<PAGE>
<PAGE>
SALOMON BROTHERS
INSTITUTIONAL
SERIES FUNDS INC
SEMI-ANNUAL REPORT
AUGUST 31, 1997
HIGH YIELD BOND FUND
EMERGING MARKETS DEBT FUND
ASIA GROWTH FUND
- ----------------------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
---------------------------------------------------------------------
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
- --------------------------------------------------------------------------------
October 22, 1997
To Our Shareholders:
We are pleased to provide you with the semi-annual report for the Salomon
Brothers Institutional High Yield Bond Fund, the Salomon Brothers Institutional
Emerging Markets Debt Fund and the Salomon Brothers Institutional Asia Growth
Fund for the period from March 1, 1997 through August 31, 1997.
HIGH YIELD BOND FUND
The Salomon Brothers Institutional High Yield Bond Fund continued to outperform
the benchmark during the six-month period ending August 31, with a total return
of 6.66% versus a return of 6.22% for the Salomon Brothers High-Yield Market
Index.
The U.S. corporate high yield market, supported by fundamental economic strength
and healthy technical factors, continued to post good returns through the end of
August. Solid economic growth and low inflation in the United States served to
improve credit quality among a broad spectrum of issuers. New issuances, at
record rates, were balanced by strong mutual fund cash inflows and demand by
collateralized bond obligations. Spurts in economically cyclical industries such
as retailers and housing related companies supplemented stable growth in
non-cyclical industries, broadly driving credit quality improvements. Credit
losses in the market remained well below historical norms and business
valuations remained buoyed by the continuing climb of the U.S. equity market.
Despite some widening of yield spreads to Treasuries in March and April, spreads
contracted over the following months, with spreads at record lows at the end of
August.
With average market yield spreads at 285 basis points, we see limited potential
for further narrowing, and continue to focus on diversification among industry
sectors and improving credits with strong underlying fundamentals.
At August 31, the Fund had 95.7% of its assets invested in high yield
securities, with 4.3% in cash.
EMERGING MARKETS DEBT FUND
The Salomon Brothers Emerging Markets Debt Fund continued to outperform the
benchmark with a return of 11.17% for the six months ending August 31, 1997,
versus a return of 9.67% for the Salomon Brothers Brady Bond Index during the
period.
During the first half of 1997, the emerging debt markets benefited from
favorable market conditions, attractive yields and positive economic and
political settings in many key countries. Swaps of newly issued global bonds for
Brady-type securities bolstered the performance of the Brady Bond sector, and
the upgrading of Argentine corporates to investment grade, based on a change of
rating methodology, had a positive impact. While U.S. stock market volatility
during August had a significant impact on emerging markets equities, the effect
on emerging markets fixed income was limited. Asian currency markets have
remained under pressure, while Latin American local markets did not suffer
similar sell-offs. Additionally, the seasonal slowdown and global volatility
have shifted market focus away from country fundamentals and toward global asset
prices. We expect that once fluctuations in global prices diminish, improving
fundamentals should result in further spread tightening.
Our overall market outlook for emerging markets debt continues to be favorable
for the remaining months of 1997. Despite potential volatility, we expect
fundamentals to remain strong, supported by a benign international interest rate
environment, improving credit ratings and the expectation of further debt
buybacks. We believe Latin America, with its strong fundamentals, is
particularly well-positioned to benefit from these events.
PAGE 1
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<PAGE>
At the end of August, the Fund had allocations of 75.2% to sovereign bonds, 2.5%
to corporate bonds, 7.3% in loan participations and 8.9% in U.S. Treasury notes,
with the remaining 6.1% in cash. As a percentage of assets, the Fund's largest
allocations were invested in the emerging markets of Russia (14.0%), Venezuela
(11.2%), Brazil (10.5%) and Mexico (9.2%). By region, approximately 52% of the
portfolio was invested in Latin America, 21% in Eastern Europe and the former
Soviet Union, and 12% in Asian and African markets.
ASIA GROWTH FUND
The Salomon Brothers Institutional Asia Growth Fund produced total returns well
above the Morgan Stanley Capital International All County Asia Free ex-Japan
Index for the six-month period ending August 31, 1997, with a total return of
0.82% versus -16.47%, respectively.
The meltdown in Southeast Asian currencies finally spilled over into the
regional equity markets at the end of August. Amidst one of the most volatile
trading periods in Asian investing history, governmental measures appeared to
provide insufficient measures to dampen economic turmoil, as selling pressures
prevailed in the markets. With investors facing high equity risk premia, we are
focusing on identifying those markets with the strongest fundamentals and
reasonable valuations.
As long-term investors, we believe that after a short period of continuing
volatility, growth will continue in the Asian markets as these countries
transition from export-led growth to expansion based on domestic consumption.
The Fund continues to overweight Northern Asia and India, where we expect market
volatility to be lower than in Southern Asia. The inclusion of China Resources
Enterprises and Cheung Kong Infrastructure in the Hang Seng Index immediately
after Hong Kong's hand-over exemplifies a fundamental shift toward China-related
stocks. Our overweight position in India reflects our belief that it is a
'natural' hedge to volatility in the region. We are underweighted in Taiwan, in
recognition of what we see as extremely high market valuations.
