<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL INVESTMENT SERIES
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
800 725-6666
SUPPLEMENT DATED NOVEMBER 4, 1996 TO THE
PROSPECTUS DATED APRIL 29, 1996
The 'Financial Highlights' section is supplemented for the Salomon Brothers
Institutional High Yield Bond Fund (the 'High Yield Bond Fund'), the Salomon
Brothers Institutional Asia Growth Fund (the 'Asia Growth Fund') and the Salomon
Brothers Institutional Money Market Fund with the following information.
Financial highlights are not presented for the Salomon Brothers Institutional
Emerging Markets Debt Fund since it has not yet commenced investment operations.
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
FINANCIAL HIGHLIGHTS
PERIOD ENDED AUGUST 31, 1996(A)(B) (UNAUDITED)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH
YIELD ASIA GROWTH
BOND FUND FUND
--------- -----------
<S> <C> <C>
Net asset value, beginning of period............................................. $ 10.00 $ 10.00
--------- -----------
Net investment income....................................................... 0.19 0.04
Net gain (loss) on investments (both realized and unrealized)............... 0.18 (0.67)
--------- -----------
Total from investment operations....................................... 0.37 (0.63)
--------- -----------
Net asset value, end of period................................................... $ 10.37 $ 9.37
--------- -----------
--------- -----------
Net assets, end of period (thousands)............................................ $ 4,147 $ 2,861
Total return*.................................................................... +3.7% - 6.3%
Ratios to average net assets:
Expenses.................................................................... 0.55%** 1.00%**
Net investment income....................................................... 9.02%** 1.41%**
Portfolio turnover rate.......................................................... 4% 47%
Average Broker Commisssion Rate.................................................. N/A $0.0069
Before waiver of management fee, expenses absorbed by SBAM and credits earned
from and fees waived by the custodian, net investment loss per share and
expense ratios would have been:
Net investment loss per share............................................... ($0.08) ($0.33)
Expense ratio............................................................... 13.50%** 13.65%**
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May
15, 1996.
(b) The Asia Growth Fund's commencement of investment operations was May 6,
1996.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period reported. Total return calculated for a period of less than one
year is not annualized.
** Annualized.
1
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 ---------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------- ------- ------- ------- -------
Net investment income......................... 0.023'SS' 0.049'SS' 0.036 0.028 0.034 0.054'SS'
Dividends from net investment income.......... (0.023) (0.049) (0.036) (0.028) (0.034) (0.054)
----------- ------- ------- ------- ------- -------
Net asset value, end of period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Net assets, end of period (thousands)......... $10,100 $11,425 $27,667 $34,120 $50,554 $35,414
Total investment return....................... +2.4% +5.0% +3.6% +2.9% +3.4% +5.5%
Ratios to average net assets:
Expenses................................. 0.49%* 0.65% 0.45% 0.35% 0.44% 0.54%
Net investment income 4.64%* 4.89% 3.53% 2.83% 3.42% 5.23%
</TABLE>
- ------------
* Annualized.
'SS' Netinvestment income per share would have been $.020, $.049 and $.052 and
the expense ratios to average net assets would have been 1.05%, .70% and
.64%, respectively, for the period ended June 30, 1996 and the years ended
December 31, 1995 and 1991, before applicable waiver of management fee,
expenses absorbed by SBAM and credits earned on custodian cash balances.
2
<PAGE>
<PAGE>
The first six paragraphs of the section 'Management -- Performance of
Accounts' are replaced with the following.
PERFORMANCE OF ACCOUNTS
Set forth in the chart below is performance data provided by SBAM AP
relating, (i) for the period from January 1, 1992 to February 28, 1995, to a
non-U.S. collective investment vehicle (the 'Offshore Fund I') managed by the
portfolio manager of the Asia Growth Fund while he was employed by a different
investment adviser unaffiliated with SBAM (ii) for the quarters ending September
30, 1995, December 31, 1995 and March 31, 1996, to a non-U.S. collective
investment vehicle managed by the portfolio manager after commencement of
employment with an affiliate of SBAM (the 'Offshore Fund II') and (iii) for the
quarters ending June 30, 1996 and September 30, 1996, to a composite
('Composite') consisting of Offshore Fund II and Salomon Brothers Asia Growth
Fund ('Retail Asia Growth Fund'), a portfolio of Salomon Brothers Series Funds
Inc, a U.S. registered investment company. The Retail Asia Growth Fund and Asia
Growth Fund have the same portfolio manager and have identical investment
objectives, policies and strategies. Both Offshore Fund I and Offshore Fund II
have substantially similar, though not identical, investment objectives,
policies and strategies as those of the Fund. With respect to Offshore Fund I,
the period shown reflects the period for which the portfolio manager was
primarily responsible for the day-to-day management of the portfolio of Offshore
Fund I. During the period shown for Offshore Fund I, the size of the fund ranged
from approximately $45 million to $95 million and during the period shown solely
for Offshore Fund II, the size of the fund ranged from approximately $8 million
to $10 million. During the period shown for the Composite, the size of the
Composite ranged from approximately $10 million to $18.5 million.
The Morgan Stanley Capital International All Country Asia Free Ex-Japan
Index is a widely recognized market index of Asian country equity issues. The
index is composed of a sample of companies from the following ten countries:
Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore,
Sri Lanka and Thailand. Constituent stocks are selected for the index on the
basis of industry representation, liquidity and sufficient float. The index is
unmanaged and accordingly, does not reflect the effect of operating expenses,
including advisory fees, transaction costs and other expenses but does
reflect reinvestment of dividends.
The performance data shown below should be read in conjunction with the
information in 'General' that follows:
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
1/1/95- TOTAL RETURN TOTAL RETURN
1/1/92- 1/1/93- 1/1/94- 2/28/95 1/1/92- 1/1/92-
12/31/92 12/31/93 12/31/94 (ANNUALIZED) 2/28/95 2/28/95
-------- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Offshore Fund I.......................... 29.50% 95.05% (13.55)% (5.47)% 106.42% 25.72%
Morgan Stanley Capital International All
Country Asia Free Ex-Japan Index....... 21.80 103.39 (16.94) (15.55) 100.05 24.48
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDING:
------------------------------
9/30/95 12/31/95 3/31/96
------- -------- -------
<S> <C> <C> <C>
Offshore Fund II................................... 2.12% 3.23% 10.19%
Morgan Stanley Capital International All Country
Asia Free Ex-Japan Index......................... 1.19 0.80 9.74
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER TOTAL RETURN
ENDING SINCE
------------------
6/30/96 9/30/96 9/1/95*
------- ------- -------
<S> <C> <C> <C>
Composite.......................................... (2.22)% (1.76)% 11.58%
Morgan Stanley Capital International All Country
Asia Free Ex-Japan Index......................... .91 (2.94) 9.64
</TABLE>
- --------------
* This figure is a weighted-average figure, representing, for the period from
September 1, 1995 to April 30, 1996, total return of Offshore Fund II, and for
the period May 1, 1996 to September 30, 1996, for the Composite.
