SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC, N-30D, 2000-04-26

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
N-30D, 2000-04-26

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<PAGE>

[PICTURES]
ANNUAL
REPORT
February 29, 2000

SALOMON BROTHERS
ASSET MANAGEMENT

SALOMON BROTHERS HIGH YIELD BOND FUND
INSTITUTIONAL SERIES FUNDS INC EMERGING MARKETS DEBT FUND

NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
- --------------------------------------------------------------------------------

March 27, 2000

To Our Shareholders:

We are pleased to provide you with the annual report for the Salomon Brothers
Institutional High Yield Bond Fund and the Salomon Brothers Institutional
Emerging Markets Debt Fund for the year ended February 29, 2000.

HIGH YIELD BOND FUND

The Salomon Brothers Institutional High Yield Bond Fund ('Fund') seeks to
maximize total return by investing primarily in a portfolio of non-investment
grade high-yield fixed income securities. For the year ended February 29, 2000,
the Fund generated a negative 3.72% return versus a 0.48% return for the Salomon
Smith Barney High Yield Market Index.(1)

The U.S. high yield market returned 0.48% for the year ended February 29, 2000,
as reported by the Salomon Smith Barney High Yield Market Index. While
benefiting from a strong economy, the high yield market suffered from the
following:

1. a high degree of volatility in U.S. Treasuries due to concerns about
rising inflation;

2. investor outflows from mutual funds;

3. a heavy new issue calendar;

4. a reduction in broker/dealer liquidity; and

5. a rise in default rates, especially among marginal commodity
producers.

The period began with concerns that a weak recovery in Asia and recession in
Latin America would trigger a slowdown in the U.S. economy. These concerns were
particularly apparent in early 1999 as Brazil devalued its currency, putting
added pressure on Latin American economies. Despite these concerns, stronger
than expected economic growth in the U.S. economy drove robust performance in
the high yield market in the first few months of the Fund's fiscal year. As the
year progressed, the continued growth of the U.S. economy led to concerns about
rising inflation, which caused interest rates to trend higher and put pressure
on the high yield market. These fundamental concerns about higher rates were
compounded by a sharp increase in the default rate, primarily due to the effects
of the Asian crisis on commodity industries. Additionally, poor broker-dealer
liquidity and mutual fund outflows further constrained the high yield market in
the latter part of the fiscal year, forcing the high yield market to retrace
much of its earlier gains.

For the year ended February 29, 2000, the high yield market's top performers
included: energy and paper & forest products, driven by the sustained rise in
commodities prices; the less cyclical gaming sector; cable & other media, which
benefited from mergers and acquisitions activity; and telecommunications, which
benefited from explosive industry growth and increased mergers and acquisitions
activity. The worst performing groups included: health care, due to the
industry's troubles with the recently imposed Medicare reimbursement system;
textile/apparel, which is suffering from cheaper imports; supermarkets/drug
stores, retail and consumer products, which experienced company specific credit
problems; and services/other. In terms of credit quality, the BB credit tier,
which returned 1.28%, outperformed B and CCC issues with returns of -0.50% and
- -9.34%, respectively, as investors moved into larger, higher quality, more
liquid BB issues over the course of the Fund's fiscal year.

The Fund underperformed the Salomon Smith Barney High Yield Market Index
primarily as a result of underweightings in energy, paper & forest products and
telecommunications. The Fund was also hurt by overweightings in retail,
services/other and consumer products as well as the underperformance of

- ---------

(1) Past performance is not indicative of future results. The Salomon Smith
Barney High Yield Market Index covers a significant portion of the below
investment-grade U.S. corporate bond market.
PAGE 1

<PAGE>

selected credits. However, the Fund benefited from underweightings in health
care and textile/apparel and an overweighting in gaming. During the course of
the period, the Fund responded to market conditions by increasing its exposure
to paper & forest products, telecommunications and energy and decreasing its
exposure to supermarkets/drugstores, retail, consumer products and
services/other.

Going forward, we expect the high yield market to continue to experience
volatility over the course of the year primarily as a result of several
technical factors, including (i) mutual fund investors continuing to withdraw
funds from the market on interest rate concerns, (ii) decreased Collateralized
Bond Obligation demand, (iii) reduced secondary market liquidity and
(iv) growing cyclical concerns later in the year. In light of these conditions,
we are pursuing a conservative investment strategy geared to increasing BB
credits and aggressively pursuing selective opportunities in undervalued B and
CCC credits.

On February 29, 2000, the high yield market, as represented by the Salomon Smith
Barney High Yield Market Index was yielding 11.85%, up from 10.33% at
February 28, 1999. The excess yield over Treasuries was 5.37%, widening by 28
points to 5.09% since the beginning of the period.

EMERGING MARKET DEBT FUND

The Salomon Brothers Institutional Emerging Markets Debt Fund ('Fund') seeks to
maximize total return through primarily investing in debt of government related
and corporate issuers located in emerging market countries. For the year ended
February 29, 2000, the Fund produced a return of 40.36%, outperforming the JP
Morgan Emerging Markets Bond Index Plus ('EMBI+')(2) which returned 34.57% for
the period.

