanaged index of common stocks of companies located
in Europe, Australasia and the Far East. Please note that an investor
cannot invest directly in an index.
3 Growth stocks are shares of companies with the potential for
faster-than-average growth within their industries. Growth stocks generally
provide an opportunity for more capital appreciation than fixed income
investments but are subject to greater market fluctuations.
4 The euro is the single currency of the European Monetary Union that was
adopted by Belgium, Germany, Spain, France, Ireland, Italy, Luxemburg, the
Netherlands, Austria, Portugal and Finland on January 1, 1999.
3 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
. Subsequent interest rate increases moderated global growth expectations, in
turn causing several rounds of earnings downgrades, especially for high
profile technology names.
These factors ultimately proved an insurmountable hurdle for most international
growth stocks, which have significantly underperformed international value
stocks/5/ during the past year. After a strong surge in the early part of the
year, growth stocks succumbed to the factors previously discussed and
underperformed value stocks by more than 8% during the Fund's fiscal year.
Selected industry sectors incurred new challenges.The European
telecommunications operators, for example, embarked on an aggressive competitive
bidding process to secure third generation wireless communications licenses.The
victorious bids, in many nationalities, were significantly above initial
expectations, causing investor apprehension about ultimate returns on capital
invested in paying for those licenses and capital spending.
--------------------------------------------------------------------------------
SELECTED INDUSTRY SECTORS INCURRED
NEW CHALLENGES. THE EUROPEAN
TELECOMMUNICATIONS OPERATORS EMBARKED
ON AN AGGRESSIVE COMPETITIVE BIDDING
PROCESS TO SECURE THIRD GENERATION WIRELESS
COMMUNICATIONS LICENSES. THE VICTORIOUS
BIDS, IN MANY NATIONALITIES, WERE
SIGNIFICANTLY HIGHER THAN EXPECTED.
--------------------------------------------------------------------------------
Fund Outlook
The composition of the Fund shifted during the period, primarily due to the
outperformance of European stocks.The Fund's allocation of approximately 54%
Europe, 40% Asia, and 6% Canada, Latin America and other emerging markets at the
beginning of the year changed to approximately 63% Europe, 28% in Asia and 8% in
Canada, Latin America and other emerging markets as of October 31, 2000.
Europe
European stock markets showed relatively solid performance during much of the
period when measured in local currencies. Yet the fall of the euro dramatically
lowered returns for dollar-based investors. In addition, we think the decline of
the euro versus the U.S. dollar appears to be due to growth and interest rate
differentials favoring the U.S. currency. Global portfolio flows into the U.S.
also pressured the euro, as did inconsistent policy pronouncements from the
European Central Bank (ECB). At the end of the fiscal year, the ECB intervened
in the currency markets in order to stabilize the euro.
The silver lining of the euro's decline has been the improvement in European
export competitiveness. However, we think the potential for imported inflation
clearly exists. Moreover, recent rounds of interest rate increases have cooled
the uptick in economic activity. Nevertheless, Europe's growth is reducing its
chronically high levels of unemployment.
----------
5 Value stocks are the shares of those companies whose shares are considered
to be inexpensive relative to their asset values or earning power.
4 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
Asia
The Asian stock markets were relatively poor performers during the period. In
our opinion, several factors weighed on Asian markets. First, the monetary
policy of many Asian economies is tied to the U.S. interest rate cycle through
currency links. As rates rose in the U.S., Asian stock markets were pressured.
Second, many of these markets have high representation of technology shares,
such as the Korean stock market. As global technology earnings came under
question, the Asian economies, as key manufacturers and assemblers of components
and semiconductors, were subject to forecast downgrades. Finally, political
transitions in several Asian economies (e.g. Taiwan) caused regional investor
concerns to rise.
In contrast with our optimism about Japanese restructuring at this time a year
ago, the pace of change in Japan has slowed. The financial system is being
rationalized. Several high profile bankruptcies of insurance and other companies
are positive for the economy in the long run. In the short term, however, these
events have been a stark reminder to Japanese consumers and savers of the
fragility of Japan's recovery.
Emerging Markets
Emerging markets suffered this year. While selected commodity prices firmed,
benefiting the generally commodity dependent export economies, investor aversion
to the heightened political risk in many less developed economies weighed on
these markets. We have limited emerging market investments and we do not
currently anticipate increasing our allocation.
--------------------------------------------------------------------------------
THE SILVER LINING OF THE EURO'S DECLINE
HAS BEEN THE IMPROVEMENT IN EUROPEAN
EXPORT COMPETITIVENESS.
--------------------------------------------------------------------------------
Top Holdings As Of October 31, 2000
Our top holdings in the Fund reflect an eclectic mix of investment themes and
emphasis. Moreover, the Fund's top holdings are illustrative of our
growth-oriented stock selection criteria, which include strong financial
structures, large business opportunities and what we deem are stable and
visionary managements.
. Tomra Systems ASA of Norway manufactures reverse vending machinery for
global beverage containers. The trend toward increased consumer deposit
legislation, especially in Germany, benefits deployment of Tomra's products
and materials recycling processes;
. The Furukawa Electric Co., Ltd. of Japan is one of the largest
manufacturers of optical fibers in Asia. The company also holds a
significant equity stake in JDS Uniphase Corp. of Canada, a clear leader in
optical networking technology;
. Groupe Danone of France produces global branded consumer products. The
company's offerings include dairy products (Dannon yogurt), bottled water
(Evian) and baked goods;
. MLP AG of Germany is a full service, retail and financial services
organization offering professional, high-income clients a diversity of
investment products;
. William Demant A/S of Denmark is a global leader in the digital hearing aid
industry;
. Celestica Inc. of Canada provides contract electronic manufacturing
services to original equipment manufacturers. Celestica manufactures,
assembles and tests a host of products for prominent global electronic
companies;
5 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
. Mettler-Toledo International Inc. of Switzerland manufactures precision
weighing and measurement instruments. A diverse customer base in the
laboratory, retail and industrial sectors increasingly demand Mettler's
highly sophisticated instruments and information management solutions;
. Opticom ASA of Norway is developing polymer-based, high-density, storage
media for a variety of data applications;
. JDS Uniphase Corp. of Canada designs, manufactures and markets high-speed
fiber optic communications equipment; and
. C-MAC Industries Inc. of Canada also is a key participant in the
consolidating contract electronic manufacturing industry. The company
concentrates on the telecommunications market and is a key supplier to
Nortel Networks Corp.
The Fund's past fiscal year has been marked by exceptional investment challenges
from a combination of currency movements, government policy changes and sharp
swings of investor sentiment. The result has been sharp stock market volatility.
Thank you for your investment in the Smith Barney Investment Series -- Smith
Barney International Aggressive Growth Fund. We look forward to continuing to
help you pursue your financial goals in the future.
Sincerely,
/s/ Jeffrey J. Russell /s/ James B. Conheady
Jeffrey J. Russell James B. Conheady
Vice President Vice President
November 27, 2000
The information provided in this letter represents the opinion of the managers
and is not intended to be a forecast of future events, a guarantee of future
results nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Fund. Please refer to pages 10 through
12 for a list and percentage breakdown of the Fund's holdings. Also, please note
any discussion of the Fund's holdings is as of October 31, 2000 and is subject
to change.
6 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class 1 Shares
---------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
===============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $32.57 $42.17 $0.00 $0.74 31.53%
---------------------------------------------------------------------------------------------------------------
10/31/99 19.06 32.57 0.00 0.00 70.88
---------------------------------------------------------------------------------------------------------------
10/31/98 18.16 19.06 0.00 0.00 4.96
---------------------------------------------------------------------------------------------------------------
10/31/97 16.52 18.16 0.00 0.00 9.99
---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/96 16.00 16.52 0.00 0.00 3.25+
===============================================================================================================
Total $0.00 $0.74
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class A Shares
---------------------------------------------------------------------------------------------------------------
Net Asset Value
--------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
===============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $32.24 $41.57 $0.00 $0.74 31.00%
---------------------------------------------------------------------------------------------------------------
10/31/99 18.94 32.24 0.00 0.00 70.22
---------------------------------------------------------------------------------------------------------------
10/31/98 18.14 18.94 0.00 0.00 4.41
---------------------------------------------------------------------------------------------------------------
10/31/97 16.54 18.14 0.00 0.00 9.74
---------------------------------------------------------------------------------------------------------------
10/31/96 13.86 16.54 0.00 0.00 19.34
---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 11.81 13.86 0.00 0.00 16.28(2))+
===============================================================================================================
Total $0.00 $0.74
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
---------------------------------------------------------------------------------------------------------------
Net Asset Value
---------------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
===============================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $31.16 $39.86 $0.00 $0.74 30.04%
---------------------------------------------------------------------------------------------------------------
10/31/99 18.44 31.16 0.00 0.00 68.98
---------------------------------------------------------------------------------------------------------------
10/31/98 17.81 18.44 0.00 0.00 3.54
---------------------------------------------------------------------------------------------------------------
10/31/97 16.36 17.81 0.00 0.00 8.93
---------------------------------------------------------------------------------------------------------------
10/31/96 13.79 16.36 0.00 0.00 18.64
---------------------------------------------------------------------------------------------------------------
Inception*-- 10/31/95 11.81 13.79 0.00 0.00 15.69/(2)/+
===============================================================================================================
Total $0.00 $0.74
===============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
---------------------------------------------------------------------------------------------------------------
Net Asset Value
----------------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividend Distribution Return/(1)/
===============================================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-- 10/31/00 $46.13 $41.61 $0.00 $0.00 (9.80)%+
===============================================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
7 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges/(1)/
--------------------------------------------------
Class 1 Class A/(2)/ Class B/(2)/ Class L
================================================================================
Year Ended 10/31/00 31.53% 31.00% 30.04% N/A
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 N/A 24.96 24.06 N/A
--------------------------------------------------------------------------------
Inception* through 10/31/00 26.20 25.19 24.28 (9.80)%+
================================================================================
With Sales Charges/(3)/
--------------------------------------------------
Class 1 Class A/(2)/ Class B/(2)/ Class L
================================================================================
Year Ended 10/31/00 20.33% 24.44% 25.04% N/A
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 N/A 23.69 23.97 N/A
--------------------------------------------------------------------------------
Inception* through 10/31/00 23.57 24.05 24.28 (11.60)%+
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges/(1)/
================================================================================
Class 1 (Inception* through 10/31/00) 167.74%
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00)(2) 254.33
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00)(2) 239.95
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) (9.80)
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class 1, A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) For the purpose of calculating performance, the Fund's inception date is
March 17, 1995 (date the Fund's investment strategy was implemented).
(3) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the current maximum sales charges of 8.50%, 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 1.00% per year until no CDSC is incurred. Class L shares also
reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within one year.
* Inception date for Class 1 shares is August 8, 1996. Inception date for
Class A and B shares is February 21, 1995. Inception date for Class L
shares is September 13, 2000.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
8 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Smith Barney International Aggressive Growth Fund at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class A and B Shares of the
Smith Barney International Aggressive Growth Fund vs. MSCI EAFE Index+
--------------------------------------------------------------------------------
March 1995 -- October 2000
International Aggressive International Aggressive MSCI EAFE
Growth Fund-- Class A Growth Fund-- Class B Index
3/17/95 9,453 10,000 10,000
Oct-95 10,991 11,069 9,993
Oct-96 13,109 13,316 11,073
Oct-97 14,385 14,641 11,618
Oct-98 15,020 15,270 12,755
Oct-99 25,567 26,041 15,694
10/31/00 32,966 33,995 16,281
+ Hypothetical illustration of $10,000 invested in Class A and B shares at
inception on March 17, 1995 (date the Fund's investment strategy was
implemented), assuming deduction of the maximum 5.00% sales charge at the
time of investment for Class A shares and the deduction of the maximum
5.00% CDSC for Class B shares. It also assumes reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 2000. The
Morgan Stanley Capital International ("MSCI") EAFE Index is a composite
portfolio consisting of equity total returns for the countries of Europe,
Australasia and the Far East. The Index is unmanaged and is not subject to
the same management and trading expenses of a mutual fund. The per-
formance of the Fund's other classes may be greater or less than the Class
A and B shares' performance indicated on this chart, depending on whether
greater or lesser sales charges and fees were incurred by shareholders
investing in the other classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and redemption
values may be more or less than the original cost. No adjustment has been made
for shareholder tax liability on dividends or capital gains.
--------------------------------------------------------------------------------
Diversification by Country*+
--------------------------------------------------------------------------------
13.1% Canada
3.4% Denmark
7.8% France
7.7% Germany
4.6% Hong Kong
13.9% Japan
8.3% Norway
4.4% Sweden
6.6% Switzerland
15.8% United Kingdom
14.4% Other
--------------------------------------------------------------------------------
Investment Allocation*++
--------------------------------------------------------------------------------
1.0% Repurchase Agreement
99.0% Common Stock
* All information is as of October 31, 2000. Please note that Fund holdings
are subject to change.
+ As a percentage of total common stock.
++ As a percentage of total investments.
9 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 99.0%
Australia -- 1.1%
500,000 ERG Ltd. $ 2,448,491
--------------------------------------------------------------------------------
Canada -- 13.0%
100,000 Celestica Inc.* 7,123,682
110,000 Certicom Corp.* 3,637,137
100,000 C-MAC Industries Inc.* 5,630,852
70,000 JDS Uniphase Corp.* 5,696,250
100,000 Nortel Networks Corp. 4,550,000
175,000 Patheon, Inc.* 1,581,222
--------------------------------------------------------------------------------
28,219,143
--------------------------------------------------------------------------------
China -- 0.6%
600,000 China Unicom Ltd.* 1,203,985
--------------------------------------------------------------------------------
Denmark -- 3.4%
155,000 William Demant A/S 7,413,650
--------------------------------------------------------------------------------
Finland -- 2.0%
100,000 Nokia Oyj 4,275,007
--------------------------------------------------------------------------------
France -- 7.7%
35,000 Axa 4,627,903
50,000 Credit Lyonnais 1,708,340
30,000 Equant N.V.* 1,003,136
50,000 FI System* 949,313
60,000 Groupe Danone 8,381,082
--------------------------------------------------------------------------------
16,669,774
--------------------------------------------------------------------------------
Germany -- 7.6%
10,000 Allianz AG 3,362,434
2,000 Biodata Information Technology AG* 433,972
25,000 DataDesign AG* 455,586
80,000 Intershop Communications AG* 4,021,021
60,000 MLP AG 8,289,541
--------------------------------------------------------------------------------
16,562,554
--------------------------------------------------------------------------------
Hong Kong -- 4.5%
60,000 China Mobile Ltd.* 1,837,500
1,000,000 Computer & Technologies Holdings Ltd. 685,977
350,000 Hutchison Whampoa Ltd. 4,341,847
1,600,000 Li & Fung Ltd. 2,974,702
--------------------------------------------------------------------------------
9,840,026
--------------------------------------------------------------------------------
Iceland -- 0.8%
85,000 deCODE GENETICS, INC.* 1,785,000
--------------------------------------------------------------------------------
Ireland -- 1. 4%
50,000 Elan Corp. PLC* 2,596,875
75,685 Irish Continental Group PLC 416,980
100,000 IWP International PLC 135,616
--------------------------------------------------------------------------------
3,149,471
--------------------------------------------------------------------------------
Israel -- 3.0%
80,000 Amdocs Ltd.* 5,185,000
175,000 BATM Advanced Communications Ltd. 1,295,995
--------------------------------------------------------------------------------
6,480,995
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Italy -- 1.9%
200,000 Telecom Italia Mobile S.p.A. $ 1,710,459
75,000 Tiscali S.p.A.* 2,393,414
--------------------------------------------------------------------------------
4,103,873
--------------------------------------------------------------------------------
Japan -- 13.8%
50,000 FANUC LTD. 4,487,590
350,000 The Furukawa Electric Co., Ltd. 9,199,560
20,000 Matsushita Communication Industrial Co., Ltd. 2,619,287
300,000 Nippon Sheet Glass Co., Ltd. 4,560,857
140 NTT DoCoMo, Inc. 3,449,034
18,000 SOFTBANK CORP. 1,079,769
20,000 SONY CORP. 1,597,216
20,000 Trend Micro Inc. 1,886,620
65,000 USHIO INC. 1,131,056
--------------------------------------------------------------------------------
30,010,989
--------------------------------------------------------------------------------
Netherlands -- 0.8%
100,000 United Pan-Europe Communications N.V.* 1,750,297
--------------------------------------------------------------------------------
Norway -- 8.2%
20,000 Fast Search & Transfer ASA* 951,562
40,000 Opticom ASA* 6,786,732
250,000 Tomra Systems ASA 10,026,343
--------------------------------------------------------------------------------
17,764,637
--------------------------------------------------------------------------------
Singapore -- 0.9%
200,000 Venture Manufacturing Ltd. 1,936,770
--------------------------------------------------------------------------------
Spain -- 1.4%
300,000 Indra Sistemas, S.A. 3,015,765
--------------------------------------------------------------------------------
Sweden -- 4.4%
250,000 AU-System AB* 1,609,281
100,000 Framtidsfabriken AB* 262,475
150,000 Icon Medialab International AB* 1,205,090
110,000 Scandinavia Online AB* 863,394
125,000 Securitas AB, Class B Shares 2,657,186
175,000 Skandia Forsakrings AB 2,960,329
350 TeleLarm Care AB* 3,441
--------------------------------------------------------------------------------
9,561,196
--------------------------------------------------------------------------------
Switzerland -- 6.6%
75,000 Fantastic Corp.* 200,246
1,000 Julius Baer Holding Ltd. AG 4,949,669
150,000 Mettler-Toledo International Inc.* 7,003,125
750 Phonak Holding AG 2,148,101
--------------------------------------------------------------------------------
14,301,141
--------------------------------------------------------------------------------
Taiwan -- 0.3%
374,000 United Microelectronics Corp. 658,756
--------------------------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
United Kingdom -- 15.6%
600,000 Baltimore Technologies PLC* $ 4,622,020
400,000 Capita Group PLC 3,072,634
107,000 COLT Telecom Group PLC* 3,407,356
500,000 Energis PLC* 4,261,900
200,000 Galen Holdings PLC 2,606,511
250,000 Guardian IT PLC 3,376,122
350,000 Hays PLC 1,931,287
610,000 Serco Group PLC 5,602,547
550,000 Telewest Communications PLC* 912,460
709,078 Vodafone Group PLC 2,957,666
30,000 Vodafone Group PLC, Sponsored ADR 1,276,875
--------------------------------------------------------------------------------
34,027,378
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $167,498,314) 215,178,898
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 1.0%
$ 2,232,000 CIBC World Markets Corp., 6.470% due 11/1/00;
Proceeds at maturity -- $2,232,401;
(Fully collateralized by U.S.
Treasury Notes, 5.000% due 2/28/01;
Market value -- $2,276,732)
(Cost -- $2,232,000) 2,232,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $169,730,314**) $217,410,898
================================================================================
* Non-income producing security.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
12 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $169,730,314) $217,410,898
Foreign currency, at value (Cost -- $705) 707
Cash 3,230
Receivable for Fund shares sold 1,882,964
Dividends and interest receivable 50,293
Deferred organization costs 4,851
--------------------------------------------------------------------------------
Total Assets 219,352,943
--------------------------------------------------------------------------------
LIABILITIES:
Investment advisory fees payable 191,387
Payable for Fund shares purchased 90,677
Distribution fees payable 63,430
Trustees' retirement plan 17,594
Accrued expenses 317,964
--------------------------------------------------------------------------------
Total Liabilities 681,052
--------------------------------------------------------------------------------
Total Net Assets $218,671,891
================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 53,836
Capital paid in excess of par value 174,672,840
Accumulated net realized loss on security transactions
and foreign currencies (3,733,539)
Net unrealized appreciation of investments and foreign
currencies 47,678,754
--------------------------------------------------------------------------------
Total Net Assets $218,671,891
================================================================================
Shares Outstanding:
Class 1 211,722
------------------------------------------------------------------------------
Class A 2,098,514
------------------------------------------------------------------------------
Class B 3,066,457
------------------------------------------------------------------------------
Class L 6,901
------------------------------------------------------------------------------
Net Asset Value:
Class 1 (and redemption value) $42.17
------------------------------------------------------------------------------
Class A (and redemption value) $41.57
------------------------------------------------------------------------------
Class B * $39.86
------------------------------------------------------------------------------
Class L ** $41.61
------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class 1 (net asset value plus 9.29% of net asset value per share) $46.09
------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value per share) $43.76
------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $42.03
================================================================================
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within first year of purchase.
See Notes to Financial Statements.
13 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 637,748
Interest 320,919
Less: Foreign withholding tax (61,188)
--------------------------------------------------------------------------------
Total Investment Income 897,479
--------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 1,924,573
Distribution fees (Note 2) 1,251,175
Shareholder and system servicing fees 668,849
Custody 124,414
Registration fees 100,663
Shareholder communications 72,511
Audit and legal 48,350
Trustees' fees 23,425
Amortization of deferred organization costs 4,214
Other 16,140
--------------------------------------------------------------------------------
Total Expenses 4,234,314
--------------------------------------------------------------------------------
Net Investment Loss (3,336,835)
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES (NOTES 3 AND 8):
Realized Loss From:
Security transactions (excluding short-term securities) (3,626,296)
Foreign currency transactions (95,289)
--------------------------------------------------------------------------------
Net Realized Loss (3,721,585)
--------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and
Foreign Currencies:
Beginning of year 35,969,950
End of year 47,678,754
--------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 11,708,804
--------------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 7,987,219
--------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 4,650,384
================================================================================
See Notes to Financial Statements.
14 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended October 31,
--------------------------------------------------------------------------------
2000 1999
================================================================================
OPERATIONS:
Net investment loss $ (3,336,835) $ (1,038,506)
Net realized gain (loss) (3,721,585) 3,033,442
Increase in net unrealized appreciation 11,708,804 28,875,283
--------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,650,384 30,870,219
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gains (2,094,997) --
Capital (118) --
--------------------------------------------------------------------------------
Decrease in Net Assets From Distributions
to Shareholders (2,095,115) --
--------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 13):
Net proceeds from sale of shares 167,121,105 23,412,892
Net asset value of shares issued for
reinvestment of dividends 2,046,141 --
Cost of shares reacquired (35,806,542) (10,825,712)
--------------------------------------------------------------------------------
Increase in Net Assets From Fund Share
Transactions 133,360,704 12,587,180
--------------------------------------------------------------------------------
Increase in Net Assets 135,915,973 43,457,399
NET ASSETS:
Beginning of year 82,755,918 39,298,519
--------------------------------------------------------------------------------
End of year $218,671,891 $82,755,918
================================================================================
See Notes to Financial Statements.
15 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney International Aggressive Growth Fund ("Fund"), formerly known
as the International Equity Fund, is a separate investment fund of the Smith
Barney Investment Series ("Series"), formerly known as the Concert Investment
Series. The Series, a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company and consists of this portfolio and seven other separate
investment portfolios: Smith Barney Large Cap Core Fund, formerly known as the
Growth Fund, Smith Barney Growth and Income Fund, formerly known as the Growth
and Income Fund, Select Growth Portfolio, Select Mid Cap Portfolio, Select
Growth and Income Portfolio, Select Small Cap Portfolio, formerly known as the
Select Emerging Growth Portfolio, and Select Government Portfolio. The financial
statements and financial highlights for the other portfolios are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets or,
if there were no sales during the day, at the current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence, subsequent to the time a value was so
established, is likely to have significantly changed the value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and ask prices in the over-the-counter market; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (e) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Fund determines the existence of a dividend declaration
after exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (i) the accounting records of the Fund are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (j) realized gain and loss on foreign
currency includes the net realized amount from the sale of currency and the
amount realized between trade date and settlement date on security transactions;
(k) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At October 31, 2000, reclassifications were made to the
Fund's capital accounts to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations. Accordingly, a
portion of accumulated net investment loss amounting to $3,326,632 was
reclassified to paid-in capital. Net investment income, net realized gains and
net assets were not affected by this change; (l) the Fund intends to comply with
the requirements of the Internal Revenue Code of 1986, as amended, pertaining to
regulated investment companies and to make distributions of taxable income
sufficient to relieve it from substantially all federal income and excise tax;
and (m) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when financial
statements are prepared. Changes in the economic environment, financial markets
and any other parameters used in determining these estimates could cause actual
results to differ.
16 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
In addition, the Fund's organization costs have been deferred and are currently
being amortized on a straight-line basis over a five-year period.
Also, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk. These contracts are marked-to-market daily,
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Investment Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup") acts as the investment adviser to the Fund. The Fund pays SSBC an
investment advisory fee calculated at an annual rate of 1.00% of the average
daily net assets. The fee is calculated daily and paid monthly.
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Fund's transfer agent. CFTC receives account fees and asset-based fees that
vary according to the size and type of account. For the year ended October 31,
2000, the Fund paid transfer agent fees of $46,442 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Fund's distributor replacing CFBDS,Inc.("CFBDS"). In
addition, SSB acts as the primary broker for the Fund's portfolio agency
transactions. Certain other broker-dealers, continue to sell Fund shares to the
public as members of the selling group. For the year ended October 31, 2000, SSB
and its affiliates received brokerage commissions of $33,368.
There are maximum initial sales charges of 8.50%, 5.00% and 1.00% for Class 1, A
and L shares, respectively. There is a contingent deferred sales charge ("CDSC")
of 5.00% on Class B shares, which applies if redemption occurs within one year
of purchase and declines by 1.00% per year until no CDSC is incurred. Class L
shares also have a 1.00% CDSC which applies if redemption occurs within the
first year of purchase.
For the year ended October 31, 2000, SSB and CFBDS received sales charges of
approximately $39,578, $1,895,679 and $2,000 on the sale of the Fund's Class 1,
A and L shares, respectively. In addition, CDSCs paid to SSB were approximately
$141,750 for Class B shares.
Pursuant to two Distribution Plans, the Fund pays a service fee with respect to
its Class A and B shares calculated at an annual rate of 0.25% of the average
daily net assets for each respective class. The Fund also pays a distribution
fee with respect to Class B and L shares calculated at the annual rate of 0.75%
of the average daily net assets of each class. For the year ended October 31,
2000, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $197,704 $1,053,300 $171
================================================================================
All officers and one Trustee of the Series are employees of SSB.
The Trustees of the Series instituted a Retirement Plan ("Plan"), effective
April 1, 1996. The Plan is not funded, and obligations under the Plan will be
paid solely out of the Series' assets. The Series will not reserve or set aside
funds for the payment of its obligations under the Plan by any form of trust or
escrow. For the current Trustees not affiliated with the Adviser, the annual
retirement benefit payable per year for a ten-year period is based upon the
highest total annual compensation received in any of the three calendar years
preceding retirement. Trustees with more than five but less than ten years of
service at retirement will receive a proportionally reduced benefit. Under the
Plan, for those Trustees retiring with the effectiveness of the Plan, the annual
retirement benefit payable per year for a ten-year period is equal to 75% of the
total compensation received from the Trust during the 1995 calendar year.
17 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
3. Investments
During the year ended October 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $177,175,121
--------------------------------------------------------------------------------
Sales 50,921,121
================================================================================
At October 31, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 68,511,678
Gross unrealized depreciation (20,831,094)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 47,680,584
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Reverse Repurchase Agreement
The Fund may enter into reverse repurchase agreement transactions for leveraging
purposes. A reverse repurchase agreement involves a sale by the Fund of
securities that it holds with an agreement by the Fund to repurchase the same
securities at an agreed upon price and date. A reverse repurchase agreement
involves the risk that the market value of the securities sold by the Fund may
decline below the repurchase price of the securities. The Fund will establish a
segregated account with its custodian, in which the Fund will maintain cash,
U.S. government securities or other liquid high grade debt obligations equal in
value to its obligations with respect to reverse repurchase agreements.
During the year ended October 31, 2000, the Fund did not enter into any reverse
repurchase agreement transactions.
6. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian as is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
proceeds from (and cost of) the closing transaction and the Fund's basis in the
contract. The Fund enters into such contracts to hedge a portion of its
portfolio. The Fund bears the market risk that arises from changes in the value
of the financial instruments and securities indices (futures contracts) and the
credit risk should a counter-party fail to perform under such contracts.
At October 31, 2000, the Fund had no open futures contracts.
7. Option Contracts
Upon the purchase of a put option or a call option by the Fund, the premium paid
is recorded as an investment, the value of which is marked to market daily. When
a purchased option expires, the Fund will realize a loss in the amount of the
cost of the option. When the Fund enters into a closing sales transaction, the
Fund will realize a gain or loss depending on whether the sales proceeds from
the closing sales transaction are greater or less than the cost of the option.
When the Fund exercises a put option, it will realize a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
As of October 31, 2000, the Fund held no purchased call or put option contracts.
18 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
When a Fund writes a covered call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain.
When the Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised, the cost of
the security sold will be decreased by the premium originally received. When a
put option is exercised, the amount of the premium originally received will
reduce the cost of the security which the Fund purchased upon exercise. When
written index options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
During the year ended October 31, 2000, the Fund did not enter into any written
covered call or put option contracts.
8. Foreign Securities
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and the U.S. government. These risks include revaluation of currencies
and future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. government.
9. Short Sales of Securities
A short sale is a transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. To complete a short sale, the Fund may arrange through a broker to
borrow the securities to be delivered to the buyer. The proceeds received by the
Fund for the short sale are retained by the broker until the Fund replaces the
borrowed securities. In borrowing the securities to be delivered to the buyer,
the Fund becomes obligated to replace the securities borrowed at their market
price at the time of replacement, whatever the price may be.
At October 31, 2000, the Fund did not have any open short sale transactions.
10. Securities Lending
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded in
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account.
At October 31, 2000, the Fund had no securities on loan.
11. Securities Traded on a To-Be-Announced Basis
The Fund may trade securities on a "to-be-announced" ("TBA") basis. In a TBA
transaction, the Fund commits to purchasing or selling securities for which
specific information is not yet known at the time of the trade, particularly the
face amount and maturity date in GNMA transactions. Securities purchased on a
TBA basis are not settled until they are delivered to the Fund normally 15 to 45
days later. These transactions are subject to market fluctuations and their
current value is determined in the same manner as for other securities.
At October 31, 2000, the Fund did not hold any TBA securities.
19 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
12. Capital Loss Carryforward
At October 31, 2000, the Fund had, for Federal income tax purposes, a capital
loss carryforward of approximately $3,734,000, available to offset future
capital gains through October 31, 2008. To the extent that these carryforward
losses are used to offset capital gains, it is probable that the gains so offset
will not be distributed.
13. Shares of Beneficial Interest
The Fund has four classes of beneficial interest, Classes 1, A, B and L each
with a par value of $0.01 per share. There are an unlimited number of shares
authorized.