General. The performance results shown above are based on total returns
reflecting realized and unrealized gains and losses and income, including that
derived from cash positions. Returns are calculated monthly for Offshore Fund I,
Offshore Fund II and the Retail Asia Growth Fund and are compounded monthly. The
investment results are time-weighted on a daily basis and market-weighted based
on market values determined as of the first business day of each month. The
performance results are net of transaction costs and advisory and other fees
incurred and reflect reinvestment of dividends and capital gains distributions,
if any.
The performance results shown above are not performance results for the
Asia Growth Fund, which has recently commenced investment operations. The
results shown above should not be deemed to be indicative of
3
<PAGE>
<PAGE>
future results for the Asia Growth Fund owing to differences in brokerage
commissions and dealer spreads, expenses, including investment advisory fees,
the size of positions taken in relation to fund size, timing of purchases and
sales and market conditions at the time of a transaction, timing of cash flows
and availability of cash for new investments.
Although substantially similar, the investment objectives, policies and
strategies for Offshore Fund I and Offshore Fund II differ in certain respects
from those of the Asia Growth Fund. In addition, such accounts were and are
managed without regard to certain tax requirements applicable to U.S.
registered investment companies that limit the proportions of short-term gains
that such companies may realize to maintain their tax status. See 'Dividends,
Distributions and Taxes.' Accordingly, the performance results shown above and
that of the Asia Growth Fund are expected to differ.
4
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL INVESTMENT SERIES
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(800) SALOMON
(800) 725-6666
SUPPLEMENT DATED NOVEMBER 4, 1996 TO THE
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 29, 1996
This Supplement to the Statement of Additional Information is not a
prospectus and is only authorized for distribution when preceded or accompanied
by a Prospectus of the Funds. The following supplements the information
contained in the Registrant's Statement of Additional Information dated April
29, 1996.
The 'Financial Statements' section is supplemented for the Salomon Brothers
Institutional High Yield Bond Fund (the 'High Yield Bond Fund'), the Salomon
Brothers Institutional Asia Growth Fund (the 'Asia Growth Fund') and the Salomon
Brothers Institutional Money Market Fund with the following information.
Financial statements are not presented for the Salomon Brothers Institutional
Emerging Markets Debt Fund since it has not yet commenced investment operations.
5
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
- -------- ------------------------------------------------------------------ -------- -------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS -- 91.8%
BASIC INDUSTRIES -- 22.4%
$100,000 Algoma Steel...................................................... 12.375% 07/15/05 $ 100,250
100,000 Alvey Systems..................................................... 11.375 01/31/03 103,000
100,000 Florida Coast..................................................... 12.750 06/01/03 105,500
100,000 Four M............................................................ 12.000 06/01/06 103,000
100,000 Harris Chemical................................................... 10.250 07/15/01 100,000
100,000 Mesa Operating.................................................... 10.625 07/01/06 104,500
100,000 Norcal Waste Systems*............................................. 12.750 11/15/05 105,750
100,000 Renco Metals...................................................... 11.500 07/01/03 105,250
100,000 Stone Container................................................... 10.750 10/01/02 103,250
----------
930,500
----------
CONSUMER CYCLICALS -- 7.1%
125,000 Apparel Retailer
(Zero coupon until 08/15/98, 12.75% thereafter)(a).............. 12.287 08/15/05 98,125
100,000 Hills Stores...................................................... 12.500 07/01/03 93,625
100,000 Wyndham Hotel..................................................... 10.500 05/15/06 102,500
----------
294,250
----------
CONSUMER NON-CYCLICALS -- 31.3%
100,000 Argosy Gaming..................................................... 13.250 06/01/04 96,000
100,000 Berry Plastics.................................................... 12.250 04/15/04 108,000
200,000 Carr-Gottstein Foods.............................................. 12.000 11/15/05 206,000
100,000 Cinemark USA...................................................... 9.625 08/01/08 99,500
100,000 Harvey Casino..................................................... 10.625 06/01/06 103,500
100,000 Majestic Star Casino.............................................. 12.750 05/15/03 107,500
100,000 Penn Traffic...................................................... 9.625 04/15/05 70,000
100,000 Remington Product................................................. 11.000 05/15/06 101,000
200,000 Revlon Consumer Products.......................................... 10.500 02/15/03 206,500
100,000 Smiths Food & Drug................................................ 11.250 05/15/07 104,500
100,000 Trump Atlantic City............................................... 11.250 05/01/06 95,500
----------
1,298,000
----------
ENERGY -- 2.5%
100,000 Cliffs Drilling................................................... 10.250 05/15/03 101,750
----------
FINANCIAL SERVICES -- 2.4%
100,000 HMH Properties.................................................... 9.500 05/15/05 97,500
----------
HEALTH CARE -- 4.9%
100,000 Maxxim Medical.................................................... 10.500 08/01/06 102,000
100,000 Paracelsus Healthcare............................................. 10.000 08/15/06 101,000
----------
203,000
----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
- -------- ------------------------------------------------------------------ -------- -------- ----------
<S> <C> <C> <C> <C>
MEDIA -- 11.7%
$100,000 Cablevision Systems............................................... 10.500% 05/15/16 $ 98,000
150,000 Diamond Cable
(Zero Coupon until 12/15/00, 11.75% thereafter)(a).............. 11.696 12/15/05 94,500
100,000 Hollinger International Publishing................................ 9.250 02/01/06 94,000
150,000 Marcus Cable
(Zero Coupon until 12/15/00, 14.125% thereafter)(a)............. 13.316 12/15/05 94,500
100,000 SFX Broadcasting.................................................. 10.750 05/15/06 102,750
----------
483,750
----------
TECHNOLOGY -- 5.0%
100,000 Talley Manufacturing & Technology................................. 10.750 10/15/03 104,125
100,000 UNC............................................................... 11.000 06/01/06 104,000
----------
208,125
----------
TELECOMMUNICATIONS & UTILITIES -- 4.5%
150,000 International CableTel
(Zero Coupon until 02/01/01, 11.50% thereafter)(a).............. 11.804 02/01/06 88,500
100,000 Western Wireless.................................................. 10.500 06/01/06 100,000
----------
188,500
----------
TOTAL CORPORATE BONDS
(cost $3,769,347).................................................................... 3,805,375
----------
CONVERTIBLE CORPORATE BONDS -- 2.2%
TECHNOLOGY -- 2.2%
100,000 VLSI Technology (cost $91,397).................................... 8.250 10/01/05 90,750
----------
TOTAL INVESTMENTS -- 94.0%
(cost $3,860,744).................................................................... 3,896,125
Other assets in excess of liabilities -- 6.0%............................................ 250,404
----------
NET ASSETS -- 100.0%..................................................................... $4,146,529
----------
----------
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
(a) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
See accompanying notes to financial statements.
