<PAGE>
<PAGE>
SALOMON BROTHERS
INSTITUTIONAL
SERIES FUNDS INC
SEMI-ANNUAL REPORT
AUGUST 31, 1998
- ------------------------------------------
HIGH YIELD BOND FUND
EMERGING MARKETS DEBT FUND
--------------------------------
----------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
----------------------------------
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
- -------------------------------------------------------------------------------
October 20, 1998
To Our Shareholders:
We are pleased to provide you with the semi-annual report for the Salomon
Brothers Institutional High Yield Bond Fund and the Salomon Brothers
Institutional Emerging Markets Debt Fund for the period ended August 31, 1998.
HIGH YIELD BOND FUND
The Salomon Brothers Institutional High Yield Bond Fund seeks 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. For the
six month period ending August 31, 1998, the Fund generated a return of - 3.10%
versus a return of - 3.96% for the Salomon Brothers High Yield Market Index.
From the Fund's inception (May 15, 1996) to date, the High Yield Bond Fund has
outpaced the benchmark with an annualized return of 9.78% versus a 9.23%
annualized return for the Index.
U.S. high-yield bond market spreads continued to remain stable through the
beginning of 1998, supported in part by continuing strong inflows into mutual
funds. As the U.S. bond market experienced a strengthening, Treasuries yielded
some 100 basis points lower than the previous year. This lower interest rate
environment attracted investors from around the world, as corporations and
municipalities continued to issue debt at record rates.
In March, the high-yield bond market began to experience volatility as investors
became increasingly concerned over events in Asia, Japan and Russia. As investor
uncertainty exacerbated and world markets continued to deteriorate, volatility
increased, with August being a particularly difficult and tumultuous month for
the U.S. high-yield bond market. Led by the emerging markets, most domestic
financial markets traded significantly lower. The Russian 'meltdown' drove vast
amounts of capital from emerging markets debt, high yield debt and stocks to the
safety of U.S. Treasuries, with the high-yield bond market suffering an outflow
of over $2 billion from mutual funds. New issue activities ground to a halt
toward the end of August, with net new issue supply totaling a mere $4.5
billion.
Throughout this period of volatility, the High Yield Bond Fund sought protection
by focusing on higher quality issues of cash flow generating companies and
through our active industry allocation process. During the particularly
difficult month of August, the High Yield Bond Fund's underweightings in
telecommunications and papers and overweighting in publishing positively
impacted performance, while an overweighting to the energy sector negatively
impacted performance during the month.
Although the high-yield bond market is exhibiting signs of a rebound, we believe
this may be short-lived and are looking to invest in higher credit quality
companies in non-cyclical industries. We do not believe the coming months will
be as grim as 1990 when emerging markets debt spreads widened 1,000 basis points
over U.S. Treasuries, for the following reasons: 1) there is no single
broker/dealer dominating the high-yield bond market, as was the case with Drexel
Lambert, which went bankrupt in 1990; 2) we foresee no major liquidation of
high-yield paper by a major ownership class, like the savings and loan industry
was forced to do in 1989 and 1990 and 3) finally, companies are more
conservatively capitalized today going into a downturn compared with the highly
leveraged companies which faced a recession in 1990. We do believe, however,
that we probably have not yet seen the full impact of this global economic
contraction, and remain cautious on the high-yield bond market.
PAGE 1
<PAGE>
<PAGE>
EMERGING MARKETS DEBT FUND
The Salomon Brothers Institutional Emerging Markets Debt Fund seeks to maximize
total return through primarily investing in debt securities of government
related and corporate issuers located in emerging market countries. For the six
month period ending August 31, 1998 the Fund produced a return of - 41.69%,
underperforming the J.P. Morgan Emerging Markets Bond Index Plus which returned
- 29.87% for the period. Since inception (October 17, 1996) to date, the
Emerging Markets Debt Fund has produced an annualized return of - 14.53%,
versus a - 15.18% annualized return for the Index.
Higher-than-normal volatility continued in the emerging markets debt market
through the end of August 1998. Asian emerging markets debt yield spreads
widened in early April as political uncertainty surfaced in Indonesia amid
attempts to implement International Monetary Fund (IMF) economic reform
recommendations. Meanwhile, Japan's economic and banking system problems became
more prominent and led to a weakening of the Japanese Yen. This, in turn,
spurred speculation of a Chinese currency devaluation. In a move to protect
their currency, the Chinese monetary authorities raised interest rates,
contributing to a slowing of their economy. Russia's dramatic decline during
August devastated Russian dollar denominated bond prices (prices declined as
much as 25% in a single day). In addition, the timing of the debt restructuring
and devaluation, coming less than a month after Russia's latest IMF financing,
shocked the market and caused a wide-spread sell-off across all emerging
markets.