During the fiscal year ended February 29, 2000, the emerging debt market
performed very well, particularly in a difficult fixed income period. The 34.57%
return of the EMBI+ compares very favorably with the 1.16% return of the Salomon
Smith Barney Broad Investment Grade ('BIG') Bond Index(3) over the same time
period. The fiscal year opened in the aftermath of the Brazilian devaluation
which had put strong downward pressure on the entire market in January 1999.
When Brazil responded to the devaluation with a comprehensive program of fiscal
and monetary reforms, the market rallied. Overall market performance for the
fiscal year was dominated by returns from a handful of countries including
Russia, Brazil and Venezuela. Spreads in the market narrowed from 1,330 basis
points over Treasuries at the beginning of the fiscal year to 816 basis points
at year-end.

The recovery in the emerging bond markets in 1999 was driven by a variety of
factors; some related to improvements in fundamental creditworthiness and others
related to technical factors. Fundamentally, sovereign credit quality was
positively impacted by rising commodity prices, particularly oil prices. Oil
producers were among the best performing countries in the emerging markets in
1999. Credit quality in emerging markets also improved with the economic rebound
in Asia and evidence of economic recovery in Latin America, especially in
Argentina and Brazil. The presidential election cycle in a number of Latin
American countries provided further evidence of improved credit quality.
Argentina held its regularly scheduled presidential election in 1999 with the
opposition candidate winning. Upcoming elections in Russia, Mexico and Peru are
likely to continue this trend of fair and open elections which encourages wider
investor participation in the asset class.

The improvement in credit fundamentals attracted new capital flows into emerging
markets. Portfolio flows improved throughout the fiscal year and have continued
in 2000 as Mexico's upgrade to investment grade status attracted a broader group
of investors to the asset class. Foreign direct investment has also rebounded
strongly in Latin America, aiding the overall investment environment.

Return volatilities for emerging markets debt also declined over year-earlier
levels. The decline in volatility is a function of reduced leverage in the
market coupled with expanded investor interest in the

- ---------

(2) Past performance is not indicative of future results. The EMBI+ is a total
return index that tracks the traded market for U.S. dollar-denominated Brady
and other similar sovereign restructured bonds in the emerging market.

(3) The Salomon Smith Barney BIG Bond Index includes institutionally traded U.S.
Treasury bonds, government sponsored bonds (U.S. agency and supranational),
mortgage-backed securities and corporate securities.

PAGE 2

<PAGE>

asset class. Twelve-month volatility for emerging markets debt averaged
approximately 10%, dramatically below the 15% long-term historical level of the
EMBI+.

For the year ended February 29, 2000, outperformers in the emerging markets
included Russia, Brazil and Venezuela. The remaining Index countries lagged the
overall return.

The following is a brief description of each sector's highlights over the past
year:

LATIN AMERICA

The key developments in Latin America during the Fund's fiscal year included
Brazil's recovery from the after-effects of its devaluation, Venezuela's
continued improvement in credit quality, successful financings by a number of
countries and Ecuador's default on its Brady bond issue.

Financing Trends. Latin American countries were large debt issuers during the
twelve months ended February 29, 2000. Argentina, Brazil and Mexico were all
large issuers during 1999 as they met renewed market interest with a combination
of new financing and refinancing of existing issues. The volume of financing for
the three Latin countries was remarkably similar in 1999 and 1998. Each year had
a quarter of relatively low issuance, the last quarter of 1998 and the first
quarter of 1999. The pace of financing in the first two months of 2000 is
running substantially ahead of the overall level for 1999.

Brazil. As mentioned previously, the most notable event to occur in Brazil
during the period was the recovery from the effects of the devaluation of the
country's local currency, the real, in January 1999. The devaluation caused
spillover throughout Latin America, but the deterioration in market sentiment
was short-lived. Shortly after the devaluation, the government made significant
progress in fiscal reform by obtaining the long awaited social security reform
and CPMF (retired civil servant contribution rate increase) approvals. These
developments, in addition to the appointment of a highly respected Central Bank
head and the potential of a revised program with the International Monetary Fund
('IMF'), stabilized Brazilian markets. Brazil consistently surprised the market
during the Fund's fiscal year with positive fiscal and monetary news. The
currency stabilized, interest rates were reduced and economic expansion has
resumed. Brazil returned 46.88% over the twelve months ended February 29, 2000.

Venezuela. Venezuela's Constituent Assembly completed the draft of the new
Constitution during the Fund's fiscal year. The Constitution calls for national
elections which are scheduled for May 28, 2000. We expect the new Constitution
to be ratified by the voters and President Chavez to be re-elected. Oil price
strength improved Venezuela's credit quality throughout 1999. Venezuela returned
40.21% during the Fund's fiscal year. We continue to overweight Venezuela for
several reasons: Venezuela's financing needs in 2000 are relatively limited; oil
prices remain substantially above budgeted levels; and Venezuelan spreads are at
particularly wide levels versus other similarly rated countries.

Ecuador. Ecuador had a few noteworthy negative developments during the Fund's
fiscal year. During October the Ecuadorian government failed to make a scheduled
payment on its Eurobonds, adding this default to its August default on Brady
bonds. The participants in the ultimate resolution of these defaults include the
administration and congress in Ecuador (controlled by opposition parties); the
IMF and the bondholders. Each of these groups has different goals and timetables
that must be resolved before Ecuador can restructure its debt. We have not seen
any evidence to indicate that the government has come up with a coordinated
strategy for dealing with the default.

MIDDLE EAST/AFRICA

The primary credits in the region experienced varied economic results during the
twelve months ended February 29, 2000. Algeria benefited from rising oil and gas
prices and renewed political stability. New elected president Abdelaziz
Bouteflika has been very effective in reducing the level of political violence
in the country. Rising oil prices have substantially improved the country's
budget balance.