On September 24, 1997, The Travelers Group Inc. ('Travelers') and Salomon Inc
('Salomon'), the ultimate parent company of Salomon Brothers Asset Management
Inc (the 'Adviser'), announced their agreement (the 'Transaction') to merge
Salomon with and into Smith Barney Holdings Inc., a subsidiary of Travelers, to
form a new company expected to be called Salomon Smith Barney Holdings Inc.
Travelers is a diversified financial services company engaged in investment
services, asset management, consumer finance and life and property casualty
insurance services. Upon consummation of the Transaction, Travelers will become
the ultimate parent of the Adviser. Shareholder approval of a new contract
with the Adviser will be sought as a result of the Transaction.
Management expects the Transaction to be completed by the end of November 1997,
subject to a number of conditions, including the receipt of U.S. and foreign
regulatory approvals and the approval of Salomon stockholders.
Cordially,
/s/ Michael S. Hyland
_____________________________________
Michael S. Hyland
Chairman & President
PAGE 2
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<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
- -------- ------------------------------------------------------------------ -------- -------- ----------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 95.7%
BASIC INDUSTRIES -- 14.3%
$100,000 Algoma Steel...................................................... 12.375% 07/15/05 $ 114,750
100,000 Allied Waste
(Zero Coupon until 06/01/02, 11.30% thereafter)(a).............. 11.300 06/01/07 67,500
50,000 Alvey Systems..................................................... 11.375 01/31/03 51,875
100,000 NL Industries
(Zero Coupon until 10/15/98, 13.00% thereafter)(a).............. 11.798 10/15/05 96,250
100,000 Norcal Waste Systems*............................................. 13.250 11/15/05 113,000
100,000 Renco Metals...................................................... 11.500 07/01/03 105,500
100,000 Shop Vac.......................................................... 10.625 09/01/03 107,750
----------
656,625
----------
CONSUMER CYCLICALS -- 9.8%
100,000 Hollinger......................................................... 9.250 02/01/06 103,000
150,000 Revlon Worldwide(a)............................................... 10.750 03/15/01 105,750
150,000 Waxman Industries
(Zero coupon until 6/01/99, 12.75% thereafter)(a)............... 12.663 06/01/04 130,125
100,000 Wyndham Hotel..................................................... 10.500 05/15/06 113,250
----------
452,125
----------
CONSUMER NON-CYCLICALS -- 25.6%
100,000 Berry Plastics.................................................... 12.250 04/15/04 110,125
150,000 Eyecare Centers of America........................................ 12.000 10/01/03 164,250
100,000 Hills Stores...................................................... 12.500 07/01/03 84,250
100,000 Iron Mountain..................................................... 10.125 10/01/06 108,000
100,000 North Atlantic Trading............................................ 11.000 06/15/04 103,500
100,000 Pen-Tab Industries................................................ 10.875 02/01/07 98,750
100,000 Rayovac........................................................... 10.250 11/01/06 104,875
100,000 SC International Services......................................... 9.250 09/01/07 100,625
200,000 Stroh Brewery..................................................... 11.100 07/01/06 209,000
100,000 Trump Atlantic City............................................... 11.250 05/01/06 97,500
----------
1,180,875
----------
ENERGY -- 11.5%
100,000 Benton Oil & Gas.................................................. 11.625 05/01/03 109,000
100,000 Dawson Product Services........................................... 9.375 02/01/07 103,000
100,000 National Energy Group............................................. 10.750 11/01/06 104,250
200,000 Parker Drilling................................................... 9.750 11/15/06 212,000
----------
528,250
----------
FINANCIAL SERVICES -- 8.1%
250,000 Coleman Escrow(a)................................................. 11.125 05/15/01 165,313
200,000 Intertek Finance PLC.............................................. 10.250 11/01/06 209,500
----------
374,813
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 3
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<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
- -------- ------------------------------------------------------------------ -------- -------- ----------
<C> <S> <C> <C> <C>
HEALTH CARE -- 4.5%
$100,000 Graham Field Health Products...................................... 9.750% 08/15/07 $ 101,000
100,000 Maxxim Medical.................................................... 10.500 08/01/06 107,750
----------
208,750
----------
MEDIA -- 5.1%
100,000 Cablevision Systems............................................... 10.500 05/15/16 112,000
150,000 Marcus Cable
(Zero Coupon until 06/15/00, 14.125% thereafter)(a)............. 13.316 12/15/05 121,875
----------
233,875
----------
TECHNOLOGY -- 9.0%
100,000 Amphenol.......................................................... 9.875 05/15/07 103,500
100,000 Decisionone....................................................... 9.750 08/01/07 102,500
100,000 HCC Industries.................................................... 10.750 05/15/07 107,000
100,000 High Voltage Engineering.......................................... 10.500 08/15/04 101,250
----------
414,250
----------
TELECOMMUNICATIONS & UTILITIES -- 6.5%
250,000 ICG Holdings
(Zero Coupon until 09/15/00, 13.50% thereafter)(a).............. 11.459 09/15/05 191,875
150,000 International CableTel
(Zero Coupon until 02/01/01, 11.500% thereafter)(a)............. 11.804 02/01/06 108,750
----------
300,625
----------
TRANSPORTATION -- 1.3%
100,000 TFM (Zero Coupon until 06/01/02, 11.75% thereafter)(a)............ 11.398 06/15/09 61,750
----------
TOTAL INVESTMENTS -- 95.7%
(cost $4,242,931)............................................... 4,411,938
Other assets in excess of liabilities -- 4.3%..................... 197,804
----------
NET ASSETS -- 100.0%.............................................. $4,609,742
----------
----------
</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.