At October 31, 2000, total paid-in capital amounted to the following for each
class:
Class 1 Class A Class B Class L
================================================================================
Total Paid-in Capital $7,145,803 $62,943,161 $104,340,713 $296,999
================================================================================
Transactions in shares of each class were as follows:
Year Ended Year Ended
October 31, 2000 October 31, 1999
----------------- -----------------
Shares Amount Shares Amount
================================================================================
Class 1
Shares sold 123,166 $6,504,138 44,253 $1,056,385
Shares issued on reinvestment 1,811 84,866 -- --
Shares reacquired (27,973) (1,340,795) (37,660) (903,732)
--------------------------------------------------------------------------------
Net Increase 97,004 $5,248,209 6,593 $152,653
================================================================================
Class A
Shares sold 1,301,043 $62,889,325 372,018 $9,036,138
Shares issued on reinvestment 19,639 910,246 -- --
Shares reacquired (390,830) (18,112,155) (241,749) (5,782,818)
--------------------------------------------------------------------------------
Net Increase 929,852 $45,687,416 130,269 $3,253,320
================================================================================
Class B
Shares sold 2,070,113 $97,428,289 553,936 $13,320,369
Shares issued on reinvestment 23,508 1,051,029 -- --
Shares reacquired (354,053) (16,353,592) (180,077) (4,139,162)
--------------------------------------------------------------------------------
Net Increase 1,739,568 $82,125,726 373,859 $9,181,207
================================================================================
Class L+
Shares sold 6,901 $299,353 -- --
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- -- --
--------------------------------------------------------------------------------
Net Increase 6,901 $299,353 -- --
================================================================================
+ For the period from September 13, 2000 (inception date) to October 31, 2000.
20 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31:
<TABLE>
<CAPTION>
Class 1 Shares 2000/(1)/ 1999/(1)/ 1998 1997 1996/(2)/
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $32.57 $19.06 $18.16 $16.52 $16.00
-----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.45) (0.28) (0.21) (0.17) (0.03)
Net realized and unrealized gain 10.79 13.79 1.11 1.81 0.55
-----------------------------------------------------------------------------------------------------------------
Total Income From Operations 10.34 13.51 0.90 1.64 0.52
-----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.74) -- -- -- --
Capital (0.00)* -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $42.17 $32.57 $19.06 $18.16 $16.52
-----------------------------------------------------------------------------------------------------------------
Total Return 31.53% 70.88% 4.96% 9.99% 3.25%++
-----------------------------------------------------------------------------------------------------------------
Net Assets End of Year (millions) $9 $4 $2 $2 $0.2
-----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 1.42% 1.68% 1.79% 2.26% 2.50%+
Net investment loss/(3)/ (0.94) (1.12) (0.99) (1.24) (1.31)+
-----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 50% 63% 57% 78%
=================================================================================================================
</TABLE>
/(1)/ Per share amounts have been calculated using the monthly average shares
method.
/(2)/ For the period from August 8, 1996 (inception date) to October 31, 1996.
/(3)/ If the Adviser had not waived fees or reimbursed expenses for the period
ended October 31, 1996, the total return would have been lower and the
annualized expense and net investment loss ratios would have been 3.87%
and (2.67)%, respectively.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
21 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31:
<TABLE>
<CAPTION>
Class A Shares 2000/(1)/ 1999/(1)/ 1998 1997 1996
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $32.24 $18.94 $18.14 $16.54 $13.86
-----------------------------------------------------------------------------------------------------------------
Income (Loss)From Operations:
Net investment loss (0.64) (0.37) (0.27) (0.26) (0.19)
Net realized and unrealized gain 10.71 13.67 1.07 1.86 2.87
-----------------------------------------------------------------------------------------------------------------
Total Income From Operations 10.07 13.30 0.80 1.60 2.68
-----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.74) -- -- -- --
Capital (0.00)* -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $41.57 $32.24 $18.94 $18.14 $16.54
-----------------------------------------------------------------------------------------------------------------
Total Return 31.00% 70.22% 4.41% 9.74% 19.34%
-----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $87 $38 $20 $17 $10
-----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(2)/ 1.82% 2.08% 2.25% 2.56% 2.75%
Net investment loss/(2)/ (1.36) (1.53) (1.46) (1.59) (1.56)
-----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 50% 63% 57% 78%
=================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) If the Adviser had not waived fees or reimbursed expenses for the year
ended October 31, 1996, the total return would have been lower and the
annualized expense and net investment loss ratios would have been 4.12%
and (2.92)%, respectively.
* Amount represents less than $0.01.
22 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31:
<TABLE>
<CAPTION>
Class B Shares 2000/(1)/ 1999/(1)/ 1998 1997 1996
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 31.16 $ 18.44 $ 17.81 $ 16.36 $ 13.79
---------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.94) (0.53) (0.39) (0.32) (0.26)
Net realized and unrealized gain 10.38 13.25 1.02 1.77 2.83
---------------------------------------------------------------------------------------------------------------------
Total Income From Operations 9.44 12.72 0.63 1.45 2.57
---------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains (0.74) -- -- -- --
Capital (0.00)* -- -- -- --
---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.74) -- -- -- --
---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $ 39.86 $ 31.16 $ 18.44 $ 17.81 $ 16.36
---------------------------------------------------------------------------------------------------------------------
Total Return 30.04% 68.98% 3.54% 8.93% 18.64%
---------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 123 $ 41 $ 18 $ 13 $ 8
---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(2)/ 2.53% 2.79% 3.11% 3.30% 3.50%
Net investment loss/(2)/ (2.07) (2.26) (2.32) (2.34) (2.31)
---------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 50% 63% 57% 78%
=====================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) If the Adviser had not waived fees or reimbursed expenses for the year
ended October 31, 1996, the total return would have been lower and the
annualized expense and net investment loss ratios would have been 4.87% and
(3.67)%, respectively.
* Amount represents less than $0.01.
23 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
period ended October 31:
Class L Shares 2000/(1)//(2)/
================================================================================
Net Asset Value, Beginning of Period $46.13
--------------------------------------------------------------------------------
Loss From Operations:
Net investment loss (0.11)
Net realized and unrealized loss (4.41)
--------------------------------------------------------------------------------
Total Loss From Operations (4.52)
--------------------------------------------------------------------------------
Less Distributions From:
Net realized gains --
Capital (0.00)*
--------------------------------------------------------------------------------
Total Distributions (0.00)*
--------------------------------------------------------------------------------
Net Asset Value, End of Period $41.61
--------------------------------------------------------------------------------
Total Return++ (9.80)%
--------------------------------------------------------------------------------
Net Assets, End of Period (000s) $287
--------------------------------------------------------------------------------
Ratios to Average Net Assets+:
Expenses 2.25%
Net investment loss (2.06)
--------------------------------------------------------------------------------
Portfolio Turnover Rate 27%
================================================================================
(1) For the period from September 13, 2000 (inception date) to October 31,
2000.
(2) Per share amounts have been calculated using the monthly average shares
method.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
24 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Smith Barney Investment Series:
We have audited the accompanying statement of assets and liabilities including
the schedule of investments, of Smith Barney International Aggressive Growth
Fund of Smith Barney Investment Series as of October 31, 2000, the related
statements of operations, changes in net assets and the financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1999 and financial highlights for each of the years in the four-year period then
ended were audited by other auditors whose report theron, dated December 15,
1999, expressed an unqualified opinion on the statement of changes in net assets
and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney International Aggressive Growth of Smith Barney Investment Series, as of
October 31, 2000, the results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
December 7, 2000
25 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Additional Information (unaudited)
--------------------------------------------------------------------------------
Change in Independent Auditor: On October 12, 2000, Ernst & Young LLP ("E&Y")
informed the Fund's Board of Trustees ("Board") that they were resigning as
auditors of the Fund. E&Y informed the Board that they were resigning to comply
with Independence Standard Board standards due to a recent relationship with
Salomon Smith Barney Inc. During the Fund's two most recent fiscal years, E&Y's
audit reports contained no adverse opinion or disclaimer of opinion; nor were
the reports qualified or modified as to uncertainty, audit scope, or accounting
principles. Further, during this same period there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of E&Y, would have caused it to make reference to the
subject matter of such disagreements in connection with its audit reports. E&Y
has provided a letter to the Securities and Exchange Commission stating that E&Y
agrees with the foregoing statements, and has provided the Fund with a copy of
such letter. A copy of this letter is available upon request by calling the Fund
at 1-800-544-5445.
26 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
October 31, 2000:
. Total long-term capital gain distributions paid of $2,094,997.
27 Smith Barney International Aggressive Growth Fund
| 2000 Annual Report to Shareholders
<PAGE>
(This page intentionally left blank.)
<PAGE>
SMITH BARNEY
INTERNATIONAL AGGRESSIVE GROWTH FUND
TRUSTEES
Donald M. Carlton
A. Benton Cocanougher
Stephen Randolph Gross
Heath B. McLendon
Alan G. Merten
R. Richardson Petit
OFFICERS
Heath B. McLendon
Chairman
John Richards
President
Lewis E. Daidone
Senior Vice President
and Treasurer
James B. Conheady
Vice President and
Investment Officer
Jeffrey J. Russell, CFA
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT ADVISER
AND ADMINISTRATOR
SSB Citi Fund Management LLC
DISTRIBUTORS
Salomon Smith Barney Inc.
PFS Distributors, Inc.
CUSTODIANS
PFPC Trust Company
Chase Manhattan Bank, N.A.
SUB-SHAREHOLDER
SERVICING AGENT
PFS Shareholder Services
3100 Breckinridge Blvd.
Duluth, Georgia 30099
<PAGE>
Smith Barney International Aggressive Growth Fund
This report is submitted for the general information of shareholders of Smith
Barney Investment Series -- Smith Barney International Aggressive Growth Fund,
but it may also be used as sales literature when preceded or accompanied by the
current Prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the Fund. If used as sales material after
January 31, 2001, this report must be accompanied by performance information for
the most recently completed calendar quarter.
SMITH BARNEY INVESTMENT SERIES
3120 Breckinridge Boulevard
Duluth, Georgia 30099-0001
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free prospec-
tus. Read it carefully before you invest or send money.
www.smithbarney.com/mutualfunds
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon
Smith Barney Inc.
FD02103 12/00
<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY
LARGE CAP CORE FUND
--------------------------------------------------------------------------------
STYLE PURE SERIES | ANNUAL REPORT | OCTOBER 31, 2000
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
--------------------------------------------------------------------------------
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
--------------------------------------------------------------------------------
<PAGE>
[PHOTO]
LARRY WEISSMAN
Portfolio Manager
Style Pure Series
Annual Report . October 31, 2000
SMITH BARNEY LARGE CAP CORE FUND
LARRY WEISSMAN
Larry Weissman, CFA, has more than 16 years of securities business experience.
Education: BS in Economics from Cornell University, MBA in Finance from Columbia
University.
FUND OBJECTIVE
The Fund seeks capital appreciation by investing principally in U.S. common
stocks and other equity securities, typically of established companies with
large market capitalizations.
FUND FACTS
FUND INCEPTION
April 14, 1987
MANAGER TENURE
3 Years
MANAGER'S INVESTMENT
INDUSTRY EXPERIENCE
16 Years
CLASS 1 CLASS A CLASS B CLASS L
NASDAQ CSGWX GROAX GROBX N/A
INCEPTION 4/14/87 8/18/98 8/18/98 9/19/00
Average Annual Total Returns as of October 31, 2000
Without Sales Charges/(1)/
Class 1 Class A Class B Class L
One-Year 16.12% 15.69% 14.76% N/A
Five-Year 21.96 N/A N/A N/A
Ten-Year 19.61 N/A N/A N/A
Since Inception+ 14.69 23.41 22.48 (3.37)%++
With Sales Charges/(2)/
Class 1 Class A Class B Class L
One-Year 6.26% 9.90% 9.76% N/A
Five-Year 19.81 N/A N/A N/A
Ten-Year 18.55 N/A N/A N/A
Since Inception+ 13.95 21.91 22.35 (5.30)%++
/(1)/ Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of all applicable
sales charges with respect to Class 1, A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
/(2)/ Assumes reinvestment of all dividends and capital gain distributions, if
any at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the maximum initial sales charges of 8.50%, 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from initial purchase.
Thereafter, this CDSC declines by 1.00% per year until no CDSC is
incurred. Class L shares also reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Inception date for Class 1 shares is April 14, 1987. Inception date for
Class A and B shares is August 18, 1996. Inception date for Class L
shares is September 19, 2000.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
What's Inside
Your Investment in the Smith Barney
Large Cap Core Fund ..........................................................1
A Message from the Chairman ..................................................2
Fund at a Glance .............................................................3
A Letter from the Portfolio Manager ..........................................4
Historical Performance .......................................................7
Growth of $10,000 ............................................................9
Schedule of Investments .....................................................10
Statement of Assets and Liabilities .........................................13
Statement of Operations .....................................................14
Statements of Changes in Net Assets .........................................15
Notes to Financial Statements ...............................................16
Financial Highlights ........................................................21
Independent Auditors' Report ................................................23
Additional Information ......................................................24
Tax Information .............................................................24
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
--------------------------------------------------------------------------------
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
YOUR INVESTMENT IN THE SMITH BARNEY LARGE CAP CORE FUND
--------------------------------------------------------------------------------
Portfolio manager Larry Weissman puts his 16 years of securities business
experience to good use in seeking long-term capital growth by investing in both
value and solid growth companies in the large-cap stock arena.
[GRAPHIC]
Looking to Capture Growth at a Reasonable Price
Larry uses a "bottom-up"* strategy in managing the Fund, focusing on individual
security selection and placing less emphasis on industry and sector allocation.
Larry uses exhaustive fundamental research to identify stocks with what he
thinks have strong growth potential. He then uses quantitative analysis to
determine whether he believes these stocks are relatively undervalued or
overvalued compared to stocks with similar fundamental characteristics.
[GRAPHIC]
Unrecognized Companies with Growth Potential
Your investment offers you the opportunity to participate in a Fund that seeks
to invest in leading companies across the large-capitalization spectrum: Core
Stocks -- We define core investments as those companies that exhibit predictable
and consistent long term growth. We look for companies that exhibit attractive
return potential relative to their growth expectations and we believe we can
find this kind of company in a wide variety of sectors and industries.
[GRAPHIC]
The Smith Barney Solution to Funds that Stray -- The Style Pure Series
The Style Pure Series is a selection of Smith Barney mutual funds that are the
basic building blocks of asset allocation. Each fund in the series attempts to
be fully invested within their asset class and investment style, enabling
investors to make asset allocation decisions in conjunction with their financial
professionals.
[GRAPHIC]
A Distinguished History of Managing Your Serious Money
Founded in 1873 and 1892, respectively, the firms of Charles D. Barney and
Edward B. Smith were among the earliest providers of securities information,
research and transactions. Merged in 1937, Smith Barney & Co. offered its
clients a powerful, blue-chip investment capability able to provide timely
information, advice and insightful asset management. Today, SSB Citi Asset
Management Group ("SSB Citi") unites the distinguished history of Smith Barney
with the unparalleled global reach of its parent, Citigroup.
At SSB Citi, you gain access to blue-chip management delivered professionally.
We are proud to offer you, the serious investor, a variety of managed solutions.
----------------
* Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
1 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN
--------------------------------------------------------------------------------
The new millennium, so far, has been marked by higher volatility and concerns
that the bull market in stocks may be running out of steam.
We believe that your serious money demands professional management. Since 1937,
Smith Barney has managed the serious money of individuals, their families and
their businesses. Today, with over $398 billion in assets under management,/1/
SSB Citi Asset Management Group ("SSB Citi") offers choices and solutions,
uniting the distinguished history of Smith Barney with the unparalleled global
reach of its parent, Citigroup.
The Smith Barney family of funds represents a complex with over a 60-year
history of investment expertise. In addition, Smith Barney is currently
conducting an extensive advertising campaign, highlighting a selection of the
most popular Smith Barney mutual funds and the investment professionals who
manage them.
[PHOTO]
HEATH B. MCLENDON
CHAIRMAN
The Smith Barney Large Cap Core Fund, formerly known as Concert Investment
Series Growth Fund, seeks long-term capital appreciation by investing
principally in U.S. common stocks, typically of established companies with large
market capitalizations. Experienced manager Larry Weissman uses a bottom-up/2/
investment strategy, focusing on the merits of individual companies rather than
outside economic influences in his search for fundamentally sound companies.
When you invest with SSB Citi you can do so with the confidence that your
interests come first, your investment success is paramount and that the ultimate
in resources is being committed to your financial success.
Thank you for your confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 29, 2000
------------
1 As of October 31, 2000. This figure represents SSB Citi's assets under
management for retail, institutional, money and separate accounts.
------------
2 Bottom-up investing is a search for outstanding performance of individual
stocks before considering the impact of economic trends.
2 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Smith Barney Large Cap Core Fund at a Glance (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Top Ten Holdings*+
--------------------------------------------------------------------------------
1. General Electric Co. ................................................ 4.7%
2. Cisco Systems, Inc. ................................................. 3.9
3. Merck & Co., Inc. ................................................... 3.2
4. Microsoft Corp. ..................................................... 3.1
5. Pfizer Inc. ......................................................... 3.1
6. EMC Corp. ........................................................... 2.9
7. Exxon Mobil Corp. ................................................... 2.7
8. Sun Microsystems, Inc. .............................................. 2.7
9. Intel Corp. ......................................................... 2.6
10. Oracle Corp. ........................................................ 2.5
--------------------------------------------------------------------------------
Industry Diversification*+
--------------------------------------------------------------------------------
[GRAPH]
5.8% Consumer Non-Durables
5.2% Consumer Services
5.7% Energy
16.9% Finance
13.5% Healthcare
2.8% Industrial Services
6.4% Producer Manufacturing
5.2% Retail
29.0% Technology
7.1% Utilities
2.4% Other
--------------------------------------------------------------------------------
Investment Breakdown*++
--------------------------------------------------------------------------------
[GRAPH]
1.9% U.S. Government Obligations
4.3% Repurchase Agreement
93.8% Common Stock
* All information is as of October 31, 2000. Please note that Portfolio
holdings are subject to change.
+ As a percentage of total common stock.
++ As a percentage of total investments.
3 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
Dear Shareholder,
We are pleased to provide the annual report for the Smith Barney Investment
Series -- Smith Barney Large Cap Core Fund ("Fund") for the year ended October
31, 2000. In this report we have summarized the period's prevailing economic and
market conditions and outlined our investment strategy. A detailed summary of
the Fund's performance can be found in the appropriate sections that follow.We
hope you find this report useful and informative.
Performance Update
For the year ended October 31, 2000, the Fund's Class 1, A and B shares, without
sales charges, returned 16.12%, 15.69% and 14.76%, respectively. The Fund's
Class 1, A and B shares, with sales charges, returned 6.26%, 9.90% and 9.76%,
respectively, for the same period. In comparison, the Standard & Poor's 500
Index ("S&P 500")/1/ returned 6.08% for the same period.
Market Update
For the year ended October 31, 2000, the Dow Jones Industrial Average
("DJIA")/2/ gained 2.25%, the S&P 500 gained 6.09%, and the Nasdaq Composite
Index/3/ returned 13.59%. In our view, performance was lackluster relative to
previous years due to increased competitive pressures, higher energy prices, a
strong dollar and slowing consumer spending.
During the period, the S&P 500 and the Nasdaq Composite Index benefited
immensely from a small, concentrated group of companies. The list of leading
U.S. companies expecting slower revenue and earnings growth continues to
lengthen. In this slower-growth environment, investors have become more
concerned about excessive valuations.
While economic growth has slowed from last winter's rapid pace, we expect the
U.S. economy may still slow further. This may affect Federal Reserve Board's
monetary policy over the next few months, which could lay the groundwork for the
next market upturn.
--------------------------------------------------------------------------------
WE WANTED TO HIGHLIGHT THAT OUR INVESTMENT
STYLE WAS MUCH MORE THAN PURE GROWTH.
WE EMPLOY A "CORE" GROWTH STRATEGY
BASED ON INVESTING IN CONSISTENT AND
STABLE GROWTH COMPANIES.
--------------------------------------------------------------------------------
Investment Strategy and Fund Update
During the year, we changed the name of the Fund from Concert Investment Series
Growth Portfolio to the Smith Barney Large Cap Core Fund to better describe our
investment style and to streamline Smith Barney fund family offerings. We wanted
to highlight that our investment style was much more than pure growth.We employ
a "core" growth strategy based on investing in consistent and stable growth
companies./4/ These companies can be found in a variety of sectors, including
sectors that might not be traditionally thought of as growth.
------------
1 The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note, an investor cannot invest directly in an index.
2 The DJIA is a price-weighted average of 30 actively traded blue-chip
stocks. Please note, an investor cannot invest directly in an index.
3 The Nasdaq Composite Index is a market value-weighted index that measures
all domestic and non-U.S. based securities listed on the NASDAQ stock
market. Please note, an investor cannot invest directly in an index.
4 Growth stocks are shares of companies with the potential for
faster-than-average growth within their industries. Growth stocks generally
provide an opportunity for more capital appreciation than fixed income
investments but are subject to greater market fluctuations.
4 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
The Fund continues to be well diversified across sectors as well as individual
companies, with our 10 largest positions comprising only 29% of the Fund's
portfolio, which is much lower than that for other comparable funds. Although
during the period the Fund has remained fully invested, we have tried to react
quickly to the changing market environment and seek to manage risk in order to
protect the Fund's assets.
--------------------------------------------------------------------------------
WE HAVE BUILT A PORTFOLIO THAT SEEKS TO
FOLLOW A LOWER-RISK, GROWTH-ORIENTED STRATEGY BY
OWNING SOME OF THE CLASSIC
BLUE-CHIP COMPANIES AS WELL AS COMPANIES
THAT WE BELIEVE HAVE THE POTENTIAL TO BECOME
THE BLUE CHIPS OF TOMORROW.
--------------------------------------------------------------------------------
While we look to invest in established companies, we do have a complement of
medium-sized, faster-growing companies that we believe are well positioned for
future growth. In fact, the median market capitalization of the Fund is just
over $57 billion, compared to $77 billion for the S&P 500.
Currently, the Fund's largest concentrations are in technology, finance, and
health care. Although the sectors we emphasize remain similar to those which we
emphasized last year, during the period we have moved the Fund more toward a
sector-neutral stance. We first began to reduce our technology and biotechnology
weightings in March 2000, since we were concerned over excessive valuations.
Indeed, the March through May 2000 correction was more of a valuation correction
since the highest multiple stocks were the ones that declined the most. During
the period, we were overweighted in the financial sector which contributed to
our outperformance. In our opinion, that sector gave us the best balance between
valuation and growth.
We again reduced our technology weighting during September and October 2000, but
this time over concerns of a deceleration in earnings growth rather than
valuation. In fact, earnings revisions after third quarter reports have been
mostly negative for the first time in a long time. Concerns over earnings growth
for the fourth quarter and 2001 led to an 8.3% decline in the Nasdaq Composite
Index for the month of October. While our underweight position in the technology
sector did benefit the Fund overall, we still do have a significant
representation in technology because of our confidence in long-term earnings for
these companies going forward.
We believe that the financial sector, which had been under pressure earlier in
the year due to rising interest rates, still provides the best risk/return
tradeoff of any sector in the stock market today. As a result, we had increased
our weighting in this sector in March as we reduced our technology weighting.
Indeed, this sector outperformed the broader market from March through September
2000. We believe that concerns over interest rates and their effect on the
economy may begin to subside as we move through 2001. Therefore, our investments
in market leaders such as American International Group Inc. ("AIG"), Providian
Financial Corp., Capital One Financial Corp., and Chase Manhattan Corp. should
benefit from any renewed investor interest in this sector.
5 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
Our largest holdings are in a variety of different industries but we believe
they all share inherent competitive advantages that we expect will result in
stable and consistent growth. For example, Sun Microsystems, Inc., International
Business Machines Corp ("IBM"), Intel Corp. and Cisco Systems Inc. are
technology leaders. Merck & Co., Inc., Pfizer Inc. and Johnson & Johnson are
leaders in new drug development. General Electric Co., Exxon Mobil Corp., and
AIG are extremely well-managed and well-positioned for the future.
--------------------------------------------------------------------------------
DURING THE VOLATILE PERIOD FROM MARCH TO
MAY, WE WERE OVERWEIGHTED IN THE FINANCIAL
SECTOR WHICH CONTRIBUTED TO OUR
OUTPERFORMANCE. IN OUR OPINION, THAT EMPHASIS GAVE
US THE BEST BALANCE BETWEEN
VALUATION AND GROWTH.
--------------------------------------------------------------------------------
Although the market has been extremely volatile during the period, we think our
focus on buying and holding high-quality, well-managed, and well-positioned
companies has helped us to weather market corrections, and has rewarded us with
consistent and superior performance. We have built a portfolio that seeks to
follow a lower-risk, growth-oriented strategy by owning some of the classic
blue-chip companies as well as companies that we believe have the potential to
become the blue chips of tomorrow. And while no guarantees can be given, we
believe this is the best investment strategy for success over the long term.
Thank you for your investment in the Smith Barney Investment Series -- Smith
Barney Large Cap Core Fund.
Sincerely,
/s/ Lawrence Weissman
Lawrence Weissman
Vice President and Investment Officer
November 29, 2000
The information provided in this letter represents the opinion of the manager
and is not intended to be a forecast of future events, a guarantee of future
results nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Fund. Please refer to pages 10 through
12 for a list and percentage breakdown of the Fund's holdings. Also, please note
any discussion of the Fund's holdings is as of October 31, 2000 and is subject
to change.
6 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Historical Performance -- Class 1 Shares
------------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $24.36 $26.52 $0.07 $1.58 16.12%
------------------------------------------------------------------------------------
10/31/99 19.59 24.36 0.11 1.82 35.60
------------------------------------------------------------------------------------
10/31/98 20.94 19.59 0.17 3.41 12.54
------------------------------------------------------------------------------------
10/31/97 17.98 20.94 0.18 1.36 26.93
------------------------------------------------------------------------------------
10/31/96 17.46 17.98 0.18 2.40 19.94
------------------------------------------------------------------------------------
10/31/95 15.31 17.46 0.16 1.03 24.01
------------------------------------------------------------------------------------
10/31/94 16.26 15.31 0.11 1.18 2.04
------------------------------------------------------------------------------------
10/31/93 16.02 16.26 0.12 1.77 14.27
------------------------------------------------------------------------------------
10/31/92 15.47 16.02 0.17 0.80 9.83
------------------------------------------------------------------------------------
10/31/91 11.26 15.47 0.22 0.00 39.90
====================================================================================
Total $1.49 $15.35
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Historical Performance -- Class A Shares
------------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $24.29 $26.41 $0.01 $1.58 15.69%
------------------------------------------------------------------------------------
10/31/99 19.54 24.29 0.05 1.82 35.24
------------------------------------------------------------------------------------
10/31/98 20.89 19.54 0.12 3.41 12.27
------------------------------------------------------------------------------------
10/31/97 17.96 20.89 0.16 1.36 26.65
------------------------------------------------------------------------------------
Inception* -- 10/31/96 16.63 17.96 0.00 0.00 8.00+
====================================================================================
Total $0.34 $8.17
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Historical Performance -- Class B Shares
------------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
====================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $23.95 $25.81 $0.00 $1.58 14.76%
------------------------------------------------------------------------------------
10/31/99 19.37 23.95 0.00 1.82 34.31
------------------------------------------------------------------------------------
10/31/98 20.75 19.37 0.00 3.41 11.43
------------------------------------------------------------------------------------
10/31/97 17.93 20.75 0.11 1.36 25.66
------------------------------------------------------------------------------------
Inception* -- 10/31/96 16.63 17.93 0.00 0.00 7.82+
====================================================================================
Total $0.11 $8.17
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Historical Performance -- Class L Shares
------------------------------------------------------------------------------------
Net Asset Value
------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns/(1)/
====================================================================================
<S> <C> <C> <C> <C> <C>
Inception* -- 10/31/00 $27.33 $26.41 $0.00 $0.00 (3.37)%+
====================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
7 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
Without Sales Charges/(1)/
------------------------------------------------
Class 1 Class A Class B Class L
================================================================================
Year Ended 10/31/00 16.12% 15.69% 14.76% N/A
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 21.96 N/A N/A N/A
--------------------------------------------------------------------------------
Ten Years Ended 10/31/00 19.61 N/A N/A N/A
--------------------------------------------------------------------------------
Inception* through 10/31/00 14.69 23.41 22.48 (3.37)%+
================================================================================
With Sales Charges/(2)/
------------------------------------------------
Class 1 Class A Class B Class L
================================================================================
Year Ended 10/31/00 6.26% 9.90% 9.76% N/A
--------------------------------------------------------------------------------
Five Years Ended 10/31/00 19.81 N/A N/A N/A
--------------------------------------------------------------------------------
Ten Years Ended 10/31/00 18.55 N/A N/A N/A
--------------------------------------------------------------------------------
Inception* through 10/31/00 13.95 21.91 22.35 (5.30)%+
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges/(1)/
================================================================================
Class 1 (10/31/90 through 10/31/00) 499.34%
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00) 142.22
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) 134.60
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) (3.37)
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class 1, A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the maximum initial sales charges of 8.50%, 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC if
shares are redeemed within one year from initial purchase. Thereafter, this
CDSC declines by 1.00% per year until no CDSC is incurred. Class L shares
also reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within the first year of purchase.
* Inception date for Class 1 shares is April 14, 1987. Inception date for
Class A and B shares is August 18, 1996. Inception date for Class L shares
is September 19, 2000.
+ Total return is not annualized, as it may not be representative of the
total return for the year.