Moroccan King Hassan II died after 38 years on the throne and has been replaced
by his eldest son, King Mohammed VI. We expect the policies that have made
Morocco a steadily improving credit will be continued by the new King. In
another important development in Morocco, a cellular telephone license has been
awarded to Telefonica for a price of $1.1 billion and a commitment to spend an
additional $700 million developing the network. The proceeds from this sale will
be used to fund a variety of government investments in Morocco.

PAGE 3

<PAGE>

During the final week of the calendar year 1999, the president of the Ivory
Coast was removed in a military coup. General Guei has assumed the presidency on
an interim basis and named an interim cabinet to serve until presidential
elections in June. While any coup is a destabilizing event, there are some
potential positives which may develop. Corruption was a major problem with the
deposed administration and General Guei has pledged to address this issue.
Failure to address the corruption problem was a major reason for suspension of
recent talks with the IMF. In addition, an early favorite for president in the
June elections is a former deputy director of the IMF. While the coup has had a
very negative immediate impact on Ivory Coast debt, there could be some longer
term benefits. It is too early to assess the long run impact of the coup.
Largely in response to the coup, Ivory Coast debt declined over 21% during the
Fund's fiscal year, making it the worst performer in the emerging debt universe.

EASTERN EUROPE

Eastern European returns were dominated by developments in Russia. A variety of
important fundamental developments occurred in Russia during the year:

The lower house of the Duma passed the 2000 budget which emphasizes increased
tax collection and deficit reduction.

Duma elections in December 1999 reduced the influence of the Communist party
and made the moderate bloc the largest faction in Congress.

The IMF engaged in an active dialogue with the Russian government which
encouraged the Russians and the London Club in their negotiations. (The London
Club is the official group of creditors lending to emerging market
governments.)

The Russian government reached an agreement with the London Club on
restructuring Soviet-era debt. This agreement helps clarify Russia's debt
burden and increases the likelihood that Russia can return to the market for
financing in the next 12-18 months.

In a development with the greatest potential long-range implications, President
Yeltsin resigned and appointed Prime Minister Putin acting President. This step
paved the way for presidential elections in March 2000. President Putin was the
overwhelming favorite. Putin was elected President on the first ballot of the
March 26, 2000 election.

Russian debt returned 216% during the Fund's fiscal year.

The Fund has concluded a successful fiscal year. We believe the outlook for
emerging markets debt remains very strong with spreads at approximately 800
basis points over Treasuries. Improving credit fundamentals and political
stability have created what we believe to be an attractive environment for
investments in emerging markets debt.

We thank you for your participation in the Salomon Brothers Institutional Series
Funds Inc and look forward to helping you pursue you financial goals in the
years to come.

Cordially,

HEATH B. MCLENDON PETER J. WILBY
HEATH B. MCLENDON PETER J. WILBY
Chairman of the Board Executive Vice President

JAMES E. CRAIGE BETH A. SEMMEL
JAMES E. CRAIGE BETH A. SEMMEL
Executive Vice President Executive Vice President

PAGE 4

<PAGE>

SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND

The following graph depicts the performance of the Institutional High Yield Bond
Fund ('Fund') versus the Salomon Smith Barney High-Yield Market Index
('Index').* It is important to note that the Fund is a professionally managed
mutual fund while the Index is not available for investment and is unmanaged.
The comparison is shown for illustrative purposes only.

COMPARISON OF A $10,000 INVESTMENT IN THE
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND TO THE
SALOMON SMITH BARNEY HIGH-YIELD MARKET INDEX
(UNAUDITED)

[PERFORMANCE GRAPH]

SALOMON
SB INSTITUTIONAL SMITH BARNEY
HIGH YIELD HIGH-YIELD
BOND FUND MARKET
DATE FUND INDEX
---- --------------- -------------
<S> <C> <C>
5/15/96 10,000 10,000
8/96 10,370 10,170
2/97 11,511 11,081
8/97 12,278 11,751
2/98 12,791 12,602
8/98 12,395 12,105
2/99 12,798 12,764
8/99 12,590 12,781
2/29/00 12,321 12,827

</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
% RETURN
--------
<S> <C>
Year ended 2/29/00.......................................... (3.72)%
Commencement of operations (5/15/96) through 2/29/00........ 5.66

CUMULATIVE TOTAL RETURN

Commencement of operations (5/15/96) through 2/29/00........ 23.21%
</TABLE>

- -------------------

* The Salomon Smith Barney High-Yield Market Index is valued at month-end only.
As a result, while the Fund's total return calculations used in this
comparison are for the period May 15, 1996 through February 29, 2000, the
Index returns are for the period June 1, 1996 through February 29, 2000.

Past performance is not predictive of future performance.

The average annual total returns reflect reinvestment of dividends and/or
capital gains distributions in additional shares.

During the year ended February 29, 2000, the Fund's investment adviser waived
a portion of its management fees, as shown in the following audited financial
statements. Absent such waiver, the Fund's average annual returns would have
been lower.

The investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

PAGE 5

<PAGE>

SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND

The following graph depicts the performance of the Salomon Brothers
Institutional Emerging Markets Debt Fund ('Fund') versus the J.P. Morgan
Emerging Markets Bond Index Plus ('Index')*. It is important to note that the
Fund is a professionally managed mutual fund while the Index is not available
for investment and is unmanaged. The comparison is shown for illustrative
purposes only.