7
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
COMMON STOCKS -- 90.1%
HONG KONG -- 27.5%
15,000 Asia Satellite Telecommunications Holdings*............................................. $ 39,282
7,200 Bank of East Asia....................................................................... 26,118
13,000 Cheung Kong Holdings.................................................................... 91,206
13,000 Cheung Kong Infrastructure*............................................................. 21,267
20,000 China Resources Enterprises............................................................. 17,976
10,000 Citic Pacific........................................................................... 43,970
65,000 Guangdong Investment.................................................................... 46,654
45,800 HKR International....................................................................... 57,750
27,600 Hong Kong Land Holdings................................................................. 62,652
20,800 Hong Kong Telecommunications............................................................ 34,835
6,600 HSBC Holdings........................................................................... 113,948
12,000 Hutchison Whampoa....................................................................... 72,628
10,000 New World Development................................................................... 48,497
216,000 Shanghai Petrochemical.................................................................. 55,868
6,000 Swire Pacific........................................................................... 53,346
----------
785,997
----------
INDIA -- 7.1%
13,500 Arvind Mills -- GDR..................................................................... 52,650
4,300 Ashok Leyland -- GDR*................................................................... 47,837
900 Larsen & Toubro -- GDR.................................................................. 13,680
5,000 Mahindra & Mahindra -- GDR*............................................................. 54,375
3,000 Reliance Industries -- GDR.............................................................. 33,750
----------
202,292
----------
INDONESIA -- 4.7%
20,000 Lippo Karawaci(a)....................................................................... 25,619
3,000 PT Hm Sampoerna(a)...................................................................... 28,886
30,000 PT Inti Indorayon Utama*(a)............................................................. 25,939
44,000 PT Lippo Life Insurance(a).............................................................. 37,575
11,000 PT Telekomunikasion*(a)................................................................. 15,500
----------
133,519
----------
KOREA -- 5.4%
1,050 Deasung Industrial...................................................................... 75,105
57 Deasung Industrial (New Shares)......................................................... 4,077
6,300 Hanwha Chemical......................................................................... 63,827
600 LG Electronics.......................................................................... 11,205
----------
154,214
----------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
MALAYSIA -- 13.6%
6,000 Arab Malaysia........................................................................... $ 24,546
19,000 Bolton Properties....................................................................... 28,958
11,000 DCB Holdings............................................................................ 33,530
22,000 Industrial Oxygen....................................................................... 32,295
8,000 Kian Joo Can Factory.................................................................... 47,487
3,000 Malakoff................................................................................ 13,837
3,400 Malayan Banking......................................................................... 32,319
9,000 Malaysia Assurance Alliance............................................................. 49,453
12,000 Malaysian Airline System................................................................ 35,856
22,000 MBF Capital............................................................................. 31,412
18,000 Tan Chong Motor Holdings................................................................ 31,909
4,000 United Engineers........................................................................ 28,396
----------
389,998
----------
PAKISTAN -- 1.3%
4,200 Pakistan State Oil*..................................................................... 39,068
----------
PHILIPPINES -- 2.8%
30,000 Ayala Land, Series B.................................................................... 38,366
40,000 Belle*.................................................................................. 10,689
60,000 Universal Robina........................................................................ 30,349
----------
79,404
----------
SINGAPORE -- 11.8%
3,900 Cerebos Pacific......................................................................... 32,426
6,700 Cycle & Carriage........................................................................ 64,277
12,500 Hong Leong Finance(a)................................................................... 42,105
4,300 Jardine Matheson Holdings............................................................... 27,090
9,000 Sembawang............................................................................... 41,572
1,500 Singapore Press Holdings(a)............................................................. 26,009
2,500 United Overseas Bank.................................................................... 23,984
37,000 Wing Tai Holdings....................................................................... 79,406
----------
336,869
----------
SRI LANKA -- 0.7%
90,000 Asia Capital*........................................................................... 12,545
15,500 United Motors Lanka..................................................................... 8,503
----------
21,048
----------
TAIWAN -- 4.5%
7,000 Cathay Life Insurance................................................................... 42,814
13,000 Formosa Plastics........................................................................ 27,451
10,000 International Commercial Bank China..................................................... 30,946
20,000 Yang Ming Marine Transport.............................................................. 27,669
----------
128,880
----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<S> <C> <C>
THAILAND -- 10.7%
10,250 Bangkok Bank............................................................................ $ 88,303
6,600 Dhana Siam Finance...................................................................... 29,472
9,000 Property Perfect(a)..................................................................... 35,388
16,500 Siam City Bank.......................................................................... 29,016
11,900 Thai Farmers Bank....................................................................... 81,355
24,300 Thai Telephone & Telecommunications*(a)................................................. 43,213
----------
306,747
----------
TOTAL COMMON STOCKS
(cost $2,750,438)..................................................................... 2,578,036
----------
WARRANTS -- 1.7%
290,000 Henderson Investment Call Warrants (expiring 02/17/97).................................. 10,126
66,000 Peregrine Investment Holdings Warrants (expiring 05/15/98).............................. 10,755
22,500 PT Indah Kiat Pulp & Paper Warrants (expiring 04/13/01)................................. 9,247
60,000 Swire Pacific A Call Warrants (expiring 05/30/97)....................................... 12,260
2,000 Thai Basket Warrants (expiring 11/19/96)................................................ 387
65,000 New World Development Warrants (expiring 04/29/97)...................................... 6,220
----------
TOTAL WARRANTS
(cost $55,177)........................................................................ 48,995
----------
<CAPTION>
CONTRACTS PURCHASED OPTIONS -- 0.7%
- ---------
<C> <S> <C>
12,841
211 Hang Seng Index Call (expiring 12/30/96, exercise price HKD 11,541).....................
5,897
4 Hang Seng Index Put (expiring 12/06/96, exercise price HKD 10,600)......................
----------
TOTAL PURCHASED OPTIONS
(cost $19,003)........................................................................ 18,738
----------
TOTAL INVESTMENTS -- 92.5%
(cost $2,824,618)..................................................................... 2,645,769
Other assets in excess of liabilities -- 7.5%........................................... 215,575
----------
NET ASSETS -- 100.0%.................................................................... $2,861,344
----------
----------
</TABLE>
* Non-income producing security.