8 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class 1 Shares of the
Smith Barney Large Cap Core Fund vs. Standard & Poor's 500 Index+
October 1990 -- October 2000
[GRAPH]
Smith Barney Large Cap Core Standard & Poor's
Fund -- Class 1 Shares 500 Index
Oct 1990 $ 9,147 $10,000
Oct 1991 12,797 13,342
Oct 1992 14,055 14,669
Oct 1993 16,050 16,855
Oct 1994 16,388 17,507
Oct 1995 20,321 22,130
Oct 1996 24,373 27,461
Oct 1997 30,937 36,277
Oct 1998 34,817 44,261
Oct 1999 47,212 55,619
Oct 2000 $54,822 $58,998
+ Hypothetical illustration of $10,000 invested in Class 1 shares on October
31, 1990, assuming deduction of the maximum 8.50% sales charge at the time
of investment for Class 1 shares. It also assumes reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 2000. The
Standard & Poor's 500 Index ("S&P 500 Index") is an index of widely held
common stocks listed on the New York and American Stock Exchanges and the
over-the-counter markets. Figures for the S&P 500 Index include
reinvestment of dividends. The Index is unmanaged and is not subject to the
same management and trading expenses of a mutual fund. The performance of
the Fund's other classes may be greater or less than the Class 1 shares'
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
class.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
9 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 93.8%
Consumer Durables -- 1.6%
927,050 Electronic Arts, Inc. + $ 46,352,500
381,150 SPX Corp. + 47,119,669
--------------------------------------------------------------------------------
93,472,169
--------------------------------------------------------------------------------
Consumer Non-Durables -- 5.4%
1,432,400 The Coca-Cola Co. 86,481,150
501,650 Colgate-Palmolive Co. 29,476,954
534,500 The Gillette Co. 18,640,688
349,000 Keebler Foods Co. 14,134,500
644,200 Kimberly-Clark Corp. 42,517,200
954,700 PepsiCo, Inc. 46,243,281
1,000,000 The Procter & Gamble Co. 71,437,500
--------------------------------------------------------------------------------
308,931,273
--------------------------------------------------------------------------------
Consumer Services -- 4.9%
500,008 Cendant Corp. + 6,000,096
455,570 Clear Channel Communications, Inc. + 27,362,673
970,585 Cox Communications, Inc. + 42,766,402
292,800 McDonald's Corp. 9,076,800
1,209,400 Time Warner Inc. 91,805,554
1,073,700 The Walt Disney Co. 38,451,881
1,131,776 Viacom Inc., Class B Shares + 64,369,760
--------------------------------------------------------------------------------
279,833,166
--------------------------------------------------------------------------------
Energy -- 5.3%
964,400 BP Amoco PLC, Sponsored ADR 49,124,125
294,600 Chevron Corp. 24,194,025
1,647,455 Exxon Mobil Corp. 146,932,393
1,014,850 Royal Dutch Petroleum Co. 60,256,719
357,600 Total Fina Elf SA, Sponsored ADR 25,613,100
--------------------------------------------------------------------------------
306,120,362
--------------------------------------------------------------------------------
Finance -- 15.8%
693,938 Ace Ltd. 27,237,067
1,075,200 AFLAC Inc. 78,556,800
1,095,700 Ambac Financial Group, Inc. 87,450,556
1,268,475 American International Group Inc. 124,310,550
1,363,750 Annuity & Life Re Holdings, Ltd.++ 37,588,359
820,200 AXA Financial, Inc. 44,342,063
626,000 Bank of America Corp. 30,087,125
1,077,650 Capital One Financial Corp. 68,026,656
1,835,450 The Chase Manhattan Corp. 83,512,975
355,300 Countrywide Credit Industries, Inc. 13,301,544
500,000 Fannie Mae 38,500,000
1,684,940 IndyMac Bancorp, Inc. + 35,173,123
238,600 Lehman Brothers Holdings Inc. 15,389,700
528,500 Morgan Stanley Dean Witter & Co. 42,445,156
578,960 Providian Financial Corp. 60,211,840
951,700 Wells Fargo & Co. 44,075,606
975,105 XL Capital Ltd. 74,961,197
--------------------------------------------------------------------------------
905,170,317
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Healthcare -- 12.7%
435,560 Affymetrix, Inc. + $ 24,119,135
570,500 American Home Products Corp. 36,226,750
900,150 Bristol-Myers Squibb Co. 54,852,891
616,900 Eli Lilly & Co. 55,135,438
553,800 Genentech, Inc. + 45,688,500
882,100 Johnson & Johnson 81,263,462
1,911,400 Merck & Co., Inc. 171,906,537
3,808,950 Pfizer Inc. 164,499,028
1,008,900 Pharmacia Corp. 55,489,500
529,664 Sepracor Inc. + 36,083,360
--------------------------------------------------------------------------------
725,264,601
--------------------------------------------------------------------------------
Industrial Services -- 2.7%
1,448,855 AES Corp. + 81,860,308
104,500 Dynegy Inc., Class A Shares 4,839,656
331,400 Enron Corp. 27,195,512
1,015,400 Halliburton Co. 37,633,262
--------------------------------------------------------------------------------
151,528,738
--------------------------------------------------------------------------------
Non-Energy Minerals -- 0.2%
359,200 Alcoa Inc. 10,304,550
--------------------------------------------------------------------------------
Producer Manufacturing -- 6.0%
4,584,670 General Electric Co. 251,297,224
402,250 Minnesota Mining and Manufacturing Co. 38,867,406
986,000 Tyco International Ltd. 55,893,875
--------------------------------------------------------------------------------
346,058,505
--------------------------------------------------------------------------------
Retail -- 4.8%
634,074 Home Depot, Inc. 27,265,182
563,900 Kroger Co. + 12,722,994
327,300 Lowe's Cos., Inc. 14,953,519
646,100 Safeway Inc. + 35,333,593
1,625,000 Target Corp. 44,890,625
1,438,900 TJX Cos., Inc. 39,210,025
2,266,000 Wal-Mart Stores, Inc. 102,819,750
--------------------------------------------------------------------------------
277,195,688
--------------------------------------------------------------------------------
Technology -- 27.2%
1,813,500 America Online, Inc. + 91,454,805
529,350 Applied Materials, Inc. + 28,121,719
3,899,000 Cisco Systems, Inc. + 210,058,623
796,650 Compaq Computer Corp 24,226,127
867,000 Corning Inc. 66,325,500
917,100 Dell Computer Corp. + 27,054,450
1,743,900 EMC Corp. + 155,316,094
449,920 Hewlett-Packard Co. 20,893,160
3,086,932 Intel Corp. 138,911,940
846,600 International Business Machines Corp. 83,390,100
585,400 Lexmark International, Inc. + 24,001,400
801,800 Linear Technology Corp. 51,766,212
1,018,400 Lucent Technologies Inc. 23,741,450
See Notes to Financial Statements.
11 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
-------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
=======================================================================================================
<S> <C> <C>
Technology -- 27.2% (continued)
2,419,270 Microsoft Corp. + $ 166,627,221
542,700 Nokia Oyj, Sponsored ADR 23,200,425
1,101,350 Nortel Networks Corp. 50,111,425
4,125,200 Oracle Corp. + 136,131,600
1,303,250 Sun Microsystems, Inc. + 144,497,844
197,095 VERITAS Software Corp. + 27,793,475
662,400 Xilinx, Inc. + 47,982,600
234,094 Yahoo! Inc . + 13,723,761
-------------------------------------------------------------------------------------------------------
1,555,329,931
-------------------------------------------------------------------------------------------------------
Transportation -- 0.5%
797,800 Knightsbridge Tankers Ltd. 17,202,563
185,300 United Parcel Service, Inc., Class B Shares 11,256,975
-------------------------------------------------------------------------------------------------------
28,459,538
-------------------------------------------------------------------------------------------------------
Utilities -- 6.7%
1,182,505 AT&T Corp. 27,419,335
320,300 AT&T Wireless Group + 7,987,481
192,500 Duke Energy Corp 16,639,219
183,900 Exelon Corporation 11,056,988
1,024,500 Qwest Communications International Inc. + 49,816,313
2,221,000 SBC Communications Inc. 128,123,937
872,100 Sprint Corp. (PCS Group) + 33,248,813
1,180,510 Verizon Communications 68,248,234
1,726,799 WorldCom, Inc. + 41,011,476
-------------------------------------------------------------------------------------------------------
383,551,796
-------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $3,217,494,404) 5,371,220,634
=======================================================================================================
<CAPTION>
FACE
AMOUNT SECURITY VALUE
=======================================================================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 1.9%
$ 85,000,000 U.S. Treasury Bond, 8.750% due 5/15/17++ (Cost -- $99,086,484) 109,207,150
=======================================================================================================
REPURCHASE AGREEMENT -- 4.3%
248,388,000 Chase Securities Inc., 6.400% due 11/1/00;
Proceeds at maturity -- $248,432,158; (Fully collateralized by
U.S. Treasury Bonds, 6.750% to 8.500% due 2/15/20 to 8/15/26;
Market value -- $253,359,200) (Cost -- $248,388,000) 248,388,000
=======================================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $3,564,968,888*) $5,728,815,784
=======================================================================================================
</TABLE>
+ Non-income producing security.
++ Security is segregated for open futures contracts commitments.
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
12 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 2000
---------------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost -- $3,564,968,888) $5,728,815,784
Cash 382,677
Receivable for Fund shares sold 2,860,704
Dividends and interest receivable 6,607,810
Receivable from broker - variation margin 1,087,500
---------------------------------------------------------------------------------------------------
Total Assets 5,739,754,475
---------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 7,599,567
Investment advisory fees payable 2,725,567
Payable for Fund shares purchased 2,381,915
Trustees' retirement plan 297,567
Distribution fees payable 207,114
Accrued expenses 1,768,759
---------------------------------------------------------------------------------------------------
Total Liabilities 14,980,489
---------------------------------------------------------------------------------------------------
Total Net Assets $5,724,773,986
===================================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 2,164,686
Capital paid in excess of par value 3,064,308,649
Undistributed net investment income 7,203,587
Accumulated net realized gain from security transactions 483,924,158
Net unrealized appreciation of investments and futures contracts 2,167,172,906
---------------------------------------------------------------------------------------------------
Total Net Assets $5,724,773,986
===================================================================================================
Shares Outstanding:
Class 1 176,870,853
------------------------------------------------------------------------------------------------
Class A 19,305,305
------------------------------------------------------------------------------------------------
Class B 20,285,580
------------------------------------------------------------------------------------------------
Class L 6,819
------------------------------------------------------------------------------------------------
Net Asset Value:
Class 1 (and redemption price) $26.52
------------------------------------------------------------------------------------------------
Class A (and redemption price) $26.41
------------------------------------------------------------------------------------------------
Class B * $25.81
------------------------------------------------------------------------------------------------
Class L ** $26.41
------------------------------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class 1 (net asset value plus 9.29% of net asset value per share) $28.98
------------------------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value per share) $27.80
------------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $26.68
===================================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within one year from initial purchase.
See Notes to Financial Statements.
13 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 2000
-------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Interest $ 16,577,758
Dividends 39,911,167
Less: Foreign withholding tax (305,429)
-------------------------------------------------------------------------------------------------------
Total Investment Income 56,183,496
-------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 31,264,546
Shareholder and system servicing fees 8,841,827
Distribution fees (Note 2) 5,865,960
Shareholder communications 910,089
Registration fees 254,751
Custody 203,339
Trustees' fees 199,798
Audit and legal 56,512
Other 43,237
-------------------------------------------------------------------------------------------------------
Total Expenses 47,640,059
-------------------------------------------------------------------------------------------------------
Net Investment Income 8,543,437
-------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 2,217,987,919
Cost of securities sold 1,730,890,582
-------------------------------------------------------------------------------------------------------
Net Realized Gain 487,097,337
-------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of year 1,837,473,261
End of year 2,167,172,906
-------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 329,699,645
-------------------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 816,796,982
-------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 825,340,419
=======================================================================================================
</TABLE>
See Notes to Financial Statements.
14 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended October 31,
-------------------------------------------------------------------------------------------------------
2000 1999
=========================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,543,437 $ 13,091,502
Net realized gain 487,097,337 349,982,436
Increase in net unrealized appreciation 329,699,645 1,037,236,660
---------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 825,340,419 1,400,310,598
---------------------------------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income (12,710,445) (20,153,502)
Net realized gains (334,495,593) (371,663,728)
---------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to Shareholders (347,206,038) (391,817,230)
---------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 555,097,691 501,492,120
Net asset value of shares issued for reinvestment of dividends 346,911,626 391,817,230
Cost of shares reacquired (831,177,116) (744,554,174)
Increase in Net Assets From Fund Share Transactions 70,832,201 148,755,176
---------------------------------------------------------------------------------------------------------
Increase in Net Assets 548,966,582 1,157,248,544
---------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 5,175,807,404 4,018,558,860
---------------------------------------------------------------------------------------------------------
End of year* $5,724,773,986 $5,175,807,404
=========================================================================================================
* Includes undistributed net investment income of: $ 7,203,587 $ 11,654,093
=========================================================================================================
</TABLE>
See Notes to Financial Statements.
15 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Large Cap Core Fund ("Fund"), formerly known as Growth Fund, is
a separate investment fund of the Smith Barney Investment Series ("Series"),
formerly known as Concert Investment Series. The Series, a Massachusetts
business trust, is registered under the Investment Company Act of 1940, as
amended, as a diversified open-end management investment company and consists of
this portfolio and seven other separate investment portfolios: Smith Barney
International Aggressive Growth Fund, formerly known as International Equity
Fund, Smith Barney Growth and Income Fund, Select Growth, Select Mid Cap, Select
Growth and Income, Select Small Cap, formerly known as Select Emerging Growth
and Select Government Portfolios. The financial statements and financial
highlights for the other portfolios are presented in separate shareholder
reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets or,
if there were no sales during the day, at the current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence, subsequent to the time a value was so
established, is likely to have significantly changed the value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and ask prices in the over-the-counter market; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (e) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Funds determine the existence of a dividend declaration
after exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (i) the accounting records of the Funds are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (j) realized gain and loss on foreign
currency includes the net realized amount from the sale of currency and the
amount realized between trade date and settlement date on security transactions;
(k) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At October 31, 2000, reclassifications were made to the
capital accounts of the Fund to reflect permanent book/tax differences and
income and gains available for distributions under income tax regulations. Net
investment income, net realized gains and net assets were not affected by this
change; (l) the Fund intends to comply with the requirements of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all federal income and excise tax; and (m) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
Also, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk. These contracts are marked-to-market daily,
by recognizing the difference between the contract exchange rate and the current
market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
16 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which in turn is a subsidiary of Citigroup Inc.
("Citigroup"), acts as the investment adviser to the Series. The Fund pays SSBC
an investment advisory fee calculated at an annual rate of 0.55% on the Fund's
average daily net assets.
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Fund's transfer agent. CFTC receives account fees and asset-based fees that
vary according to the account size and type of account. For the year ended
October 31, 2000, the Fund paid transfer agent fees of $60,847 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Series' distributor replacing CFBDS, Inc. In addition, SSB acts
as the primary broker for the Series' portfolio agency transactions. Certain
other broker-dealers continue to sell Fund shares to the public as members of
the selling group. For the year ended October 31, 2000, SSB and its affiliates
received $158,539 in brokerage commissions.
There are maximum initial sales charges of 8.50%, 5.00% and 1.00% for Class 1,A
and L shares, respectively. There is a contingent deferred sales charge
("CDSC") of 5.00% on Class B shares, which applies if redemption occurs within
one year from purchase. This CDSC declines thereafter by 1.00% per year until no
CDSC is incurred. Class L shares also have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. In certain cases, Class A
shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. This CDSC only applies to those purchases of Class A shares,
which, when combined with current holdings of Class A shares, equal or exceed
$1,000,000 in the aggregate. These purchases do not incur an initial sales
charge.
For the year ended October 31, 2000, SSB and CFBDS received sales charges of
approximately $8,657,000, $6,281,000 and $1,000 on sales of the Fund's Class 1,
A and L shares, respectively.
In addition, CDSCs paid to SSB were approximately $1,250,000 for Class B shares.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L shares calculated at an annual rate of 0.25% of the average
daily net assets for each respective class. The Fund also pays a distribution
fee with respect to Class B and L shares calculated at the annual rate of 0.75%
of the average daily net assets of the class. For the year ended October 31,
2000, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $1,133,782 $4,732,100 $78
================================================================================
All officers and one Trustee of the Series are employees of SSB.
The Trustees of the Series instituted a Retirement Plan ("Plan"), effective
April 1, 1996. Then Plan is not funded, and obligations under the Plan will be
paid solely out of the Series' assets. The Series will not reserve or set aside
funds for the payment of its obligations under the Plan by any form of trust or
escrow. For the current Trustees not affiliated with the Adviser, the annual
retirement benefit payable per year for a ten-year period is based upon the
highest total annual compensation received in any of the three calendar years
preceding retirement. Trustees with more than five but less than ten years of
service at retirement will receive a proportionally reduced benefit. Under the
Plan, for those Trustees retiring with the effectiveness of the Plan, the annual
retirement benefit payable per year for a ten-year period is equal to 75% of the
total compensation received from the Trust during the 1995 calendar year.
3. Investments
During the year ended October 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $1,889,006,732
--------------------------------------------------------------------------------
Sales 2,217,987,919
================================================================================
17 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At October 31, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $2,246,130,582
Gross unrealized depreciation (82,283,686)
--------------------------------------------------------------------------------
Net unrealized appreciation $2,163,846,896
================================================================================
4. Repurchase Agreements
The Funds purchase (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Funds require continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian as is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
proceeds from (and cost of) the closing transaction and the Fund's basis in the
contract. The Fund enters into such contracts to hedge a portion of its
portfolio. The Fund bears the market risk that arises from changes in the value
of the financial instruments and securities indices (futures contracts) and the
credit risk should a counterparty fail to perform under such contracts.
At October 31, 2000, the Fund had the following open futures contracts:
Purchased # of Basis Market Unrealized
Contracts Contracts Expiration Value Value Gain
================================================================================
S&P 500 150 12/00 $50,681,490 $54,007,500 $3,326,010
================================================================================
6. Option Contracts
Upon the purchase of a put option or a call option by the Fund, the premium paid
is recorded as an investment, the value of which is marked to market daily. When
a purchased option expires, the Fund will realize a loss in the amount of the
cost of the option. When the Fund enters into a closing sales transaction, the
Fund will realize a gain or loss depending on whether the sales proceeds from
the closing sales transaction are greater or less than the cost of the option.
When the Fund exercises a put option, it will realize a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
At October 31, 2000, the Fund held no purchased call or put option contracts.
When a Fund writes a covered call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain.
When the Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised, the cost of
the security sold will be decreased by the premium originally received. When a
put option is exercised, the amount of the premium originally received will
reduce the cost of the security which the Fund purchased upon exercise. When
written index options are exercised, settlement is made in cash.
18 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise price.
The risk in writing a put option is that the Fund is exposed to the risk of a
loss if the market price of the underlying security declines.
During the year ended October 31, 2000, the Fund did not enter into any written
covered call or put option contracts.
7. Foreign Securities
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and the U.S. government. These risks include revaluation of currencies
and future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. government.
8. Short Sales of Securities
A short sale is a transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. To complete a short sale, the Fund may arrange through a broker to
borrow the securities to be delivered to the buyer. The proceeds received by the
Fund for the short sale are retained by the broker until the Fund replaces the
borrowed securities. In borrowing the securities to be delivered to the buyer,
the Fund becomes obligated to replace the securities borrowed at their market
price at the time of replacement, whatever the price may be.
At October 31, 2000, the Fund did not have any open short sale transactions.
9. Securities Lending
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded in
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned. The custodian establishes and maintains the collateral in a
segregated account.
Interest income earned from securities lending by the Fund for the year ended
October 31, 2000 was $432,314.
At October 31, 2000, the Fund did not have any securities on loan.
10. Securities Traded on a To-Be-Announced Basis
In a TBA transaction, the Fund commits to purchasing or selling securities for
which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the Fund
normally 15 to 45 days later. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other securities.
At October 31, 2000, the Fund did not hold any TBA securities.
19 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
11. Shares of Beneficial Interest
The Fund has four classes of beneficial interest, 1, A, B and L, each with a par
value of $0.01 per share.There are an unlimited number of shares authorized.
For the year ended October 31, 2000, total paid-in capital amounted to the
following:
<TABLE>
<CAPTION>
Class 1 Class A Class B Class L
=================================================================================================
<S> <C> <C> <C> <C>
Total Paid-in Capital $2,233,031,758 $410,816,286 $422,445,897 $179,394
=================================================================================================
</TABLE>
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 2000 October 31, 1999
----------------------------- -----------------------------
Shares Amount Shares Amount
=================================================================================================
<S> <C> <C> <C> <C>
Class 1
Shares sold 6,534,306 $ 172,501,823 9,411,963 $ 209,005,325
Shares issued on reinvestment 12,103,933 299,814,441 16,683,567 356,027,327
Shares reacquired (25,440,474) (672,870,040) (29,090,514) (649,360,808)
-------------------------------------------------------------------------------------------------
Net Decrease (6,802,235) $(200,553,776) (2,994,984) $ (84,328,156)
=================================================================================================
Class A
Shares sold 7,397,903 $ 195,036,348 6,499,940 $ 145,825,290
Shares issued on reinvestment 928,886 22,989,917 852,135 18,167,521
Shares reacquired (3,174,788) (83,785,073) (2,401,189) (53,765,679)
-------------------------------------------------------------------------------------------------
Net Increase 5,152,001 $ 134,241,192 4,950,886 $ 110,227,132
=================================================================================================
Class B
Shares sold 7,238,246 $ 187,380,126 6,586,645 $ 146,661,505
Shares issued on reinvestment 990,032 24,107,268 833,209 17,622,382
Shares reacquired (2,867,063) (74,522,003) (1,878,345) (41,427,687)
-------------------------------------------------------------------------------------------------
Net Increase 5,361,215 $ 136,965,391 5,541,509 $ 122,856,200
=================================================================================================
Class L*
Shares sold 6,819 $ 179,394 -- --
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- -- --
-------------------------------------------------------------------------------------------------
Net Increase 6,819 $ 179,394 -- --
=================================================================================================
</TABLE>
* For the period from September 19, 2000 (inception date) to October 31,
2000.
20 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, except where noted:
<TABLE>
<CAPTION>
Class 1 Shares 2000/(1)/ 1999/(1)/ 1998 1997 1996
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $24.36 $19.59 $20.94 $17.98 $17.46
-----------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.07 0.08 0.13 0.17 0.19
Net realized and unrealized gain 3.74 6.62 2.10 4.33 2.91
-----------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.81 6.70 2.23 4.50 3.10
-----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.11) (0.17) (0.18) (0.18)
Net realized gains (1.58) (1.82) (3.41) (1.36) (2.40)
-----------------------------------------------------------------------------------------------------------------
Total Distributions (1.65) (1.93) (3.58) (1.54) (2.58)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $26.52 $24.36 $19.59 $20.94 $17.98
-----------------------------------------------------------------------------------------------------------------
Total Return 16.12% 35.60% 12.54% 26.93% 19.94%
-----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $4,691 $4,475 $3,657 $3,547 $3,005
-----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.70% 0.76% 0.78% 0.88% 0.93%
Net investment income 0.26 0.34 0.63 0.86 1.08
-----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 37% 113% 165% 202%
=================================================================================================================
<CAPTION>
Class A Shares 2000/(1)/ 1999/(1)/ 1998 1997 1996/(2)/
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $24.29 $19.54 $20.89 $17.96 $16.63
-----------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.02) 0.02 0.05 0.15 0.02
Net realized and unrealized gain 3.73 6.60 2.13 4.30 1.31
-----------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.71 6.62 2.18 4.45 1.33
-----------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) (0.05) (0.12) (0.16) --
Net realized gains (1.58) (1.82) (3.41) (1.36) --
-----------------------------------------------------------------------------------------------------------------
Total Distributions (1.59) (1.87) (3.53) (1.52) --
-----------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $26.41 $24.29 $19.54 $20.89 $17.96
-----------------------------------------------------------------------------------------------------------------
Total Return 15.69% 35.24% 12.27% 26.65% 8.00%++
-----------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $510 $344 $180 $109 $49
-----------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.04% 1.01% 1.02% 1.13% 1.17%+
Net investment income (loss) (0.07) 0.09 0.38 0.57 0.46+
-----------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 37% 113% 165% 202%
=================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 18, 1996 (inception date) to October 31, 1996.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
21 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, except where noted:
<TABLE>
<CAPTION>
Class B Shares 2000(1) 1999(1) 1998 1997 1996(2)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $23.95 $19.37 $20.75 $17.93 $16.63
-------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.23) (0.14) (0.11) 0.01 (0.01)
Net realized and unrealized gain 3.67 6.54 2.14 4.28 1.31
-------------------------------------------------------------------------------------------------------------------
Total Income From Operations 3.44 6.40 2.03 4.29 1.30
-------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- (0.11) --
Net realized gains (1.58) (1.82) (3.41) (1.36) --
-------------------------------------------------------------------------------------------------------------------
Total Distributions (1.58) (1.82) (3.41) (1.47) --
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $25.81 $23.95 $19.37 $20.75 $17.93
-------------------------------------------------------------------------------------------------------------------
Total Return 14.76% 34.31% 11.43% 25.66% 7.82%++
-------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $524 $357 $182 $126 $74
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.83% 1.76% 1.75% 1.88% 1.93%+
Net investment loss (0.86) (0.65) (0.35) (0.16) (0.29)+
-------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34% 37% 113% 165% 202%
===================================================================================================================
<CAPTION>
Class L Shares 2000(1)(3)
===================================================================================================================
<S> <C>
Net Asset Value, Beginning of Period $27.33
-------------------------------------------------------------------------------------------------------------------
Loss From Operations:
Net investment loss (0.01)
Net realized and unrealized loss (0.91)
-------------------------------------------------------------------------------------------------------------------
Total Loss From Operations (0.92)
-------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
Net realized gains --
-------------------------------------------------------------------------------------------------------------------
Total Distributions --
Net Asset Value, End of Period $26.41
-------------------------------------------------------------------------------------------------------------------
Total Return (3.37)%++
-------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $180
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.54%+
Net investment loss (0.46)+
-------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 34%
===================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 18, 1996 (inception date) to October 31, 1996.
(3) For the period from September 19, 2000 (inception date) to October 31,
2000.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
22 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Smith Barney Investment Series
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Large Cap Core Fund of the Smith
Barney Investment Series as of October 31, 2000, the related statements of
operations, changes in net assets and the financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1999 and financial highlights for each of the years in the four-year period then
ended were audited by other auditors whose report thereon, dated December 15,
1999, expressed an unqualified opinion on the statement of changes in net assets
and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000 by correspondence with the custodian. As
to securities purchased but not received, we performed other appropriate
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Smith
Barney Large Cap Core Fund of the Smith Barney Investment Series as of October
31, 2000, the results of its operations, the changes in its net assets and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
New York, New York
December 19, 2000
23 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Additional Information (unaudited)
--------------------------------------------------------------------------------
Change in Independent Auditor: On October 12, 2000, Ernst & Young LLP ("E&Y")
informed the Fund's Board of Trustees ("Board") that they were resigning as
auditors of the Fund. E&Y informed the Board that they were resigning to comply
with Independence Standard Board standards due to recent relationship with
Salomon Smith Barney Inc. During the Fund's two most recent fiscal years, E&Y's
audit reports contained no adverse opinion or disclaimer of opinion; nor were
the reports qualified or modified as to uncertainty, audit scope, or accounting
principles. Further, during this same period there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of E&Y, would have caused it to make reference to the
subject matter of such disagreements in connection with its audit reports. E&Y
has provided a letter to the Securities and Exchange Commission stating that E&Y
agrees with the foregoing statements, and has provided the Fund with a copy of
such letter. A copy of this letter is available upon request by calling the Fund
at 1-800-544-5445.
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designates for the fiscal year
ended October 31, 2000:
. A corporate dividends received deduction of 96.17%.
. Total long-term capital gain distributions paid of $334,392,189.
A total of 13.13% of the ordinary dividends paid by the Fund from net
investment income are derived from Federal obligations and may be exempt from
taxation at the state level.
24 Smith Barney Large Cap Core Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
SMITH BARNEY
LARGE CAP CORE FUND
--------------------------------------------------------------------------------
TRUSTEES INVESTMENT ADVISER
Donald M. Carlton SSB Citi Fund Management LLC
A. Benton Cocanougher
Stephen Randolph Gross DISTRIBUTORS
Heath B. McLendon Salomon Smith Barney Inc.
Alan G. Merten PFS Distributors,Inc.
R. Richardson Petit
CUSTODIAN
OFFICERS PFPC Trust Company
Heath B. McLendon Chase Manhattan Bank, N.A.
Chairman
SUB-TRANSFER AGENT
John Richards PFS Shareholder Services
President 3100 Breckinridge Blvd.
Duluth, Georgia 30099
Lewis E. Daidone
Senior Vice President
and Treasurer
Lawrence B. Weissman, CFA
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
<PAGE>
Smith Barney Large Cap Core Fund
--------------------------------------------------------------------------------
This report is submitted for the general information of shareholders of the
Smith Barney Investment Series -- Smith Barney Large Cap Core Fund, but it may
also be used as sales literature when proceeded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Fund. If used as sales material after January 31,
2001, this report must be accompanied by performance information for the most
recently completed calendar quarter.
SMITH BARNEY INVESTMENT SERIES
3120 Breckinridge Boulevard
Duluth, Georgia 30099-0001
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free
prospectus. Read it carefully before you invest or send money.
www.smithbarney.com/mutualfunds
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
FD02102 12/00
<PAGE>
SMITH BARNEY
GROWTH & INCOME FUND
CLASSIC SERIES | ANNUAL REPORT | OCTOBER 31, 2000
[LOGO OF SMITH BARNEY]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
<PAGE>
[PHOTO]
MICHAEL KAGAN
Portfolio Manager
Classic Series
Annual Report . October 31, 2000
SMITH BARNEY
GROWTH & INCOME FUND
MICHAEL KAGAN
Michael Kagan has more than 15 years of securities business experience and has
been managing the Fund since August 11, 2000.
Education: BA in Economics, Harvard University. Attended the Massachusetts
Institute of Technology's Sloan School of Management.
FUND OBJECTIVE
The Fund seeks reasonable growth and income by investing in a portfolio
consisting principally of equity securities, including convertible securities,
that provide dividend or interest income.
FUND FACTS
FUND INCEPTION
--------------------------------------------------------------------------------
August 18, 1996
MANAGER TENURE
--------------------------------------------------------------------------------
Since August 11, 2000
MANAGER'S INVESTMENT
INDUSTRY EXPERIENCE
--------------------------------------------------------------------------------
15 Years
CLASS 1 CLASS A CLASS B CLASS L
--------------------------------------------------------------------------------
NASDAQ CGINX GRIAX GRIBX N/A
--------------------------------------------------------------------------------
INCEPTION 4/14/87 8/18/96 8/18/96 10/9/00
--------------------------------------------------------------------------------
Average Annual Total Returns as of October 31, 2000
Without Sales Charges/(1)/
Class 1 Class A Class B Class L
----------------------------------------------------------------------------
One-Year 5.39% 5.14% 4.36% N/A
----------------------------------------------------------------------------
Five-Year 16.63 N/A N/A N/A
----------------------------------------------------------------------------
Ten-Year 15.98 N/A N/A N/A
----------------------------------------------------------------------------
Since Inception+ 12.28 16.76 15.88 2.97%++
----------------------------------------------------------------------------
With Sales Charges/(2)/
Class 1 Class A Class B Class L
----------------------------------------------------------------------------
One-Year (3.55)% (0.10)% (0.06)% N/A
----------------------------------------------------------------------------
Five-Year 14.59 N/A N/A N/A
----------------------------------------------------------------------------
Ten-Year 14.95 N/A N/A N/A
----------------------------------------------------------------------------
Since Inception+ 11.55 15.35 15.73 0.93%++
----------------------------------------------------------------------------
/(1)/ Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of all applicable
sales charges with respect to Class 1, A and L shares of the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
/(2)/ Assumes reinvestment of all dividends and capital gain distributions, if
any at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the maximum sales charge of 8.50%, 5.00% and 1.00%,
respectively; and Class B shares reflect the deduction of a 5.00% CDSC,
which applies if shares are redeemed within one year from initial
purchase. Thereafter, this CDSC declines by 1.00% per year until no CDSC
is incurred. Class L shares also reflect the deduction of a 1.00% CDSC,
which applies if shares are redeemed within the first year of purchase.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption value may be more or less than the original cost.