Emerging debt markets continue to be negatively impacted by the global trend of
investors reducing their appetite for risk. Beginning with Asian currency
problems in the fall of 1997 and compounded by the extended Japanese recession
and recent weakness in U.S. equity prices, investors are demanding a higher risk
premium for investing in credit sensitive fixed income assets. In this
environment, countries whose fiscal or monetary fundamentals fall short of
investor expectations are punished severely. Russia's problems occurred in this
risk-averse investment environment. The investment environment limited the range
of Russia's policy response and compounded the severity of the sell-off which
spilled-over to all other emerging market credits.
We expect this highly volatile period for emerging markets debt to continue. The
elements required for stability must come from a variety of sources both inside
and outside the emerging debt markets. These elements range from an economic
recovery in Japan and stability in U.S. equity prices to an end to political
turmoil in Russia. When stability returns, emerging markets debt will again
trade on credit fundamentals. Until then, we believe market volatility will
continue to be extremely high and market sentiment will be negative.
We thank you for your participation in the Salomon Brothers Institutional
Investment Series and look forward to helping you pursue your financial goals in
the years to come.
Cordially,
/s/ HEATH B. MCLENDON
Heath B. McLendon
Chairman & President
/s/ PETER J. WILBY
Peter J. Wilby
Executive Vice President
PAGE 2
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
- -------- ---------------------------------------------------------------- -------- -------- -----------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 100.0%
BASIC INDUSTRIES -- 9.3%
$150,000 AEI Holding..................................................... 10.000% 11/15/07 $ 143,250
250,000 Ball Corporation................................................ 8.250 08/01/08 245,625
100,000 Berry Plastics.................................................. 12.250 04/15/04 105,125
250,000 Envirosource.................................................... 9.750 06/15/03 247,500
250,000 Huntsman Packaging.............................................. 9.125 10/01/07 241,250
250,000 Indesco International........................................... 9.750 04/15/08 238,750
250,000 Millar Western Forest........................................... 9.875 05/15/08 193,750
500,000 Murrin Murrin Holdings.......................................... 9.375 08/31/07 390,000
250,000 PCI Chemicals................................................... 9.250 10/15/07 226,250
-----------
2,031,500
-----------
CONSUMER CYCLICALS -- 9.2%
500,000 Cole National Group............................................. 8.625 08/15/07 490,000
100,000 Hills Stores.................................................... 12.500 07/01/03 64,000
250,000 HMH Properties.................................................. 7.875 08/01/08 240,000
500,000 Maxim Group..................................................... 9.250 10/15/07 495,000
500,000 Musicland Group................................................. 9.000 06/15/03 470,000
250,000 Prime Hospitality............................................... 9.750 04/01/07 250,000
-----------
2,009,000
-----------
CONSUMER NON-CYCLICALS -- 19.8%
350,000 Delta Beverage Group............................................ 9.750 12/15/03 353,500
250,000 French Fragrances............................................... 10.375 05/15/07 262,500
100,000 Graham-Field Health Products.................................... 9.750 08/15/07 89,000
250,000 Grand Casinos................................................... 9.000 10/15/04 265,000
500,000 Imperial Holly.................................................. 9.750 12/15/07 487,500
500,000 Jafra Cosmetics International................................... 11.750 05/01/08 482,500
100,000 North Altlantic Trading......................................... 11.000 06/15/04 94,750
500,000 Packaged Ice.................................................... 9.750 02/01/05 480,000
250,000 Prime Medical Services.......................................... 8.750 04/01/08 245,000