(a) Foreign Shares
Abbreviations used in this statement:
GDR -- Global Depository Receipt
HKD -- Hong Kong Dollar
See accompanying notes to financial statements.
10
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD ASIA GROWTH
BOND FUND FUND
---------- -----------
<S> <C> <C>
ASSETS:
Investments, at value (Note A)................................................... $3,896,125 $2,645,769
Cash and foreign currency........................................................ 156,246 182,792
Receivable for securities sold................................................... -- 141,161
Interest and dividends receivable................................................ 91,987 2,206
Receivable from investment advisor............................................... 83,409 85,596
Deferred organization expense.................................................... 54,226 67,972
---------- -----------
Total assets................................................................ 4,281,993 3,125,496
---------- -----------
---------- -----------
LIABILITIES:
Payable for:
Securities purchased............................................................. -- 107,965
Organization fees................................................................ 52,651 68,608
Accrued expenses................................................................. 82,813 87,579
---------- -----------
Total liabilities........................................................... 135,464 264,152
---------- -----------
NET ASSETS............................................................................ $4,146,529 $2,861,344
---------- -----------
---------- -----------
NET ASSETS CONSIST OF:
Paid-in capital.................................................................. $4,034,661 $3,033,340
Undistributed net investment income.............................................. 75,562 12,554
Accumulated net realized gain (loss) on investments, options and foreign currency
transactions.................................................................... 925 (17,990 )
Net unrealized appreciation (depreciation) on investments, options and other
assets.......................................................................... 35,381 (166,560 )
---------- -----------
NET ASSETS............................................................................ $4,146,529 $2,861,344
---------- -----------
---------- -----------
SHARES OUTSTANDING.................................................................... 399,750 305,254
---------- -----------
---------- -----------
NET ASSET VALUE PER SHARE............................................................. $ 10.37 $ 9.37
---------- -----------
---------- -----------
Note A: Cost of investments........................................................... $3,860,744 $2,824,618
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED AUGUST 31, 1996(A)(B) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH
YIELD ASIA GROWTH
BOND FUND FUND
--------- -----------
<S> <C> <C>
INCOME:
Interest.......................................................................... $ 80,158 $ 5,113
Dividends (Note A)................................................................ -- 16,349
--------- -----------
80,158 21,462
EXPENSES:
Management fee.................................................................... 4,179 6,681
Custody, administration and shareholder servicing fees............................ 77,630 80,222
Registration and filing fees...................................................... 12,961 14,098
Audit and tax return preparation fees............................................. 7,518 8,176
Legal............................................................................. 3,758 4,088
Amortization of organization expenses............................................. 3,442 4,696
Printing.......................................................................... 1,503 1,635
Directors' fees and expenses...................................................... 1,316 1,431
Other............................................................................. 752 817
--------- -----------
113,059 121,844
Management fee waived and expenses absorbed by investment advisor................. (87,588 ) (92,277)
Credits earned on cash balances, and fees waived by custodian..................... (20,875 ) (20,659)
--------- -----------
Net expenses...................................................................... 4,596 8,908
--------- -----------
NET INVESTMENT INCOME.................................................................. 75,562 12,554
--------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments....................................................................... 925 (15,716)
Options written................................................................... -- 172
Foreign currency transactions..................................................... -- (2,446)
--------- -----------
925 (17,990)
--------- -----------
Net change in unrealized appreciation (depreciation) on:
Investments....................................................................... 35,381 (178,849)
Foreign currency transactions and other assets.................................... -- 12,289
--------- -----------
35,381 (166,560)
--------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................................ 36,306 (184,550)
--------- -----------
--------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $111,868 $(171,996)
--------- -----------
--------- -----------
Note A: Net of foreign withholding tax of.............................................. $ -- $ 1,348
--------- -----------
--------- -----------
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May 15,
1996.
(b) The Asia Growth Fund's commencement of investment operations was May 6,
1996.
See accompanying notes to financial statements.
12
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED AUGUST 31, 1996(A)(B) (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD ASIA GROWTH
BOND FUND FUND
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................... $ 75,562 $ 12,554
Net realized gain (loss) on investments, options, and foreign currency
transactions................................................................... 925 (17,990 )
Net change in unrealized appreciation (depreciation) on investments, foreign
currency transactions and other assets......................................... 35,381 (166,560 )
----------- -----------
Net increase (decrease) in net assets resulting from operations................. 111,868 (171,996 )
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares................................................... 5,005,307 3,000,000
Payment for redemption of shares................................................ (1,003,976) --
----------- -----------
Change in net assets resulting from capital share transactions.................. 4,001,331 3,000,000
----------- -----------
NET INCREASE IN NET ASSETS........................................................... 4,113,199 2,828,004
----------- -----------
NET ASSETS:
Beginning of period............................................................. 33,330 33,340
----------- -----------
End of period (including undistributed net investment income of $75,562 and
$12,554, respectively)......................................................... $ 4,146,529 $2,861,344
----------- -----------
----------- -----------
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May 15,
1996.
(b) The Asia Growth Fund's commencement of investment operations was May 6,
1996.
See accompanying notes to financial statements.
13
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Salomon Brothers Institutional High Yield Bond Fund (the 'High Yield Bond
Fund'), Salomon Brothers Institutional Asia Growth Fund (the 'Asia Growth Fund')
and Salomon Brothers Institutional Emerging Markets Debt Fund (the 'Emerging
Markets Debt Fund') are portfolios of the Salomon Brothers Institutional Series
Funds Inc (the 'Institutional Series'). The High Yield Bond Fund and the Asia
Growth Fund (each, a 'Fund' and collectively, the 'Funds') are included in this
report. The Emerging Markets Debt Fund has not commenced investment operations
and is therefore not included in this report. The Institutional Series is an
open-end investment company incorporated in Maryland on January 19, 1996. Each
Fund has a specific investment objective: the High Yield Bond Fund's objective
is to maximize total return by investing primarily in a portfolio of high yield
fixed-income securities that offer a yield above that generally available on
debt securities in the four highest rating categories of the recognized rating
services; the Asia Growth Fund's objective is to seek long-term capital
appreciation.