+ Inception date for Class 1 shares is April 14, 1987. Inception date for
Class A and B shares is August 18, 1996 and for Class L shares is
October 9, 2000.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
What's Inside
Your Investment in the Smith Barney
Growth & Income Fund ................................................... 1
A Message from the Chairman .............................................. 2
Fund at a Glance ......................................................... 3
Letter from the Portfolio Manager ........................................ 4
Historical Performance ................................................... 7
Growth of $10,000 ........................................................ 9
Schedule of Investments ..................................................10
Statement of Assets and Liabilities ......................................14
Statement of Operations ..................................................15
Statements of Changes in Net Assets ......................................16
Notes to Financial Statements ............................................17
Financial Highlights .....................................................23
Independent Auditors' Report .............................................25
Additional Information ...................................................26
Tax Information ..........................................................27
[LOGO OF SMITH BARNEY]
--------------------------------------------------------------------------------
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
YOUR INVESTMENT IN THE SMITH BARNEY
GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Seasoned portfolio manager Michael Kagan uses a two-step selection process to
identify those stocks he deems to have strong growth potential. Michael's goal:
creating a portfolio that seeks to offer investors reasonable growth and income.
[GRAPHIC]
A Stock Selection Focus*
Michael uses quantitative analysis to find stocks with growth potential and to
determine whether they're undervalued or overvalued relative to the overall
market. Michael then uses fundamental qualitative research to validate his
expectations for future growth.
[GRAPHIC]
An Exhaustive Security Selection Process
Michael relies on a team of 15 experienced analysts to help him identify those
companies that may represent the best large-cap opportunities. Each member of
the analyst team is a specialist in the industry they cover, and Michael uses
their recommendations as the foundation in building the Fund's portfolio.
[GRAPHIC]
Portfolio Manager-Driven Funds--The Classic Series
The Classic Series is a selection of Smith Barney Mutual Funds that invest
across asset classes and sectors, utilizing a range of strategies in order to
achieve their objectives. This series of funds lets investors participate in
mutual fund where investment decisions are determined by portfolio managers,
based on each fund's investment objectives and guidelines. Classic Series funds
invest across asset classes and sectors, utilizing a range of strategies in
order to achieve their objectives.
[GRAPHIC]
A Commitment to Managing Your Serious Money
SSB Citi Asset Management Group ("SSB Citi"), the investment management division
of Citigroup, comprises Smith Barney Asset Management, Salomon Brothers Asset
Management and Citibank Global Asset Management, organizations with powerful
investment capabilities.
SSB Citi, as a member of one of the largest financial services providers in the
world, offers you the benefits of our unparalleled global capabilities.
At SSB Citi, you gain access to portfolio management delivered professionally.
We are proud to offer you, the serious investor, a variety of managed solutions.
----------
* Please note that these quantitative and qualitative factors, as well as the
expected dividends and income, influence the Fund's purchases and sales of
securities. Past performance is not indicative of future results.
1 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
A MESSAGE FROM THE CHAIRMAN
--------------------------------------------------------------------------------
The new millennium, so far, has been marked by higher volatility and concerns
that the bull market in stocks may be running out of steam.
We believe that your serious money demands professional management. Since 1937,
Smith Barney has managed the serious money of individuals, their families and
their businesses. Today, with over $398.6 billion in assets under management,/1/
we believe that SSB Citi Asset Management Group ("SSB Citi") offers choices and
solutions, uniting the distinguished history of Smith Barney with the
unparalleled global reach of its parent, Citigroup.
On August 11, 2000, Michael Kagan assumed the day-to-day management of your
Fund. Michael has been with Salomon Brothers Asset Management, a division of SSB
Citi, since 1994. In 1995, he was named co-manager of the Salomon Brothers Fund
(SBF-NYSE), a $1.9 billion closed-end fund, and was made lead manager in
September 1998. Michael has more than 15 years of experience in the securities
business and we welcome him warmly and wish him well in his new
responsibilities.
For those of you who are new shareholders, I would like to extend a warm welcome
to you on behalf of everyone at SSB Citi. The Smith Barney Growth and Income
Fund seeks reasonable growth and income by investing in equity securities,
including convertible securities/2/ that provide dividend or interest income.
When you invest with SSB Citi you can do so with the confidence that your
interests come first, your investment success is paramount and that the ultimate
in resources is being committed to your financial success.
Thank you for your confidence in our investment management approach.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
November 14, 2000
[PHOTO]
HEATH B. MCLENDON
CHAIRMAN
---------------------
----------
1 As of October 31, 2000.This figure represents SSB Citi's assets under
management for retail, institutional, money, and separate accounts. ddd
----------
2 Convertible securities are bonds or preferred stocks that may be converted
into common stock or other equity interests in the issuer at a
predetermined price.
2 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Smith Barney Growth & Income Fund at a Glance (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Top Ten Holdings+*
--------------------------------------------------------------------------------
1.Inrange Technologies Corp. ............................................ 6.3%
2.Microsoft Corp. ....................................................... 3.3
3.Cisco Systems, Inc. ................................................... 3.1
4.Verizon Communications ................................................ 3.0
5.The Bank of New York Co., Inc. ........................................ 2.9
6.Costco Wholesale Corp. ................................................ 2.7
7.Exxon Mobil Corp. ..................................................... 2.6
8.Federated Department Stores, Inc. ..................................... 2.6
9.Intel Corp. ........................................................... 2.4
10.International Business Machines Corp. ................................. 2.4
--------------------------------------------------------------------------------
Industry Diversification of Common Stock++*
--------------------------------------------------------------------------------
4.1% Consumer Services
20.1% Electronic Technology
6.7% Energy Minerals
18.4% Finance
10.8% Health Technology
4.0% Process Industries
8.1% Retail Trade
6.1% Technology Services
10.0% Utilities
11.7% Other
--------------------------------------------------------------------------------
Investment Allocation++**
--------------------------------------------------------------------------------
3.0% Convertible Corporate Bonds & Repurchase Agreement
0.2% Options Purchased
96.8% Common Stock
* As a percentage of total common stock.
** As a percentage of total investments.
++ Please note that these holdings are as of October 31, 2000 and are subject to
change.
3 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
Dear Shareholder,
We are pleased to provide the annual report for the Smith Barney Investment
Series -- Smith Barney Growth & Income Fund ("Fund") for the year ended October
31, 2000. In this report we have summarized the period's prevailing economic and
market conditions and outlined our investment strategy. A detailed summary of
the Fund performance can be found in the appropriate sections that follow. We
hope you find this report to be useful and informative.
Performance Update
For the year ended October 31, 2000, the Fund's Class A shares, without and with
sales charges, returned 5.14% and a negative 0.10%, respectively. In comparison,
the Standard & Poor's 500 Index ("S&P 500")/1/ returned 6.08% for the same
period.
Market and Economic Overview
After four extraordinary years of over 20% annual returns, it looks like the
stock market's returns may be lower in 2000. The small change in the market's
value over the past year masked a volatile environment. Technology stocks were
the market leaders from last October to this March, but fell sharply in the
spring, only to recover during the summer and decline again in the autumn. We
view the second decline as more significant, as it was driven by weaker
fundamentals, whereas the first was driven by market sentiment. The earnings
outlook for semiconductor, PC companies and telecommunications equipment makers
weakened noticeably over the summer and fall.
--------------------------------------------------------------------------------
AS INDICATED BY ITS NAME, THE FUND'S RETURN MAY COMPRISE CAPITAL APPRECIATION,
"GROWTH," AND A SIGNIFICANT DIVIDEND, "INCOME."
--------------------------------------------------------------------------------
During the first half of 2000, the question that many stock market investors
asked was, "When will the economy slow down enough for the Federal Reserve Board
("Fed") to stop raising rates?" The answer may have come during the third
quarter. Gross domestic product ("GDP")/2/ growth slowed from 8% in the second
quarter to 5% in the third quarter of 2000.The best performing stocks during the
third quarter, financials and utilities, were in the industries that benefit
most from a lower-rate environment. In general, value stocks/3/ tended to
perform better than growth stocks./4/
Investment Strategy
The Fund owns stocks in large companies, typically over $10 billion in size. We
own a mixture of growth and value stocks. As indicated by its name, the Fund's
return may comprise capital appreciation,"growth," and a significant
dividend,"income." And while no guarantees can be given, the gross dividend
yield/5/ of the Fund, before expenses, should exceed that of the market.
We are risk-averse investors. We have a bias toward owning high-quality
companies with strong balance sheets. We carefully examine the accounting
procedures of the companies that we invest in, and we will not purchase the
stocks of companies whose accounting we consider to be aggressive. The Fund is
managed to be highly diversified, with industry exposure similar to that of the
market's.
----------
1 The S&P 500 is a market-capitalization-weighted measure of 500 widely held
common stocks. Please note an investor cannot invest directly in an index.
2 GDP is the market value of the goods and services produced by labor and
property in the U.S. GDP comprises consumer and government purchases, private
domestic investments and net exports of goods and services.
3 Value stocks are the shares of those companies whose shares are considered to
be inexpensive relative to their asset values or earning power.
4 Growth stocks are shares of companies with the potential for
faster-than-average growth within their industries. Growth stocks generally
provide an opportunity for more capital appreciation than fixed income
investments but are subject to greater market fluctuations.
5 Dividend yield is the annual percentage of return that an investor receives on
either common or preferred stock. The yield is based on the amount of the
dividend divided by the market price (at the time of purchase) of the stock.
4 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
WE PURCHASED A LARGE POSITION IN COSTCO WHOLESALE CORP., THE DISCOUNT RETAILER,
AND SOLD THE FUND'S POSITION IN WAL-MART STORES, INC. COSTCO HAS OUTGROWN
WAL-MART IN COMPARABLE STORE SALES IN 17 OF THE LAST 18 MONTHS. IT IS THE ONLY
RETAILER WHO HAS CONSISTENTLY BEATEN WAL-MART HEAD TO HEAD.
--------------------------------------------------------------------------------
We attempt to beat the stock market (i.e., the S&P 500) by seeking to own better
stocks and avoiding weaker stocks. For example, we own a large position in
Kimberly Clark, 1.4% of the Fund at October 31, 2000, but we own no position
whatsoever in Procter & Gamble. Kimberly Clark is the largest producer in the
world of diapers and tissue, while Procter & Gamble is number two. Kimberly
Clark has consistently gained market share from Procter & Gamble in both diapers
and tissue during the past two years. We believe Kimberly Clark will grow its
earnings per share about 11% this year and is forecasted to grow its earnings by
12% next year. We expect Procter & Gamble's earnings growth rate is only about
3% this year and 6% next year. Yet Procter & Gamble is 30% more expensive than
Kimberly Clark on a price/earnings ("P/E") ratio./6/ Both companies are large,
high-quality, consumer products companies -- but Kimberly Clark seems to us to
represent an outstanding opportunity based on every metric that we use.
Fund Update
Despite the change in the Portfolio Manager on August 11, 2000, the industry
allocations of the Fund have changed little during the period. We have
substituted several stocks for those stocks that we consider weaker.
We added a position in Kimberly Clark, and sold Procter & Gamble, as previously
discussed. We purchased a large position in Costco, the discount retailer, and
sold the Fund's position in Wal-Mart. Costco has outgrown Wal-Mart in comparable
store sales in 17 of the last 18 months. It is the only retailer who has
consistently beaten Wal-Mart head to head. Wal-Mart is so large that the growth
in its sales last year added over 1% to retail sales for the entire U.S.
Costco's market is much less saturated. Yet Wal-Mart appears to be more
expensive than Costco.
We built a position in the Bank of New York, the largest fee-based bank in the
U.S., and greatly reduced the Fund's holdings in the brokerage stocks. This move
was done for safety. The Bank of New York's businesses are steady and offer high
return potential. The brokerage stocks had run up over the summer, and their
earnings are closely tied to the strength of the new-issue market.
We reduced the Fund's positions in semiconductor stocks. It became apparent to
us, in early September 2000, that the supply tightness that had fueled strong
semiconductor earnings for the past two years had ended.
----------
6 P/E ratio is the price of a stock divided by its earnings per share.
5 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
ALTHOUGH WE ARE CONCERNED ABOUT A SLOWDOWN
IN THE U.S. ECONOMY, WE ARE NOT LOOKING FOR A
RECESSION OR FOR A BEAR MARKET.
--------------------------------------------------------------------------------
Market Outlook
Due to the efforts of the Fed, the U.S. economy has begun to slow. The stock
market is likely to cycle between periods of enthusiasm that we may experience a
"soft landing" and periods of fear that we will fall into a recession. We
believe that the U.S. economy is at greater risk of a "hard landing" than the
consensus does. In particular, high-energy prices are causing cost push
inflation such as we have not seen since the 1970's. The resulting
stagflation/7/ gives the Fed less of a free hand to decrease interest rates than
it would like.
Therefore, the Fund's portfolio is positioned somewhat defensively. Although the
portfolio's sector weightings are very similar to those of the S&P 500, the
portfolio is overweight in energy and health care, and is underweight in capital
goods and technology stocks. Instead of highly cyclical companies such as
Caterpillar Inc., we own companies with a history of growing earnings through
recessions, such as Emerson Electric. Preservation of capital is important to
us, and we strive to avoid stocks that might decline sharply.
Although we are concerned about a slowdown in the U.S. economy, we are not
looking for a recession or for a bear market. We expect a year similar to 1994,
when growth eased, and stocks took a breather, allowing their earnings to catch
up with their prices.
Thank you for your investment in the Smith Barney Investment Series -- Smith
Barney Growth & Income Fund and your continued confidence in our investment
approach.
Sincerely,
/s/ Michael Kagan
Michael Kagan
Vice President and Investment Officer
November 14, 2000
The information provided in this letter represents the opinion of the manager
and is not intended to be a forecast of future events, a guarantee of future
results nor investment advice. Further, there is no assurance that certain
securities will remain in or out of the Fund. Please refer to pages 10 through
13 for a list and percentage breakdown of the Fund's holdings. Also, please note
any discussion of the Fund's holdings is as of October 31, 2000 and is subject
to change.
----------
7 Stagflation is a term that was coined in the 1970s to describe the previously
unprecedented combination of slow economic growth and high unemployment
(stagnation) with rising prices (inflation).
6 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class 1 Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $21.36 $19.03 $0.07 $3.45 5.39%
--------------------------------------------------------------------------------------------
10/31/99 18.53 21.36 0.08 0.78 20.27
--------------------------------------------------------------------------------------------
10/31/98 20.10 18.53 0.20 3.25 10.90
--------------------------------------------------------------------------------------------
10/31/97 18.11 20.10 0.30 2.18 27.35
--------------------------------------------------------------------------------------------
10/31/96 16.95 18.11 0.34 1.75 20.58
--------------------------------------------------------------------------------------------
10/31/95 15.77 16.95 0.30 1.60 22.45
--------------------------------------------------------------------------------------------
10/31/94 17.13 15.77 0.28 1.16 0.51
--------------------------------------------------------------------------------------------
10/31/93 15.54 17.13 0.28 0.30 14.13
--------------------------------------------------------------------------------------------
10/31/92 14.70 15.54 0.30 0.42 10.85
--------------------------------------------------------------------------------------------
10/31/91 11.49 14.70 0.32 0.00 31.68
--------------------------------------------------------------------------------------------
10/31/90 12.51 11.49 0.33 0.00 (5.84)
============================================================================================
Total $2.80 $14.89
============================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class A Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $21.35 $19.03 $0.02 $3.45 5.14%
--------------------------------------------------------------------------------------------
10/31/99 18.53 21.35 0.03 0.78 19.93
--------------------------------------------------------------------------------------------
10/31/98 20.10 18.53 0.15 3.25 10.63
--------------------------------------------------------------------------------------------
10/31/97 18.11 20.10 0.25 2.18 27.04
--------------------------------------------------------------------------------------------
Inception* -- 10/31/96 17.19 18.11 0.06 0.00 5.72+
============================================================================================
Total $0.51 $9.66
============================================================================================
</TABLE>
--------------------------------------------------------------------------------
Historical Performance -- Class B Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns/(1)/
============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $21.16 $18.70 $0.00 $3.45 4.36%
--------------------------------------------------------------------------------------------
10/31/99 18.48 21.16 0.00 0.78 19.03
--------------------------------------------------------------------------------------------
10/31/98 20.07 18.48 0.04 3.25 9.85
--------------------------------------------------------------------------------------------
10/31/97 18.09 20.07 0.12 2.18 26.08
--------------------------------------------------------------------------------------------
Inception* -- 10/31/96 17.19 18.09 0.04 0.00 5.49+
============================================================================================
Total $0.20 $9.66
============================================================================================
</TABLE>
7 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance -- Class L Shares
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns/(1)/
============================================================================================
<S> <C> <C> <C> <C> <C>
Inception*-- 10/31/00 $18.49 $19.04 $0.00 $0.00 2.97%+
============================================================================================
</TABLE>
It is the Fund's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Average Annual Total Returns
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Without Sales Charges/(1)/
-------------------------------------------------------
Class 1 Class A Class B Class L
==============================================================================================
<S> <C> <C> <C> <C>
Year Ended 10/31/00 5.39% 5.14% 4.36% N/A
----------------------------------------------------------------------------------------------
Five Years Ended 10/31/00 16.63 N/A N/A N/A
----------------------------------------------------------------------------------------------
Ten Years Ended 10/31/00 15.98 N/A N/A N/A
----------------------------------------------------------------------------------------------
Inception* through 10/31/00 12.28 16.76 15.88 2.97%+
==============================================================================================
<CAPTION>
With Sales Charges/(2)/
-------------------------------------------------------
Class 1 Class A Class B Class L
==============================================================================================
Year Ended 10/31/00 (3.55)% (0.10)% (0.06)% N/A
----------------------------------------------------------------------------------------------
Five Years Ended 10/31/00 14.59 N/A N/A N/A
----------------------------------------------------------------------------------------------
Ten Years Ended 10/31/00 14.95 N/A N/A N/A
----------------------------------------------------------------------------------------------
Inception* through 10/31/00 11.55 15.35 15.73 0.93%+
==============================================================================================
</TABLE>
--------------------------------------------------------------------------------
Cumulative Total Returns
--------------------------------------------------------------------------------
Without Sales Charges/(1)/
================================================================================
Class 1 (10/31/90 through 10/31/00) 380.95%
--------------------------------------------------------------------------------
Class A (Inception* through 10/31/00) 91.84
--------------------------------------------------------------------------------
Class B (Inception* through 10/31/00) 85.85
--------------------------------------------------------------------------------
Class L (Inception* through 10/31/00) 2.97
================================================================================
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect deduction of the applicable
sales charges with respect to Class 1, A and L shares or the applicable
contingent deferred sales charges ("CDSC") with respect to Class B and L
shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the current maximum sales charges of 8.50%, 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC, which
applies if shares are redeemed within one year from purchase. This CDSC
declines by 1.00% per year until no CDSC is incurred. Class L shares also
reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed
within one year of purchase.
* Inception date for Class 1 shares is April 14, 1987. Inception date for
Class A and B shares is August 18, 1996. Inception date for Class L shares
is October 9, 2000.
+ Total return is not annualized, as it may not be representative of the total
return for the year.
8 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Historical Performance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in Class 1 Shares of the
Smith Barney Growth & Income Fund vs. Standard & Poor's 500 Index+
--------------------------------------------------------------------------------
October 1990 -- October 2000
[GRAPH]
Smith Barney Growth & Income Fund -- Class 1 Shares
Oct. 1990 9,148
Oct. 1991 11,987
Oct. 1992 13,287
Oct. 1993 15,165
Oct. 1994 15,242
Oct. 1995 18,664
Oct. 1996 22,504
Oct. 1997 28,659
Oct. 1998 31,783
Oct. 1999 38,225
Oct. 2000 40,284
Standard & Poor's 500 Index
Oct. 1990 10,000
Oct. 1991 13,342
Oct. 1992 14,669
Oct. 1993 16,855
Oct. 1994 17,507
Oct. 1995 22,130
Oct. 1996 27,461
Oct. 1997 36,277
Oct. 1998 44,261
Oct. 1999 55,619
Oct. 2000 63,893
+ Hypothetical illustration of $10,000 invested in Class 1 shares on October
31, 1990, assuming deduction of the maximum 8.50% sales charge at the time
of investment and the reinvestment of dividends and capital gains, if any,
at net asset value through October 31, 2000. The Standard & Poor's 500
Index ("S&P 500 Index") is an index of widely held common stocks listed on
the New York and American Stock Exchanges and the over-the-counter markets.
Figures for the S&P 500 Index include reinvestment of dividends. The S&P
500 Index is unmanaged and is not subject to the same management and
trading expenses of a mutual fund. The performance of the Fund's other
classes may be greater or less than the Class 1 shares' performance
indicated on this chart, depending on whether greater or lesser sales
charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
9 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 96.8%
Consumer Durables -- 2.6%
1,764 Ford Motor Co. $ 46,085
540,963 General Motors Corp.* 17,527,201
170,000 SPX Corp.* 21,016,250
--------------------------------------------------------------------------------
38,589,536
--------------------------------------------------------------------------------
Consumer Non-Durables -- 3.7%
209,000 The Coca-Cola Co.+ 12,618,375
335,000 Kimberly-Clark Corp. 22,110,000
406,000 PepsiCo, Inc. 19,665,625
--------------------------------------------------------------------------------
54,394,000
--------------------------------------------------------------------------------
Consumer Services -- 4.0%
650,000 AT&T Corp. - Liberty Media Corp.* 11,700,000
307,000 McDonald's Corp. 9,517,000
539,000 The News Corp., Ltd. ADR+ 19,505,062
265,000 Viacom Inc., Class B Shares+* 15,071,875
98,000 The Walt Disney Co. 3,509,625
--------------------------------------------------------------------------------
59,303,562
--------------------------------------------------------------------------------
Electronic Technology -- 19.4%
65,000 Alcatel ADR+ 4,054,375
40,000 BEA Systems, Inc.+* 2,870,000
820,000 Cisco Systems, Inc.*++ 44,177,500
1,028,000 Compaq Computer Corp. 31,261,480
250,000 Corning Inc.+ 19,125,000
235,000 Dell Computer Corp.+* 6,932,500
275,000 EMC Corp.* 24,492,188
270,000 Hewlett-Packard Co.+ 12,538,125
46,000 Inrange Technologies Corp.+* 1,684,750
774,000 Intel Corp. 34,830,000
346,000 International Business Machines Corp. 34,081,000
39,000 Mercury Interactive Corp.* 4,329,000
126,000 Nokia Oyj ADR 5,386,500
738,000 Oracle Corp.* 24,354,000
157,000 Palm, Inc.* 8,409,312
205,000 Seagate Technology, Inc.* 14,324,375
53,000 Siebel Systems, Inc.+* 5,561,688
280,000 Telefonaktiebolaget LM Ericsson ADR+ 3,885,000
116,000 Texas Instruments Inc. 5,691,250
--------------------------------------------------------------------------------
287,988,043
--------------------------------------------------------------------------------
Energy Minerals -- 6.5%
129,000 Amerada Hess Corp. 7,998,000
205,000 Enron Corp.+ 16,822,813
235,000 Exelon Corp. 14,129,375
425,000 Exxon Mobil Corp.+ 37,904,688
120,000 Royal Dutch Petroleum Co. ADR 7,125,000
121,000 Tosco Corp.+ 3,463,625
123,000 Total Fina Elf S.A.+ 8,809,875
--------------------------------------------------------------------------------
96,253,376
--------------------------------------------------------------------------------
See Notes to Financial Statements.
10 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Finance -- 17.8%
250,000 The Allstate Corp.+ $ 10,062,500
305,000 American Express Co. 18,300,000
265,000 American International Group, Inc.+ 25,970,000
56,000 Avalonbay Communities, Inc. 2,572,500
265,000 Bank of America Corp.+ 12,736,562
727,000 The Bank of New York Co., Inc. 41,847,937
55,000 Boston Properties, Inc. 2,227,500
436,000 Capital One Financial Corp.+ 27,522,500
85,000 CarrAmerica Realty Corp. 2,512,813
192,500 The Chase Manhattan Corp.+ 8,758,750
245,000 Equity Office Properties Trust 7,380,625
78,000 Equity Residential Properties Trust 3,670,875
466,490 FleetBoston Financial Corp. 17,726,620
63,000 Freddie Mac 3,780,000
115,000 The Goldman Sachs Group, Inc.+ 11,478,438
95,000 J.P. Morgan & Co. Inc.+ 15,722,500
140,000 Morgan Stanley Dean Witter & Co. 11,243,750
165,000 PaineWebber Inc. 11,756,250
140,000 PNC Financial Services Group+ 9,362,500
38,000 Providian Financial Corp.+ 3,952,000
45,000 Spieker Properties, Inc. 2,491,875
300,000 Washington Mutual, Inc.+ 13,200,000
--------------------------------------------------------------------------------
264,276,495
--------------------------------------------------------------------------------
Health Services -- 1.3%
476,000 HCA-The Healthcare Co.+ 19,010,250
--------------------------------------------------------------------------------
Health Technology -- 10.5%
294,000 Abbott Laboratories 15,526,875
319,000 American Home Products Corp. 20,256,500
158,000 Eli Lilly & Co.+ 14,121,250
45,000 Genentech, Inc.* 3,712,500
53,000 Invitrogen Corp.* 4,031,312
336,000 Merck & Co., Inc. 30,219,000
386,000 Novartis AG 14,812,750
617,000 Pfizer Inc. 26,646,688
69,000 Pharmacia Corp. 3,795,000
132,000 Schering-Plough Corp. 6,822,750
245,000 Watson Pharmaceuticals, Inc.*+ 15,327,812
--------------------------------------------------------------------------------
155,272,437
--------------------------------------------------------------------------------
Non-Energy Minerals -- 2.4%
578,000 Alcoa Inc. 16,581,375
80,000 OM Group, Inc. 3,700,000
84,000 Phelps Dodge Corp. 3,927,000
395,000 PolyOne Corp. 3,110,625
295,000 UPM-Kymmene Oyj ADR 8,628,750
--------------------------------------------------------------------------------
35,947,750
--------------------------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Process Industries -- 3.9%
120,000 Air Products & Chemicals, Inc. $ 4,477,500
317,200 Emerson Electric Co.+ 23,294,375
538,000 General Electric Co.+ 29,489,125
--------------------------------------------------------------------------------
57,261,000
--------------------------------------------------------------------------------
Producer Manufacturing -- 0.5%
60,000 General Dynamics Corp. 4,293,750
100,000 Ingersoll-Rand Co.+ 3,775,000
--------------------------------------------------------------------------------
8,068,750
--------------------------------------------------------------------------------
Retail Trade -- 7.8%
1,048,200 Costco Wholesale Corp.*+ 38,390,325
1,148,000 Federated Department Stores, Inc. *+ 37,381,750
369,000 The Home Depot, Inc. 15,867,000
437,000 Safeway Inc. ADR*+ 23,898,437
--------------------------------------------------------------------------------
115,537,512
--------------------------------------------------------------------------------
Technology Services -- 5.9%
330,000 America Online, Inc.* 16,641,900
270,000 Automatic Data Processing, Inc. 17,634,375
85,000 Celestica Inc.* 6,109,375
678,000 Microsoft Corp.* 46,697,250
--------------------------------------------------------------------------------
87,082,900
--------------------------------------------------------------------------------
Transportation -- 0.6%
340,000 Southwest Airlines Co. 9,690,000
--------------------------------------------------------------------------------
Utilities -- 9.9%
398,000 The Coastal Corp. 30,024,125
160,000 Duke Energy Corp.+ 13,830,000
252,000 Edison International 6,016,500
1,049,000 Genuity Inc.* 5,769,500
140,000 PG&E Corp.+ 3,771,250
459,000 SBC Communications Inc.+ 26,478,562
106,500 UnitedGlobalCom Inc.* 3,388,031
730,600 Verizon Communications 42,237,813
615,000 WorldCom, Inc.* 14,606,250
--------------------------------------------------------------------------------
146,122,031
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $1,168,409,997) 1,434,797,642
================================================================================
CONTRACTS SECURITY VALUE
================================================================================
PURCHASED PUT OPTIONS* -- 0.2%
136,000 Cisco Systems, Inc., Put @ 45, Expire 11/18/00 204,000
Corning Inc.:
40,000 Put @ 83.375, Expire 11/18/00 400,000
36,000 Put @ 90, Expire 11/18/00 531,000
37,000 Put @ 93.375, Expire 1/20/00 888,000
See Notes to Financial Statements.
12 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedule of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
CONTRACTS SECURITY VALUE
================================================================================
PURCHASED OPTIONS-- 0.2% (continued)
39,500 S&P 500 Index, Put @ 1350, Expire 11/18/00 $ 246,875
27,000 SPX Corp.,Put @ 120, Expire 11/18/00 138,375
--------------------------------------------------------------------------------
TOTAL PURCHASED OPTIONS
(Cost -- $2,346,024) 2,408,250
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
CONVERTIBLE CORPORATE BONDS -- 1.2%
$ 4,175,000 Hutchison Whampoa Intl., 2.875% due 9/15/03+* 4,433,349
10,900,000 NTL Inc.,5.750% due 12/15/09+* 6,989,625
7,200,000 Verizon Global FDG Corp., 5.750% due 4/1/03 6,939,000
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $18,225,168) 18,361,974
================================================================================
REPURCHASE AGREEMENT -- 1.8%
26,796,000 Chase Securities Inc., 6.400% due 11/1/00;
Proceeds at maturity -- $26,800,764; (Fully
collateralized by U.S. Treasury Bonds, 6.750%
due 8/15/26; Market value -- $27,336,963)
(Cost -- $26,796,000) 26,796,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $1,215,777,189**) $1,482,363,866
================================================================================
+ All or a portion of this security is on loan (See Note 9).
* Non-incoming producing security.