COMPARISON OF A $10,000 INVESTMENT IN THE
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND TO THE
J.P. MORGAN EMERGING MARKETS BOND INDEX PLUS
(UNAUDITED)

[PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
J.P. MORGAN
SB INSTITUTIONAL EMERGING
EMERGING MARKETS
MARKETS BOND INDEX
DATE DEBT FUND PLUS
---- ---------------- ------------
<S> <C> <C>
10/17/96 10,000 10,000
2/97 11,139 11,055
8/97 12,384 12,094
2/98 12,766 12,267
8/98 7,444 8,483
2/99 9,808 9,998
8/99 11,116 11,067
2/29/00 13,767 13,454

</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS
% RETURN
--------
<S> <C>
Year ended 2/29/00.......................................... 40.36%
Commencement of operations (10/17/96) through 2/29/00....... 9.95

CUMULATIVE TOTAL RETURN

Commencement of operations (10/17/96) through 2/29/00....... 37.67%
</TABLE>

- -------------------

* The J.P. Morgan Emerging Markets Bond Index is a total return index that
tracks the traded market for U.S. dollar dominated Brady and other similar
sovereign restructured bonds traded in emerging markets.

Past performance is not predictive of future performance.

The average annual total returns reflect reinvestment of dividends and/or
capital gains distributions in additional shares.

The investment return and principal value of an investment in the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.

PAGE 6

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
SCHEDULES OF INVESTMENTS
FEBRUARY 29, 2000
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------ -------- -----
<S> <C> <C>
CORPORATE BONDS -- 94.5%

BASIC INDUSTRIES -- 13.8%
$ 150,000 AEI Resource Holdings Inc., 10.500% due 12/15/05(a)......... $ 60,000
500,000 AK Steel Corp., 7.875% due 2/15/09.......................... 452,500
500,000 Berry Plastics Corp., 12.250% due 4/15/04................... 507,500
500,000 Borden Chemicals and Plastics, 9.500% due 5/1/05............ 472,500
349,000 Doman Industries LTD, 8.750% due 3/15/04.................... 303,630
500,000 Equistar Chemicals LP, 8.750% due 2/15/09................... 493,125
500,000 Georgia Gulf Corp., 10.375% due 11/1/07(a).................. 517,500
250,000 Huntsman Packaging Corp., 9.125% due 10/1/07................ 241,250
250,000 Indesco International Inc, 9.750% due 4/15/08............... 100,000
250,000 LTV Corp., 11.750% due 11/15/09(a).......................... 254,375
500,000 Lyondell Chemical Co., Series B, 9.875% due 5/1/07.......... 480,000
250,000 Millar Western Forest Products, 9.875% due 5/15/08.......... 248,750
500,000 Murrin Murrin Holdings Property, 9.375% due 8/31/07......... 445,000
500,000 P&L Coal Holdings Corp., Series B, 9.625% due 5/15/08....... 460,000
500,000 PCI Chemicals Canada Inc., 9.250% due 10/15/07.............. 416,250
500,000 RePap New Brunswick, 10.625% due 4/15/05.................... 465,000
500,000 Republic Technologies Corp., 13.750% due 7/15/09(a)(b)...... 190,000
375,000 Tembec Industries Inc., 8.625% due 6/30/09.................. 361,875
500,000 ZSC Specialty, 11.000% due 7/1/09........................... 515,000
-----------
6,984,255
-----------
CONSUMER CYCLICALS -- 9.4%
500,000 Advance Stores Co. Inc., Series B, 10.250% due 4/15/08...... 425,000
250,000 Archibald Candy Corp., 10.250% due 7/1/04................... 240,000
375,000 Capstar Hotel, 8.750% due 8/15/07........................... 335,625
Cole National Group Inc.:
250,000 9.875% due 12/31/06......................................... 185,000
250,000 8.625% due 8/15/07.......................................... 168,750
475,000 Finlay Fine Jewelry Corp., 8.375% due 5/1/08................ 432,250
500,000 Flooring America, 9.250% due 10/15/07....................... 420,000
424,000 Guitar Center Management, 11.000% due 7/1/06................ 415,520
500,000 HMH Properties, Series B, 7.875% due 8/1/08................. 437,500
250,000 Imperial Holly Corp., 9.750% due 12/15/07................... 115,000
500,000 Mattress Discounters Co., 12.625% due 7/15/07(a)(b)......... 475,000
375,000 Pillowtex Corp., Series B, 9.000% due 12/15/07.............. 153,750
250,000 Premier International Foods PLC, 12.000% due 9/1/09(a)...... 243,750
125,000 Vlasic Foods Inc., 10.250% due 7/1/09....................... 87,500
250,000 Westpoint Stevens Inc., 7.875% due 6/15/05.................. 217,500
500,000 Worldtex Inc., Series B, 9.625% due 12/15/07................ 411,250
-----------
4,763,395
-----------
CONSUMER NON-CYCLICALS -- 15.3%
500,000 Derby Cycle Corp., 10.000% due 5/15/08...................... 255,000
500,000 French Fragrances Inc., Series B, 10.375% due 5/15/07....... 482,500
500,000 Fresenius Medical Care Capital Trust 1, 9.000% due
12/1/06................................................... 475,000
500,000 Harrahs Operating Co., Inc., 7.875% due 12/15/05............ 470,000
500,000 Hollywood Park Inc., Series B, 9.250% due 2/15/07........... 483,750
500,000 Home Interiors & Gifts, Inc., 10.125% due 6/1/08............ 417,500
375,000 Isles of Capri Casinos, 8.750% due 4/15/09.................. 333,281
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 7