PAGE 4
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<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT (A) DESCRIPTION RATE DATE (NOTE 1A)
- ---------- --------------------------------------------------------------- -------- -------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 2.5%
ENERGY -- 2.5%
$ 350,000 Companhia Energetica Sao Paul (cost $348,502)*................. 9.125% 06/26/07 $ 344,750
-----------
SOVEREIGN BONDS -- 75.2%
ARGENTINA -- 5.0%
250,000 Republic of Argentina, Global Bond............................. 11.750 02/12/07 282,813
200,000 Republic of Argentina, Global Bond(f).......................... 11.000 10/09/06 227,750
250,000 Republic of Argentina, Par Bond, Series L*..................... 5.500 03/31/23 184,063
-----------
694,626
-----------
BRAZIL -- 10.5%
1,008,585 Federal Republic of Brazil, Capitalization Bond(b)(f).......... 8.000 04/15/14 820,736
750,000 Federal Republic of Brazil, DCB, Series L*..................... 6.938 04/15/12 621,094
-----------
1,441,830
-----------
BULGARIA -- 4.2%
750,000 Republic of Bulgaria, IAB*..................................... 6.688 07/28/11 577,500
-----------
ECUADOR -- 4.0%
710,810 Republic of Ecuador, PDI Bond*(b).............................. 6.688 02/27/15 506,452
54,679 Republic of Ecuador, Registered PDI Bond*(b)................... 6.688 02/27/15 38,959
-----------
545,411
-----------
IVORY COAST -- 2.1%
750,000 Ivory Coast, FLIRB(c)(e)....................................... -- 12/29/49 294,375
-----------
MEXICO -- 9.2%
675,000 United Mexico States, Global Bond.............................. 11.500 05/15/26 800,888
400,000 United Mexico States, Global Bond.............................. 11.375 09/15/16 463,250
-----------
1,264,138
-----------
PANAMA -- 5.4%
200,000 Republic of Panama, IRB*....................................... 3.750 07/17/14 155,250
667,631 Republic of Panama, PDI Bond*(b)............................... 6.688 07/17/16 585,846
-----------
741,096
-----------
PERU -- 4.3%
500,000 Government of Peru, PDI Bond*.................................. 4.000 03/07/17 330,625
400,000 Government of Peru, PDI Bond*.................................. 4.000 03/07/17 264,500
-----------
595,125
-----------
PHILIPPINES -- 2.3%
200,000 Republic of the Philippines Treasury Bill(e)................... -- 08/14/98 198,750
125,000 Republic of the Philippines(f)................................. 8.750 10/07/16 123,828
-----------
322,578
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 5
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT (A) DESCRIPTION RATE DATE (NOTE 1A)
- ---------- --------------------------------------------------------------- -------- -------- -----------
<C> <S> <C> <C> <C>
POLAND -- 3.0%
PLZ 2,000,000 Republic of Poland............................................. 12.000% 06/12/02 $ 417,239
-----------
RUSSIA -- 14.0%
2,700,000 Russia -- Principal Loan(b)(c)(e).............................. -- 12/29/49 1,932,188
-----------
VENEZUELA -- 11.2%
500,000 Republic of Venezuela, DCB, Series DL*......................... 6.750 12/18/07 467,813
1,300,000 Republic of Venezuela, Par Bond, including 6,500
attached warrants, expiring 03/31/20(f)...................... 6.750 03/31/20 1,068,435
-----------
1,536,248
-----------
TOTAL SOVEREIGN BONDS
(cost $9,943,589)................................................................. 10,362,354
-----------
LOAN PARTICIPATIONS -- 7.2%
ALGERIA -- 3.4%
525,000 The People's Democratic Republic of Algeria, Tranche A*(d)
(Chase Manhattan Bank)....................................... 6.910 09/04/06 464,625
-----------
MOROCCO -- 3.8%
575,000 Kingdom of Morocco, Tranche A * (d) (Chase Manhattan Bank, N.A.