++ All or a portion of this security is segregated for purchased put and written
call options.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
13 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value (Cost -- $1,215,777,189) $ 1,482,363,866
Collateral for securities on loan (Note 9) 143,397,333
Receivable for securities sold 16,885,331
Receivable for Fund shares sold 933,486
Dividends and interest receivable 1,120,285
-------------------------------------------------------------------------------------------
Total Assets 1,644,700,301
-------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities on loan (Note 9) 143,397,333
Payable for securities purchased 32,346,918
Payable for Fund shares purchased 1,133,396
Payable for options written (Premiums received -- $1,607,835) (Note 6) 826,250
Investment advisory fees payable 814,863
Trustees retirement plan 284,409
Distribution fees payable 89,038
Payable to bank 539
Accrued expenses 1,236,522
-------------------------------------------------------------------------------------------
Total Liabilities 180,129,268
-------------------------------------------------------------------------------------------
Total Net Assets $ 1,464,571,033
===========================================================================================
NET ASSETS:
Par value of shares of beneficial interest $ 771,867
Capital paid in excess of par value 1,091,872,530
Overdistributed net investment income (58,299)
Accumulated net realized gain on security transactions and options 104,616,673
Net unrealized appreciation of investments and options 267,368,262
-------------------------------------------------------------------------------------------
Total Net Assets $ 1,464,571,033
===========================================================================================
Shares Outstanding:
Class 1 53,470,447
-------------------------------------------------------------------------------------------
Class A 11,273,648
-------------------------------------------------------------------------------------------
Class B 12,431,766
-------------------------------------------------------------------------------------------
Class L 10,809
===========================================================================================
Net Asset Value:
Class 1 (and redemption price) $19.03
-------------------------------------------------------------------------------------------
Class A (and redemption price) $19.03
-------------------------------------------------------------------------------------------
Class B * $18.70
-------------------------------------------------------------------------------------------
Class L ** $19.04
===========================================================================================
Maximium Public Offering Price Per Share:
Class 1 (net asset value plus 9.29% of net asset value per share) $20.80
-------------------------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value per share) $20.03
-------------------------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value per share) $19.23
===========================================================================================
</TABLE>
* Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
** Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within the first year of purchase.
See Notes to Financial Statements.
14 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 591,872
Dividends 18,883,765
Less: Foreign withholding tax (4,848)
-----------------------------------------------------------------------------------------------
Total Investment Income 19,470,789
-----------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 9,663,674
Distribution fees (Note 2) 2,799,689
Shareholder and system servicing fees 2,354,595
Shareholder communications 351,920
Trustees' fees 176,310
Registration fees 135,174
Custody 48,541
Audit and legal 36,105
Other 9,999
-----------------------------------------------------------------------------------------------
Total Expenses 15,576,007
-----------------------------------------------------------------------------------------------
Net Investment Income 3,894,782
-----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS (NOTES 3 AND 6):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 108,041,883
Options written (1,190,175)
-----------------------------------------------------------------------------------------------
Net Realized Gain 106,851,708
-----------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Options:
Beginning of year 300,813,424
End of year 267,368,262
-----------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (33,445,162)
-----------------------------------------------------------------------------------------------
Net Gain on Investments and Options 73,406,546
-----------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 77,301,328
===============================================================================================
</TABLE>
See Notes to Financial Statements.
15 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Years Ended October 31,
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
======================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,894,782 $ 4,140,150
Net realized gain 106,851,708 242,433,122
Increase (decrease) in net unrealized appreciation (33,445,162) 17,881,827
------------------------------------------------------------------------------------------------------
Increase In Net Assets From Operations 77,301,328 264,455,099
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (3,894,782) (4,140,150)
Net realized gain (242,086,093) (56,051,830)
------------------------------------------------------------------------------------------------------
Decrease In Net Assets From Distributions to Shareholders (245,980,875) (60,191,980)
------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 11):
Net proceeds from sale of shares 181,864,792 200,988,247
Net asset value of shares issued for reinvestment of dividends 245,772,799 60,191,853
Cost of shares reacquired (305,079,851) (294,359,957)
------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets From Fund Share Transactions 122,557,740 (33,179,857)
------------------------------------------------------------------------------------------------------
Increase (Decrease) In Net Assets (46,121,807) 171,083,262
NET ASSETS:
Beginning of year 1,510,692,840 1,339,609,578
------------------------------------------------------------------------------------------------------
End Of Year* $ 1,464,571,033 $ 1,510,692,840
======================================================================================================
* Includes overdistributed net investment income of: $(58,299) $(58,299)
======================================================================================================
</TABLE>
See Notes to Financial Statements.
16 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Smith Barney Growth & Income Fund ("Fund"), formerly known as the Growth and
Income Fund, is a separate investment fund of the Smith Barney Investment Series
("Series"), formerly known as the Concert Investment Series. The Series, a
Massachusetts business trust, is registered under the investment Company Act of
1940, as amended, as a diversified open-end management investment company and
consists of this fund and two other separate investment funds: Smith Barney
International Aggressive Growth Fund, formerly known as the International Equity
Fund, Select Growth Portfolio, Select Mid Cap Portfolio, Select Growth and
Income Portfolio, Select Small Cap Portfolio, formerly known as Select Emerging
Growth Portfolio, Select Government Portfolio and Smith Barney Large Cap Core
Fund, formerly known as the Growth Fund. The financial statements and financial
highlights for the other funds are presented in separate shareholder reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets or,
if there were no sales during the day, at the current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence, subsequent to the time a value was so
established, is likely to have significantly changed the value, then the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and ask prices in the over-the-counter market; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (e) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
the accrual basis; (f) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Fund determine the existence of a dividend declaration after
exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; (i) the accounting records of the Fund are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; (j) realized gain and loss on foreign
currency includes the net realized amount from the sale of currency and the
amount realized between trade date and settlement date on security transactions;
(k) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At October 31, 2000, reclassifications were made to the
capital accounts of the Fund to reflect permanent book/tax differences and
income and gains available for distributions under income tax regulations. Net
investment income, net realized gains and net assets were not affected by this
change; (l) the Fund intends to comply with the requirements of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
and to make distributions of taxable income sufficient to relieve it from
substantially all federal income and excise tax; and (m) estimates and
assumptions are required to be made regarding assets, liabilities and changes in
net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ.
Also, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk.
17 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
These contracts are marked-to-market daily, by recognizing the difference
between the contract exchange rate and the current market rate as an unrealized
gain or loss. Realized gains or losses are recognized when contracts are
settled.
2. Investment Advisory Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup") acts as the investment adviser to the Series. The Fund pays an
investment advisory fee calculated at an annual rate of the Fund's average daily
net assets as follows:
Average Daily Net Assets Annual Rate
================================================================================
First $1 billion 0.65%
--------------------------------------------------------------------------------
Next $1 billion 0.60
--------------------------------------------------------------------------------
Next $1 billion 0.55
--------------------------------------------------------------------------------
Next $1 billion 0.50
--------------------------------------------------------------------------------
Over $4 billion 0.45
================================================================================
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Fund's transfer agent. CFTC receives account fees and asset-based fees that
vary according to the account size and type of account. For the year ended
October 31, 2000, the Fund paid transfer agent fees of $24,614 to CFTC.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Fund's distributor replacing CFBDS, Inc. ("CFBDS"). In
addition, SSB acts as the primary broker for the Fund's portfolio agency
transactions. Certain other broker-dealers continue to sell Fund shares to the
public as members of the selling group. For the year ended October 31, 2000, SSB
and its affiliates received $38,060 in brokerage commissions.
There are maximum initial sales charges of 8.50%, 5.00% and 1.00% for Class 1, A
and L shares, respectively. There is a contingent deferred sales charge ("CDSC")
of 5.00% on Class B shares, which applies if redemption occurs within one year
from purchase. The CDSC declines thereafter by 1.00% per year until no CDSC is
incurred. Class L shares also have a 1.00% CDSC, which applies if redemption
occurs within the first year of purchase. In certain cases, Class A shares have
a 1.00% CDSC, which applies if redemption occurs within the first year of
purchase. This CDSC only applies to those purchases of Class A shares, which,
when combined with current holdings of Class A shares, equal or exceed
$1,000,000 in the aggregate. These purchases do not incur an initial sales
charge.
For the year ended October 31, 2000, SSB and CFBDS received sales charges of
approximately $1,793,000, $2,343,000 and $1,000 on sales of the Fund's Class 1,
A and L shares, respectively. In addition, CDSCs paid to SSB were approximately
$732,000 for Class B shares.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A, B and L shares calculated at an annual rate of 0.25% of the average
daily net assets for each respective class. The Fund also pays a distribution
fee with respect to Class B and L shares calculated at the annual rate of 0.75%
of the average daily net assets of the class. For the year ended October 31,
2000, total Distribution Plan fees incurred were:
Class A Class B Class L
================================================================================
Distribution Plan Fees $511,442 $2,288,164 $83
================================================================================
All officers and one Trustee of the Series are employees of SSB.
The Trustees of the Series instituted a Retirement Plan ("Plan"), effective
April 1, 1996. The Plan is not funded, and obligations under the Plan will be
paid solely out of the Series' assets. The Series will not reserve or set aside
funds for the payment of its obligations under the Plan by any form of trust or
escrow. For the current Trustees not affiliated with the Adviser, the annual
retirement benefit payable per year for a ten-year period is based upon the
highest total annual compensation received in any of the three calendar years
preceding retirement. Trustees with more than five but less than ten years of
service at retirement will receive a proportionally reduced benefit. Under the
Plan, for those Trustees retiring with the effectiveness of the Plan, the annual
retirement benefit payable per year for a ten-year period is equal to 75% of the
total compensation received from the Trust during the 1995 calendar year.
18 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
3. Investments
During the year ended October 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $ 945,039,153
--------------------------------------------------------------------------------
Sales 1,071,418,115
================================================================================
At October 31, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 306,117,743
Gross unrealized depreciation (39,531,066)
--------------------------------------------------------------------------------
Net unrealized appreciation $ 266,586,677
================================================================================
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian as is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
proceeds from (and cost of) the closing transaction and the Fund's basis in the
contract. The Fund enters into such contracts to hedge a portion of its
portfolio.The Fund bears the market risk that arises from changes in the value
of the financial instruments and securities indices (futures contracts) and the
credit risk should a counterparty fail to perform under such contracts.
At October 31, 2000, the Fund had no open futures contracts.
6. Option Contracts
Upon the purchase of a put option or a call option by the Fund, the premium paid
is recorded as an investment, the value of which is marked to market daily.When
a purchased option expires, the Fund will realize a loss in the amount of the
cost of the option.When the Fund enters into a closing sales transaction, the
Fund will realize a gain or loss depending on whether the sales proceeds from
the closing sales transaction are greater or less than the cost of the option.
When the Fund exercises a put option, it will realize a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Fund exercises a call option,
the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
At October 31, 2000, the Fund had purchased put options with a total cost of
$2,346,024.
When the Fund writes a covered call or put option,an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily.When a written option expires, the Fund realizes a
gain.When the Fund enters into a closing purchase transaction, the Fund realizes
a gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised, the cost of
the security sold will be decreased by the premium originally received.When a
put option is exercised, the amount of the premium originally received will
reduce the cost of the security which the Fund purchased upon exercise. When
written index options are exercised, settlement is made in cash.
19 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
The risk associated with purchasing options is limited to the premium originally
paid. The Fund enters into options for hedging purposes. The risk in writing a
covered call option is that the Fund gives up the opportunity to participate in
any increase in the price of the underlying security beyond the exercise
price. The risk in writing a put option is that the Fund is exposed to the risk
of a loss if the market price of the underlying security declines.
The following covered call options transactions occurred on the Fund during the
year ended October 31, 2000.
<TABLE>
<CAPTION>
Number Of
Contracts Premiums
=====================================================================================================================
<S> <C> <C> <C>
Options written, outstanding at October 31, 1999 -- --
Options written 4,050 $ 3,711,093
Options cancelled in closing purchase transactions (1,290) (2,103,258)
---------------------------------------------------------------------------------------------------------------------
Options written, outstanding at October 31, 2000 2,760 $ 1,607,835
=====================================================================================================================
<CAPTION>
The following table represents the written call options open at October 31, 2000:
Number Of Strike
Contracts Expiration Price Value
=====================================================================================================================
1,360 Cisco Systems, Inc. 11/18/00 $ 55.000 $(442,000)
400 Corning Inc. 11/18/00 90.000 (77,500)
360 Corning Inc. 11/18/00 100.000 (22,500)
370 Corning Inc. 1/20/00 103.375 (152,625)
270 SPX Corp. 11/18/00 130.000 (131,625)
---------------------------------------------------------------------------------------------------------------------
Total Options Written (Premiums received -- $1,607,835) $(826,250)
=====================================================================================================================
</TABLE>
7. Foreign Securities
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and the U.S. government. These risks include revaluation of currencies
and future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. government.
8. Short Sales of Securities
A short sale is a transaction in which the Fund sells securities it does not own
(but has borrowed) in anticipation of a decline in the market price of the
securities. To complete a short sale, the Fund may arrange through a broker to
borrow the securities to be delivered to the buyer. The proceeds received by the
Fund for the short sale are retained by the broker until the Fund replaces the
borrowed securities. In borrowing the securities to be delivered to the buyer,
the Fund becomes obligated to replace the securities borrowed at their market
price at the time of replacement, whatever the price may be.
At October 31, 2000, the Fund did not have any open short sale transactions.
9. Securities Lending
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Funds to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded in
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high quality money market instruments that are
maintained at all times in an amount at least equal to the current market value
of the loaned securities, plus a margin which may vary depending on the type of
securities loaned.The custodian establishes and maintains the collateral in a
segregated account.
20 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At October 31, 2000, the Fund loaned stocks having a value of approximately
$141,693,539. The Fund held the following collateral for loaned securities:
Security Description Value
================================================================================
Time Deposits:
Bank of Brussels, 6.66% due 11/1/00 $ 23,733,119
Caisse Des Depots, 6.66% due 11/1/00 23,733,119
Chase Bank, 6.66% due 11/1/00 23,733,119
State Street Bank, 6.66% due 11/1/00 23,733,119
UBS Securities, 6.59% due 11/1/00 8,501,144
Floating Rate Notes:
AmSouth Bank, 6.79% due 1/25/01 3,268,545
Bear Stearns & Co., 6.77% due 9/12/01 3,893,734
Bear Stearns & Co., 6.61% due 10/30/01 3,193,713
First Union Bank, 6.76% due 5/21/01 469,022
First Union Bank, 6.62% due 5/23/01 551,643
First Union Bank, 6.76% due 7/27/01 1,556,574
KeyBank Corp., 6.76% due 2/14/01 2,976,146
Morgan Stanley Dean Witter & Co., 6.78% due 11/2/00 2,783,648
Sigma Finance, 6.60% due 12/4/00 4,547,703
Yankee Certificate Of Deposit:
Daichi Kangyo Bank, 6.59% due 11/1/00 6,777,723
Norinchukin Bank, 6.59% due 11/1/00 6,777,723
Sanwa Bank, 6.60% due 11/13/00 3,167,539
--------------------------------------------------------------------------------
Total $143,397,333
================================================================================
Income earned from securities lending by the Fund for the year ended October 31,
2000 was $158,394.
10. Securities Traded on a To-Be-Announced Basis
In a TBA transaction, the Fund commits to purchasing or selling securities for
which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the Fund
normally 15 to 45 days later. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other securities.
At October 31, 2000, the Fund did not hold any TBA securities.
11. Shares of Beneficial Interest
The Fund has four classes of beneficial interest, Classes 1, A, B and L each
with a par value of $0.01 per share. There are an unlimited number of shares
authorized.
At October 31, 2000, total paid-in capital amounted to the following for each
class:
<TABLE>
<CAPTION>
Class 1 Class A Class B Class L
=========================================================================================
<S> <C> <C> <C> <C>
Total Paid-in Capital $654,083,839 $209,757,759 $228,608,294 $194,505
=========================================================================================
</TABLE>
21 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Transactions in shares of each class were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 2000 Year Ended October 31, 1999
---------------------------------- -------------------------------------
Shares Amount Shares Amount
==================================================================================================================================
<S> <C> <C> <C> <C>
Class 1
Shares sold 2,182,584 $ 42,193,753 2,598,797 $ 53,410,600
Shares issued on reinvestment 9,398,458 181,359,984 2,463,190 48,749,017
Shares reacquired (10,611,813) (204,928,094) (10,761,833) (221,519,010)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 969,229 $ 18,625,643 (5,699,846) $(119,359,393)
==================================================================================================================================
Class A
Shares sold 3,836,842 $ 73,704,625 3,444,529 $ 71,212,020
Shares issued on reinvestment 1,553,778 29,986,623 282,097 5,574,730
Shares reacquired (2,615,468) (50,191,349) (1,943,345) (40,176,253)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,775,152 $ 53,499,899 1,783,281 $ 36,610,497
==================================================================================================================================
Class B
Shares sold 3,454,782 $ 65,771,909 3,712,290 $ 76,365,627
Shares issued on reinvestment 1,805,254 34,426,192 298,328 5,868,106
Shares reacquired (2,639,981) (49,960,408) (1,593,823) (32,664,694)
----------------------------------------------------------------------------------------------------------------------------------
Net Increase 2,620,055 $ 50,237,693 2,416,795 $ 49,569,039
==================================================================================================================================
Class L*
Shares sold 10,809 $ 194,505 -- --
Shares issued on reinvestment -- -- -- --
Shares reacquired -- -- -- --
----------------------------------------------------------------------------------------------------------------------------------
Net Increase 10,809 $ 194,505 -- --
==================================================================================================================================
</TABLE>
* For the period from October 9, 2000 (inception date) to October 31, 2000.
22 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31:
<TABLE>
<CAPTION>
Class 1 Shares 2000(1) 1999(1) 1998 1997 1996
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.36 $18.53 $20.10 $18.11 $16.95
---------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.08 0.09 0.18 0.24 0.31
Net realized and unrealized gain 1.11 3.60 1.70 4.23 2.94
---------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.19 3.69 1.88 4.47 3.25
---------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.07) (0.08) (0.20) (0.30) (0.34)
Net realized gains (3.45) (0.78) (3.25) (2.18) (1.75)
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (3.52) (0.86) (3.45) (2.48) (2.09)
---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $19.03 $21.36 $18.53 $20.10 $18.11
---------------------------------------------------------------------------------------------------------------------------
Total Return 5.39% 20.27% 10.90% 27.35% 20.58%
---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $1,017 $1,122 $1,079 $1,097 $943
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.85% 0.84% 0.83% 0.88% 0.91%
Net investment income 0.43 0.43 0.90 1.25 1.78
---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 63% 53% 34% 93% 121%
===========================================================================================================================
Class A Shares 2000(1) 1999(1) 1998 1997 1996(2)
===========================================================================================================================
Net Asset Value, Beginning of Year $21.35 $18.53 $20.10 $18.11 $17.19
---------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.04 0.03 (0.02) 0.20 0.07
Net realized and unrealized gain 1.11 3.60 1.85 4.22 0.91
---------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 1.15 3.63 1.83 4.42 0.98
---------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) (0.03) (0.15) (0.25) (0.06)
Net realized gains (3.45) (0.78) (3.25) (2.18) --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (3.47) (0.81) (3.40) (2.43) (0.06)
---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $19.03 $21.35 $18.53 $20.10 $18.11
---------------------------------------------------------------------------------------------------------------------------
Total Return 5.14% 19.93% 10.63% 27.04% 5.72%++
---------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $215 $181 $124 $80 $33
---------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.06% 1.12% 1.07% 1.12% 1.16%+
Net investment income 0.21 0.15 0.63 0.96 1.78+
---------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 63% 53% 34% 93% 121%
===========================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 18, 1996 (inception date) to October 31, 1996.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
23 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout each
year ended October 31:
<TABLE>
<CAPTION>
Class B Shares 2000(1) 1999(1) 1998 1997 1996(2)
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $21.16 $18.48 $20.07 $18.09 $17.19
-------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.10) (0.12) (0.01) 0.06 0.04
Net realized and unrealized gain 1.09 3.58 1.71 4.22 0.90
-------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.99 3.46 1.70 4.28 0.94
-------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.04) (0.12) (0.04)
Net realized gains (3.45) (0.78) (3.25) (2.18) --
-------------------------------------------------------------------------------------------------------------------
Total Distributions (3.45) (0.78) (3.29) (2.30) (0.04)
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $18.70 $21.16 $18.48 $20.07 $18.09
-------------------------------------------------------------------------------------------------------------------
Total Return 4.36% 19.03% 9.85% 26.08% 5.49%++
-------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $ 232 $ 208 $ 137 $ 99 $ 52
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.81% 1.87% 1.81% 1.88% 1.91%+
Net investment income (loss) (0.54) (0.60) (0.09) 0.22 1.05+
-------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 63% 53% 34% 93% 121%
===================================================================================================================
Class L Shares 2000(1)(3)
===================================================================================================================
Net Asset Value, Beginning of Year $18.49
-------------------------------------------------------------------------------------------------------------------
Income (Loss) From Investment Operations:
Net investment loss (0.02)
Net realized and unrealized gain 0.57
-------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.55
-------------------------------------------------------------------------------------------------------------------
Less Distributions:
Net investment income --
-------------------------------------------------------------------------------------------------------------------
Total Distributions --
-------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $19.04
-------------------------------------------------------------------------------------------------------------------
Total Return 2.97%++
-------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $ 205
-------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.71%+
Net investment loss (1.23)+
-------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 63%
===================================================================================================================
</TABLE>
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from August 18, 1996 (inception date) to October 31, 1996.
(3) For the period from October 9, 2000 (inception date) to October 31, 2000.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
24 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
The Board of Directors and Shareholders
of the Smith Barney Investment Series:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Smith Barney Growth and Income Fund of the
Smith Barney Investment Series as of October 31, 2000, the related statement of
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended October 31, 1999 and the financial
highlights for each of the years in the four-year period ended October 31, 1999
were audited by other auditors whose report thereon, dated December 15, 1999,
expressed an unqualified opinion on that statement of changes in net assets and
those financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2000 by correspondence with the custodian. As
to securities purchased or sold but not yet received or delivered, we performed
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Smith Barney Growth & Income Fund of the Smith Barney Investment Series as of
October 31, 2000, the results of its operations, the changes in its net assets
and financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
December 19, 2000
25 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Additional Information (unaudited)
--------------------------------------------------------------------------------
Change in Independent Auditor: On October 12, 2000, Ernst & Young LLP ("E&Y")
informed the Fund's Board of Trustees ("Board") that they were resigning as
auditors of the Fund. E&Y informed the Board that they were resigning to comply
with Independence Standard Board standards due to a recent relationship with
Salomon Smith Barney Inc. During the Fund's two most recent fiscal years, E&Y's
audit reports contained no adverse opinion or disclaimer of opinion; nor were
the reports qualified or modified as to uncertainty, audit scope, or accounting
principles. Further, during this same period there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of E&Y, would have caused it to make reference to the
subject matter of such disagreements in connection with its audit reports. E&Y
has provided a letter to the Securities and Exchange Commission stating that E&Y
agrees with the foregoing statements, and has provided the Fund with a copy of
such letter. A copy of this letter is available upon request by calling the Fund
at 1-800-544-5445.
26 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
October 31, 2000:
. Total long-term capital gain distributions paid of $228,396,718.
. A corporate dividends received deduction of 91.09%.
27 Smith Barney Growth & Income Fund | 2000 Annual Report to Shareholders
<PAGE>
This page intentionally left blank
<PAGE>
SMITH BARNEY
GROWTH & INCOME FUND
BOARD OF TRUSTEES
Donald M. Carlton
A. Benton Cocanougher
Stephen Randolph Gross
Heath B. McLendon
Alan G. Merten
R. Richardson Petit
OFFICERS
Heath B. McLendon
Chairman
John Richards
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Michael Kagan
Vice President and
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
INVESTMENT ADVISOR
SSB Citi Fund Management LLC
DISTRIBUTORS
Salomon Smith Barney Inc.
PFS Distributors, Inc.
CUSTODIANS
PFPC Trust Company
Chase Manhattan Bank, N.A.
TRANSFER AGENT
Citi Fiduciary Trust Company
125 Broad Street, 11th Floor
New York, New York 10004
SUB-TRANSFER AGENT
PFS Shareholder Services
3100 Breckinridge Blvd.
Duluth, Georgia 30099
<PAGE>
Smith Barney Growth & Income Fund
This report is submitted for the general information of the shareholders of
Smith Barney Investment Series -- Smith Barney Growth & Income Fund. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus for the Series, which contains information
concerning the Funds' investment policies and expenses as well as other
pertinent information.
SMITH BARNEY GROWTH & INCOME FUND
3120 Breckinridge Boulevard
Duluth,Georgia 30099-0001
For complete information on any Smith Barney Mutual Funds, including management
fees and expenses, call or write your financial professional for a free
prospectus. Read it carefully before you invest or send money.
www.smithbarney.com/mutualfunds
[LOGO OF SALOMON SMITH BARNEY]
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
FD02101 12/00
<PAGE>
THE SMITH BARNEY
INVESTMENT SERIES
--------------------------------------------------------------------------------
ANNUAL REPORT
October 31, 2000
Select Portfolios
[LOGO OF SMITH BARNEY]
Your Serious Money. Professionally Managed(SM)
--------------------------------------------------------------------------------
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
--------------------------------------------------------------------------------
<PAGE>
Table of Contents
Letter to Shareholders ..................................................... 1
Smith Barney Investment Series -- Select Portfolios
Select Small Cap Portfolio .............................................. 3
Select Mid Cap Portfolio ................................................ 6
Select Growth Portfolio ................................................. 9
Select Growth and Income Portfolio ...................................... 12
Select Government Portfolio ............................................. 15
Schedules of Investments ................................................... 18
Statements of Assets and Liabilities ....................................... 36
Statements of Operations ................................................... 37
Statements of Changes in Net Assets ........................................ 38
Notes to Financial Statements .............................................. 40
Financial Highlights ....................................................... 46
Report of Independent Auditors ............................................. 51
Tax Information ............................................................ 52
Management of the Series ................................................... IBC
<PAGE>
[PHOTO]
HEATH B.
MCLENDON
Chairman
Smith Barney
Investment Series
Dear Shareholder:
We are pleased to provide the annual report for the Smith Barney Investment
Series Select Portfolios ("Portfolio(s)")/1/ for the year ended October 31,
2000. The performance and current holdings of each Portfolio are discussed in
greater detail on the following pages. In this report, we summarize the period's
prevailing economic and market conditions and outline the investment strategy
employed by each Portfolio. We hope that you find this report to be useful and
informative.
The Performance of the Smith Barney Investment Series Select Portfolios/2/
Total Returns for the Year Ended October 31, 2000:
Portfolio Total Returns
--------- -------------
Select Small Cap Portfolio 11.64%
Select Mid Cap Portfolio 43.43
Select Growth Portfolio 15.61
Select Growth & Income 6.86
Select Government Portfolio 6.55
Market Commentary
For much of the period, the stock market has been influenced by two dominant
themes -- the direction of interest rates and investors concerns regarding the
valuations assigned to many technology and Internet stocks. The Federal Reserve
Board's ("Fed") decision to steadily increase short-term interest rates during
the period, in our opinion, caused many investors to question the durability of
broad U.S. economic growth and the accompanying sustainability of the current
bull market in stocks.
Since the beginning of 2000, a market shift has occurred, leaving many investors
who invested in technology and high-growth companies distressed and investors in
financial, energy, and utility stocks encouraged.
Momentum investing and technology stocks have been out of favor with investors
during the past few months, replaced in many cases by a renewed interest in
companies that many investors believed may provide real earnings with strong
financials.
Interest rate increases, instituted by the Fed beginning last year and
continuing in early 2000, following the benign conclusion of the Y2K scare, had
a dramatic effect on the U.S. stock markets. This in turn, has contributed to a
slowdown in overall U.S. economic growth from the very robust levels of the
second half of 1999 and the first quarter of 2000.
During the past few months, a concerned sentiment has grown among investors that
a possible "soft landing" being engineered by the Fed might become something
more severe with negative ramifications on corporate profits. The high cost of
energy combined with the diminished wealth effect resulting from the large
decline in the NASDAQ/3/ market, have led to a slowing in the U.S. economy and
in particular, a deceleration in the rate of growth in spending on technology
capital goods.
After four years of over 20% annual returns, it appears that the stock market's
returns may be lower in 2000. During the past year the markets were highly
volatile. Technology stocks were the market leaders from October 1999 to March
2000, but fell sharply in mid-April, as witnessed by the approximate 35% decline
of the NASDAQ, only to recover during the summer and decline again in the
autumn. We view the second decline as more significant, as it was driven by
weaker fundamentals, whereas the first decline was driven primarily by market
sentiment. The earnings outlook for semiconductor, PC companies and
telecommunications equipment makers weakened noticeably over the summer and fall
of 2000.
---------
/1/ The Portfolios are underlying investment options of various variable
annuity products. A variable annuity product is a contract issued by an
insurance company where the annuity premium (a set amount of dollars) is
immediately turned into units of a portfolio of securities. Upon
retirement, the policy holder is paid according to accumulated units whose
dollar value varies according to the performance of the securities within
the subaccounts. Its objective is to preserve, through investment, the
purchasing value of the annuity which otherwise is subject to erosion
through inflation.
/2/ The performance returns presented for these Portfolios do not reflect
expenses imposed in connection with investing in variable annuity contracts
such as administrative fees, account charges and surrender charges, which
if reflected, would reduce the performance of the Portfolios. Past
performance is not indicative of future results.
/3/ NASDAQ is a computerized system that provides brokers and dealers with
price quotations for securities traded over the counter as well as for many
New York Stock Exchange listed securities.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 1
<PAGE>
While economic growth has slowed from last winter's rapid pace, we expect the
U.S. economy may slow even further. This may affect the Fed's monetary policy
over the next few months, which could potentially lay the groundwork for the
next market upturn. During the first half of 2000, the question that many stock
market investors asked was, "When will the economy slow down enough for the Fed
to stop raising interest rates?" The answer came during the third quarter of
2000. Gross domestic product ("GDP")/4/ growth slowed from an 8% annual growth
rate in the second quarter to a 5% annual growth rate in the third quarter of
2000. The best performing stocks during the third quarter, financials and
utilities, were in industries that generally benefit most from lower interest
rates.
Recently, the bond market has made up for its past malaise and then some, fueled
by news of the U.S. Treasury plans to buy back approximately $30 billion of its
long-term debt obligations.
The U.S. Treasury Department's announcement of its plans to begin buying back
debt in the open market via a reverse auction due to the federal budget surplus
has had a significant impact on the bond market. Portfolio managers and traders
throughout the investment community began to realize that for the first time in
20 years not only would there be less new supply there would also be fewer U.S.
Treasuries outstanding. This caused a huge rally in bonds even as the Fed was in
its most aggressive rate tightening campaign since 1994.
Thank you for investing in The Smith Barney Investment Series -- Select
Portfolios.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
Smith Barney Investment Series
November 27, 2000
---------
/4/ GDP is the market value of the goods and services produced by labor and
property in the U.S. GDP comprises consumer and government purchases,
private domestic investments and net exports of goods and services.