200,000 Revlon Worldwide(a)............................................. 9.718 03/15/01 145,000
250,000 SC International Services....................................... 9.250 09/01/07 242,500
100,000 Shop Vac........................................................ 10.625 09/01/03 106,000
200,000 Stroh Brewery................................................... 11.100 07/01/06 99,500
500,000 Universal Hospital Services..................................... 10.250 03/01/08 490,000
250,000 Windmere-Durable................................................ 10.000 07/31/08 240,000
250,000 Windy Hill...................................................... 9.750 05/15/07 256,250
-----------
4,339,000
-----------
DATA TECHNOLOGY/INFORMATION SERVICES -- 1.4%
250,000 Amphenol........................................................ 9.875 05/15/07 247,500
100,000 DecisionOne Holdings
(Zero Coupon until 08/01/02, 11.500% thereafter)(a)........... 10.092 08/01/08 53,000
-----------
300,500
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 3
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
- -------- ---------------------------------------------------------------- -------- -------- -----------
<C> <S> <C> <C> <C>
ENERGY -- 5.3%
$250,000 Costilla Energy................................................. 10.250% 10/01/06 $ 225,000
250,000 Dailey International............................................ 9.500 02/15/08 201,250
100,000 Dawson Product Services......................................... 9.375 02/01/07 98,500
250,000 Frontier Oil.................................................... 9.125 02/15/06 232,500
100,000 National Energy Group........................................... 10.750 11/01/06 54,000
200,000 Offshore Logistics.............................................. 7.875 01/15/08 186,000
250,000 Transamerican Energy............................................ 11.500 06/15/02 160,000
-----------
1,157,250
-----------
FINANCIAL/LEASING -- 4.1%
250,000 ATC Group Services.............................................. 12.000 01/15/08 221,250
500,000 Morgan Stanley Aircraft Finance................................. 8.700 03/15/23 450,000
250,000 Nationwide Credit............................................... 10.250 01/15/08 238,750
-----------
910,000
-----------
HOUSING RELATED -- 3.3%
500,000 Forest City Enterprises......................................... 8.500 03/15/08 490,000
250,000 Nortek.......................................................... 8.875 08/01/08 236,250
-----------
726,250
-----------
MANUFACTURING -- 13.6%
50,000 Alvey Systems................................................... 11.375 01/31/03 52,500
500,000 Axiohm Transaction Solution..................................... 9.750 10/01/07 468,750
500,000 Derby Cycle/Lyon Cycle.......................................... 10.000 05/15/08 432,500
125,000 Furon........................................................... 8.125 03/01/08 121,250
250,000 High Voltage Engineering........................................ 10.500 08/15/04 238,750
250,000 Insilco......................................................... 10.250 08/15/07 248,750
250,000 International Utility Structures................................ 10.750 02/01/08 238,750
500,000 Polymer Group................................................... 8.750 03/01/08 460,000
500,000 Stellex Industries.............................................. 9.500 11/01/07 470,000
250,000 Stena AB........................................................ 10.500 12/15/05 260,000
-----------
2,991,250
-----------
MEDIA -- 22.6%
500,000 Adelphia Communications, Series B............................... 9.875 03/01/07 530,000
250,000 Falcon Holding Group
(Zero Coupon until 04/15/03, 9.285%
thereafter)(a)................................................ 9.285 04/15/10 160,000
375,000 Granite Broadcasting............................................ 8.875 05/15/08 360,000
500,000 GST Telecom
(Zero Coupon until 05/01/03, 10.500%
thereafter)(a)................................................ 10.500 05/01/08 270,000
100,000 Hollinger International Publishing.............................. 9.250 02/01/06 99,000
150,000 Hollinger International Publishing.............................. 9.250 03/15/07 150,000
</TABLE>
See accompanying notes to financial statements.