and Morgan Guaranty Trust Company)........................... 6.813 01/01/09 529,359
-----------
TOTAL LOAN PARTICIPATIONS
(cost $943,420)................................................................... 993,984
-----------
U.S. TREASURY NOTE -- 8.9%
1,250,000 U.S. Treasury Note(f) (cost $1,227,362)........................ 6.125 08/15/07 1,230,275
-----------
TOTAL INVESTMENTS -- 93.8%
(cost $12,462,873)................................................................ 12,931,363
Other assets in excess of liabilities -- 6.2%......................................... 849,845
-----------
NET ASSETS -- 100.0%.................................................................. $13,781,208
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 6
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND (CONCLUDED)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MATURITY CONTRACT TO IN EXCHANGE CONTRACTS AT UNREALIZED
DATE DELIVER FOR VALUE DEPRECIATION
-------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales................................... 09/22/97 DEM 440,000 $ 237,581 $243,911 $ (6,330)
------------
------------
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(c) When and if issued. Security issued pursuant to the corresponding
government's Brady Plan debt restructuring. The investment advisor believes
that the Brady Plan will be finalized and the related bonds issued.
Accordingly, the Fund has marked-to-market its investment in this security
at year end.
(d) Participation interest was acquired through the financial institutions
indicated parenthetically.
(e) Non-income producing security.
(f) Security is segregated as collateral for when and if issued securities and
loan participations.
Abbreviations used in this statement:
DCB -- Debt Conversion Bonds
DEM -- German Deutschemark
FLIRB -- Front-Loaded Interest Reduction Bonds
IAB -- Interest Arrears Bonds
IRB -- Interest Reduction Bonds
PDI -- Past Due Interest
PLZ -- Polish Zloty
See accompanying notes to financial statements.
PAGE 7
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCKS -- 87.6%
CHINA -- 6.7%
140,000 Beijing Yanhua Petrochemical............................................................ $ 54,196
30,000 Heilongjiang Electric Power, Class B.................................................... 28,200
30,000 Shanghai Tyre and Rubber, Class B....................................................... 14,700
132,000 Shanghai Worldbest, Class B............................................................. 96,888
70,000 Shenzhen Chiwan Wharf Holdings, Class B................................................. 42,996
53,000 Shenzhen Fangda, Class B................................................................ 88,909
----------
325,889
----------
HONG KONG -- 38.2%
21,000 Asia Satellite Telecommunications Holdings.............................................. 58,533
120,000 Beijing Datang Power*................................................................... 64,649
8,000 Beijing Enterprises*.................................................................... 60,391
7,000 Cheung Kong............................................................................. 74,069
31,000 China Resources Enterprises............................................................. 130,008
37,000 Continental Mariner Investment.......................................................... 46,790
46,000 Cosco Pacific........................................................................... 89,335
136,000 Far East Hotels & Entainment............................................................ 71,076
32,000 Guangdong Kelon Electronics............................................................. 39,848
55,200 HKR International....................................................................... 70,518
17,000 Hong Kong Land Holdings................................................................. 49,130
28,500 Hutchison Whampoa....................................................................... 237,209
20,000 Ka Wah Bank............................................................................. 59,746
47,000 Kwong On Bank........................................................................... 69,443
26,000 New World Development................................................................... 162,049
25,500 New World Infrastructure*............................................................... 71,405
74,000 Ng Fung Hong............................................................................ 99,787
152,000 Poly Investment Holdings................................................................ 47,074
44,000 Shum Yip Investment..................................................................... 62,172
130,000 Silver Grant International.............................................................. 93,942
28,000 Swire Pacific, Class A.................................................................. 214,078
----------
1,871,252
----------
INDIA -- 10.3%
3,300 East India Hotel -- GDR................................................................. 45,870
6,000 Industrial Credit & Investment -- GDR................................................... 84,000
6,500 Mahindra & Mahindra -- GDR.............................................................. 74,100
9,300 Reliance Industries -- GDR.............................................................. 182,513
6,000 State Bank of India -- GDR.............................................................. 118,500
----------
504,983
----------
INDONESIA -- 1.5%
15,000 PT Indostat(a).......................................................................... 30,354
193,900 PT Lippo Life Insurance(a).............................................................. 40,873
----------
71,227
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 8
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<C> <S> <C>
KOREA -- 4.0%
1,407 Deasung Industrial...................................................................... $ 56,124
2,800 Hyundai Engineering & Construction*..................................................... 58,947