--------------------------------------------------------------------------------
2 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Small Cap Portfolio
--------------------------------------------------------------------------------
The Select Small Cap Portfolio ("Portfolio") seeks capital appreciation. The
Portfolio invests primarily in domestic companies, in early stages of their life
cycles, characterized by relatively high earnings growth./1/
Portfolio Manager:
Sandip A. Bhagat, CFA
[PHOTO]
Assumed management:
September 15, 1999
Investment experience:
More than thirteen years
Background: Joined Travelers in 1987. Extensive portfolio management experience
in quantitative investment management. Formerly, a Vice President at Mandell
Institute, Inc., a research & development think tank.
Education: BS, Chemical Engineering, University of Bombay; MS, Chemical
Engineering, University of Connecticut; MBA, Finance, University of Connecticut.
Portfolio Update
For the year ended October 31, 2000, the Select Small Cap Portfolio returned
11.64%. In comparison, the Russell 2000 Index ("Russell 2000")/2/ returned
17.41% for the same period.
The Portfolio's fundamental goal is to capture the performance of the small cap
stock market with a high degree of consistency. We do not attempt to time the
market nor do we focus on exploiting market sector opportunities based on
economic forecasts. Instead, we employ an active investment strategy based on a
sophisticated, proprietary model that seeks to identify small cap stocks that
are likely to perform better than their peers.
The past six months of the period proved to be a difficult time for the U.S.
stock markets, with most major indices posting negative results. During the past
six months, the small capitalization market, as measured by the Russell 2000,
declined 1.11%, compared to the 0.42% decline of the Standard and Poor's 500
Index ("S&P 500")/3/, which measures the performance of large capitalization
stocks. However, for the year ended October 31, 2000, the Russell 2000, advanced
17.41%, compared to a 6.08% return for the S&P 500.
We continue to maintain our bullish outlook on the technology sector despite the
recent sell-off. We will look to increase our exposure to select segments within
the technology sector, especially the software segment. Our view towards the
energy sector also remains favorable, as we look for increased capital budgeting
expenditures to drive strong earnings growth during the remainder of the year.
We seek to control the risk of the Portfolio through its overall
diversification, which has been a huge benefit in the current volatile markets.
We expect this strategy to work for investors given a somewhat uncertain
direction for the U.S. stock marketplace.
---------
/1/ Because the Portfolio invests primarily in small-capitalization companies,
an investment in the Portfolio may be considered more volatile and more
susceptible to loss than an investment in a portfolio that invests
primarily in large capitalization companies. Compared to medium and large,
established companies, small-capitalization companies are more likely to
have limited product lines, limited capital resources and less experienced
management. The price of small capitalization company stocks tend to be
more volatile than the price of larger capitalization company stocks.
/2/ The Russell 2000 is an unmanaged index of smaller capitalization stocks.
Please note that an investor cannot invest directly in an index.
/3/ The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note that an investor cannot invest directly in an
index.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 3
<PAGE>
--------------------------------------------------------------------------------
Select Small Cap Portfolio
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
---------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=================================================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $ 9.92 $11.03 $0.05 $0.00** 11.64%
-----------------------------------------------------------------------------------------------------------------
9/15/99*--10/31/99 10.00 9.92 0.00 0.00 (0.80)++
=================================================================================================================
Total $0.05 $0.00
=================================================================================================================
</TABLE>
It is the Portfolio's policy to distribute dividends and capital gains, if any,
annually.
--------------------------------------------------------------------------------
Average Annual Total Returns+
--------------------------------------------------------------------------------
Year Ended 10/31/00 11.64%
--------------------------------------------------------------------------------
9/15/99* through 10/31/00 9.47
================================================================================
--------------------------------------------------------------------------------
Cumulative Total Return+
--------------------------------------------------------------------------------
9/15/99* through 10/31/00 10.75%
================================================================================
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
** Amount represents less than $0.01.
--------------------------------------------------------------------------------
4 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Small Cap Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in the Select Small Cap Portfolio
vs. Russell 2000 Stock Index+
--------------------------------------------------------------------------------
[LINE GRAPH]
<TABLE>
<CAPTION>
Select Small Cap Russell 2000 Stock Index
Portfolio
<S> <C> <C>
Sep 15, 99 10,000 10,000
10/99 9,920 10,040
1/00 11,959 11,653
4/00 11,989 11,919
7/00 11,105 11,811
Oct 31, 2000 11,075 11,787
</TABLE>
+ Hypothetical illustration of $10,000 invested on September 15, 1999
(commencement of operations), assuming reinvestment of dividends and
capital gains, if any, at net asset value through October 31, 2000. The
Russell 2000 Stock Index is a capitalization weighted total return index
which is comprised of 2,000 of the smallest capitalized U.S. domiciled
companies with less than average growth orientation whose common stock is
traded in the United States and the New York Stock Exchange, American Stock
Exchange and NASDAQ. The Index is unmanaged and is not subject to the same
management and trading expenses as a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Industry Diversification of Common Stock*++
--------------------------------------------------------------------------------
[BAR GRAPH]
3.7% Computer Software
16.3% Consumer Discretionary
8.1% Electronic - Components
7.0% Finance
23.6% Health Care
4.1% Internet Content
5.9% Materials & Processing
4.1% Producer Durables
16.9% Technology
10.3% Other
* As a percentage of total common stock.
++ Holdings are as of October 31, 2000 and are subject to change.
Investment Allocation**++
--------------------------------------------------------------------------------
[PIE CHART]
52.1% Common Stock
4.8% U.S. Government Obligations
43.1% Repurchase Agreements
** As a percentage of total investments.
--------------------------------------------------------------------------------
The Smith Barney Investment Series-- Select Portfolios 5
<PAGE>
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
--------------------------------------------------------------------------------
The Select Mid Cap Portfolio ("Portfolio") seeks capital appreciation. The
Portfolio invests primarily in equity securities of medium-sized companies,
which are companies with market capitalizations within the range of those
companies included in the Standard & Poor's MidCap 400 Index ("S&P MidCap 400")
/1/ at the time of investment./2/
Portfolio Manager:
Lawrence B. Weissman, CFA
[PHOTO]
Assumed management:
September 15, 1999
Investment experience:
More than 15 years
Background: Joined Salomon Smith Barney in 1997. Previously with Neuberger &
Berman and TIAA-CREF.
Education: BS, Cornell University; MBA, Columbia University
Portfolio Update
For the year ended October 31, 2000, the Select Mid Cap Portfolio returned
43.43%. In comparison, the S&P MidCap 400 returned 31.65% for the same period.
The Portfolio is made up of companies that we believe to be high-quality,
well-positioned, and at competitive prices. Conceptually, we seek to take
advantage of the price differences between large- and medium-capitalization
companies without taking on undue risk.
In seeking to accomplish this goal, we follow an investment approach that
focuses on companies that we perceive to have significant advantages and
excellent competitive positions in the marketplace. In our view, many of these
companies are leaders in their respective fields and are poised to take
advantage of their leadership position. We also look for consistent growth,
strong management, positive cash flow and high return on equity as factors in
determining whether to invest in a company.
The Portfolio seeks long-term growth of capital by investing primarily in the
stocks of medium-sized companies./3/ Since the Portfolio's inception, we have
remained committed to our investment style and we continue to focus on
maintaining a quality-oriented portfolio that we believe may provide higher
returns with potentially lower risk over time.
Recently, U.S. stock markets have experienced extreme levels of volatility.
However, during the period we maintained our stock selection strategy of buying
companies that we believe have exhibited strong growth characteristics,
including high historic growth rates and skilled management that is committed to
long-term growth.
We believe our positive performance during the period can be directly attributed
to our solid stock selection and our disciplined and conservative investment
style. (Of course, past performance is not indicative of future results.)
---------
/1/ The S&P MidCap 400 is a market-value weighted index, consisting of 400
domestic stocks chosen for market size, liquidating and industry group
representation. Please note that an investor cannot invest directly in an
index.
/2/ Because the Portfolio invests primarily in medium-capitalization companies,
an investment in the portfolio may be more volatile and more susceptible to
loss than an investment in a portfolio which invests primarily in
large-capitalization companies. Medium-capitalization companies may have
more limited product lines, markets
---------
and financial resources than large-capitalization companies. They may have
shorter operating histories and more erratic businesses, although they
generally have more established businesses than small-capitalization
companies. The prices of medium-capitalization company stocks tend to be
more volatile than the prices of large-capitalization company stocks.
/3/ Medium-sized companies are those companies whose market capitalization is
within the market capitalization range of companies in the S&P MidCap 400
at the time of the Portfolio's investment.
--------------------------------------------------------------------------------
6 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $10.11 $14.48 $0.02 $0.00 43.43%
---------------------------------------------------------------------------------------------
9/15/99* -- 10/31/99 10.00 10.11 0.00 0.00 1.10++
=============================================================================================
Total $0.02 $0.00
=============================================================================================
It is the Portfolio's policy to distribute dividends and capital gains, if any, annually.
---------------------------------------------------------------------------------------------
Average Annual Total Returns+
---------------------------------------------------------------------------------------------
Year Ended 10/31/00 43.43%
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 38.99
=============================================================================================
---------------------------------------------------------------------------------------------
Cumulative Total Return+
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 45.01%
=============================================================================================
</TABLE>
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
--------------------------------------------------------------------------------
The Smith Barney Investment Series-- Select Portfolios 7
<PAGE>
--------------------------------------------------------------------------------
Select Mid Cap Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in the Select Mid Cap Portfolio
vs. Standard & Poor's MidCap 400 Index+
--------------------------------------------------------------------------------
September 1999 -- October 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
Select
Mid Cap Portfolio Standard & Poor's Mid Cap 400 Index
<S> <C> <C>
Sep-1999 10,000 10,000
10/99 10,110 9,975
1/00 11,767 10,809
4/2000 13,169 12,095
7/2000 13,900 12,312
Oct 31, 2000 14,501 13,132
</TABLE>
+ Hypothetical illustration of $10,000 invested on September 15, 1999
(commencement of operations), assuming the reinvestment of dividends and
capital gains, if any, at net asset value through October 31, 2000. The
Standard & Poor's MidCap 400 Index ("S&P MidCap 400") is a widely
recognized index of 400 medium-capitalization stocks. Figures for the S&P
MidCap 400 include reinvestment of dividends. The Index is unmanaged and is
not subject to the same management and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Industry Diversification of Common Stock*++
--------------------------------------------------------------------------------
[BAR GRAPH]
3.5% Commercial Services
4.8% Consumer Durables
4.6% Consumer Services
20.9% Finance
10.4% Health Care - Drugs
7.3% Industrial Services
23.2% Technology
3.4% Telecommunications
4.2% Utilities
17.7% Other
* As a percentage of total common stock.
++ Holdings are as of October 31, 2000 and are subject to change.
Investment Allocation**++
--------------------------------------------------------------------------------
[PIE CHART]
22.4% Repurchase Agreements
77.6% Common Stock
** As a percentage of total investments.
--------------------------------------------------------------------------------
8 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Growth Portfolio
--------------------------------------------------------------------------------
The Select Growth Portfolio ("Portfolio") seeks capital appreciation. The
Portfolio invests principally in U.S. common stocks and other equity securities,
typically of established companies with large-market capitalizations.
Portfolio Manager:
Lawrence B. Weissman, CFA
[PHOTO]
Assumed management:
September 15, 1999
Investment experience:
More than 15 years
Background: Joined Salomon Smith Barney in 1997. Previously with Neuberger &
Berman and TIAA-CREF.
Education: B.S., Cornell University; M.B.A., Columbia University
Portfolio Update
For the year ended October 31, 2000, the Select Growth Portfolio returned
15.61%. In comparison, the Standard & Poor's 500 Index ("S&P 500")/1/ returned
6.08% for the same period.
We continue to manage the Portfolio in line with its investment objective of
capital appreciation in what we believe to be an effective way. We continue to
pursue a measured and disciplined approach to investing in what we consider to
be quality companies well positioned for the long term.
During the period, the Portfolio continued to be well diversified across sectors
as well as individual companies. Although during the period the Portfolio has
remained fully invested, we have tried to react quickly to the changing market
environment and manage risk in order to protect the Portfolio's assets.
We look to invest in established companies. Although the market has been
extremely volatile during the period, our focus on buying and holding
high-quality, well-managed, and well-positioned companies has helped us to
weather market corrections and has rewarded us with consistent and superior
performance. We have built a portfolio that follows a lower risk,
growth-oriented strategy by investing in both the classic blue-chip companies as
well as companies that we believe have the potential to become the blue chips of
tomorrow. And while no guarantees can be made, we believe this is the best
investment strategy for success over the long term.
---------
/1/ The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note that an investor cannot invest directly in an
index.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 9
<PAGE>
--------------------------------------------------------------------------------
Select Growth Portfolio
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $10.51 $12.14 $0.01 $0.00 15.61%
---------------------------------------------------------------------------------------------
9/15/99* -- 10/31/99 10.00 10.51 0.00 0.00 5.10++
=============================================================================================
Total $0.01 $0.00
=============================================================================================
It is the Portfolio's policy to distribute dividends and capital gains, if any, annually.
---------------------------------------------------------------------------------------------
Average Annual Total Returns+
---------------------------------------------------------------------------------------------
Year Ended 10/31/00 15.61%
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 18.83
=============================================================================================
---------------------------------------------------------------------------------------------
Cumulative Total Return+
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 21.50%
=============================================================================================
</TABLE>
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
--------------------------------------------------------------------------------
10 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Growth Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in the Select Growth Portfolio
vs. Standard & Poor's 500 Index+
--------------------------------------------------------------------------------
September 1999 -- October 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
Select
Growth Portfolio Standard & Poor's 500 Index
<S> <C> <C>
Sep 15, 99 10,000 10,000
10/99 10,510 10,633
1/00 11,540 10,911
4/00 12,380 11,397
7/00 12,310 11,259
Oct 31, 2000 12,150 11,278
</TABLE>
+ Hypothetical illustration of $10,000 invested on September 15, 1999
(commencement of operations), assuming the reinvestment of dividends and
capital gains, if any, at net asset value through October 31, 2000. The
Standard & Poor's 500 Index ("S&P 500") is an index of widely held common
stocks listed on the New York and American Stock Exchanges and the
over-the-counter markets. Figures for the S&P 500 include reinvestment of
dividends. The Index is unmanaged and is not subject to the same management
and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Industry Diversification of Common Stock*++
--------------------------------------------------------------------------------
[BAR GRAPH]
5.9% Consumer Non-Durables
5.2% Consumer Services
6.8% Energy
15.4% Finance
13.5% Health Care
6.6% Producer Manufacturing
6.2% Software
21.5% Technology
6.6% Utilities
12.3% Other
* As a percentage of total common stock.
++ Holdings are as of October 31, 2000 and are subject to change.
Investment Allocation**++
--------------------------------------------------------------------------------
[PIE CHART]
14.9% Repurchase Agreement
85.1% Common Stock
** As a percentage of total investments.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 11
<PAGE>
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
--------------------------------------------------------------------------------
The Select Growth and Income Portfolio ("Portfolio") seeks reasonable growth and
income. The Portfolio invests principally in equity securities, including
convertible securities that provide dividend or interest income. However, the
Portfolio may also invest in non-income-producing investments for potential
appreciation in value. The Portfolio emphasizes U.S. stocks with large market
capitalizations.
Portfolio Manager:
Michael Kagan
[PHOTO]
Assumed management:
August 14, 2000
Investment experience:
More than 15 years
Background: Joined Smith Barney Asset Management in 2000 and has been with
Salomon Brothers Asset Management since 1994. Prior to joining Salomon, Mike
helped manage two hedge funds, Bentley and Zweig Advisors.
Education: BA, Economics, Harvard University; attended the MIT Sloan School of
Management.
Special Shareholder Notice
On August 14, 2000, Michael Kagan assumed the day-to-day management of the
Portfolio. Michael has been with Salomon Brothers Asset Management since 1994.
Michael has more than 15 years of experience in the securities business.
Portfolio Update
For the year ended October 31, 2000, the Select Growth and Income Portfolio
returned 6.86%. In comparison, the Standard & Poor's 500 Index ("S&P 500")/1/
returned 6.08% for the same period.
The Portfolio own stocks in large companies, typically over $10 billion in size.
The Portfolio owns a mixture of growth and value stocks. As indicated by its
name, the Portfolio's return may comprise capital appreciation, "growth," and a
significant dividend, "income." And while no guarantees can be given, the gross
dividend yield/2/ of the Portfolio, before expenses, should exceed that of the
market.
The Portfolio seeks to own high-quality companies with strong balance sheets. We
carefully examine the accounting procedures of the companies that the Portfolio
invests in, and we will not purchase the stocks of companies whose accounting we
consider to be aggressive. The Portfolio is highly diversified, with industry
exposure similar to that of the market.
---------
/1/ The S&P 500 is a market capitalization-weighted measure of 500 widely held
common stocks. Please note that an investor cannot invest directly in an
index.
---------
/2/ Dividend yield is the annual percentage of return that an investor receives
on either common or preferred stock. The yield is based on the amount of
the dividend divided by the market price (at the time of purchase) of the
stock.
--------------------------------------------------------------------------------
12 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Total
Year Ended of Year of Year Dividends Distributions Returns+
=============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $10.10 $10.77 $0.02 $0.00 6.86%
---------------------------------------------------------------------------------------------
9/15/99* -- 10/31/99 10.00 10.10 0.00 0.00 1.00++
=============================================================================================
Total $0.02 $0.00
=============================================================================================
It is the Portfolio's policy to distribute dividends and capital gains, if any, annually.
---------------------------------------------------------------------------------------------
Average Annual Total Returns+
---------------------------------------------------------------------------------------------
Year Ended 10/31/00 6.86%
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 7.00
=============================================================================================
---------------------------------------------------------------------------------------------
Cumulative Total Return+
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 7.93%
=============================================================================================
</TABLE>
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 13
<PAGE>
--------------------------------------------------------------------------------
Select Growth and Income Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in the Select Growth and Income Portfolio
vs. Standard & Poor's 500 Index+
--------------------------------------------------------------------------------
September 1999 -- October 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
Select Growth
and Income Portfolio Standard & Poor's 500 Index
<S> <C> <C>
Sep 15, 99 10,000 10,000
10/99 10,100 10,633
1/00 10332 10,911
4/00 10693 11,397
7/00 10392 11,259
Oct 31, 2000 10,793 11,278
</TABLE>
+ Hypothetical illustration of $10,000 invested on September 15, 1999
(commencement of operations), assuming the reinvestment of dividends and
capital gains, if any, at net asset value through October 31, 2000. The
Standard & Poor's 500 Index ("S&P 500") is an index of widely held common
stocks listed on the New York and American Stock Exchanges and the
over-the-counter markets. Figures for the S&P 500 include reinvestment of
dividends. The Index is unmanaged and is not subject to the same management
and trading expenses of a mutual fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Industry Diversification of Common Stock*++
--------------------------------------------------------------------------------
[BAR GRAPH]
5.6% Consumer Non-Durables
18.9% Electronic Technology
8.1% Energy Minerals
17.9% Finance
8.2% Health Technology
10.1% Retail Trade
5.6% Software
11.6% Technology Services
3.1% Utilities
10.9% Other
* As a percentage of total common stock.
++ Holdings are as of October 31, 2000 and are subject to change.
Investment Allocation**++
--------------------------------------------------------------------------------
[PIE CHART]
0.9% Convertible Corporate Bonds
47.0% Common Stock
52.1% Repurchase Agreements
** As a percentage of total investments.
--------------------------------------------------------------------------------
14 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Government Portfolio
--------------------------------------------------------------------------------
The Select Government Portfolio ("Portfolio") seeks high current return
consistent with the preservation of capital. The Portfolio invests primarily in
government debt securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities./1/ These securities include U.S. Treasury
securities, mortgage-related and asset-backed securities. Some
government-guaranteed, mortgage-related securities are backed by the full faith
and credit of the U.S. Treasury; some are supported by the right of the issuer
to borrow from the U.S. government; and some are backed only by the credit of
the issuer itself.
Portfolio Manager:
James E. Conroy
[PHOTO]
Assumed management:
September 15, 1999
Investment experience:
More than 24 years
Background: Joined E. F. Hutton Co. Inc. in 1983. Formerly a portfolio manager
for Equitable Asset Management and I.N.A. Securities.
Education: B.A., Economics, Muhlenberg College
Portfolio Update
For the year ended October 31, 2000, the Select Government Portfolio returned
6.55%. In comparison, the Lehman Brothers Government/Corporate Bond Index/2/
returned 6.46% for the same period.
Further signs of moderating economic data and concern surrounding higher oil
prices prompted a flattening of the yield curve./3/ The feeling is that the
Federal Reserve Board ("Fed") may need to begin considering monetary easing.
Moreover, recent bond market activity concerned itself with renewed corporate
bond supply and an eye toward corporate earnings announcements.
We believe that the issues mentioned are a potentially negative factor for the
bond market. Going forward through the first quarter of 2001, we believe the Fed
may begin the easing process resulting in lower short-term interest rates.
The chart below shows the yields from U.S. Treasuries during the period under
review.
Yields from U.S. Treasuries 10/31/00 10/31/99
--------------------------- -------- --------
3-Month Treasury Bill 6.38% 5.11%
2-Year Treasury Note 5.92 5.82
5-Year Treasury Note 5.81 5.98
10-Year Treasury Note 5.76 6.05
30-Year Treasury Bond 5.79 6.18
The commentaries provided on pages 3 through 15 represent the opinion of the
managers and is not intended to be a forecast of future events, a guarantee of
future results or investment advice. Further, there is no assurance that certain
securities will remain in or out of the Portfolios. Please refer to pages 18
through 35 for a list and percentage breakdown of the Portfolios' holdings.
Also, please note any discussion of the Portfolios' holdings is as of October
31, 2000 and is subject to change.
---------
/1/ Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Portfolio shares are not deposits or obligations of, or insured or
guaranteed by the U.S. government, any financial institution, the Federal
Deposit Insurance Corporation or any other agency, entity or person.
---------
/2/ The Lehman Brothers Government/Corporate Bond Index is a broad measure of
the performance of government and corporate, fixed-rate debt issues. Please
note an investor cannot invest directly in an index.
/3/ The yield curve is the graphical depiction of the relationship between the
yield on bonds of the same credit quality but different maturities.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 15
<PAGE>
--------------------------------------------------------------------------------
Select Government Portfolio
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Historical Performance
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Asset Value
----------------------
Beginning End Income Capital Gain Total
Period Ended of Period of Period Dividends Distributions Returns+
=============================================================================================
<S> <C> <C> <C> <C> <C>
10/31/00 $10.13 $10.62 $0.16 $0.00 6.55%
---------------------------------------------------------------------------------------------
9/15/99* -- 10/31/99 10.00 10.13 0.00 0.00 1.30++
=============================================================================================
Total $0.16 $0.00
=============================================================================================
It is the Portfolio's policy to dividends and annually. distribute capital
gains, if any,
---------------------------------------------------------------------------------------------
Average Annual Total Returns+
---------------------------------------------------------------------------------------------
Year Ended 10/31/00 6.55%
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 7.00
=============================================================================================
---------------------------------------------------------------------------------------------
Cumulative Total Return+
---------------------------------------------------------------------------------------------
9/15/99* through 10/31/00 7.93%
=============================================================================================
</TABLE>
+ Assumes reinvestment of all dividends and capital gain distributions.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Commencement of operations.
--------------------------------------------------------------------------------
16 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Select Government Portfolio at a Glance (unaudited)
--------------------------------------------------------------------------------
Growth of $10,000 Invested in the Select Government Portfolio
vs. Lehman Brothers Government Index+
--------------------------------------------------------------------------------
September 1999 -- October 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
Select Lehman Brothers
Government Portfolio Government Index
<S> <C> <C>
Sep 15, 99 10,000 10,000
10/99 10,130 10,016
1/00 9,808 9,951
4/00 10,184 10,241
7/00 10,478 10,531
Oct 31, 2000 10,793 10,820
</TABLE>
+ Hypothetical illustration of $10,000 invested on September 15, 1999
(commencement of operations), assuming the reinvestment of dividends and
capital gains, if any, at net asset value through October 31, 2000. The
Lehman Brothers Government Index includes U.S. treasuries and agencies with
maturities of one year or greater having a minimum outstanding principal of
$100 million and are only fixed coupon securities. The Index is unmanaged
and is not subject to the same management and trading expenses as a mutual
fund.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
Investment Allocation as of October 31, 2000*
--------------------------------------------------------------------------------
[PIE CHART]
100.0% U.S. Government Obligations
* As a percentage of total investments. Please note holdings are subject to
change.
U.S. Treasury Securities are debt obligations of the United States Government.
They are secured by the full faith and credit of the Federal Government, and
include such instruments as Treasury bonds, notes and bills.
Mortgage-Backed Securities are debt securities issued by U.S. government
agencies such as the Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
National Mortgage Association ("FNMA") and Government National Mortgage
Association ("GNMA"). They represent thousands of individual home mortgages that
are pooled to form securities. As homeowners pay interest and principal each
month, these payments are passed on to investors. Mortgage-backed securities are
backed by the full faith and credit of the issuing agency.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 17
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 52.1%
Auto & Transportation -- 1.1%
1,700 American Axle & Manufacturing Holdings, Inc.* $ 21,144
417 CNF Transportation, Inc. 11,129
400 Cognex Corp.* 13,400
1,700 Copart, Inc.*+ 25,606
681 Mesaba Holdings, Inc.*+ 7,363
351 SkyWest, Inc.+ 17,725
--------------------------------------------------------------------------------
96,367
--------------------------------------------------------------------------------
Broadcast Media -- 0.7%
1,100 The Ackerley Group, Inc. 11,413
600 Citadel Communications Corp.* 7,275
300 Radio One, Inc.*+ 2,381
600 Radio One, Inc., Class D Shares*+ 4,809
800 Westwood One, Inc.*+ 15,150
627 XO Communications, Inc.*+ 21,151
--------------------------------------------------------------------------------
62,179
--------------------------------------------------------------------------------
Computer Software -- 1.9%
900 AppliedTheory Corp.* 4,275
900 BindView Development Corp.* 7,031
1,000 Exchange Applications, Inc.*+ 3,203
300 Informatica Corp.*+ 28,350
300 Mercury Interactive Corp.*+ 33,300
200 Micromuse, Inc.*+ 33,937
900 MicroStrategy, Inc.*+ 21,544
712 Mynd Corp.*+ 9,078
400 Open Market, Inc.*+ 1,325
600 Peregrine Systems, Inc.*+ 14,400
800 Remedy Corp.*+ 13,700
--------------------------------------------------------------------------------
170,143
--------------------------------------------------------------------------------
Consumer Discretionary -- 8.5%
1,166 99 Cents Only Stores*+ 26,162
773 Apollo Group, Inc., Class A Shares* 30,244
800 AppleBee's International, Inc. 24,162
610 Bebe Stores Inc.* 9,302
712 Borders Group, Inc.* 9,879
996 CEC Entertainment, Inc.* 31,747
930 Church & Dwight Co., Inc. 18,367
356 Claire's Stores, Inc. 7,164
691 Complete Business Solutions, Inc.*+ 7,169
1,000 Cost Plus, Inc.*+ 28,000
500 CoStar Group Inc.*+ 15,625
732 Cox Radio, Inc., Class A Shares*+ 16,653
981 The Dial Corp.+ 10,975
526 Dollar Tree Stores, Inc.*+ 20,599
752 Emmis Communications Corp., Class A Shares*+ 20,116
813 Ethan Allen Interiors Inc.+ 23,780
996 Furniture Brands International, Inc.*+ 16,807
See Notes to Financial Statements.
--------------------------------------------------------------------------------
18 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Consumer Discretionary -- 8.5% (continued)
417 Houghton Mifflin Co.+ $ 15,351
554 International Game Technology*+ 20,290
1,078 Jack In The Box Inc.*+ 26,411
834 Jones Apparel Group, Inc.*+ 23,196
661 Linens `n Things, Inc.*+ 20,326
1,100 The Men's Wearhouse, Inc.*+ 32,175
1,100 On Assignment, Inc.*+ 27,706
376 Outback Steakhouse, Inc.*+ 10,716
534 Performance Food Group Co.*+ 21,627
800 Plexus Corp.*+ 50,450
732 Pre-Paid Legal Services, Inc.*+ 32,117
300 Quanta Services, Inc.*+ 9,319
529 Regis Corp.+ 8,001
874 Ross Stores, Inc.+ 11,526
371 Sotheby's Holdings, Inc., Class A Shares+ 10,087
2,100 The Source Information Management Co.*+ 11,550
1,200 Spherion Corp.*+ 14,250
1,000 TeleTech Holdings, Inc.*+ 27,750
498 Tupperware Corp.+ 8,528
518 United Stationers, Inc.*+ 15,572
1,900 WMS Industries Inc.*+ 42,275
--------------------------------------------------------------------------------
755,974
--------------------------------------------------------------------------------
Consumer Staples -- 0.4%
1,917 The Earthgrains Co.+ 38,819
--------------------------------------------------------------------------------
Electronic -- Components -- 4.2%
800 Alpha Industries, Inc.* 31,900
300 ANADIGICS, Inc.* 6,712
905 C-Cube Microsystems Inc.* 17,647
800 Credence Systems Corp.*+ 15,000
200 Cree, Inc.*+ 19,850
600 Dallas Semiconductor Corp.+ 23,775
400 DuPont Photomasks, Inc.*+ 22,450
800 In Focus Systems, Inc.*+ 35,350
1,200 Kulicke & Soffa Industries, Inc.*+ 17,625
1,000 Lattice Semiconductor Corp.*+ 29,188
600 Micrel, Inc.*+ 27,150
1,200 NETsilicon, Inc.*+ 17,025
263 QLogic Corp.*+ 25,445
1,200 Sensormatic Electronics Corp.*+ 21,600
700 TranSwitch, Corp.*+ 40,425
600 TriQuint Semiconductor, Inc.*+ 22,988
--------------------------------------------------------------------------------
374,130
--------------------------------------------------------------------------------
Finance -- 3.7%
2,038 AmeriCredit Corp.* 54,771
234 Astoria Financial Corp. 8,775
379 Commerce Bancorp Inc. 22,953
361 Dain Rauscher Corp.+ 33,866
1,159 Doral Financial Corp.+ 20,717
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 19
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Finance -- 3.7% (continued)
564 Eaton Vance Corp.+ $ 28,094
341 The FINOVA Group, Inc.+ 874
538 Greater Bay Bancorp+ 17,519
696 HSB Group Inc.+ 27,536
482 Hudson United Bancorp+ 10,785
838 Metris Cos., Inc.+ 27,130
1,027 North Fork Bancorporation, Inc.+ 20,733
600 Pinnacle Holdings Inc.*+ 9,450
447 Radian Group Inc.+ 31,681
346 Southwest Securities Group, Inc.+ 9,775
--------------------------------------------------------------------------------
324,659
--------------------------------------------------------------------------------
Health Care -- 12.3%
400 Abgenix, Inc.* 31,550
312 Affymetrix, Inc.* 17,277
400 Alkermes, Inc.* 14,825
1,100 Aphton Corp.* 33,000
935 Bergen Brunswig Corp., Class A Shares 8,473
5,700 Caremark Rx, Inc.* 71,250
700 Cephalon, Inc.* 37,537
1,200 CONMED Corp.*+ 17,625
727 Cooper Cos., Inc.+ 25,990
400 COR Therapeutics, Inc.*+ 22,600
700 Cytyc Corp.*+ 41,562
200 Diagnostic Products Corp.+ 9,125
800 Emisphere Technologies, Inc.*+ 20,250
100 Enzo Biochem, Inc.*+ 3,850
788 Enzon, Inc.*+ 56,145
269 Gilead Sciences Inc.*+ 23,134
352 Human Genome Sciences, Inc.*+ 31,114
600 ImClone Systems Inc.*+ 32,813
500 Incyte Genomics, Inc.*+ 18,313
2,213 King Pharmaceuticals, Inc.*+ 99,170
1,621 Ligand Pharmaceuticals, Inc., Class B Shares*+ 24,112
895 Medicis Pharmaceuticals Corp., Class A Shares*+ 65,894
260 MedQuist Inc.*+ 2,925
1,100 Mentor Corp.+ 19,388
620 Millennium Pharmaceuticals, Inc.*+ 44,989
800 Neose Technologies, Inc.*+ 28,950
534 Ocular Sciences, Inc.*+ 6,608
1,139 Omnicare, Inc.+ 19,932
1,200 Orthodontic Centers of America, Inc.*+ 40,050
1,446 Pharmaceutical Product Development Inc.*+ 45,278
900 Pharmacopeia, Inc.*+ 16,425
1,154 PSS World Medical, Inc.*+ 3,462
651 Res-Care, Inc.*+ 3,581
1,500 Respironics, Inc.*+ 29,438
3,777 SICOR Inc.*+ 48,393
630 STERIS Corp.*+ 9,450
See Notes to Financial Statements.