The following is a summary of significant accounting policies followed by the
Institutional Series in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
('GAAP'). The preparation of financial statements in accordance with GAAP
requires management to make estimates of certain reported amounts in the
financial statements. Actual amounts could differ from those estimates.
(A) INVESTMENT VALUATION. Portfolio securities listed or traded on national
securities exchanges, or reported on the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day,
at the mean of the current bid and asked price which represents the current
value of the security. Over-the-counter securities are valued at the mean
of the current bid and asked price. Debt securities are valued by using
either market quotations or independent pricing services which use prices
provided by market-makers or estimates of market values obtained from yield
data relating to instruments or securities with similar characteristics.
Publicly traded sovereign bonds are typically traded internationally on the
over-the-counter market and are valued at the mean of the last current bid
and asked price as of the close of business of that market. Short-term
securities with less than 60 days remaining to maturity when acquired by a
Fund will be valued at amortized cost which approximates market value. If a
Fund acquires such securities with more than 60 days remaining to maturity,
they will be valued at current market value (using the bid price), until
the 60th day prior to maturity, and will then be valued on an amortized
cost basis.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in domestic companies may be subject to limitation in other
emerging countries. Foreign ownership limitations also may be imposed by
the charters of individual companies in emerging countries to prevent,
among other things, violation of foreign investment limitations. As a
result, an additional class of shares (identified as 'Foreign Shares' in
the Portfolio of Investments) may be created and offered for investment by
such companies. The 'local' and 'foreign' shares' market values may differ.
Foreign securities quoted in a foreign currency are translated into U.S.
dollars using exchange rates at 2:30 p.m. Eastern time (12:30 p.m. for the
Asia Growth Fund), or at such other rates as Salomon Brothers Asset
Management ('SBAM') may determine to be appropriate in computing net asset
value.
Securities for which reliable quotations or prices from pricing services
are not readily available (as may be the case for securities of limited
marketability) and all other assets are valued at their respective fair
value as determined in good faith by, or under procedures established by,
the Board of Directors.
14
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
(B) OPTION CONTRACTS. When a Fund writes or purchases a call or a put
option, an amount equal to the premium received or paid by the Fund is
recorded as a liability or asset, the value of which is marked-to-market
daily to reflect the current market value of the option. When the option
expires, the Fund realizes a gain or loss equal to the amount of the
premium received or paid. When the Fund exercises an option or enters into
a closing transaction by purchasing or selling an offsetting option, it
realizes a gain or loss without regard to any unrealized gain or loss on
the underlying security. When a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
When a written put option is exercised, the amount of the premium received
reduces the cost of the security that the Fund purchased upon exercise of
the option.
(C) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is
each Fund's policy that the Fund take possession, through its custodian, of
the underlying collateral and monitor the collateral's value at the time
the agreement is entered into and on a daily basis during the term of the
repurchase agreement to ensure that it equals or exceeds the repurchase
price. In the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings.
(D) FOREIGN CURRENCY TRANSLATION. The accounting records of each Fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities of the Funds denominated in a foreign currency are translated
into U.S. dollars at the prevailing rates of exchange each day. Purchases
and sales of securities, income receipts and expense payments are
translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions. Net realized gains and losses on
foreign currency transactions represent net gains and losses from sales and
maturities of forward currency contracts, disposition of foreign
currencies, currency gains and losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effect of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statements of
Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or
loss on investments.
(E) FORWARD FOREIGN CURRENCY CONTRACTS. Each Fund may enter into forward
foreign currency contracts in connection with planned purchases or sales of
securities or to hedge the value of portfolio securities. A forward foreign
currency contract is an agreement between two parties to buy and sell a
currency at a set price on a future date. The contract is marked-to-market
daily and the change in value is recorded by the Fund as an unrealized gain
or loss. When a forward foreign currency contract is extinguished, through
either delivery or offset by entering into another forward foreign currency
contract, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
of the contract at the time it was extinguished or offset.
(F) FEDERAL INCOME TAXES. Each Fund intends to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
by distributing all of its income, including any net realized gains, to
shareholders. Therefore, no Federal income tax or excise tax provision is
required.
(G) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Each Fund will declare
dividends from net investment income annually. Distributions of net
realized gains to shareholders of each Fund, if any, are declared at least
annually. Dividends and distributions to shareholders of each Fund are
recorded on the ex-dividend date and are determined in accordance with
income tax regulations which may differ from GAAP primarily due to
differences in the treatment of foreign currency gains/losses, deferral of
wash sales, and post-October losses incurred by each
15
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
Fund. Permanent book/tax differences are reclassified within the capital
accounts based on their federal income tax basis treatment; temporary
differences do not require reclassifications. Dividends and distributions
which exceed net investment income and net realized gains for financial
reporting purposes but not for tax purposes are reported as dividends in
excess of net investment income and distributions in excess of net realized
capital gains.
(H) EXPENSES. Direct expenses are charged to the Fund that incurred them,
and general expenses of the Institutional Series are allocated to the Funds
based on each Fund's relative net assets.
(I) ORGANIZATIONAL COSTS. Certain costs incurred in connection with each
Fund's organization have been deferred and are being amortized by the Funds
over a 60 month period from the date each Fund commenced investment
operations.
(J) OTHER. Investment transactions are recorded as of the trade date.
Dividend income is recorded on the ex-dividend date or on a when-known
basis. Interest income, including the accretion of discounts or
amortization of premiums, is recognized when earned. Gains or losses on
sales of securities are calculated for financial accounting and Federal
income tax purposes on the identified cost basis.
2. MANAGEMENT FEE AND OTHER AGREEMENTS
Each Fund retains SBAM, an indirect wholly owned subsidiary of Salomon Inc, to
act as investment manager of each Fund, subject to the supervision by the Board
of Directors of the Institutional Series. Among other things, SBAM furnishes the
Funds with office space and certain services and facilities required for
conducting the business of the Funds, and pays the compensation of its officers.
The management fee for these services for each Fund is payable monthly and is
based on the following annual percentages of each Funds' average daily net
assets: .50% for the High Yield Bond Fund and .75% for the Asia Growth Fund.