300 Mirae*.................................................................................. 53,850
253 Samsung Electronics..................................................................... 27,191
----------
196,112
----------
MALAYSIA -- 6.9%
25,000 Kian Joo Can Factory.................................................................... 74,391
24,000 Malakoff................................................................................ 55,819
23,000 Resorts World........................................................................... 44,053
29,000 Sime Darby.............................................................................. 68,440
16,000 Tenaga Nasional......................................................................... 47,610
12,000 United Engineers........................................................................ 48,841
----------
339,154
----------
PHILIPPINES -- 3.2%
384,000 Belle*.................................................................................. 60,235
29,000 Manila Electric, Class B................................................................ 97,614
----------
157,849
----------
SINGAPORE -- 8.0%
7,000 Cycle & Carriage........................................................................ 40,291
31,500 DBS Land................................................................................ 80,860
5,000 Elec & Eltek International.............................................................. 36,000
31,000 Hong Leong Finance(a)................................................................... 60,503
75,000 Noble Group............................................................................. 31,500
13,000 Singapore Airlines...................................................................... 94,608
23,000 Wing Tai Holdings....................................................................... 48,693
----------
392,455
----------
SRI LANKA -- 0.5%
99,000 Asia Capital*........................................................................... 22,126
----------
TAIWAN -- 5.3%
15,000 Compal Electronics...................................................................... 72,075
5,000 Compeq Manufacturing.................................................................... 47,006
21,000 Nan Ya Plastics......................................................................... 54,840
32,000 Sheng Yu Steel.......................................................................... 45,014
41,800 Yang Ming Marine Transport.............................................................. 40,170
----------
259,105
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 9
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1997 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL ASIA GROWTH FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- --------- ---------------------------------------------------------------------------------------- ----------
<C> <S> <C>
THAILAND -- 3.0%
3,500 Delta Electronics....................................................................... $ 28,739
22,000 Industrial Finance...................................................................... 17,419
3,700 Shinawatra Computer(a).................................................................. 18,446
2,000 Siam Cement(a).......................................................................... 30,733
2,000 Siam Cement............................................................................. 22,874
11,000 Singer Thailand......................................................................... 18,710
36,450 Thai Telephone & Telecommunications*(a)................................................. 11,224
----------
148,145
----------
TOTAL COMMON STOCKS
(cost $4,829,421)..................................................................... 4,288,297
----------
<CAPTION>
PRINCIPAL
AMOUNT CONVERTIBLE CORPORATE BONDS -- 2.2%
- ---------
<C> <S> <C>
$ 100,000 Taiwan Semiconductor, 0.00%, due 07/03/02 106,375
(cost $100,000).......................................................................
----------
WARRANTS AND RIGHTS -- 1.9%
140,000 Hutchison Call Warrants, expires 12/30/97............................................... 21,318
120,000 Shanghai Industrial Warrants, expires 11/18/97.......................................... 46,455
180,000 Swire Pacific Warrants, expires 02/14/98................................................ 22,763
36 LG Information & Communications Rights, expires 09/19/97(b)............................. 961
5,120 Sheng Yu Steel Rights, expires 09/10/97(b).............................................. 1,676
----------
TOTAL WARRANTS AND RIGHTS
(cost $71,003)........................................................................ 93,173
----------
<CAPTION>
CONTRACTS PURCHASED OPTIONS -- 3.2%
- ---------
<C> <S> <C>
31,167
280 Hang Seng Index OTC Put (expiring 09/19/97, exercise price HKD 4,773)...................
125,358
1,600 Samsung Electronics Call (expiring 02/01/99, exercise price $0.10)......................
8
38,000 Overseas United Bank Call (expiring 10/11/97, exercise price $6.5868)...................
----------
TOTAL PURCHASED OPTIONS
(cost $153,340)....................................................................... 156,533
----------
TOTAL INVESTMENTS -- 94.9%
(cost $5,153,764)..................................................................... 4,644,378
Other assets in excess of liabilities -- 5.1%........................................... 250,383
----------
NET ASSETS -- 100.0%.................................................................... $4,894,761
----------
----------
</TABLE>
* Non-income producing security.
(a) Foreign Shares
(b) Securities fair valued under procedures adopted by the Board of Directors.
At August 31, 1997, total securities fair valued in this manner amounted to
$2,637 (0.1% of Net Assets).
Abbreviations used in this statement:
GDR -- Global Depository Receipt
HKD -- Hong Kong Dollar
OTC -- Over The Counter
See accompanying notes to financial statements.