--------------------------------------------------------------------------------
20 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Health Care -- 12.3% (continued)
895 Sybron International Corp.*+ $ 22,151
615 Transkaryotic Therapies, Inc.*+ 22,909
259 Universal Health Services, Inc., Class B Shares+ 21,724
--------------------------------------------------------------------------------
1,091,262
--------------------------------------------------------------------------------
Internet Content -- 2.1%
790 Avocent Corp.* 56,041
1,400 AXENT Technologies, Inc.* 26,862
700 Digital Island*+ 8,837
900 Globix Corp.*+ 9,113
2,100 Juno Online Services, Inc.*+ 5,578
800 SonicWALL, Inc.*+ 11,950
800 StarMedia Network, Inc.*+ 4,900
800 Verity, Inc.*+ 18,800
750 VerticalNet Inc.*+ 20,918
151 Walt Disney Internet Group*+ 1,161
500 WatchGuard Technologies, Inc.*+ 25,000
--------------------------------------------------------------------------------
189,160
--------------------------------------------------------------------------------
Materials & Processing -- 3.1%
2,008 Airgas, Inc.* 13,554
1,300 Astec Industries, Inc.* 13,406
564 Centex Construction Products, Inc. 14,629
579 Cousins Properties, Inc.+ 15,054
971 Encompass Services Corp.*+ 4,430
412 Federal Realty Investment Trust+ 7,931
124 Huttig Building Products, Inc.*+ 543
595 NL Industries, Inc.+ 14,057
402 NVR Inc.*+ 41,567
457 Reckson Associates Realty Corp.+ 10,340
341 The Rouse Co.+ 8,418
900 Spartech Corp.+ 13,894
1,098 Stillwater Mining Co.*+ 31,842
305 USG Corp.+ 5,204
559 Vornado Realty Trust+ 19,460
1,900 Waste Connections, Inc.*+ 48,569
1,083 Wausau-Mosinee Paper Corp.+ 9,476
--------------------------------------------------------------------------------
272,374
--------------------------------------------------------------------------------
Other Energy -- 1.7%
818 Barrett Resources Corp.* 29,755
691 Basin Exploration Inc.* 13,690
498 Ocean Energy, Inc.*+ 6,910
1,612 Plains Resources Inc.*+ 30,830
854 R&B Falcon Corp.*+ 21,350
800 Swift Energy Co.*+ 26,000
1,800 Unit Corp.*+ 23,963
--------------------------------------------------------------------------------
152,498
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 21
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Producer Durables -- 2.1%
854 C&D Technology, Inc. $ 50,493
849 CommScope Inc.*+ 21,490
341 Jacobs Engineering Group, Inc.*+ 14,109
600 Lennar Corp.+ 19,275
722 Manitowoc Co., Inc.+ 19,629
951 Mettler - Toledo International Inc.*+ 44,400
650 Nordson Corp.+ 18,647
--------------------------------------------------------------------------------
188,043
--------------------------------------------------------------------------------
Technology -- 8.8%
574 ADTRAN, Inc.* 21,812
1,091 American Management Systems, Inc.* 23,593
874 Amkor Technology, Inc.* 19,392
767 Aspen Technology, Inc.* 31,687
1,392 AVT Corp.* 8,743
386 Black Box Corp.* 25,428
793 CACI International Inc., Class A Shares* 16,356
513 Carrier Access Corp.* 6,412
290 CIBER, Inc.* 2,266
680 Cognizant Technology Solutions Corp.* 27,880
600 Coherent, Inc.* 20,887
800 Commerce One, Inc.*+ 51,350
630 Cypress Semiconductor Corp.*+ 23,586
493 Diamond Technology Partners, Inc.*+ 22,000
835 Dycom Industries, Inc.*+ 31,417
300 Emulex Corp.*+ 44,062
100 hi/fn, Inc.*+ 6,175
835 iGATE Capital Corp.*+ 4,227
200 JNI Corp.*+ 17,813
1,532 Lam Research Corp.*+ 29,683
823 MasTec, Inc.*+ 23,816
2,155 Mentor Graphics Corp.*+ 50,508
300 Netro Corp.*+ 6,544
411 Powerwave Technologies, Inc.*+ 19,779
3,200 Quantum Corp.*+ 36,600
900 RadiSys Corp.*+ 23,850
700 Rare Medium Group, Inc.*+ 3,238
600 Sanchez Computer Associates, Inc.*+ 9,638
500 SanDisk Corp.*+ 26,867
696 Sawtek, Inc.*+ 35,409
361 SCM Microsystems, Inc.*+ 13,718
437 Visual Networks, Inc.*+ 1,611
1,164 Wind River Systems Inc.*+ 47,797
235 WorldGate Communications, Inc.*+ 4,392
534 Xircom, Inc.*+ 7,543
879 Zebra Technologies Corp.*+ 38,511
--------------------------------------------------------------------------------
784,590
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
22 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Small Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Telecommunications & Equipment -- 1.1%
700 Advanced Fibre Communications, Inc.* $ 22,794
900 DMC Stratex Networks, Inc.*+ 20,812
500 InterDigital Communication Corp.*+ 5,469
500 Leap Wireless International, Inc.*+ 24,875
1,200 Mpower Communications Corp.*+ 7,800
500 MRV Communications, Inc.*+ 19,750
--------------------------------------------------------------------------------
101,500
--------------------------------------------------------------------------------
Utilities -- 0.4%
995 Intermedia Communications, Inc.*+ 22,014
925 ITC/DeltaCom, Inc.*+ 7,487
351 US LEC Corp., Class A Shares*+ 2,106
--------------------------------------------------------------------------------
31,607
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $4,733,528) 4,633,305
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. GOVERNMENT OBLIGATIONS -- 4.8%
U.S. Treasury Bills:
$ 165,000 5.910% due 12/14/00+ 163,830
90,000 5.960% due 12/14/00+ 89,360
45,000 5.980% due 12/14/00+ 44,678
30,000 6.015% due 12/14/00+ 29,784
100,000 6.040% due 12/14/00+ 99,279
--------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost -- $426,931) 426,931
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $5,160,459) 5,060,236
================================================================================
REPURCHASE AGREEMENTS -- 43.1%
1,845,000 Goldman Sachs & Co., 6.550% due 11/1/00;
Proceeds at maturity-- $1,845,336; (Fully
collateralized by U.S. Treasury Notes & Bonds,
3.625% to 12.750% due 2/28/02 to 8/15/26;
Market value -- $1,881,902) 1,845,000
1,982,000 Morgan Stanley Dean Witter & Co., 6.500% due
11/1/00; Proceeds at maturity -- $1,982,358;
(Fully collateralized by U.S. Treasury Notes,
4.750% to 7.875% due 2/28/03 to 11/15/04;
Market value-- $2,031,479) 1,982,000
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $3,827,000) 3,827,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $8,987,459**) $8,887,236
================================================================================
* Non-income producing security.
+ This security has been segregated for open futures contracts commitments.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 23
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 77.6%
Commercial Services -- 2.7%
3,370 Advent Software, Inc.* $201,568
2,650 Convergys Corp.* 115,441
6,898 FactSet Research Systems, Inc.+ 261,227
--------------------------------------------------------------------------------
578,236
--------------------------------------------------------------------------------
Consumer Durables -- 3.7%
5,560 Electronic Arts, Inc.*+ 278,000
5,150 Harley-Davidson, Inc. 248,166
2,085 SPX Corp.*+ 257,758
--------------------------------------------------------------------------------
783,924
--------------------------------------------------------------------------------
Consumer Non-Durables -- 2.2%
4,347 Keebler Foods Co. 176,053
8,000 The Pepsi Bottling Group, Inc. 277,000
--------------------------------------------------------------------------------
453,053
--------------------------------------------------------------------------------
Consumer Services -- 3.6%
3,550 Cablevision Systems Corp., Class A Shares* 264,475
3,750 Entercom Communications Corp.* 146,953
2,000 Gemstar -- TV Guide International, Inc.* 137,125
6,430 Imax Corp.* 31,346
4,400 Univision Communications, Inc.* 168,300
--------------------------------------------------------------------------------
748,199
--------------------------------------------------------------------------------
Electronic Components -- 1.4%
2,200 National Semiconductor Corp.* 57,200
3,275 Vitesse Semiconductor Corp.* 229,045
--------------------------------------------------------------------------------
286,245
--------------------------------------------------------------------------------
Energy -- 2.1%
3,450 Anadarko Petroleum Corp. 220,973
5,765 Newfield Exploration Co.* 217,629
--------------------------------------------------------------------------------
438,602
--------------------------------------------------------------------------------
Finance -- 16.2%
6,730 ACE Ltd.+ 264,152
4,895 Ambac Financial Group, Inc.+ 390,682
9,165 Annuity and Life Re Holdings, Ltd.+ 252,610
4,550 Arthur J. Gallagher & Co. 287,219
3,500 Capital One Financial Corp. 220,937
3,630 Commerce Bancorp, Inc.+ 219,842
2,450 Concord EFS, Inc.* 101,216
2,200 Countrywide Credit Industries, Inc. 82,363
5,400 IndyMac Mortgage Holdings Inc. 112,725
1,000 Lehman Brothers Holdings Inc. 64,500
3,350 Marshall & Ilsley Corp. 151,797
6,154 Nationwide Financial Services, Inc. 299,238
6,200 North Fork Bancorporation, Inc. 125,162
2,100 Providian Financial Corp. 218,400
1,170 State Street Corp. 145,946
See Notes to Financial Statements.
--------------------------------------------------------------------------------
24 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Finance -- 16.2% (continued)
2,380 Stilwell Financial, Inc. $ 106,654
3,147 Waddell & Reed Financial, Inc. 100,327
3,425 XL Capital Ltd., Class A Shares 263,297
--------------------------------------------------------------------------------
3,407,067
--------------------------------------------------------------------------------
Health Care - Drugs -- 8.1%
2,050 Affymetrix, Inc.* 113,519
3,030 Chiron Corp.* 131,237
2,175 Forest Laboratories, Inc.* 288,188
1,820 Genentech, Inc.* 150,150
3,500 IVAX Corp.* 152,250
2,475 MedImmune, Inc.* 161,803
3,300 Millennium Pharmaceuticals, Inc.* 239,456
4,385 Sepracor, Inc.*+ 298,728
3,425 Stryker Corp. 161,403
--------------------------------------------------------------------------------
1,696,734
--------------------------------------------------------------------------------
Health Care - Services -- 1.4%
2,540 Wellpoint Health Networks Inc.* 297,021
--------------------------------------------------------------------------------
Industrial Services -- 5.7%
4,100 The AES Corp.* 231,650
3,280 BJ Services Co.* 171,995
3,280 Calpine Corp.* 258,915
3,230 Cooper Cameron Corp.* 176,035
5,630 Diamond Offshore Drillings, Inc. 194,587
4,400 Weatherford International, Inc.* 160,600
--------------------------------------------------------------------------------
1,193,782
--------------------------------------------------------------------------------
Process Industries -- 0.9%
5,000 Ecolab Inc. 195,938
--------------------------------------------------------------------------------
Producer Manufacturing -- 2.4%
3,950 Cintas Corp. 183,181
4,150 Grant Prideco, Inc.* 77,034
6,481 Molex Inc., Class A Shares 254,784
--------------------------------------------------------------------------------
514,999
--------------------------------------------------------------------------------
Retail -- 2.6%
10,000 Bed Bath & Beyond, Inc.* 258,125
2,530 Best Buy Co., Inc.* 126,974
4,075 Dollar Tree Stores, Inc.* 159,434
--------------------------------------------------------------------------------
544,533
--------------------------------------------------------------------------------
Technology -- 18.0%
7,450 ADC Telecommunications, Inc.* 159,244
2,080 Applied Micro Circuits Corp.* 158,860
325 Avanex Corp.* 33,008
65 Avici Systems Inc.* 2,819
5,500 Citrix Systems, Inc.* 121,688
5,850 Fiserv, Inc.*+ 306,759
35 Inrange Technologies Corp., Class B Shares* 1,282
4,505 Intuit Inc.* 276,776
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series-- Select Portfolios 25
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
SHARES SECURITY VALUE
================================================================================
Technology -- 18.0% (continued)
4,890 Jabil Circuit, Inc.* $ 279,036
430 Juniper Networks, Inc.* 83,850
3,100 L-3 Communications Holdings, Inc.* 204,406
2,360 Lexmark International Group, Inc., Class A Shares* 96,760
3,400 Linear Technology Corp. 219,513
2,475 Maxim Integrated Products, Inc.* 164,123
70 McDATA Corp., Class B Shares* 5,835
1,975 Mercury Interactive Corp.* 219,225
2,100 Novellus Systems, Inc.* 85,969
115 ONI Systems Corp.* 9,322
2,175 Sanmina Corp.* 248,630
2,520 Siebel Systems, Inc.* 264,443
2,400 Symbol Technologies, Inc. 109,050
1,780 Teradyne, Inc.* 55,625
1,435 VERITAS Software Corp.* 202,357
3,750 Waters Corp.*+ 272,109
110 webMethods, Inc.* 9,776
2,600 Xilinx, Inc.* 188,338
--------------------------------------------------------------------------------
3,778,803
--------------------------------------------------------------------------------
Telecommunications -- 2.6%
1,150 Amdocs Ltd.* 74,534
815 COLT Telecom Group PLC, Sponsored ADR* 106,459
1,150 Comverse Technology, Inc.* 128,512
165 Corvis Corp.* 10,828
4,500 Covad Communications Group, Inc.* 23,766
2,400 Time Warner Telecom Inc., Class A Shares* 143,100
1,790 Tycom Ltd.* 59,965
--------------------------------------------------------------------------------
547,164
--------------------------------------------------------------------------------
Transportation -- 0.8%
7,400 Knightsbridge Tanker Ltd. 159,563
--------------------------------------------------------------------------------
Utilities -- 3.2%
2,975 The Coastal Corp. 224,427
6,800 Dynegy, Inc., Class A Shares 314,925
4,000 Montana Power Co. 113,000
950 Southern Energy, Inc.* 25,888
--------------------------------------------------------------------------------
678,240
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- 15,163,632) 16,302,103
================================================================================
See Notes to Financial Statements.
--------------------------------------------------------------------------------
26 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Mid Cap Portfolio
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENTS -- 22.4%
$4,629,000 Goldman Sachs & Co., 6.550% due 11/1/00;
Proceeds at maturity -- $ 4,629,842;
(Fully collateralized by U.S. Treasury
Notes & Bonds, 3.625% to 12.750% due
2/28/02 to 8/15/26;
Market value -- $4,721,585) $ 4,629,000
72,000 Morgan Stanley Dean Witter & Co., 6.500%
due 11/1/00; Proceeds at maturity --
$ 72,013; (Fully collateralized by
U.S. Treasury Notes, 4.750% to 7.875%
due 2/28/03 to 11/15/04;
Market value-- $73,797) 72,000
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost-- $4,701,000) 4,701,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost-- $19,864,632**) $21,003,103
================================================================================
* Non-income producing security.
+ This security has been segregated for open futures contracts commitments.
** Aggregate cost for Federal income tax purpose is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 27
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth Portfolio
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 85.1%
Consumer Durables -- 1.5%
7,250 Electronic Arts, Inc.* $ 362,500
3,006 SPX Corp.* 371,617
--------------------------------------------------------------------------------
734,117
--------------------------------------------------------------------------------
Consumer Non-Durables -- 5.0%
11,200 The Coca-Cola Co. 676,200
3,950 Colgate-Palmolive Co. 232,102
4,210 The Gillette Co. 146,824
2,750 Keebler Foods Co. 111,375
5,050 Kimberly Clark Corp. 333,300
2,150 McDonald's Corp. 66,650
7,500 PepsiCo, Inc. 363,281
7,850 The Procter & Gamble Co. 560,784
--------------------------------------------------------------------------------
2,490,516
--------------------------------------------------------------------------------
Consumer Services -- 4.5%
3,450 Cendant Corp.* 41,400
3,560 Clear Channel Communications, Inc.* 213,823
7,600 Cox Communications, Inc.* 334,875
9,450 Time Warner Inc. 717,349
1,450 United Parcel Service, Inc., Class B Shares 88,087
8,881 Viacom Inc., Class A Shares* 505,106
8,400 The Walt Disney Co. 300,825
--------------------------------------------------------------------------------
2,201,465
--------------------------------------------------------------------------------
Energy -- 5.8%
7,542 BP Amoco PLC, Sponsored ADR 384,171
2,300 Chevron Corp. 188,888
1,500 Duke Energy Corp. 129,656
800 Dynegy Inc. 37,050
2,600 Enron Corp. 213,363
1,400 Exelon Corp. 84,175
12,878 Exxon Corp. 1,148,557
7,950 Royal Dutch Petroleum Co., NY Shares 472,031
2,800 Total Fina Elf SA 200,550
--------------------------------------------------------------------------------
2,858,441
--------------------------------------------------------------------------------
Finance -- 13.1%
5,450 Ace Ltd. 213,913
8,600 AMBAC Financial Group, Inc. 686,388
9,950 American International Group, Inc. 975,100
10,700 Annuity and Life Re (Holdings), Ltd. 294,919
6,400 AXA Financial, Inc. 346,000
4,900 Bank of America Corp. 235,506
8,450 Capital One Financial Corp. 533,406
14,350 The Chase Manhattan Corp. 652,925
2,800 Countrywide Credit Industries,Inc. 104,825
3,900 Fannie Mae 300,300
13,180 IndyMac Mortgage Holdings, Inc.* 275,133
1,800 Lehman Brothers Holdings Inc. 116,100
See Notes to Financial Statements.
--------------------------------------------------------------------------------
28 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth Portfolio
SHARES SECURITY VALUE
================================================================================
Finance -- 13.1% (continued)
4,150 Morgan Stanley Dean Witter & Co. $ 333,297
4,526 Providian Financial Corp. 470,704
7,450 Wells Fargo Co. 345,028
7,625 XL Capital Ltd. 586,172
--------------------------------------------------------------------------------
6,469,716
--------------------------------------------------------------------------------
Health Care -- 11.5%
3,410 Affymetrix, Inc.* 188,829
4,450 American Home Products Corp. 282,575
7,050 Bristol-Myers Squibb Co. 429,609
4,825 Eli Lilly & Co. 431,234
4,300 Genentech, Inc.* 354,750
6,900 Johnson & Johnson 635,663
14,950 Merck & Co., Inc. 1,344,566
29,825 Pfizer Inc. 1,288,067
7,900 Pharmacia Corp. 434,500
4,435 Sepracor Inc.* 302,134
--------------------------------------------------------------------------------
5,691,927
--------------------------------------------------------------------------------
Industrial Services -- 1.9%
11,350 The AES Corp.* 641,275
7,950 Halliburton Co. 294,646
--------------------------------------------------------------------------------
935,921
--------------------------------------------------------------------------------
Insurance -- 1.2%
8,400 AFLAC Inc. 613,725
--------------------------------------------------------------------------------
Producer Manufacturing -- 5.6%
2,800 Alcoa, Inc. 80,325
35,880 General Electric Co. 1,966,673
3,150 Minnesota Mining & Manufacturing Co. 304,368
7,700 Tyco International Ltd. 436,493
--------------------------------------------------------------------------------
2,787,859
--------------------------------------------------------------------------------
Retail -- 4.4%
4,876 The Home Depot, Inc. 209,668
4,400 The Kroger Co.* 99,275
2,550 Lowe's Cos., Inc. 116,503
5,050 Safeway Inc.* 276,172
12,750 Target Corp. 352,218
11,250 The TJX Cos., Inc. 306,563
17,750 Wal-Mart Stores, Inc. 805,406
--------------------------------------------------------------------------------
2,165,805
--------------------------------------------------------------------------------
Software -- 5.2%
18,930 Microsoft Corp.* 1,303,804
32,300 Oracle Corp.* 1,065,900
1,540 VERITAS Software Corp.* 217,164
--------------------------------------------------------------------------------
2,586,868
--------------------------------------------------------------------------------
Technology -- 18.3%
14,200 America Online, Inc.*+ 716,106
4,150 Applied Materials, Inc.* 220,469
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series-- Select Portfolios 29
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth Portfolio
SHARES SECURITY VALUE
================================================================================
Technology -- 18.3% (continued)
30,550 Cisco Systems, Inc.*+ $1,645,881
6,250 Compaq Computer Corp. 190,062
6,800 Corning Inc. 520,200
7,200 Dell Computer Corp.* 212,400
13,650 EMC Corp.* 1,215,703
3,480 Hewlett-Packard Co. 161,603
24,168 Intel Corp. 1,087,560
6,650 International Business Machines Corp. 655,025
4,600 Lexmark International Group, Inc.,
Class A Shares* 188,600
6,300 Linear Technology Corp. 406,744
7,961 Lucent Technologies Inc. 185,591
10,200 Sun Microsystems, Inc.* 1,130,925
5,200 Xilinx, Inc.* 376,675
1,850 Yahoo! Inc.* 108,456
--------------------------------------------------------------------------------
9,022,000
--------------------------------------------------------------------------------
Telecommunications & Equipment -- 1.2%
4,200 Nokia Oyj, Sponsored ADR 179,550
8,600 Nortel Networks Corp. 391,300
--------------------------------------------------------------------------------
570,850
--------------------------------------------------------------------------------
Transportation -- 0.3%
6,250 Knightsbridge Tankers Ltd. 134,766
--------------------------------------------------------------------------------
Utilities -- 5.6%
9,237 AT&T Corp. 214,183
2,350 AT&T Wireless Group* 58,603
8,025 Qwest Communications International Inc.* 390,216
17,400 SBC Communications Inc. 1,003,763
6,850 Sprint Corp. (PCS Group)* 261,156
9,265 Verizon Communications 535,633
13,500 WorldCom, Inc.* 320,625
--------------------------------------------------------------------------------
2,784,179
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost-- $41,635,741) 42,048,155
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
REPURCHASE AGREEMENT -- 14.9%
$7,372,000 Goldman, Sachs & Co., 6.550% due 11/1/00;
Proceeds at maturity -- $7,373,341; (Fully
collateralized by U.S. Treasury Notes &
Bonds, 3.625% to 12.750% due 2/28/02 to
8/15/26; Market value -- $7,519,448)
(Cost -- $7,372,000) 7,372,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $49,007,741**) $49,420,155
================================================================================
* Non-income producing security.
+ This security has been segregated for open futures contracts commitments.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
30 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
SHARES SECURITY VALUE
================================================================================
COMMON STOCK -- 47.0%
Airlines -- 0.3%
400 AMR Corp.* $ 13,100
1,800 Southwest Airlines Co. 51,300
--------------------------------------------------------------------------------
64,400
--------------------------------------------------------------------------------
Consumer Durables -- 0.2%
937 General Motors Corp., Class H Shares* 30,359
--------------------------------------------------------------------------------
Consumer Non-Durables -- 2.6%
1,100 The Coca-Cola Co. 66,412
600 Johnson Controls, Inc. 35,775
1,900 Kimberly-Clark Corp. 125,400
2,200 PepsiCo, Inc. 106,562
2,500 Philip Morris Cos., Inc. 91,563
1,700 UPM - Kymmene Oyj, Sponsored ADR 49,725
--------------------------------------------------------------------------------
475,437
--------------------------------------------------------------------------------
Consumer Services -- 0.4%
2,300 McDonald's Corp. 71,300
--------------------------------------------------------------------------------
Electronic Technology -- 8.9%
600 Adobe Systems Inc. 45,637
900 Analog Devices, Inc.* 58,500
800 Applied Materials, Inc.* 42,500
600 Celestica, Inc.* 43,125
4,300 Cisco Systems, Inc.* 231,662
1,500 Compaq Computer Corp. 45,615
600 Corning, Inc. 45,900
900 EMC Corp.* 80,156
1,900 Emerson Electric Co. 139,531
1,000 General Dynamics Corp. 71,563
2,600 General Electric Co. 142,513
1,400 Hewlett-Packard Co. 65,013
200 Inrange Technologies Corp.* 7,325
4,300 Intel Corp. 193,500
1,400 International Business Machines Corp. 137,900
2,400 Motorola, Inc. 59,850
600 National Semiconductor Corp.* 15,600
700 SCI Systems, Inc.* 30,100
1,100 Seagate Technology, Inc.* 76,862
500 Sun Microsystems, Inc.* 55,437
500 Texas Instruments, Inc. 24,531
--------------------------------------------------------------------------------
1,612,820
--------------------------------------------------------------------------------
Energy Minerals -- 3.8%
600 Air Products & Chemicals, Inc. 22,388
800 Amerada Hess Corp. 49,600
1,300 Coastal Corp. 98,069
800 Duke Energy Corp. 69,150
1,200 Exxon Mobil Corp. 107,025
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 31
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
SHARES SECURITY VALUE
================================================================================
Energy Minerals -- 3.8% (continued)
700 Royal Dutch Petroleum Co., Sponsored ADR $ 41,563
4,300 Total Fina Elf SA, Sponsored ADR 307,988
--------------------------------------------------------------------------------
695,783
--------------------------------------------------------------------------------
Finance -- 8.4%
1,400 American Express Co. 84,000
1,600 American International Group, Inc. 156,800
1,400 Bank of America Corp. 67,288
5,000 The Bank of New York Co., Inc. 287,812
2,400 Capital One Financial Corp. 151,500
1,800 Chase Manhattan Corp. 81,900
300 Chubb Corp. 25,331
500 Comerica Inc. 30,156
600 Fannie Mae 46,200
2,500 Fleet Boston Financial Corp. 95,000
400 Freddie Mac 24,000
600 The Goldman Sachs Group, Inc. 59,888
500 J.P. Morgan & Co., Inc. 82,750
400 Merrill Lynch & Co., Inc. 28,000
1,400 Morgan Stanley Dean Witter & Co. 112,437
800 Paine Webber Group, Inc. 57,000
1,100 PNC Financial Services Group 73,563
300 UnionBanCal Corp. 6,300
1,400 Washington Mutual, Inc. 61,600
--------------------------------------------------------------------------------
1,531,525
--------------------------------------------------------------------------------
Health Services -- 1.2%
3,400 HCA - The Healthcare Co. 135,788
700 Wellpoint Health Networks Inc.* 81,856
--------------------------------------------------------------------------------
217,644
--------------------------------------------------------------------------------
Health Technology -- 3.9%
700 Abbott Laboratories 36,969
200 American Home Products Corp. 12,700
300 Baxter International Inc. 24,656
700 Biogen, Inc.* 42,131
1,200 Bristol-Myers Squibb Co. 73,125
400 Eli Lilly & Co. 35,750
800 Johnson & Johnson 73,700
1,700 Merck & Co., Inc. 152,894
1,900 Mylan Laboratories Inc. 53,200
2,500 Pfizer Corp. 107,969
200 Schering-Plough Corp. 10,338
1,300 Watson Pharmaceuticals, Inc.* 81,331
--------------------------------------------------------------------------------
704,763
--------------------------------------------------------------------------------
Non-Energy Minerals -- 1.3%
6,800 Alcoa, Inc. 195,075
1,000 Phelps Dodge Corp. 46,750
--------------------------------------------------------------------------------
241,825
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
32 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
SHARES SECURITY VALUE
================================================================================
Processing Industries -- 0.3%
500 OM Group, Inc. $ 23,125
3,000 PolyOne Corp. 23,625
500 The Sherwin-Williams Co. 10,844
--------------------------------------------------------------------------------
57,594
--------------------------------------------------------------------------------
Producer Manufacturing -- 0.7%
1,000 SPX Corp.* 123,625
--------------------------------------------------------------------------------
Real Estate -- 0.7%
300 Avalonbay Communities, Inc. 13,781
600 Boston Properties, Inc. 24,300
500 CarrAmerica Realty Corp. 14,781
1,400 Equity Office Properties Trust 42,175
500 Equity Residential Properties Trust 23,531
200 Spieker Properties, Inc. 11,075
--------------------------------------------------------------------------------
129,643
--------------------------------------------------------------------------------
Retail Trade -- 4.7%
6,500 Costco Wholesale Corp.* 238,062
7,300 Federated Department Stores, Inc.* 237,706
1,800 The Home Depot, Inc. 77,400
600 Lowe's Cos., Inc. 27,413
5,100 Safeway, Inc.* 278,906
--------------------------------------------------------------------------------
859,487
--------------------------------------------------------------------------------
Software -- 2.6%
300 BEA Systems, Inc.* 21,525
4,125 Microsoft Corp.* 284,109
2,600 Oracle Corp.* 85,800
800 Siebel Systems, Inc.* 83,950
--------------------------------------------------------------------------------
475,384
--------------------------------------------------------------------------------
Technology Services -- 5.5%
1,700 America Online, Inc.* 85,731
4,000 AT&T Corp. - Liberty Media Corp.* 72,000
2,800 Atmel Corp.* 41,825
1,400 Automatic Data Processing, Inc. 91,437
1,200 Electronic Data Systems Corp. 56,325
2,800 Genuity, Inc.* 15,400
3,200 The News Corp. Ltd. 115,800
144 Sabre Holdings Corp.* 4,815
2,400 SBC Communications, Inc. 138,450
1,000 Unisys Corp.* 12,750
1,000 UnitedGlobalCom Inc.* 31,812
4,000 Verizon Communications 231,250
4,100 WorldCom, Inc. 97,375
--------------------------------------------------------------------------------
994,970
--------------------------------------------------------------------------------
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 33
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Growth and Income Portfolio
SHARES SECURITY VALUE
================================================================================
Utilities -- 1.5%
800 DTE Energy Co. $ 28,900
1,300 Edison International 31,037
1,000 Enron Corp. 82,063
1,100 Exelon Corp. 66,138
600 PG&E Corp. 16,163
1,100 TXU Corp. 40,769
--------------------------------------------------------------------------------
265,070
--------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $8,194,825) 8,551,629
================================================================================
FACE
AMOUNT SECURITY VALUE
================================================================================
CONVERTIBLE CORPORATE BONDS -- 0.9%
Diversified Operations -- 0.1%
$25,000 Hutchison Whampoa Ltd., 2.875% due 9/15/03+ 26,547
--------------------------------------------------------------------------------
Technology Services -- 0.8%
110,000 NTL (Delaware), Inc., 5.750% due 12/15/09 70,538
75,000 Verizon Communications, 5.750% due 4/1/03 72,281
--------------------------------------------------------------------------------
142,819
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost -- $168,261) 169,366
================================================================================
SUB-TOTAL INVESTMENTS
(Cost -- $8,363,086) 8,720,995
================================================================================
REPURCHASE AGREEMENTS -- 52.1%
4,045,000 Goldman, Sachs & Co., 6.550% due 11/1/00;
Proceeds at maturity-- $4,045,736; (Fully
collateralized by U.S. Treasury Notes & Bonds,
3.625% to 12.750% due 2/28/02 to 8/15/26;
Market value--$4,125,904) 4,045,000
5,429,000 Morgan Stanley Dean Witter & Co., 6.500%
due 11/1/00; Proceeds at maturity-- $5,429,980;
(Fully collateralized by U.S. Treasury Notes,
4.750% to 7.875% due 2/28/03 to 11/15/04;
Market value--$5,564,531) 5,429,000
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $9,474,000) 9,474,000
================================================================================
TOTAL INVESTMENTS -- 100%
(Cost -- $17,837,086**) $18,194,995
================================================================================
* Non-income producing security.
+ Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
34 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Schedules of Investments (continued) October 31, 2000
--------------------------------------------------------------------------------
Select Government Portfolio
FACE
AMOUNT SECURITY VALUE
================================================================================
U.S. GOVERNMENT OBLIGATIONS -- 100.0%
$5,000,000 U.S. Treasury Notes, 6.000% due 8/15/09
(Cost -- $4,956,250*) $5,053,450
================================================================================
* Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 35
<PAGE>
--------------------------------------------------------------------------------
Statements of Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select Select Select Select Select
Small Cap Mid Cap Growth Growth and Government
Portfolio Portfolio Portfolio Income Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at cost $5,160,459 $15,163,632 $41,635,741 $ 8,363,086 $4,956,250
Repurchase agreements, at cost 3,827,000 4,701,000 7,372,000 9,474,000 --
====================================================================================================================================
Investments, at value $5,060,236 $16,302,103 $42,048,155 $ 8,720,995 $5,053,450
Repurchase agreements, at value 3,827,000 4,701,000 7,372,000 9,474,000 --
Cash 216 334 777 118 --
Dividends and interest receivable 1,038 11,490 24,803 8,615 63,587
Receivable from broker -
variation margin 109,200 48,375 29,000 -- --
Receivable for Fund shares sold 328,335 597,610 269,786 111,649 6,034
Receivable for securities sold 64,891 -- -- -- --
Receivable from manager 18,807 25,557 25,987 16,225 51,404
------------------------------------------------------------------------------------------------------------------------------------
Total Assets 9,409,723 21,686,469 49,770,508 18,331,602 5,174,475
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 40,438 212,561 76,314 209,010 --
Payable to bank -- -- -- -- 88,619
Payable for Fund shares purchased -- 14,242 2,847 2,933 60,083
Accrued expenses 34,992 40,506 60,963 30,802 30,113
------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 75,430 267,309 140,124 242,745 178,815
------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $9,334,293 $21,419,160 $49,630,384 $18,088,857 $4,995,660
====================================================================================================================================
NET ASSETS:
Par value of shares of
beneficial interest $ 8,460 $ 14,794 $ 40,892 $ 16,789 $ 4,703
Capital paid in excess of par value 8,939,459 20,148,563 49,516,305 17,719,514 4,684,228
Undistributed net investment income -- 46,320 63,306 86,795 209,529
Accumulated net realized gain (loss)
from security transactions and
futures contracts 666,461 103,950 (491,227) (92,150) --
Net unrealized appreciation
(depreciation) of investments and
futures contracts (280,087) 1,105,533 501,108 357,909 97,200
------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $9,334,293 $21,419,160 $49,630,384 $18,088,857 $4,995,660
====================================================================================================================================
Shares Outstanding 846,018 1,479,418 4,089,238 1,678,885 470,331
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value $11.03 $14.48 $12.14 $10.77 $10.62
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
36 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Statements of Operations For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select Select Select Select Select
Small Cap Mid Cap Growth Growth and Government
Portfolio Portfolio Portfolio Income Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 18,022 $ 31,978 $ 102,309 $ 54,427 $ --
Interest 43,313 78,528 106,443 93,082 303,545
Less: Foreign withholding tax (51) -- (751) (10) --
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 61,284 110,506 208,001 147,499 303,545
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 47,934 49,370 113,202 44,203 30,476
Shareholder communications 29,410 16,926 35,875 22,167 25,764
Audit and legal 24,169 29,420 24,569 23,494 16,788
Shareholder and system servicing fees 18,416 18,413 15,330 17,304 18,852
Custody 11,115 22,079 24,836 2,198 300
Registration fees 2,043 4,938 10,275 4,364 --
Trustees' fees 1,150 975 1,267 872 656
Other 1,395 425 10,774 6,804 11,609
------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 135,632 142,546 236,128 121,406 104,445
Less: Investment advisory fee waiver
and expense reimbursement (Note 2) (71,372) (79,789) (92,376) (65,219) (63,486)
------------------------------------------------------------------------------------------------------------------------------------
Net Expenses 64,260 62,757 143,752 56,187 40,959
------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) (2,976) 47,749 64,249 91,312 262,586
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES
CONTRACTS (NOTES 3 AND 5):
Realized Gain (Loss) From:
Security transactions
(excluding short-term securities) 833,008 83,220 (486,815) (90,237) --
Futures contracts 41,264 86,456 -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) 874,272 169,676 (486,815) (90,237) --
------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
(Depreciation) of Investments
and Futures Contracts:
Beginning of year 142,646 93,912 253,697 29,436 39,500
End of year (280,087) 1,105,533 501,108 357,909 97,200
------------------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized
Appreciation (Depreciation) (422,733) 1,011,621 247,411 328,473 57,700
------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) on Investments
and Futures Contracts 451,539 1,181,297 (239,404) 238,236 57,700
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations $448,563 $1,229,046 $(175,155) $329,548 $320,286
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 37
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets For the Year Ended October 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Select Select Select Select Select
Small Cap Mid Cap Growth Growth and Government
Portfolio Portfolio Portfolio Income Portfolio Portfolio
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (2,976) $ 47,749 $ 64,249 $ 91,312 $ 262,586
Net realized gain (loss) 874,272 169,676 (486,815) (90,237) --
Change in net unrealized
appreciation (depreciation) (422,733) 1,011,621 247,411 328,473 57,700
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations 448,563 1,229,046 (175,155) 329,548 320,286
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (23,683) (5,008) (5,012) (7,000) (79,999)
Net realized gains (1,386) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (25,069) (5,008) (5,012) (7,000) (79,999)
------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
(NOTE 10):
Net proceeds from sale of shares 9,868,192 21,023,534 51,115,794 17,989,875 3,177,400
Net asset value of shares issued
for reinvestment of dividends 25,069 5,008 5,012 7,000 79,999
Cost of shares reacquired (5,945,205) (3,865,070) (6,583,806) (3,275,942) (3,568,453)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Fund Share Transactions 3,948,056 17,163,472 44,537,000 14,720,933 (311,054)
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 4,371,550 18,387,510 44,356,833 15,043,481 (70,767)
NET ASSETS:
Beginning of year 4,962,743 3,031,650 5,273,551 3,045,376 5,066,427
------------------------------------------------------------------------------------------------------------------------------------
End of year* $ 9,334,293 $21,419,160 $49,630,384 $18,088,857 $ 4,995,660
====================================================================================================================================
* Includes undistributed
net investment income of: -- $46,320 $63,306 $86,795 $209,529
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
--------------------------------------------------------------------------------
38 2000 Annual Report to Shareholders
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued) For the Period Ended October 31, 1999(a)
------------------------------------------------------------------------------------------------------------------------------------
Select Select Select Select Select
Small Cap Mid Cap Growth Growth and Government
Portfolio Portfolio Portfolio Income Portfolio Portfolio
====================================================================================================================================
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $ 23,683 $ 3,579 $ 4,069 $ 2,483 $ 26,942
Net realized loss (203,449) (65,726) (4,412) (1,913) --
Increase in net unrealized
appreciation 142,646 93,912 253,697 29,436 39,500
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations (37,120) 31,765 253,354 30,006 66,442
------------------------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
(NOTE 10):
Net proceeds from sale of shares 5,145,506 3,152,203 5,250,450 3,201,467 5,031,042
Cost of shares reacquired (145,643) (152,318) (230,253) (186,097) (31,057)
------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 4,999,863 2,999,885 5,020,197 3,015,370 4,999,985
------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets 4,962,743 3,031,650 5,273,551 3,045,376 5,066,427
NET ASSETS:
Beginning of period -- -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
End of period* $4,962,743 $3,031,650 $5,273,551 $3,045,376 $5,066,427
====================================================================================================================================
* Includes undistributed
net investment income of: $23,683 $3,579 $4,069 $2,483 $26,942
====================================================================================================================================
</TABLE>
(a) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
See Notes to Financial Statements.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 39
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
1. Significant Accounting Policies
The Select Small Cap, formerly known as Select Emerging Growth, Select Mid Cap,
Select Growth, Select Growth and Income, and Select Government Portfolios
("Portfolios") are separate investment funds of the Smith Barney Investment
Series ("Trust"), formerly known as the Concert Investment Series. The Trust, a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a diversified open-end management investment company and
consists of these Portfolios and three other separate investment portfolios:
Smith Barney Large Cap Core Fund, formerly known as the Growth Fund, Smith
Barney Growth and Income Fund, formerly known as Growth and Income Fund, and
Smith Barney International Aggressive Growth Fund, formerly known as
International Equity Fund. The financial statements and financial highlights for
the other portfolios are presented in a separate shareholder report.
The significant accounting policies consistently followed by the Trust are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets or,
if there were no sales during the day, at the current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence, subsequent to the time a value was so
established, is likely to have significantly changed the value then, the fair
value of those securities will be determined by consideration of other factors
by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are valued
at the average between bid and ask prices in the over-the-counter market; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (e) interest income,
adjusted for amortization of premium and accretion of discount is recorded on
the accrual basis; (f) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Portfolios determine the existence of a dividend declaration
after exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Portfolios on
the ex-dividend date; (i) the accounting records of the Portfolios are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of securities, and income and expenses are translated at the rate of
exchange quoted on the respective date that such transactions are recorded.
Differences between income and expense amounts recorded and collected or paid
are adjusted when reported by the custodian bank; (j) realized gain and loss on
foreign currency includes the net realized amount from the sale of currency and
the amount realized between trade date and settlement date on security
transactions; (k) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At October 31, 2000, reclassifications
were made to the Select Small Cap Portfolio's capital accounts to reflect
permanent book/tax differences and income and gains available for distributions
under income tax regulations. Net investment income, net realized gains and net
assets were not affected by this change; (l) each Portfolio intends to comply
with the requirements of the Internal Revenue Code of 1986, as amended,
--------------------------------------------------------------------------------
40 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
pertaining to regulated investment companies and to make distributions of
taxable income sufficient to relieve it from substantially all Federal income
and excise tax; and (m) estimates and assumptions are required to be made
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
Also, the Select Mid Cap Portfolio may enter into forward exchange contracts in
order to hedge against foreign currency risk. These contracts are
marked-to-market daily, by recognizing the difference between the contract
exchange rate and the current market rate as an unrealized gain or loss.
Realized gains or losses are recognized when contracts are settled.
2. Investment Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc.
("Citigroup"), acts as the investment advisor to the Trust.
The Select Small Cap, Select Mid Cap, Select Growth, and Select Growth and
Income Portfolios pay SSBC an investment advisory fee calculated at an annual
rate of 0.75% of their average daily net assets and the Select Government
Portfolio pays SSBC an investment advisory fee calculated at an annual rate of
0.60% of its average daily net assets. These fees are calculated daily and paid
monthly. For the year ended October 31, 2000, SSBC waived all of its investment
advisory fees for the Select Small Cap, Select Mid Cap, Select Growth and Income
and Select Government Portfolios and $92,376 for the Select Growth Portfolio. In
addition, expenses were reimbursed in the amounts of $23,438, $30,419, $21,016
and $33,010 for the Select Small Cap, Select Mid Cap, Select Growth and Income,
and Select Government Portfolios, respectively.
Effective June 5, 2000, Salomon Smith Barney Inc. ("SSB"), another subsidiary of
SSBH, became the Portfolios' distributor replacing CFBDS, Inc. In addition, SSB
acts as the primary broker for the Portfolios' agency transactions. Certain
other broker-dealers, continue to sell Portfolio shares to the public as members
of the selling group. For the year ended October 31, 2000, SSB and it's
affiliates, received brokerage commissions of $943.
Citi Fiduciary Trust Company ("CFTC"), another subsidiary of Citigroup, acts as
the Portfolios' transfer agent and PFPC Global Fund Services ("PFPC") acts as
the Portfolios' sub-transfer agent. CFTC receives account fees and asset-based
fees that vary according to the size and type of account. PFPC is responsible
for shareholder recordkeeping and financial processing for all shareholder
accounts and is paid by CFTC. For the year ended October 31, 2000, the
Portfolios paid transfer agent fees of $25,000 to CFTC.
All officers and one Trustee of the Portfolios are employees of SSB.
3. Investments
During the year ended October 31, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Purchases Sales
================================================================================
Select Small Cap Portfolio $ 3,850,423 $4,726,587
--------------------------------------------------------------------------------
Select Mid Cap Portfolio 15,888,931 3,415,459
--------------------------------------------------------------------------------
Select Growth Portfolio 41,824,761 4,388,010
--------------------------------------------------------------------------------
Select Growth and Income Portfolio 8,945,932 3,468,972
--------------------------------------------------------------------------------
Select Government Portfolio -- --
================================================================================
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 41
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At October 31, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
<CAPTION>
Net Unrealized
Appreciation
Appreciation Depreciation (Depreciation)
===================================================================================================================
<S> <C> <C> <C>
Select Small Cap Portfolio $1,056,490 $(1,156,713) $ (100,223)
-------------------------------------------------------------------------------------------------------------------
Select Mid Cap Portfolio 1,817,329 (678,858) 1,138,471
-------------------------------------------------------------------------------------------------------------------
Select Growth Portfolio 2,829,943 (2,417,529) 412,414
-------------------------------------------------------------------------------------------------------------------
Select Growth and Income Portfolio 794,842 (436,933) 357,909
-------------------------------------------------------------------------------------------------------------------
Select Government Portfolio 97,200 -- 97,200
===================================================================================================================
</TABLE>
4. Repurchase Agreements
The Portfolios purchase (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Portfolios require continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Futures Contracts
The Portfolios may from time to time enter into futures contracts.
Initial margin deposits made upon entering into futures contracts are recognized
as assets. The initial margin is segregated by the custodian as is noted in the
schedule of investments. During the period the futures contract is open, changes
in the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the contract
at the end of each day's trading. Variation margin payments are made or received
and recognized as assets due from or liabilities due to broker, depending upon
whether unrealized gains or losses are incurred. When the contract is closed,
the Portfolio records a realized gain or loss equal to the difference between
the proceeds from (and cost of) the closing transaction and the Portfolio's
basis in the contract. The Portfolio enters into such contracts to hedge a
portion of its portfolio. The Portfolio bears the market risk that arises from
changes in the value of the financial instruments and securities indices
(futures contracts) and the credit risk should a counterparty fail to perform
under such contracts.
At October 31, 2000, the following Portfolios had open futures contracts:
<TABLE>
<CAPTION>
Select Small Cap Portfolio
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Loss
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Russell 2000 Futures 16 12/00 $4,183,864 $4,004,000 $(179,864)
=======================================================================================================================
<CAPTION>
Select Mid Cap Portfolio
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Loss
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Mid Cap 400 Futures 9 12/00 $2,378,563 $2,345,625 $(32,938)
=======================================================================================================================
<CAPTION>
Select Growth Portfolio
# of Basis Market Unrealized
Purchased Contracts Contracts Expiration Value Value Gain
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
S&P 500 Futures 4 12/00 $1,351,506 $1,440,200 $88,694
=======================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
42 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
6. Option Contracts
The Portfolios may from time to time enter into option contracts.
Upon the purchase of a put option or a call option by the Portfolio, the premium
paid is recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, the Portfolio will realize a loss in the amount
of the cost of the option. When the Portfolio enters into a closing sales
transaction, the Portfolio will realize a gain or loss depending on whether the
sales proceeds from the closing sales transaction are greater or less than the
cost of the option. When the Portfolio exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Portfolio
exercises a call option, the cost of the security which the Portfolio purchases
upon exercise will be increased by the premium originally paid.
At October 31, 2000, the Portfolios held no purchased call or put option
contracts.
When the Portfolio writes a call option or a put option, an amount equal to the
premium received by the Portfolio is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Portfolio realizes
a gain equal to the amount of the premium received. When the Portfolio enters
into a closing purchase transaction, the Portfolio realizes a gain (or loss if
the cost of the closing purchase transaction exceeds the premium received when
the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is eliminated.
When a written call option is exercised, the Portfolio 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 originally received will reduce the cost of
the security which the Portfolio purchased upon exercise. When written index
options are exercised, settlement is made in cash.
The risk associated with purchasing options is limited to the premium originally
paid. The Portfolio enters into options for hedging purposes. The risk in
writing a covered call option is that the Portfolio gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a covered put option is that the Portfolio
is exposed to the risk of loss if the market price of the underlying security
declines.
During the year ended October 31, 2000, the Portfolios did not enter into any
written call or put option contracts.
7. Foreign Securities
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and the U.S. government. These risks include revaluation of currencies
and future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. government.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 43
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
8. Securities Traded on a To-Be-Announced Basis
The Portfolios may trade securities on a "to-be-announced" ("TBA") basis.
In a TBA transaction, the Portfolios commit to purchasing or selling securities
for which specific information is not yet known at the time of the trade,
particularly the face amount and maturity date in GNMA transactions. Securities
purchased on a TBA basis are not settled until they are delivered to the
Portfolios normally 15 to 45 days later. These transactions are subject to
market fluctuations and their current value is determined in the same manner as
for other securities.
At October 31, 2000, the Portfolios did not hold any TBA securities.
9. Capital Loss Carryforward
At October 31, 2000, the Select Growth Portfolio had, for Federal income tax
purposes, a capital loss carryforward of approximately $50,000, available to
offset future capital gains. To the extent that these carryforward losses are
used to offset capital gains, it is probable that the gains so offset will not
be distributed. The amount and year of the expiration for each carryforward loss
is indicated below:
2007 2008
================================================================================
Carryforward Amounts $4,000 $46,000
================================================================================
10. Shares of Beneficial Interest
At October 31, 2000, the Trust had an unlimited number of shares authorized with
a par value of $0.01 per share.
Transactions in shares of each Portfolio were as follows:
Year Ended Period Ended
October 31, 2000 October 31, 1999(a)
================================================================================
Select Small Cap Portfolio
Shares sold 847,622 515,061
Shares issued on reinvestment 2,043 --
Shares reacquired (503,679) (15,029)
--------------------------------------------------------------------------------
Net Increase 345,986 500,032
================================================================================
Select Mid Cap Portfolio
Shares sold 1,481,655 315,703
Shares issued on reinvestment 426 --
Shares reacquired (302,494) (15,872)
--------------------------------------------------------------------------------
Net Increase 1,179,587 299,831
================================================================================
Select Growth Portfolio
Shares sold 4,140,876 525,358
Shares issued on reinvestment 424 --
Shares reacquired (554,063) (23,357)
--------------------------------------------------------------------------------
Net Increase 3,587,237 502,001
================================================================================
(a) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
--------------------------------------------------------------------------------
44 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
Year Ended Period Ended
October 31, 2000 October 31, 1999(a)
================================================================================
Select Growth and Income Portfolio
Shares sold 1,691,973 320,772
Shares issued on reinvestment 647 --
Shares reacquired (315,226) (19,281)
Net Increase 1,377,394 301,491
--------------------------------------------------------------------------------
Select Government Portfolio
Shares sold 306,687 503,093
Shares issued on reinvestment 8,163 --
Shares reacquired (344,523) (3,089)
--------------------------------------------------------------------------------
Net Increase (Decrease) (29,673) 500,004
================================================================================
(a) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 45
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
year ended October 31:
Select Small Cap Portfolio 2000/(1)/ 1999/(2)/
================================================================================
Net Asset Value, Beginning of Year $9.92 $10.00
--------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(3)/ (0.01) 0.05
Net realized and unrealized gain (loss) 1.17 (0.13)
--------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.16 (0.08)
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.05) --
Net realized gains (0.00)* --
--------------------------------------------------------------------------------
Total Distributions (0.05) --
--------------------------------------------------------------------------------
Net Asset Value, End of Year $11.03 $9.92
--------------------------------------------------------------------------------
Total Return 11.64% (0.80)%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $9,334 $4,963
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)(4)/ 1.00% 1.00%+
Net investment income (loss) (0.05) 3.96+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 69% 0%
===============================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
(3) The Advisor has agreed to waive all of its fees for the year ended October
31, 2000 and the period ended October 31, 1999. The Advisor also reimbursed
expenses of $23,438 and $15,763 for the year ended October 31, 2000 and the
period ended October 31, 1999, respectively. If such fees were not waived
and expenses not reimbursed, the per share effect on net investment income
and the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
------------------- ----------------------
2000 1999 2000 1999
------- ------- ------- -------
Select Small Cap Portfolio $0.13 $0.04 2.12% 4.38%+
(4) As a result of a voluntary expense limitation, the expense ratio will not
exceed 1.00%.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
46 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the year
ended October 31:
Select Mid Cap Portfolio 2000/(1)/ 1999/(2)/
================================================================================
Net Asset Value, Beginning of Year $10.11 $10.00
--------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.09 0.01
Net realized and unrealized gain 4.30 0.10
--------------------------------------------------------------------------------
Total Income From Operations 4.39 0.11
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) --
--------------------------------------------------------------------------------
Total Distributions (0.02) --
--------------------------------------------------------------------------------
Net Asset Value, End of Year $14.48 $10.11
--------------------------------------------------------------------------------
Total Return 43.43% 1.10%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $21,419 $3,032
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)(4)/ 0.95% 0.95%+
Net investment income 0.72 1.00+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 58% 8%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
(3) The Advisor has agreed to waive all of its fees for the year ended October
31, 2000 and the period ended October 31, 1999. In addition, the Advisor
also reimbursed expenses of $30,419 and $13,182 for the year ended October
31, 2000 and the period ended October 31, 1999, respectively. If such fees
were not waived and expenses not reimbursed, the per share effect on net
investment income and the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
------------------- ----------------------
2000 1999 2000 1999
------ ------ ------ ------
Select Mid Cap Portfolio $0.15 $0.05 2.14% 5.35%+
(4) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 47
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the year
ended October 31:
Select Growth Portfolio 2000/(1)/ 1999/(2)/
================================================================================
Net Asset Value, Beginning of Year $10.51 $10.00
--------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.05 0.01
Net realized and unrealized gain 1.59 0.50
--------------------------------------------------------------------------------
Total Income From Operations 1.64 0.51
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) --
--------------------------------------------------------------------------------
Total Distributions (0.01) --
--------------------------------------------------------------------------------
Net Asset Value, End of Year $12.14 $10.51
--------------------------------------------------------------------------------
Total Return 15.61% 5.10%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $49,630 $5,274
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)(4)/ 0.95% 0.95%+
Net investment income 0.42 0.67+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 6%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
(3) The Advisor has agreed to waive all or a portion of its fees for the year
ended October 31, 2000 and the period ended October 31, 1999. In addition,
the Advisor also reimbursed expenses of $20,272 for the period ended October
31, 1999. If such fees were not waived and expenses not reimbursed, the per
share effect on net investment income and the actual expense ratios would
have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
------------------- ----------------------
2000 1999 2000 1999
------ ------ ------ ------
Select Growth Portfolio $0.07 $0.05 1.55% 5.00%+
(4) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
48 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the year
ended October 31:
Select Growth and Income Portfolio 2000/(1)/ 1999/(2)/
================================================================================
Net Asset Value, Beginning of Year $10.10 $10.00
--------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.16 0.01
Net realized and unrealized gain 0.53 0.09
--------------------------------------------------------------------------------
Total Income From Operations 0.69 0.10
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.02) --
--------------------------------------------------------------------------------
Total Distributions (0.02) --
--------------------------------------------------------------------------------
Net Asset Value, End of Year $10.77 $10.10
--------------------------------------------------------------------------------
Total Return 6.86% 1.00%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $18,089 $3,045
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)(4)/ 0.95% 0.95%+
Net investment income 1.54 0.69+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 72% 1%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
(3) The Advisor has agreed to waive all of its fees for the year ended October
31, 2000 and the period ended October 31, 1999. In addition, the Advisor
also reimbursed expenses of $21,016 and $12,636 for the year ended October
31, 2000 and the period ended October 31, 1999, respectively. If such fees
were not waived and expenses not reimbursed, the per share effect on net
investment income and the expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
------------------- ----------------------
2000 1999 2000 1999
---- ---- ----- ----
Select Growth and
Income Portfolio $0.12 $0.05 2.05% 5.22%+
(4) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 49
<PAGE>
--------------------------------------------------------------------------------
Financial Highlights (continued)
--------------------------------------------------------------------------------
For a share of each class of beneficial interest outstanding throughout the
year ended October 31:
Select Government Portfolio 2000/(1)/ 1999/(2)/
================================================================================
Net Asset Value, Beginning of Year $10.13 $10.00
--------------------------------------------------------------------------------
Income From Operations:
Net investment income/(3)/ 0.53 0.05
Net realized and unrealized gain 0.12 0.08
--------------------------------------------------------------------------------
Total Income From Operations 0.65 0.13
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.16) --
--------------------------------------------------------------------------------
Total Distributions (0.16) --
--------------------------------------------------------------------------------
Net Asset Value, End of Year $10.62 $ 10.13
--------------------------------------------------------------------------------
Total Return 6.55% 1.30%++
--------------------------------------------------------------------------------
Net Assets, End of Year (000s) $4,996 $ 5,066
--------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)(4)/ 0.80% 0.80%+
Net investment income 5.19 4.36+
--------------------------------------------------------------------------------
Portfolio Turnover Rate 0% 0%
================================================================================
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from September 15, 1999 (commencement of operations) to
October 31, 1999.
(3) The Advisor has agreed to waive all of its fees for the year ended October
31, 2000 and the period ended October 31, 1999. In addition, the Advisor
also reimbursed expenses of $33,010 and $14,291 for the year ended October
31, 2000 and the period ended October 31, 1999, respectively. If such fees
were not waived and expenses not reimbursed, the per share effect on net
investment income and the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
Select Government Portfolio $0.13 $0.04 2.06% 3.73%+
(4) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.80%.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
--------------------------------------------------------------------------------
50 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Independent Auditors' Report
--------------------------------------------------------------------------------
The Shareholders and Board of Trustees
of the Smith Barney Investment Series:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Select Small Cap Portfolio, Select Mid Cap
Portfolio, Select Growth Portfolio, Select Growth and Income Portfolio and
Select Government Portfolio (five of the portfolios constituting the Smith
Barney Investment Series) as of October 31, 2000, and the related statements of
operations, the statements of changes in net assets and financial highlights for
the year then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The statements of changes in net assets and financial highlights for the
period from September 15, 1999 (commencement of operations) to October 31, 1999
were audited by other auditors whose report thereon, dated December 15, 1999,
expressed an unqualified opinion on those statements of changes in net assets
and financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of October 31, 2000, by
correspondence with the custodian and brokers. As to securities purchased and
sold but not yet received and delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Select Small Cap Portfolio, Select Mid Cap Portfolio, Select Growth Portfolio,
Select Growth and Income Portfolio and Select Government Portfolio as of October
31, 2000, and the results of their operations, the changes in their net assets
and the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
December 7, 2000
--------------------------------------------------------------------------------
The Smith Barney Investment Series -- Select Portfolios 51
<PAGE>
--------------------------------------------------------------------------------
Tax Information (unaudited)
--------------------------------------------------------------------------------
The following October 31, 2000 fiscal year end disclosures are of various tax
benefits that will be reported to shareholders at calendar year end.
The following percentages of ordinary income distributions have been designated
as qualifying for the dividends received deduction available to corporate
shareholders:
Select Small Cap Portfolio......................... 0.15%
Select Mid Cap Portfolio........................... 5.88
Select Growth Portfolio............................ 100.00
Select Growth and Income Portfolio................. 54.57
The following percentages of ordinary income distributions have been derived
from investments in U.S. Government and Agency obligations. All or a portion of
the corresponding percentages may be exempt from taxation at the state level.
Select Small Cap Portfolio......................... 4.17%
Select Government Portfolio........................ 99.37
--------------------------------------------------------------------------------
52 2000 Annual Report to Shareholders
<PAGE>
--------------------------------------------------------------------------------
Management of the Series
--------------------------------------------------------------------------------
Board of Trustees
Donald M. Carlton
A. Benton Cocanougher
Stephen Randolph Gross
Heath B. McLendon
Alan G. Merten
R. Richardson Pettit
Officers
Heath B. McLendon
Chairman
John Richards
President
Lewis E. Daidone
Senior Vice President and Treasurer
Sandip A. Bhagat, CFA
Vice President and Investment Officer
James E. Conroy
Vice President and Investment Officer
Michael Kagan
Vice President and Investment Officer
Lawrence B. Weissman, CFA
Vice President and Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
Investment Advisor and Administrator
SSB Citi Fund Management LLC
Custodian
PFPC Trust Company
This report is submitted for the general information of the shareholders of The
Smith Barney Investment Series. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus for
the Trust, which contains information concerning the Trust's investment policies
and expenses as well as other pertinent information.
<PAGE>
(This page intentionally left blank.)