SBAM has retained Salomon Brothers Asset Management Asia Pacific Limited ('SBAM
AP'), an affiliate of SBAM, to act as sub-advisor to the Asia Growth Fund. SBAM
AP is compensated by SBAM at no additional expense to the Asia Growth Fund.
Salomon Brothers Asset Management Limited ('SBAM Limited'), an affiliate of
SBAM, provides certain administrative services to the Asia Growth Fund. For such
administrative services, SBAM Limited is compensated by SBAM at no additional
expense to the Asia Growth Fund.
If in any fiscal year total expenses of any Fund, excluding taxes, interest,
brokerage and extraordinary expenses, but including the management fee, exceed
the most stringent expense limitation imposed by state securities regulations
applicable to each Fund, SBAM will pay or reimburse the Funds for the excess.
Currently, this limitation on an annual basis is 2.5% of the first $30 million
of average daily net assets, 2.0% of the next $70 million of average daily net
assets and 1.5% of average daily net assets in excess of $100 million. For the
period ended August 31, 1996, there was no such reimbursement. However, SBAM has
voluntarily agreed to waive its management fees and absorb a portion of expenses
to the extent that each Fund's operating expense ratio exceeds, on an annual
basis, .55% and 1.00% of average daily net assets for the High Yield Bond Fund
and Asia Growth Fund, respectivley. For the period ended August 31, 1996, SBAM
waived management fees of $4,179 and $6,681 for the High Yield Bond Fund and
Asia Growth Fund, respectively, and voluntarily absorbed expenses of $83,409 and
$85,596 for the High Yield Bond Fund and Asia Growth Fund, respectively.
Investors Bank & Trust Company ('IBT') serves as custodian, transfer agent and
administrator for each Fund, which includes performing certain administrative
services in connection with the operation of each Fund. IBT has agreed to waive
a portion of its custody fees until October 31, 1996. In addition, a credit is
earned on outstanding cash balances held by the custodian during
16
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
each billing period. During the period ended August 31, 1996, fees of $20,000
were waived by IBT for each Fund and credits of $875 and $659 were earned on
outstanding cash balances for the High Yield Bond Fund and the Asia Growth Fund,
respectively.
3. CAPITAL STOCK
At August 31, 1996, the Institutional Series had 10,000,000,000 shares of
authorized capital stock, par value $.001 per share. Transactions in Fund shares
for the period ended August 31, 1996 were as follows:
<TABLE>
<CAPTION>
HIGH
YIELD ASIA
BOND FUND GROWTH FUND
--------- -----------
<S> <C> <C>
Shares sold....................................................... 495,821 301,920
Shares redeemed................................................... (99,404) --
--------- -----------
Net increase...................................................... 396,417 301,920
--------- -----------
--------- -----------
</TABLE>
At August 31, 1996, SBAM owned approximately 1% of total shares outstanding of
each of the Funds.
4. PORTFOLIO ACTIVITY
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the period ended August 31, 1996, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
High Yield Bond................................................... $3,957,554 $ 100,925
---------- ----------
---------- ----------
Asia Growth....................................................... $4,082,851 $1,265,665
---------- ----------
---------- ----------
</TABLE>
At August 31, 1996, the cost for Federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments held in each
Fund were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
High Yield Bond Fund....................... $3,860,744 $ 58,612 $ (23,231) $ 35,381
Asia Growth Fund........................... $2,824,618 $ 66,173 $ (245,022) $ (178,849)
</TABLE>
Transactions in options written for the Asia Growth Fund during the period ended
August 31, 1996 were as follows:
<TABLE>
<CAPTION>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Options written....................................................... (14,000) $(2,344 )
Options terminated in closing purchase transactions................... 14,000 2,344
--------- --------
Options outstanding at August 31, 1996................................ -- --
--------- --------
--------- --------
</TABLE>
5. PORTFOLIO INVESTMENT RISKS
CREDIT AND MARKET RISK. Funds that invest in high yield instruments are subject
to certain credit and market risks. The yields of high yield debt obligations
reflect, among other things, perceived credit risk. The Funds' investment in
securities rated below investment grade typically involve risks not associated
with higher rated securities including, among others, greater risk of timely and
ultimate payment of interest and principal, greater market price volatility and
less liquid secondary market trading. The consequences of political, social,
economic or diplomatic changes may have
17
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
disruptive effects on the market prices of investments held by the Funds. The
Funds' investment in non-dollar denominated securities may also result in
foreign currency losses caused by devaluations and exchange rate fluctuations.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. Both Funds may enter into
forward foreign currency contracts ('forward contracts') to facilitate
settlement of foreign currency denominated portfolio transactions or to manage
foreign currency exposure associated with foreign currency denominated
securities. Forward contracts involve elements of market risk in excess of the
amounts reflected in the Statements of Assets and Liabilities. The Funds bear
the risk of an unfavorable change in the foreign exchange rate underlying the
forward contract. Risks may also arise upon entering into these contracts from
the potential inability of the counterparties to meet the terms of their
contracts.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
The High Yield Bond Fund may invest in instruments whose values and interest
rates may be linked to foreign currencies, interest rates, indices or some other
financial indicator. The value at maturity or interest rates for these
instruments will increase or decrease according to the change in the indicator
to which it is indexed. These securities are generally more volatile in nature
and the risk of loss of principal is greater.
A risk in writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. A risk in writing a put option is that the Fund may
incur a loss if the market price of the underlying security decreases and the
option is exercised. In addition, there is the risk that the Fund may not be
able to enter into a closing transaction because of an illiquid secondary
market.
18
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
FINANCIAL HIGHLIGHTS
PERIOD ENDED AUGUST 31, 1996(A)(B) (UNAUDITED)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH
YIELD ASIA GROWTH
BOND FUND FUND
--------- -----------
<S> <C> <C>
Net asset value, beginning of period............................................. $ 10.00 $ 10.00
--------- -----------
Net investment income....................................................... 0.19 0.04
Net gain (loss) on investments (both realized and unrealized)............... 0.18 (0.67)
--------- -----------
Total from investment operations....................................... 0.37 (0.63)
--------- -----------
Net asset value, end of period................................................... $ 10.37 $ 9.37
--------- -----------
--------- -----------
Net assets, end of period (thousands)............................................ $ 4,147 $ 2,861
Total return*.................................................................... +3.7% -6.3%
Ratios to average net assets:
Expenses.................................................................... 0.55%** 1.00%**
Net investment income....................................................... 9.02%** 1.41%**
Portfolio turnover rate.......................................................... 4% 47%
Average Broker Commisssion Rate.................................................. N/A $0.0069
Before waiver of management fee, expenses absorbed by SBAM and credits earned
from and fees waived by the custodian, net investment loss per share and
expense ratios would have been:
Net investment loss per share............................................... ($0.08) ($0.33)
Expense ratio............................................................... 13.50%** 13.65%**
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May
15, 1996.