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
SCHEDULES OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2000
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------ -------- -----
<S> <C> <C>
CONSUMER NON-CYCLICALS -- 15.3% (CONTINUED)
$ 500,000 Jafra Cosmetics International Inc., 11.750% due 5/1/08...... $ 477,500
250,000 North Atlantic Trading Co., Series B, 11.000% due 6/15/04... 225,625
Park Place Entertainment:
500,000 7.875% due 12/15/05....................................... 467,500
200,000 9.375% due 2/15/07(a)..................................... 198,500
500,000 Polaroid Corp., 11.500% due 2/15/06......................... 515,000
Pueblo Xtra International Inc.:
250,000 Series C, 9.500% due 8/1/03............................... 118,750
250,000 9.500% due 8/1/03......................................... 118,750
400,000 Revlon Consumer Products Inc., 8.625% due 2/1/08............ 164,000
500,000 Sealy Mattress Co., Series B, 9.875% due 12/15/07........... 499,375
125,000 Simmons Co., Series B, 10.250% due 3/15/09.................. 113,750
500,000 Sun International Hotels Ltd., 9.000% due 3/15/07........... 465,000
500,000 Syratech Corp., 11.000% due 4/15/07......................... 300,000
250,000 United Industries Corp., Series B, 9.875% due 4/1/09........ 200,000
375,000 Universal Hospital Services, Inc., 10.250% due 3/1/08....... 243,750
250,000 Windmere-Durable Holdings, Inc., 10.000% due 7/31/08........ 244,375
500,000 Winsloew Furniture, Inc., Series B, 12.750% due 8/15/07..... 452,500
-----------
7,721,406
-----------
DATA TECHNOLOGY/INFORMATION SERVICES -- 0.5%
250,000 Mastec Inc., Series B, 7.750% due 2/1/08 230,625
-----------
ENERGY -- 5.6%
500,000 Belco Oil & Gas Corp., Series B, 8.875% due 9/15/07......... 470,000
500,000 Canadian Forest Oil Ltd., 8.750% due 9/15/07................ 460,000
250,000 Cliffs Drilling Corp., Series B, 10.250% due 5/15/03........ 255,625
250,000 Costilla Energy Inc., 10.250% due 10/1/06(c)(d)............. 43,750
250,000 Devon Energy Corp., 10.250% due 11/1/05..................... 269,688
250,000 Frontier Oil Corp., Series A, 9.125% due 2/15/06............ 210,000
250,000 Plains Resources PLX, Series E, 10.250% due 3/15/06(a)...... 245,000
375,000 R & B Falcon Corp., 9.500% due 12/15/08..................... 363,750
500,000 Western Gas Resources, Inc., 10.000% due 6/15/09............ 511,250
-----------
2,829,063
-----------
FINANCIAL/LEASING -- 5.0%
495,099 Airplanes Pass-Through Trust, Series D, 10.875% due
3/15/19................................................... 450,556
250,000 American Business Information Inc., 9.500% due 6/15/08...... 222,500
500,000 Avis Rent A Car, Inc., 11.000% due 5/1/09................... 507,500
ContiFinancial Corp.:
250,000 7.500% due 3/15/02........................................ 23,750
1,125,000 8.375% due 8/15/03........................................ 106,875
625,000 8.125% due 4/1/08......................................... 59,375
250,000 DVI Inc., 9.875% due 2/1/04................................. 245,625
250,000 DynCorp, 9.500% due 3/1/07.................................. 223,437
250,000 Nationwide Credit Inc., Series A, 10.250% due 1/15/08....... 185,000
500,000 Sovereign BanCorp., 10.500% due 11/15/06.................... 503,750
-----------
2,528,368
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 8