PAGE 4
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
- -------- --------------------------------------------------------- -------- -------- -----------
<C> <S> <C> <C> <C>
MEDIA -- CONTINUED
$250,000 ICG Holdings
(Zero Coupon until 09/15/00, 13.500%
thereafter)(a)......................................... 11.459% 09/15/05 $ 192,500
375,000 Intermedia Communication................................. 8.600 06/01/08 356,250
500,000 International CableTel
(Zero Coupon until 02/01/01, 11.500%
thereafter)(a)......................................... 11.804 02/01/06 375,000
500,000 LIN Television........................................... 8.375 03/01/08 485,000
150,000 Marcus Cable
(Zero Coupon until 06/15/00, 14.250%
thereafter)(a)......................................... 13.316 12/15/05 141,000
250,000 Mastec................................................... 7.750 02/01/08 235,000
125,000 Mediacom................................................. 8.500 04/15/08 119,375
500,000 Nextel Communications
(Zero Coupon until 02/15/03, 9.950%
thereafter)(a)......................................... 9.950 02/15/08 285,000
250,000 Nextlink Communications.................................. 9.000 03/15/08 246,250
250,000 Perry-Judd............................................... 10.625 12/15/07 251,250
600,000 United International Holdings
(Zero Coupon until 02/15/03, 10.750%
thereafter)(a)......................................... 10.153 02/15/08 270,000
750,000 Viatel
(Zero Coupon until 04/15/03, 12.500%
thereafter)(a)......................................... 11.210 04/15/08 435,000
-----------
4,960,625
-----------
SERVICES/OTHER -- 7.3%
400,000 Allied Waste
(Zero Coupon until 06/01/02, 11.300%
thereafter)(a)......................................... 9.400 - 11.300 06/01/07 298,000
250,000 Kindercare Learning Centers.............................. 9.500 02/15/09 245,000
250,000 LES...................................................... 9.250 06/01/08 247,500
250,000 Loomis Fargo............................................. 10.000 01/15/04 242,500
100,000 Norcal Waste Systems*.................................... 13.500 11/15/05 115,500
500,000 Sitel.................................................... 9.250 03/15/06 460,000
-----------
1,608,500
-----------
TRANSPORTATION -- 4.1%
250,000 Atlantic Express Transportation.......................... 10.750 02/01/04 261,250
500,000 Enterprises Shipholding.................................. 8.875 05/01/08 460,000
150,000 Holt Group............................................... 9.750 01/15/06 135,000
100,000 TFM
(Zero Coupon until 06/15/02, 11.750%
thereafter)(a)......................................... 11.398 06/15/09 51,000
-----------
907,250
-----------
TOTAL INVESTMENTS -- 100.0%
(cost -- $23,697,721).................................. $21,941,125
-----------
-----------
</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 5
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) DESCRIPTION RATE DATE VALUE
---------- --------------------------------------------------------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
SOVEREIGN BONDS -- 88.9%
ARGENTINA -- 15.5%
ARS 1,108,891 Republic of Argentina, Bocon Pro l*...................... 3.087% 04/01/07 $ 553,329
250,000 Republic of Argentina, Global Bond....................... 11.750 02/12/07 125,313
1,100,000 Republic of Argentina, Global Bond....................... 11.750 02/12/07 551,375
1,550,000 Republic of Argentina, Global Bond....................... 11.375 01/30/17 1,131,500
-----------
2,361,517
-----------
BRAZIL -- 16.7%
2,581,486 Federal Republic of Brazil, Capitalization
Bond (b)............................................... 8.000 04/15/14 1,331,078
2,182,500 Federal Republic of Brazil, Global Bond.................. 6.625 04/15/06 1,205,831
-----------
2,536,909
-----------
BULGARIA -- 3.8%
700,000 Republic of Bulgaria, IAB*............................... 6.688 07/28/11 302,750
500,000 Republic of Bulgaria, Discount Bond, Series A*........... 6.688 07/28/24 284,063
-----------
586,813
-----------
COSTA RICA -- 1.1%
200,000 Banco Central Costa Rica................................. 6.250 05/21/15 160,000
-----------
CROATIA -- 2.2%
500,000 Republic of Croatia, FRN Series A*....................... 6.500 07/31/10 340,000
-----------
ECUADOR -- 4.8%
1,250,000 Republic of Ecuador, Par Bond............................ 3.500 02/28/25 512,500
622,407 Republic of Ecuador, PDI Bond*(b)........................ 6.625 02/27/15 194,502
56,584 Republic of Ecuador, Registered PDI Bond*(b)............. 6.625 02/27/15 17,682
-----------