(b) The Asia Growth Fund's commencement of investment operations was May 6,
1996.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the ex-dividend date, and a sale at net asset value on the last day of
each period reported. Total return calculated for a period of less than one
year is not annualized.
** Annualized.
See accompanying notes to financial statements.
19
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE DATE (NOTE 1A)
- --------- ------------------------------------------------------------- ---------- -------- -----------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 25.4%
AUTO -- CARS -- 2.5%
$ 250,000 Ford Motor Credit............................................ 5.280% 07/22/96 $ 249,230
-----------
BANKS -- 1.7%
175,000 J. P. Morgan................................................. 5.250 07/26/96 174,362
-----------
COMPUTER SYSTEMS -- 2.5%
250,000 IBM Credit................................................... 5.280 07/19/96 249,340
-----------
FINANCE COMPANIES -- 4.2%
250,000 General Electric Capital..................................... 5.270 08/19/96 248,207
175,000 Transamerica Finance......................................... 5.350 07/22/96 174,454
-----------
422,661
-----------
FINANCIAL -- BROKERAGE -- 2.4%
250,000 Goldman Sachs Group.......................................... 5.330 07/23/96 249,186
-----------
FOODS -- 4.2%
250,000 Cargill...................................................... 5.350 07/08/96 249,740
175,000 Heinz (H.J.)................................................. 5.340 07/24/96 174,403
-----------
424,143
-----------
MERCHANDISING -- 5.4%
175,000 Penney (J.C.) Funding........................................ 5.270 07/26/96 174,360
175,000 Penney (J.C.) Funding........................................ 5.340 07/31/96 174,221
200,000 Toys 'R' Us.................................................. 5.330 07/08/96 199,793
-----------
548,374
-----------
UTILITIES -- COMMUNICATIONS -- 2.5%
250,000 Bell Atlantic Financial Services............................. 5.320 07/09/96 249,704
-----------
TOTAL COMMERCIAL PAPER (cost $2,567,000).............................................. 2,567,000
-----------
U.S. GOVERNMENT AGENCY -- 74.8%
2,935,000 Federal Farm Credit Bank..................................... 5.260 07/24/96 2,925,136
1,270,000 Federal Home Loan Mortgage Corporation....................... 5.260 07/15/96 1,266,341
1,300,000 Federal Home Loan Mortgage Corporation....................... 5.270 07/15/96 1,298,397
2,065,000 Federal Home Loan Mortgage Corporation....................... 5.240 07/17/96 2,060,191
-----------
TOTAL U.S. GOVERNMENT AGENCY
(cost $7,550,065)................................................................. 7,550,065
-----------
TOTAL INVESTMENTS -- 100.2%
(cost $10,117,065)................................................................ 10,117,065
Liabilities in excess of other assets -- (0.2%)....................................... (17,523)
-----------
NET ASSETS -- 100.0%.................................................................. $10,099,542
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $10,117,065)...................................................... $10,117,065
Cash.......................................................................................... 13,883
Receivable from investment advisor............................................................ 18,542
Receivable for Fund shares sold............................................................... 643
Interest receivable........................................................................... 19
-----------
Total assets............................................................................. 10,150,152
-----------
LIABILITIES
Dividend payable.............................................................................. 30,016
Accrued expenses.............................................................................. 20,594
-----------
Total liabilities........................................................................ 50,610
-----------
NET ASSETS (equivalent to $1.00 per share on 10,099,832 shares of $.001 par value capital stock
outstanding)..................................................................................... $10,099,542
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCOME
Interest........................................................................................ $220,913
EXPENSES
Management fee........................................................................ $ 5,522
Custody and administration fees....................................................... 14,227
Audit and tax return preparation fees................................................. 7,500
Registration and filing fees.......................................................... 6,000
Printing.............................................................................. 4,500
Legal................................................................................. 2,500
Directors' fees and expenses.......................................................... 1,384
Shareholder services.................................................................. 483
Other................................................................................. 3,241
-------
45,357
Management fee waived and expenses absorbed by investment advisor..................... (24,064)
Credits earned from custodian on cash balances........................................ (266) 21,027
------- --------
Net investment income........................................................................... 199,886
NET REALIZED LOSS ON SECURITIES SOLD................................................................. (379)
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................................... $199,507
--------
--------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
1996 DECEMBER 31,
(UNAUDITED) 1995
----------- ------------
<S> <C> <C>
OPERATIONS
Net investment income......................................................... $ 199,886 $ 744,110
Net realized gain (loss) on securities sold................................... (379) 6,443
----------- ------------
Net increase in net assets from operations.................................... 199,507 750,553
----------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.......................................... (199,886) (744,110)
Distributions from net realized gains......................................... -- (959)
----------- ------------
(199,886) (745,069)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares................................................. 15,799,870 79,773,668
Net asset value of shares issued in reinvestment of dividends................. 108,937 555,617
Payment for redemption of shares.............................................. (17,234,354) (96,624,438)
----------- ------------
Net decrease in net assets derived from share transactions.................... (1,325,547) (16,295,153)
----------- ------------
Contribution from investment advisor.......................................... -- 48,447
----------- ------------
Net decrease in net assets.................................................... (1,325,926) (16,241,222)
NET ASSETS
Beginning of period........................................................... 11,425,468 27,666,690
----------- ------------
End of period................................................................. $10,099,542 $ 11,425,468
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 ---------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------- ------- ------- ------- -------
Net investment income......................... 0.023'SS' 0.049'SS' 0.036 0.028 0.034 0.054'SS'
Dividends from net investment income.......... (0.023) (0.049) (0.036) (0.028) (0.034) (0.054)
----------- ------- ------- ------- ------- -------
Net asset value, end of period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
Net assets, end of period (thousands)......... $10,100 $11,425 $27,667 $34,120 $50,554 $35,414
Total investment return....................... +2.4% +5.0% +3.6% +2.9% +3.4% +5.5%
Ratios to average net assets:
Expenses................................. 0.49%* 0.65% 0.45% 0.35% 0.44% 0.54%
Net investment income.................... 4.64%* 4.89% 3.53% 2.83% 3.42% 5.23%
</TABLE>
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* Annualized.