PAGE 10
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS ASIA GROWTH
BOND FUND DEBT FUND FUND
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note A)................................... $4,411,938 $12,931,363 $4,644,378
Cash and foreign currency........................................ 20,340 2,118,967 22,637
Receivable for securities sold................................... -- 2,087,500 351,455
Interest and dividends receivable................................ 83,161 237,882 10,703
Receivable from investment advisor............................... 96,065 98,052 127,856
Deferred organization expense.................................... 47,221 52,635 58,003
---------- ----------- -----------
Total assets................................................ 4,658,725 17,526,399 5,215,032
---------- ----------- -----------
LIABILITIES:
Payable for:
Securities purchased............................................. -- 3,657,656 247,693
Unrealized depreciation of forward foreign currency contracts.... -- 6,330 --
Accrued expenses................................................. 48,983 81,205 72,578
---------- ----------- -----------
Total liabilities........................................... 48,983 3,745,191 320,271
---------- ----------- -----------
NET ASSETS............................................................ $4,609,742 $13,781,208 $4,894,761
---------- ----------- -----------
---------- ----------- -----------
NET ASSETS CONSIST OF:
Paid-in capital.................................................. $3,942,820 $11,861,967 $4,611,163
Undistributed net investment income.............................. 313,097 498,927 2,902
Accumulated net realized gain on investments, options and foreign
currency transactions.......................................... 184,818 961,612 791,853
Net unrealized appreciation (depreciation) on investments,
foreign currency transactions and other assets................. 169,007 458,702 (511,157)
---------- ----------- -----------
NET ASSETS............................................................ $4,609,742 $13,781,208 $4,894,761
---------- ----------- -----------
---------- ----------- -----------
SHARES OUTSTANDING.................................................... 406,126 1,162,402 464,050
---------- ----------- -----------
---------- ----------- -----------
NET ASSET VALUE PER SHARE............................................. $ 11.35 $ 11.86 $ 10.55
---------- ----------- -----------
---------- ----------- -----------
Note A: Cost of investments........................................... $4,242,931 $12,462,873 $5,153,764
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
PAGE 11
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS ASIA GROWTH
BOND FUND DEBT FUND FUND
--------- ---------- -----------
<S> <C> <C> <C>
INCOME:
Interest........................................................... $331,161 $ 543,849 $ 1,856
Dividends (Note A)................................................. -- -- 43,620
--------- ---------- -----------
331,161 543,849 45,476
EXPENSES:
Management fee..................................................... 16,420 41,930 19,531
Custody and administration fees.................................... 82,550 88,800 122,500
Audit and tax return preparation fees.............................. 10,000 26,000 8,000
Amortization of organization expenses.............................. 6,427 6,427 7,947
Legal.............................................................. 500 2,500 1,500
Directors' fees and expenses....................................... 3,000 2,500 3,000
Registration and filing fees....................................... 7,150 8,250 6,950
Printing........................................................... 3,500 7,500 3,000
Shareholder services............................................... 500 500 500
Other.............................................................. 500 500 500
--------- ---------- -----------
130,547 184,907 173,428
Management fee waived and expenses absorbed by investment
advisor.......................................................... (112,485 ) (139,982) (147,387)
--------- ---------- -----------
Net expenses....................................................... 18,062 44,925 26,041
--------- ---------- -----------
NET INVESTMENT INCOME................................................... 313,099 498,924 19,435
--------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (Note B)............................................... 184,818 951,171 830,868
Foreign currency transactions...................................... -- 18,493 (18,339)
--------- ---------- -----------
184,818 969,664 812,529
--------- ---------- -----------
Net change in unrealized appreciation (depreciation) on:
Investments........................................................ (64,327 ) 213,342 (784,231)
--------- ---------- -----------
Foreign currency transactions and other assets..................... -- (6,343) (1,831)
--------- ---------- -----------
(64,327 ) 206,999 (786,062)
--------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN........................................ 120,491 1,176,663 26,467
--------- ---------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............................. $433,590 $1,675,587 $ 45,902
--------- ---------- -----------
--------- ---------- -----------
Note A: Net of foreign withholding tax of............................... $ -- $ -- $ 3,630
--------- ---------- -----------
--------- ---------- -----------
Note B: Net of foreign withholding tax of............................... $ -- $ -- $ 1,178
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
See accompanying notes to financial statements.
PAGE 12
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKET ASIA GROWTH
BOND FUND DEBT FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................ $ 313,099 $ 498,924 $ 19,435
Net realized gain on investments and foreign currency
transactions................................................... 184,818 969,664 812,529
Net change in unrealized appreciation (depreciation) on
investments, foreign currency transactions and other assets.... (64,327) 206,999 (786,062 )
----------- ----------- -----------
Net increase in net assets from operations....................... 433,590 1,675,587 45,902
----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income............................. (126,300) (85,212) (32,026 )
Distributions from net realized gains............................ (170,305) (218,931) (161,057 )
----------- ----------- -----------
(296,605) (304,143) (193,083 )
----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares.................................... -- 6,000,000 --
Net asset value of shares issued in reinvestment of dividends.... 296,606 261,315 193,083
Payment for redemption of shares................................. (2,398,634) (62,174) (93,235 )
----------- ----------- -----------
Change in net assets resulting from capital share transactions... (2,102,028) 6,199,141 99,848
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS................................. (1,965,043) 7,570,585 (47,333 )
----------- ----------- -----------
NET ASSETS:
Beginning of period.............................................. 6,574,785 6,210,623 4,942,094
----------- ----------- -----------
End of period*................................................... $ 4,609,742 $13,781,208 $4,894,761
----------- ----------- -----------
----------- ----------- -----------
*Including undistributed net investment income of................ $ 313,097 $ 498,927 $ 2,902
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
PAGE 13
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED FEBRUARY 28, 1997(A)(B)(C)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKET DEBT ASIA GROWTH
BOND FUND FUND FUND
---------- ----------- -----------
<S> <C> <C> <C>
OPERATIONS:
Net investment income............................................ $ 401,544 $ 195,671 $ 16,668
Net realized gain on investments, options, and foreign currency
transactions................................................... 179,876 221,919 172,352
Net change in unrealized appreciation on investments, foreign
currency transactions and other assets......................... 233,334 251,703 274,905
---------- ----------- -----------
Net increase in net assets from operations....................... 814,754 669,293 463,925
---------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income............................. (275,246) (110,456) (16,532)
Distributions from net realized gains............................ (9,571) (11,040) (16,614)
---------- ----------- -----------
(284,817) (121,496) (33,146)
---------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares.................................... 10,905,307 8,800,000 6,600,000
Net asset value of shares issued in reinvestment of dividends.... 284,817 121,496 33,146
Payment for redemption of shares................................. (5,178,606) (3,292,000) (2,155,171)
---------- ----------- -----------
Change in net assets resulting from capital share transactions... 6,011,518 5,629,496 4,477,975
---------- ----------- -----------
NET INCREASE IN NET ASSETS............................................ 6,541,455 6,177,293 4,908,754
---------- ----------- -----------
NET ASSETS:
Beginning of period.............................................. 33,330 33,330 33,340
---------- ----------- -----------
End of period*................................................... $6,574,785 $ 6,210,623 $ 4,942,094
---------- ----------- -----------
---------- ----------- -----------
*Including undistributed net investment income of................ $ 126,298 $ 85,215 $ 15,493
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May 15,
1996.