724,684
-----------
IVORY COAST -- 0.2%
325,000 Republic of Ivory Coast, FLIRB*.......................... 2.000 03/29/18 37,375
-----------
MEXICO -- 4.9%
875,000 United Mexico States, Global Bond........................ 11.500 05/15/26 738,828
-----------
PANAMA -- 5.2%
250,000 Republic of Panama, Global Bond.......................... 8.875 09/30/27 189,813
700,000 Republic of Panama, IRB*................................. 4.000 07/17/14 434,000
263,667 Republic of Panama, PDI Bond*(b)......................... 6.688 07/17/16 174,844
-----------
798,657
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 6
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) DESCRIPTION RATE DATE VALUE
---------- --------------------------------------------------------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
PERU -- 5.6%
1,750,000 Government of Peru, FLIRB*............................... 3.250% 03/07/17 $ 717,500
225,000 Government of Peru, PDI Bond*............................ 4.000 03/07/17 106,875
50,000 Government of Peru, Registered PDI Bond*................. 4.000 03/07/17 23,750
-----------
848,125
-----------
PHILIPPINES -- 4.2%
650,000 Republic of the Philippines, Global Bond................. 8.875 04/15/08 468,000
250,000 Republic of the Philippines, Global Bond................. 8.750 10/07/16 173,750
-----------
641,750
-----------
RUSSIA -- 8.0%
1,600,000 Russian Government, Global Bond.......................... 11.750 06/10/03 390,000
1,075,000 Russian Government, Global Bond.......................... 8.750 07/24/05 225,750
2,475,000 Russian Government, Global Bond.......................... 12.750 06/24/28 594,000
50,873 Russian Government, IAN*................................. 6.625 12/15/15 6,868
-----------
1,216,618
-----------
SOUTH KOREA -- 6.1%
150,000 Export-Import Bank of Korea, Global Bond................. 7.250 06/25/01 121,613
45,000 Export-Import Bank of Korea, Global Bond................. 6.500 02/10/02 34,115
75,000 Korea Development Bank, Global Bond...................... 7.900 02/01/02 59,636
225,000 Korea Development Bank, Global Bond...................... 6.625 11/21/03 154,316
790,000 Republic of Korea, Global Bond........................... 8.875 04/15/08 558,431
-----------
928,111
-----------
VENEZUELA -- 10.6%
1,357,140 Republic of Venezuela, DCB, Series DL*................... 6.625 12/18/07 542,008
2,600,000 Republic of Venezuela, Global Bond....................... 9.250 09/15/27 1,075,750
-----------
1,617,758
-----------
TOTAL SOVEREIGN BONDS
(cost -- $20,534,420)......................................................... 13,537,145
-----------
LOAN PARTICIPATIONS -- 11.1%
ALGERIA -- 0.4%
54,545 The People's Democratic Republic of Algeria,
Tranche 1*(c) (Chase Manhattan Bank)................... 6.938 09/04/06 32,727
36,364 The People's Democratic Republic of Algeria,
Tranche A*(c) (Chase Manhattan Bank)................... 6.938 03/06/00 30,182
-----------
62,909
-----------
MOROCCO -- 5.5%
1,350,000 Kingdom of Morocco, Tranche A*(c)
(BankBoston, Chase Manhattan Bank,
J.P. Morgan, Merrill Lynch, Pierce, Fenner
and Smith)............................................. 6.563 01/01/09 830,250
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 7
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 (UNAUDITED)
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT(A) DESCRIPTION RATE DATE VALUE
---------- --------------------------------------------------------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
RUSSIA -- 5.2%
8,025,000 Russian Government, Principal Loan*(c)(d)
(Bank of America, Chase Manhattan Bank,
Goldman Sachs, ING Barings, J.P. Morgan)............... 6.625% 12/15/20 $ 793,429
-----------
TOTAL LOAN PARTICIPATIONS
(cost -- $5,610,120)........................................................ 1,686,588
-----------
TOTAL INVESTMENTS -- 100.0%
(cost -- $26,144,540)....................................................... $15,223,733
-----------
-----------
</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) Participation interest was acquired through the financial institutions
indicated parenthetically.
(d) Portion of income is capitalized as Russian Government Interest in Arrears
Notes.
Abbreviations used in this statement:
ARS -- Argentinian Peso.
BOCON -- Bonos De Consolidacion
DCB -- Debt Conversion Bonds.
FLIRB -- Front-Loaded Interest Reduction Bonds.
FRN -- Floating Rate Notes.
IAB -- Interest Arrears Bonds.
IAN -- Interest Arrears Notes.
IRB -- Interest Reduction Bonds.
PDI -- Past Due Interest.
See accompanying notes to financial statements.