'SS' Net investment income per share would have been $.020, $.049 and $.052 and
the expense ratios to average net assets would have been 1.05%, .70% and
.64%, respectively, for the period ended June 30, 1996 and the years ended
December 31, 1995 and 1991, before applicable waiver of management fee,
expenses absorbed by SBAM and credits earned on custodian cash balances.
See accompanying notes to financial statements.
24
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Series Funds Inc (the 'Company') was incorporated in Maryland
on April 17, 1990 as an open-end management investment company, and currently
operates as a series company comprised of ten portfolios: Salomon Brothers Cash
Management Fund (the 'Cash Management Fund'), Salomon Brothers New York
Municipal Money Market Fund, (the 'New York Municipal Money Fund'), Salomon
Brothers Institutional Money Market Fund (the 'Fund'), Salomon Brothers New York
Municipal Bond Fund (the 'New York Municipal Bond Fund'), Salomon Brothers
National Intermediate Municipal Fund (the 'National Intermediate Municipal
Fund'), Salomon Brothers U.S. Government Income Fund (the 'U.S. Government
Income Fund'), Salomon Brothers High Yield Bond Fund (the 'High Yield Bond
Fund'), Salomon Brothers Strategic Bond Fund (the 'Strategic Bond Fund'),
Salomon Brothers Total Return Fund (the 'Total Return Fund'), and Salomon
Brothers Asia Growth Fund (the 'Asia Growth Fund'). The Fund is included in this
report. The Fund changed its name from Salomon Brothers U.S. Treasury Securities
Money Market Fund to its current name on April 29, 1996. Prior to April 29,
1996, the Fund's objective was to seek a high level of current income by
investing only in short-term United States government and government agency
securities. The Fund's current objective is to seek as high a level of current
income as is consistent with liquidity and the stability of principal. The Cash
Management Fund, New York Municipal Money Fund, New York Municipal Bond Fund,
National Intermediate Municipal Fund, U.S. Government Income Fund, High Yield
Bond Fund, Strategic Bond Fund, Total Return Fund, and Asia Growth Fund are
reported in separate reports and are not included herein.
Following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles ('GAAP'). The preparation of
financial statements in accordance with GAAP requires management to make
estimates of certain reported amounts in the financial statements. Actual
amounts could differ from those estimates.
(A) SECURITIES VALUATION. Portfolio securities are valued using the
amortized cost method, which involves initially valuing an investment at
its cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value and does not include unrealized gains or losses.
(B) FEDERAL INCOME TAXES. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code applicable to
regulated investment companies, including the distribution requirements of
the Tax Reform Act of 1986, and to distribute all of its income, including
any net realized gains, to shareholders. Therefore, no Federal income tax
or excise tax provision is required.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends on the shares of
the Fund are declared each business day to shareholders of record at twelve
noon (New York time) on that day, and paid on the last business day of the
month. Distributions of net realized gains to shareholders, if any, are
declared annually and recorded on the ex-dividend date. Dividends and
distributions are determined in accordance with income tax regulations,
which may differ from GAAP.
(D) EXPENSES. Direct expenses are charged to the Fund, and general expenses
of the Company are allocated to the Fund based on relative average net
assets for the period the expense was incurred.
25
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
- --------------------------------------------------------------------------------
(E) OTHER. Investment transactions are recorded as of the trade date.
Interest income, including the accretion of discounts or the amortization
of premiums, is recognized when earned. Gains or losses on sales of
securities are calculated on the identified cost basis.
2. MANAGEMENT FEE AND OTHER AGREEMENTS
The Company retains Salomon Brothers Asset Management Inc ('SBAM'), an indirect
wholly owned subsidiary of Salomon Inc, to act as investment manager of the
Fund, subject to the supervision by the Board of Directors of the Company. SBAM
furnishes the Company with office space and certain services and facilities
required for conducting the business of the Company and pays the compensation of
its officers. The management fee for these services is payable monthly and is
based on an annual rate of .20% of the Fund's average daily net assets. Prior to
April 29, 1996, the management fee was based on an annual rate of .10% of the
Fund's average daily net assets.
If in any fiscal year total expenses of the Fund, excluding taxes, interest,
brokerage and extraordinary expenses, but including the management fee, exceed
the most stringent expense limitations imposed by state securities regulations
applicable to the Fund, SBAM will pay or reimburse the Fund for the excess.
Currently, the most restrictive of these limitations on an annual basis is 2.5%
of the first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of average daily net assets in
excess of $100 million. No such expense reimbursement was required for the six
months ended June 30, 1996.
Under a voluntary agreement between SBAM and the Fund, SBAM has agreed to reduce
or otherwise limit the expenses of the Fund (exclusive of taxes, interest and
extraordinary expenses such as litigation and indemnification expenses), on an
annualized basis, to .18% of the Fund's average daily net assets for a period
ending April 29, 1997, and to no more than .25% thereafter. For the six months
ended June 30, 1996, SBAM voluntarily waived management fees of $5,522 and
voluntarily absorbed $18,542 of expenses.
Investors Bank & Trust Company serves as custodian, administrator and
shareholder servicing agent for the Fund, which includes performing custodial
and certain administrative services in connection with the operation of the
Fund. During the six months ended June 30, 1996, custodian fees were reduced by
$266 for the Fund, relating to credits earned on cash balances held by the
custodian.
The Fund has an agreement with Salomon Brothers Inc to distribute its shares.
3. CAPITAL STOCK
At June 30, 1996, the Company had 10,000,000,000 shares of authorized capital
stock, par value $.001 per share, of which the Fund had 1,000,000,000 shares
authorized.
26
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets consist of:
<TABLE>
<S> <C>
Par value...................................................................... $ 10,100
Paid-in capital in excess of par............................................... 10,089,732
Undistributed net investment income............................................ 265
Accumulated net realized loss on investments................................... (555)
-----------
Net assets..................................................................... $10,099,542
-----------
-----------
</TABLE>
4. PORTFOLIO ACTIVITY
The Fund invests in money market instruments maturing in thirteen months or less
whose short-term credit ratings are within the two highest ratings categories of
two nationally recognized statistical rating organizations ('NRSROs') or if
rated by only one NRSRO, that NRSRO, or, if not rated, are believed by the
investment manager to be of comparable quality.
At December 31, 1995, the Fund had $176 in net capital loss carry-forwards
expiring in 2002 available to offset future capital gains.
27
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as............. 'SS'
<PAGE>