<PAGE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------ -------- -----
<S> <C> <C>
MANUFACTURING -- 13.1%
$ 250,000 American Axle & Manufacturing Inc., 9.750% due 3/1/09....... $ 247,500
500,000 Anchor Advanced Products, Inc., Series B, 11.750% due
4/1/04.................................................... 365,000
500,000 Blount Inc., 13.000% due 8/1/09(a).......................... 530,000
375,000 Breed Technologies Inc., 9.250% due 4/15/08(c)(d)........... 7,500
500,000 Cabot Safety-Kleen Corp., 12.500% due 7/15/05............... 516,875
500,000 Federal-Mogul Corp., 7.500% due 1/15/09..................... 436,250
500,000 Foamex LP, 9.875% due 6/15/07............................... 422,500
500,000 Hexcel Corp., 9.750% due 1/15/09............................ 427,500
250,000 High Voltage Engineering Corp., 10.500% due 8/15/04......... 205,625
125,000 International Utility Structures Inc., 10.750% due 2/1/08... 105,000
375,000 Jackson Products Inc., Series B, 9.500% due 4/15/05......... 339,375
500,000 JH Heafner Co., Series D, 10.000% due 5/15/08............... 440,625
500,000 Key Plastics Inc., Series B, 10.250% due 3/15/07(e)......... 187,500
250,000 Lear Corp., Series B, 8.110% due 5/15/09.................... 233,125
500,000 Motors & Gears Inc., Series D, 10.750% due 11/15/06......... 496,250
500,000 Nortek Inc., 9.875% due 3/1/04.............................. 485,000
500,000 Sequa Corp., 9.000% due 8/1/09.............................. 470,000
250,000 Stellex Industries Inc., 9.500% due 11/1/07................. 175,000
500,000 Tenneco Automotive Inc., 11.625% due 10/15/09(a)............ 509,375
-----------
6,600,000
-----------
MEDIA -- 18.7%
Adelphia Communications Corp.:
200,000 Series B, 10.500% due 7/15/04............................. 203,000
250,000 Series B, 9.875% due 3/1/07............................... 248,125
375,000 Allbritton Communications, Series B, 9.750% due 11/30/07.... 368,437
500,000 Centennial Cellular, 10.750% due 12/15/08................... 511,250
725,000 Charter Communications Holdings Inc., zero coupon until
4/1/04, 9.920% thereafter due 4/1/11...................... 420,500
500,000 Classic Cable Inc., 10.500% due 3/1/10(a)................... 502,500
250,000 Covad Communications Group, 12.000% due 2/15/10(a)(f)....... 250,000
500,000 CSC Holdings Inc., 9.875% due 2/15/13....................... 521,250
250,000 Frontiervision Operating Partners, 11.000% due 10/15/06..... 260,625
375,000 Granite Broadcasting Corp., 8.875% due 5/15/08.............. 348,750
250,000 GST Telecommunications, Inc., zero coupon until 5/1/03,
10.500% thereafter due 5/1/08............................. 125,000
Hollinger International Publishing:
100,000 9.250% due 2/1/06......................................... 94,750
337,000 9.250% due 3/15/07........................................ 319,308
250,000 ICG Holdings Inc., zero coupon until 9/15/00, 13.500%
thereafter due 9/15/05.................................... 230,000
500,000 Insight Midwest, 9.750% due 10/1/09(a)(f)................... 505,000
500,000 Intermedia Communications Inc., Series B, 8.600% due
6/1/08.................................................... 460,000
200,000 Leap Wireless, 12.500% due 4/15/10(a)(b).................... 205,000
500,000 LIN Television Corp., 8.375% due 3/1/08..................... 445,000
600,000 Nextel Communications, Inc., zero coupon until 10/31/02,
9.750% thereafter due 10/31/07............................ 433,500
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 9

<PAGE>

<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
------ -------- -----
<S> <C> <C>
MEDIA -- 18.7% (CONTINUED)
$ 500,000 NTL Inc., Series B, zero coupon until 2/1/01, 11.500%
thereafter due 2/1/06..................................... $ 468,750
500,000 Orange PLC, 8.750% due 6/1/06............................... 512,500
250,000 Rogers Communications, Inc., 8.875% due 7/15/07............. 251,250
375,000 RSL Communications LTD., 12.250% due 11/15/06............... 363,750
250,000 Telewest Communications PLC, zero coupon until 10/1/00,
11.000% thereafter due 10/1/07............................ 237,188
225,000 Telewest Communications PLC, zero coupon until 4/15/04,
9.250% thereafter due 4/15/09(a).......................... 135,000
750,000 United International Holdings, zero coupon until 2/15/03,
10.750% thereafter due 2/15/08............................ 530,625
750,000 Viatel Inc., zero coupon until 4/15/03, 12.500% thereafter
due 4/15/08............................................... 450,000
-----------
9,401,058
-----------
SERVICES/OTHER -- 7.1%
500,000 Allied Waste Industries, Inc., Series B, 10.000% due
8/1/09(a)................................................. 418,750
375,000 Aqua Chemicals Inc., 11.250% due 7/1/08..................... 213,750
500,000 Axiohm Transaction Solutions, Inc., 9.750% due
10/1/07(d)(f)............................................. 105,000
500,000 Energis PLC, 9.750% due 6/15/09............................. 517,500
500,000 Integrated Electrical Services, Inc., Series B, 9.375% due
2/1/09.................................................... 430,000
250,000 Iron Mountain Inc., 10.125% due 10/1/06..................... 248,125
250,000 Loomis Fargo & Co., 10.000% due 1/15/04..................... 245,000
250,000 Pierce Leahy Corp., 11.125% due 7/15/06..................... 255,625
500,000 Primark Corp., 9.250% due 12/15/08.......................... 467,500
500,000 Safety-Kleen Corp., 9.250% due 6/1/08....................... 460,000
250,000 Sitel Corp., 9.000% due 3/15/06............................. 230,000
-----------
3,591,250
-----------
TRANSPORTATION -- 4.0%
250,000 Atlantic Express Transportation, 10.750% due 2/1/04......... 242,500
375,000 Continential Airlines, Inc., 8.000% due 12/15/05............ 343,125
250,000 Enterprises Shipholding Corp., 8.875% due 5/1/08............ 150,625
500,000 Holt Group, 9.750% due 1/15/06.............................. 316,250
250,000 Laidlaw Inc., 6.650% due 10/1/04............................ 201,250
500,000 Northwest Airlines Inc., 7.625% due 3/15/05................. 445,000
250,000 Stena AB, 10.500% due 12/15/05.............................. 230,000
100,000 TFM S.A. de C.V., zero coupon until 6/15/02, 11.750%
thereafter due 6/15/09.................................... 72,250
-----------
2,001,000
-----------
UTILITIES -- 2.0%
500,000 Azurix Corp., 10.375% due 2/15/07(a)(f)..................... 502,500
Calpine Corp.:
250,000 8.750% due 7/15/07.......................................... 246,875
250,000 7.875% due 4/1/08........................................... 240,000
-----------
989,375
-----------
TOTAL CORPORATE BONDS
(Cost -- $53,152,820)....................................... 47,639,795
-----------