(b) The Emerging Markets Debt Fund's commencement of investment operations was
October 17, 1996.
(c) The Asia Growth Fund's commencement of investment operations was May 6,
1996.
See accompanying notes to financial statements.
PAGE 14
<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 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 Emerging Markets Debt Fund's objective is to maximize total return
by investing primarily in debt securities of government, government related and
corporate issuers located in emerging market countries; 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 are 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 market 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 market countries to
prevent, among other concerns, 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.
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.
(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
PAGE 15
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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.
The Asia Growth Fund may be subject to taxes imposed by countries in which
it invests. Such taxes are generally based on income and/or capital gains
earned or repatriated. Taxes are accrued and applied to net investment
income, net realized gains and net unrealized appreciation as such income
and/or gains are earned.
(G) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Each Fund declares
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, treatment of
gain from passive foreign investment companies ('PFICs'), deferral of
PAGE 16
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
wash sales, and post-October losses incurred by each Fund. Permanent
book/tax differences are reclassified within the capital accounts based on
their federal income tax basis treatment; temporary differences do not
require reclassifications. Dividends and distributions which exceed net
investment income and net realized gains for financial reporting purposes
but not for tax purposes are reported as 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. In the event that any of the initial shares purchased by SBAM
are redeemed, proceeds of such redemption will be reduced by the
proportionate amount of the unamortized deferred organization costs which
the number of shares redeemed bears to the total number of initial shares
purchased.
(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 for the Asia Growth Fund. 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, .70% for the Emerging Markets Debt
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.
For the six months ended August 31, 1997, SBAM waived management fees of
$16,420, $41,930 and $19,531 for the High Yield Bond Fund, Emerging Markets Debt
Fund and Asia Growth Fund, respectively, and voluntarily absorbed expenses of
$96,065, $98,052 and $127,856 for the High Yield Bond Fund, Emerging Markets
Debt Fund and Asia Growth Fund, respectively.
Investors Bank & Trust Company ('IBT') serves as custodian and administrator for
each Fund, which includes performing certain administrative services in
connection with the operation of each Fund.
PAGE 17
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
3. CAPITAL STOCK
At August 31, 1997, the Institutional Series had 10,000,000,000 shares of
authorized capital stock, par value $.001 per share. Transactions in Fund shares
for the six months ended August 31, 1997 were as follows:
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS DEBT ASIA
BOND FUND FUND GROWTH FUND
--------- ------------ -----------
<S> <C> <C> <C>
Shares sold...................................... -- 575,264 --
Shares issued as reinvestment.................... 27,112 23,145 17,178
Shares redeemed.................................. 211,893 5,300 7,848
--------- ------------ -----------
Net increase (decrease).......................... (184,781 ) 593,109 9,330
--------- ------------ -----------
--------- ------------ -----------
</TABLE>
At August 31, 1997, SBAM owned approximately 19% and 45% of the total shares
outstanding of the Emerging Markets Debt Fund and Asia Growth Fund,
respectively.
4. PORTFOLIO ACTIVITY
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the six months ended August 31, 1997, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
High Yield Bond Fund........................................... $ 4,247,319 $ 6,277,288
----------- -----------
----------- -----------
Emerging Markets Debt Fund..................................... $33,618,591 $27,458,755
----------- -----------
----------- -----------
Asia Growth Fund............................................... $ 7,365,062 $ 7,648,389
----------- -----------
----------- -----------
</TABLE>
At August 31, 1997, 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.................... $ 4,242,931 $181,281 $ 12,274 $ 169,007
Emerging Markets Debt Fund.............. $12,462,873 $603,612 $ 135,122 $ 468,490
Asia Growth Fund........................ $ 5,153,764 $314,492 $ 823,878 $ (509,386)
</TABLE>
5. PORTFOLIO INVESTMENT RISKS
CREDIT AND MARKET RISK. Funds that invest in emerging markets and high yield
debt instruments are subject to certain credit and market risks. The yields of
debt obligations reflect, among other things, perceived credit risk. 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 in emerging market countries may have disruptive effects
on the market prices of investments held by the Funds.