PAGE 8
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at value (Note A)............................................... $ 21,941,125 $ 15,223,733
Cash......................................................................... 884,902 505,868
Receivable for securities sold............................................... -- 1,750,602
Interest receivable.......................................................... 544,605 661,371
Receivable from investment manager........................................... 45,418 12,353
Deferred organization expense................................................ 34,472 39,886
------------ ------------
Total assets............................................................ 23,450,522 18,193,813
------------ ------------
LIABILITIES:
Payable for securities purchased............................................. -- 471,344
Accrued expenses and other liabilities....................................... 34,759 74,163
------------ ------------
Total liabilities....................................................... 34,759 545,507
------------ ------------
NET ASSETS........................................................................ $ 23,415,763 $ 17,648,306
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Paid-in capital.............................................................. $ 23,852,534 $ 30,242,531
Undistributed net investment income.......................................... 1,248,951 1,298,202
Accumulated net realized gain (loss) on investments and foreign currency
transactions................................................................ 70,874 (2,899,733)
Net unrealized depreciation on investments................................... (1,756,596) (10,992,694)
------------ ------------
NET ASSETS........................................................................ $ 23,415,763 $ 17,648,306
------------ ------------
------------ ------------
SHARES OUTSTANDING (Note B)....................................................... 2,498,254 4,190,690
------------ ------------
------------ ------------
NET ASSET VALUE PER SHARE......................................................... $ 9.37 $ 4.21
------------ ------------
------------ ------------
Note A: Cost of investments....................................................... $ 23,697,721 $ 26,144,540
------------ ------------
------------ ------------
Note B: Par value................................................................. $ 0.001 $ 0.001
------------ ------------
------------ ------------
</TABLE>
Authorized shares of 10,000,000,000 for the Institutional Series Funds.
See accompanying notes to financial statements.
PAGE 9
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
----------- ------------
<S> <C> <C>
INCOME:
Interest...................................................................... $ 1,187,211 $ 1,320,576
----------- ------------
EXPENSES:
Management fee................................................................ 66,518 79,704
Custody and administration fees............................................... 71,024 66,176
Audit and tax return preparation fees......................................... 19,504 12,024
Printing...................................................................... 6,992 3,312
Amortization of organization expenses......................................... 6,427 6,427
Registration and filing fees.................................................. 4,705 1,715
Legal......................................................................... 4,232 2,576
Directors' fees and expenses.................................................. 3,864 3,864
Other......................................................................... 1,840 1,656
----------- ------------
185,106 177,454
Management fee waived and expenses absorbed by investment manager............. (111,936) (92,057)
----------- ------------
Net expenses.................................................................. 73,170 85,397
----------- ------------
NET INVESTMENT INCOME.............................................................. 1,114,041 1,235,179
----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments................................................................... (40,282) (2,428,176)
Foreign currency transaction.................................................. -- (114)
----------- ------------
(40,282) (2,428,290)
----------- ------------
Net change in unrealized appreciation (depreciation) on
Investments................................................................... (1,864,698) (11,444,884)
----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................................ (1,904,980) (13,873,174)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.............................. $ (790,939) $(12,637,995)
----------- ------------
----------- ------------
</TABLE>
See accompanying notes to financial statements.
PAGE 10
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY
FOR THE SIX MONTHS ENDED (UNAUDITED) AND THE YEAR ENDED: 1998 28, 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 1,114,041 $ 587,636
Net realized gain (loss) on investments....................................... (40,282) 314,821
Net change in unrealized appreciation (depreciation) on investments........... (1,864,698) (125,232)
------------ -----------
Net increase (decrease) in net assets from operations......................... (790,939) 777,225
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income.......................................... -- (572,322)
Distributions from net realized gains......................................... -- (380,672)
------------ -----------
-- (952,994)
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares............................................. 13,672,511 21,239,234
Net asset value of shares issued in reinvestment of dividends................. -- 945,321
Cost of shares reaquired...................................................... (12,129,569) (5,919,811)
------------ -----------
Change in net assets resulting from capital share transactions................ 1,542,942 16,264,744
------------ -----------
NET INCREASE IN NET ASSETS......................................................... 752,003 16,088,975
------------ -----------
NET ASSETS:
Beginning of period........................................................... 22,663,760 6,574,785
------------ -----------
End of period*................................................................ $ 23,415,763 $22,663,760
------------ -----------
------------ -----------
*Including undistributed net investment income of............................. $ 1,248,951 $ 134,910
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to financial statements.
PAGE 11
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
FOR THE SIX MONTHS ENDED (UNAUDITED) AND THE YEAR ENDED: 1998 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 1,235,179 $ 927,845
Net realized gain (loss) on investments and foreign currency transactions.... (2,428,290) 920,411
Net change in unrealized appreciation (depreciation) on investments and other
assets...................................................................... (11,444,884) 200,487
------------ ------------
Net increase (decrease) in net assets from operations........................ (12,637,995) 2,048,743
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income......................................... -- (869,966)
Distributions from net realized gains........................................ -- (1,682,804)
------------ ------------
-- (2,552,770)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares................................................ 16,366,902 18,263,159
Net asset value of shares issued in reinvestment of dividends................ -- 2,493,021
Cost of shares reacquired.................................................... (676,936) (11,866,441)
------------ ------------
Change in net assets resulting from capital share transactions............... 15,689,966 8,889,739
------------ ------------
NET INCREASE IN NET ASSETS........................................................ 3,051,971 8,385,712
------------ ------------
NET ASSETS:
Beginning of period.......................................................... 14,596,335 6,210,623
------------ ------------
End of period*............................................................... $ 17,648,306 $ 14,596,335
------------ ------------
------------ ------------
*Including undistributed net investment income of............................ $ 1,298,202 $ 63,023
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements.