CONVERTIBLE CORPORATE BONDS -- 0.8%
500,000 Quantum Corp., 7.000% due 8/1/04 (Cost -- $408,941)......... 391,875
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 10

<PAGE>

<TABLE>
<CAPTION>
SHARES SECURITY VALUE
------ -------- -----
<S> <C> <C>
PREFERRED STOCK(C) -- 0.5%
250 Rural Cellular Corp. ....................................... $ 250,000
TCR Holding:
439 Class B..................................................... 4
241 Class C..................................................... 2
636 Class D..................................................... 6
1,316 Class E..................................................... 13
-----------
TOTAL PREFERRED STOCK (Cost -- $250,157).................... 250,025
-----------
WARRANTS(C) -- 0.1%
500 Winsloew Furniture Corp., Expire 1/1/01 (Cost -- $37,337)... 26,250
-----------
</TABLE>

<TABLE>
<CAPTION>
FACE
AMOUNT
------
<S> <C> <C>
REPURCHASE AGREEMENT -- 4.1%
$2,095,000 State Street Bank, 5.681% due 3/1/00; Proceeds at
maturity -- $2,095,331; (Fully collateralized by U.S.
Treasury Note, 6.125% due 8/15/07; Market value --
$2,140,938) (Cost -- $2,095,000)............................ 2,095,000
-----------
TOTAL INVESTMENTS -- 100%
(Cost -- $55,944,255*)...................................... $50,402,945
-----------
-----------
</TABLE>

- -------------------

(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(b) Security issued with attached warrants.
(c) Non-income producing security.
(d) Currently in default.
(e) Security went into default subsequent to fiscal year-end.
(f) Security issued with rights attached.
* Aggregate cost for Federal income tax purposes is substantially the same.

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 11

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
SCHEDULES OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2000
SALOMON BROTHERS INSTITUTIONAL EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FACE
AMOUNT(a) SECURITY VALUE
- --------- -------- -----
<S> <C> <C>
SOVEREIGN BONDS -- 91.0%
ARGENTINA -- 5.6%
Republic of Argentina:
494,695ARS BOCON Pro 1, 3.013% due 4/1/07(b)......................... $ 333,776
465,000 Discount FRN, Series L-GL, 6.875% due 3/31/23(b).......... 383,044
600,000 Zero coupon due 10/15/02.................................. 463,500
150,000 Zero coupon due 10/15/03.................................. 103,500
300,000 Zero coupon due 10/15/04.................................. 183,000
1,100,000ARS 11.786% due 4/10/05(b).................................... 1,034,000
600,000 11.000% due 12/4/05....................................... 590,250
-----------
3,091,070
-----------
BRAZIL -- 19.3%
Federal Republic of Brazil:
1,626,949 C Bond, 8.000% due 4/15/14(c)............................. 1,202,419
2,750,000 DCB Series L, 7.000% due 4/15/12(b)....................... 2,048,750
1,620,000 NMB Series L, 7.000% due 4/15/09(b)....................... 1,336,500
4,859,000 14.500% due 10/15/09...................................... 5,252,579
400,000 12.750% due 1/15/20....................................... 392,500
530,000 12.250% due 3/6/30........................................ 503,368
-----------
10,736,116
-----------
BULGARIA -- 4.3%
Republic of Bulgaria:
875,000 Discount Bond, Series A, 6.500% due 7/28/24(b)............ 722,969
2,000,000 FLIRB, Series A, Bearer, 2.750% due 7/28/12(b)............ 1,500,000
250,000 IAB Series PDI, 7.063% due 7/28/11(b)..................... 206,562
-----------
2,429,531
-----------
COLOMBIA -- 5.1%
Republic of Colombia:
400,000 FRN, 7.270% due 6/15/03(d)................................ 366,000
400,000 FRN, 11.218% due 8/13/05(b)............................... 390,000
600,000 FRN, 9.750% due 4/23/09(b)................................ 544,125
500,000 FRN, 8.700% due 2/15/16(b)................................ 376,250
1,000,000 10.875% due 3/9/04........................................ 1,000,000
250,000 8.375% due 2/15/27........................................ 181,875
-----------
2,858,250
-----------
COSTA RICA -- 0.9%
Republic of Costa Rica:
400,000 Banco Central Costa Rica, Series B, 6.250% 5/21/15........ 356,000
125,000 Costa Rica, 9.335%, due 5/15/09........................... 125,000
-----------
481,000
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 12