The Funds' investment in non-dollar denominated securities may also result in
foreign currency losses caused by devaluations and exchange rate fluctuations.
Foreign securities and currency transactions 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.
PAGE 18
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. Each Fund 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.
The High Yield Bond Fund and Emerging Markets Debt 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.
6. EVENTS SUBSEQUENT TO AUGUST 31, 1997
On September 24, 1997, Travelers Group ('Travelers') and Salomon Inc
('Salomon'), the ultimate parent company of Salomon Brothers Asset Management
Inc the 'Adviser,' announced their agreement (the 'Transaction') to merge
Salomon with and into Smith Barney Holdings Inc., a subsidiary of Travelers, to
form a new company expected to be called Salomon Smith Barney Holdings Inc.
Travelers is a diversified financial services company engaged in investment
services, asset management, consumer finance and life and property casualty
insurance services. Upon consummation of the Transaction, Travelers will become
the ultimate parent of the Adviser, which will continue to serve as investment
adviser to the Funds.
Management expects the Transaction to be completed by the end of November, 1997,
subject to a number of conditions, including the receipt of U.S. and foreign
regulatory approvals and the approval of Salomon stockholders.
PAGE 19
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS
HIGH YIELD BOND FUND DEBT FUND ASIA GROWTH FUND
-------------------------- ------------------------- --------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED PERIOD ENDED
AUGUST 31, PERIOD ENDED AUGUST 31, ENDED AUGUST 31, PERIOD ENDED
1997 FEBRUARY 28, 1997 FEBRUARY 1997 FEBRUARY 28,
(UNAUDITED) 1997(A) (UNAUDITED) 28, 1997(B) (UNAUDITED) 1997(C)
----------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 11.13 $10.00 $ 10.91 $ 10.00 $ 10.87 $ 10.00
----------- ------ ----------- ----------- ----------- ------------
Net investment income.................... 0.77 0.57 0.35 0.35 0.04 0.04
Net gain (loss) on investments (both
realized and unrealized)............... (0.05) 0.93 0.87 0.78 0.06 0.91
----------- ------ ----------- ----------- ----------- ------------
Total from investment operations..... 0.72 1.50 1.22 1.13 0.10 0.95
----------- ------ ----------- ----------- ----------- ------------
Dividends from net investment income..... (0.21) (0.36) (0.08) (0.20) (0.07) (0.04)
Distributions from net realized gain on
investments............................ (0.29) (0.01) (0.19) (0.02) (0.35) (0.04)
----------- ------ ----------- ----------- ----------- ------------
Total dividends and distributions.... (0.50) (0.37) (0.27) (0.22) (0.42) (0.08)
----------- ------ ----------- ----------- ----------- ------------
Net asset value, end of period............... $ 11.35 $11.13 $ 11.86 $ 10.91 $ 10.55 $ 10.87
----------- ------ ----------- ----------- ----------- ------------
----------- ------ ----------- ----------- ----------- ------------
Net assets, end of period (thousands)........ $ 4,610 $6,575 $13,781 $ 6,211 $ 4,895 $ 4,942
Total return*................................ +6.7% +15.1% +11.2% +11.4% +0.8% +9.6%
Ratios to average net assets:
Expenses................................. 0.55%** 0.55%** 0.75%** 0.75%** 1.00%** 1.00%**
Net investment income.................... 9.53%** 9.36%** 8.33%** 8.94%** 0.75%** 0.58%**
Portfolio turnover rate...................... 70% 151% 260% 136% 1.49% 133%
Average Broker Commisssion Rate.............. N/A N/A N/A N/A $0.0055 $ 0.0052
Before waiver of management fee, expenses
absorbed by SBAM and credits earned from
and fees waived by the custodian, net
investment income (loss) per share and
expense ratios would have been:
Net investment income (loss) per share... $ 0.57 $ 0.29 $ 0.21 $ 0.08 $ (0.28) $ (0.59)
Expense ratio............................ 3.00%** 5.22%** 4.15%** 7.57%** 6.71%** 10.03%**
</TABLE>
- ------------
(a) The High Yield Bond Fund's commencement of investment operations was May 15,
1996.
(b) The Emerging Markets Debt Fund's commencement of investment operations was
October 17, 1996.
(c) 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.
PAGE 20
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TELEPHONE
1-888-777-0102, TOLL FREE
DISTRIBUTOR
SALOMON BROTHERS INC
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
INVESTMENT MANAGER
SALOMON BROTHERS ASSET MANAGEMENT INC
SEVEN WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
DIVIDEND DISBURSING AND TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP, INC.
53 STATE STREET
BOSTON, MASSACHUSETTS 02109-2873
LEGAL COUNSEL
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
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SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
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