PAGE 12
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Institutional High Yield Bond Fund (the 'High Yield Bond Fund')
and Salomon Brothers Institutional Emerging Markets Debt Fund (the 'Emerging
Markets Debt Fund') are portfolios constituting 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 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 until the 60th day prior to
maturity, and will then be valued on an amortized cost basis.
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 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.
PAGE 13
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
(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 foreign 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) LOAN PARTICIPATIONS. Each Fund may invest in fixed and floating rate
loans arranged through private negotiations between a foreign sovereign
entity and one or more financial institutions ('lender'). The market value
of the Emerging Markets Debt Fund's loan participations at August 31, 1998
was $1,686,588.
(G) 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.
(H) 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
federal income tax regulations which may differ from GAAP. These
differences are due primarily to differences in the treatment of foreign
currency gains/losses, deferral of wash sales, and post-October losses
incurred by each Fund. Permanent book/tax differences are reclassified
within the capital accounts based on their federal income tax basis
treatment; temporary differences do not require reclassifications.
Dividends and distributions which exceed net investment income and net
realized gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income and
distributions in excess of net realized capital gains.
(I) 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.
(J) 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.
PAGE 14
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
(K) OTHER. Investment transactions are recorded as of the trade date.
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, a wholly-owned subsidiary of Salomon Smith Barney
Holdings Inc. ('SSBH'), to act as investment manager of each Fund, subject to
the supervision by the Board of Directors of the Institutional Series. The
management agreement with SBAM was most recently approved by shareholders at a
special meeting held on January 14, 1998. Approval of the agreement was
necessary due to the merger of Salomon Inc, which had been the ultimate parent
company of the investment manager, with and into SSBH, which occurred on
November 28, 1997. 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 Fund's average daily net assets: .50% for the High
Yield Bond Fund and .70% for the Emerging Markets Debt Fund.
For the six months ended August 31, 1998, SBAM waived management fees of $66,518
and $79,704 for the High Yield Bond Fund and Emerging Markets Debt Fund,
respectively, and voluntarily absorbed expenses of $45,418 and $12,353 for the
High Yield Bond Fund and Emerging Markets Debt 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.
3. CAPITAL STOCK
At August 31, 1998, the Institutional Series had 10,000,000,000 shares of
authorized capital stock, par value $.001 per share. Transactions in Fund shares
for the periods indicated were as follows:
For the Six Months Ended August 31, 1998:
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Shares sold........................................................ 1,382,746 2,286,684
Shares issued as reinvestment...................................... -- --
Shares redeemed.................................................... 1,228,191 119,059
--------- ---------
Net increase....................................................... 154,555 2,167,625
--------- ---------
--------- ---------
</TABLE>
For the Year Ended February 28, 1998:
<TABLE>
<CAPTION>
HIGH EMERGING
YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Shares sold........................................................ 2,215,772 2,206,977
Shares issued as reinvestment...................................... 95,040 341,053
Shares redeemed.................................................... 558,020 1,094,258
--------- ---------
Net increase....................................................... 1,752,792 1,453,772
--------- ---------
--------- ---------
</TABLE>
PAGE 15
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
4. PORTFOLIO ACTIVITY
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the six months ended August 31, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
High Yield Bond Fund........................................... $23,112,970 $51,379,264
----------- -----------
----------- -----------
Emerging Markets Debt Fund..................................... $16,346,226 $33,618,677
----------- -----------
----------- -----------
</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.
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.
In connection with purchasing participations, the Fund generally will have no
right to enforce compliance by the borrower, and the Fund may not benefit
directly from any collateral supporting the loan in which it has purchased the
participation. As a result, the Fund will assume the credit risk of both the
borrower and the lender that is selling the participation. In the event of the
insolvency of the lender selling the participation, the Fund may be treated as a
general creditor of the lender and may not benefit from any set-off between the
lender and the borrower.
PAGE 16
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
6. TAX INFORMATION
At August 31, 1998, the cost for Federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments held in each
Fund were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
AGGREGATE UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION DEPRECIATION
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
High Yield Bond Fund....................... $23,697,721 $ 44,064 $ 1,800,660 $ 1,756,596
Emerging Markets Debt Fund................. $26,144,540 $ -- $ 10,920,807 $ 10,920,807
</TABLE>
PAGE 17
<PAGE>
<PAGE>
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH YIELD BOND FUND EMERGING MARKETS DEBT FUND
----------------------------------------- -----------------------------------------
SIX SIX
MONTHS MONTHS
ENDED YEAR PERIOD ENDED YEAR PERIOD
AUGUST 31, ENDED ENDED AUGUST 31, ENDED ENDED
1998 FEBRUARY 28, FEBRUARY 28, 1998 FEBRUARY 28, FEBRUARY 28,
(UNAUDITED) 1998 1997(A) (UNAUDITED) 1998 1997(B)
----------- ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 9.67 $ 11.13 $ 10.00 $ 7.21 $ 10.91 $ 10.00
----------- ------------ ------------ ----------- ------------ ------------
Net investment income........... 0.44 1.51 0.57 0.28 1.69 0.35
Net gain (loss) on investments
(both realized and
unrealized)................... (0.74) (0.34) 0.93 (3.28) (0.27) 0.78
----------- ------------ ------------ ----------- ------------ ------------
Total from investment
operations............... (0.30) 1.17 1.50 (3.00) 1.42 1.13
----------- ------------ ------------ ----------- ------------ ------------
Dividends from net investment
income........................ -- (1.66) (0.36) -- (1.77) (0.20)
Distributions from net realized
gain on investments........... -- (0.97) (0.01) -- (3.35) (0.02)
----------- ------------ ------------ ----------- ------------ ------------
Total dividends and
distributions............ -- (2.63) (0.37) -- (5.12) (0.22)
----------- ------------ ------------ ----------- ------------ ------------
Net asset value, end of period....... $ 9.37 $ 9.67 $ 11.13 $ 4.21 $ 7.21 $ 10.91
----------- ------------ ------------ ----------- ------------ ------------
----------- ------------ ------------ ----------- ------------ ------------
Net assets, end of period
(thousands)........................ $23,416 $ 22,664 $ 6,575 $17,648 $ 14,596 $ 6,211
Total return*........................ -3.1% +11.1% +15.1% -41.7% +14.6% +11.4%
Ratios to average net assets:
Expenses........................ 0.55%** 0.55% 0.55%** 0.75%** 0.75% 0.75%**
Net investment income........... 8.38%** 9.10% 9.36%** 10.85%** 8.53% 8.94%**
Portfolio turnover rate.............. 71% 189% 151% 166% 549% 136%
Before waiver of management fee,
expenses absorbed by SBAM and
credits earned from and fees waived
by the custodian, net investment
income per share and expense ratios
would have been:
Net investment income per
share......................... $ 0.40 $ 0.93 $ 0.29 $ 0.26 $ 1.18 $ 0.08
Expense ratio................... 1.39%** 4.03% 5.22%** 1.56%** 3.34% 7.57%**
</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.
* 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.
PAGE 18
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<PAGE>
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
<PAGE>
TELEPHONE
1-888-777-0102, TOLL FREE
DISTRIBUTOR
CFBDS, INC
21 Milk Street
Boston, Massachusetts 02109-5408
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
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
---------------------------------------------------------------------------------
</TABLE>
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman;
ASARCO Incorporated
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN
Vice President-General Counsel,
Pfizer International Inc.
HEATH B. MCLENDON
Chairman and President, Managing Director,
Smith Barney Inc.; President and Director,
Mutual Management Corp. and Travelers Investment Adviser, Inc.; Chairman of
Smith Barney Strategy Advisers Inc.
OFFICERS
HEATH B. MCLENDON
Chairman and President
LEWIS E. DAIDONE
Executive Vice President
and Treasurer
JAMES E. CRAIGE
Executive Vice President
THOMAS K. FLANAGAN
Executive Vice President
MAUREEN O'CALLAGHAN
Executive Vice President
BETH A. SEMMEL
Executive Vice President
PETER J. WILBY
Executive Vice President
ANTHONY PACE
Assistant Controller
<PAGE>