<PAGE>

<TABLE>
<CAPTION>
FACE
AMOUNT(a) SECURITY VALUE
- --------- -------- -----
<S> <C> <C>
CROATIA -- 3.0%
Republic of Croatia, FRN:
1,240,909 Series A, 7.063% due 7/31/10(b)........................... $ 1,158,699
507,461 Series B, 7.063% due 7/31/06(b)........................... 483,992
-----------
1,642,691
-----------
ECUADOR -- 1.9%
Republic of Ecuador, Bearer, Par Bond, 4.000% due
2,800,000 2/28/25(b)(d)(e).......................................... 1,036,000
-----------
IVORY COAST -- 0.8%
Republic of Ivory Coast:
1,375,000 FLIRB, 2.000% due 3/29/18(b).............................. 261,250
721,875 PDI Bond, 2.000% due 3/29/18(b)........................... 169,641
-----------
430,891
-----------
JAMAICA -- 0.9%
500,000 Government of Jamaica, 10.875% due 6/10/05.................. 481,250
-----------
MEXICO -- 17.0%
2,200,000 Petro Mexicanos, 9.250% 3/30/18............................. 2,150,500
6,052,000 United Mexican States, 11.375% 9/15/16...................... 7,141,360
132,000 United Mexican States; Par Bond, 6.250% 12/31/19............ 107,498
-----------
9,399,358
-----------
PANAMA -- 4.1%
Republic of Panama:
700,000 IRB, 4.250% due 7/17/14(b)................................ 556,063
987,791 PDI Bond, 7.062% due 7/17/16(b)(c)........................ 822,337
1,000,000 8.875% due 9/30/27........................................ 862,500
-----------
2,240,900
-----------
PERU -- 3.4%
Government of Peru:
1,975,000 FLIRB, 3.750% due 3/7/17(b)............................... 1,267,061
900,000 PDI Bond, 4.500% due 3/7/17(b)............................ 630,562
-----------
1,897,623
-----------
PHILIPPINES -- 2.0%
1,125,000 Republic of the Philippines, 9.875% due 1/15/19............. 1,082,812
-----------
POLAND -- 1.8%
150,000 Republic of Poland, Par Bond, 3.500% due 10/27/24(b)........ 93,984
975,000 RSTA Bond, 4.000% due 10/27/24(b)........................... 650,812
250,000 TPSA Finance, 7.750% due 12/10/08(d)........................ 243,750
-----------
988,546
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 13

<PAGE>

<TABLE>
<CAPTION>
FACE
AMOUNT(a) SECURITY VALUE
- --------- -------- -----
<S> <C> <C>
RUSSIA -- 9.7%
1,000,000 Russian Federation, 11.750% 6/10/03......................... $ 860,000
9,700,000 Russian IAN, 6.906% due 12/15/15(e)(f)...................... 2,315,875
2,800,000 Russian Ministry of Finance, 12.750% due 6/24/28............ 2,187,500
-----------
5,363,375
-----------
VENEZUELA -- 11.2%
Republic of Venezuela:
357,140 FLIRB, 6.875% due 3/31/07(b).............................. 299,440
1,142,851 DCB, 7.000% 12/18/07(b)................................... 954,280
2,250,000 13.625% due 8/15/18....................................... 2,103,750
4,200,000 9.250% due 9/15/27........................................ 2,845,500
-----------
6,202,970
-----------

TOTAL SOVEREIGN BONDS
(Cost -- $45,834,931)..................................... 50,362,383
-----------

LOAN PARTICIPATIONS(g) -- 8.3%

ALGERIA -- 2.9%
The People's Democratic Republic of Algeria,
459,090 Tranche A, 7.500% due 3/4/00 (Chase Manhattan Bank,
Merrill Lynch)(b)....................................... 459,091

679,544 Tranche 1, 6.000% due 9/4/06 (Chase Manhattan Bank)(b).... 533,443
800,000 Tranche 3, 6.812% due 3/4/10 (Chase Manhattan Bank)(b).... 592,000
-----------
1,584,534
-----------
MOROCCO -- 2.8%
1,684,569 Kingdom of Morocco, Tranche A, 6.844% due 1/1/09
(BankBoston, Chase Manhattan Bank, J.P. Morgan, ING
Securities)(b)............................................ 1,575,074
-----------
RUSSIA -- 2.6%
6,000,000 Russian Government, Principal Loan 6.906% due 12/15/20
(Bank of America, Chase Manhattan Bank,
Goldman Sachs, ING Securities, J.P. Morgan)(e)............ 1,425,000
-----------

TOTAL LOAN PARTICIPATIONS
(Cost -- $3,219,380)...................................... 4,584,608
-----------

REPURCHASE AGREEMENT -- 0.7%
377,000 State Street Bank 5.720% due 3/1/00; Proceeds at maturity
-- $377,060 (Fully collateralized by U.S. Treasury Bonds,
8.750% due 5/15/17; Market
value -- 387,500)(Cost -- $377,000)..................... 377,000
-----------

TOTAL INVESTMENTS -- 100%
(Cost -- $49,431,311*).................................... $55,323,991
-----------
-----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 14

<PAGE>

(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Interest rate shown reflects current rate on instruments with variable rate
or step coupon rate.
(c) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(d) Security is exempt from registration under rule 144A of the Securities Act
of 1933. The security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.
(e) Currently in default.
(f) Non-income producing security.
(g) Participation interest was acquired through the financial institutions
indicated parenthetically.
* Aggregate cost for Federal income tax purposes is substantially the same.

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 Bond.
NMB -- New Money Bond.
PDI -- Past Due Interest.
RSTA -- Revolving Short-Term Agreement.
TPSA -- Telkomunkacja Polska SA.

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 15

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
ASSETS:
Investments, at value (Cost -- $55,944,255 and
$49,431,311).......................................... $50,402,945 $55,323,991
Cash.................................................... 656 578
Receivable for securities sold.......................... -- 5,772,439
Receivable for Fund shares sold......................... -- 314,138
Interest receivable..................................... 1,248,146 1,567,917
Receivable from investment manager...................... 16,871 --
Deferred organization costs............................. 15,365 20,779
Other assets............................................ 465 742
----------- -----------
TOTAL ASSETS............................................ 51,684,448 63,000,584
----------- -----------

LIABILITIES:
Payable for securities purchased........................ 221,765 494,485
Management fees payable................................. -- 16,395
Accrued expenses........................................ 48,013 60,235
----------- -----------
TOTAL LIABILITIES....................................... 269,778 571,115
----------- -----------
TOTAL NET ASSETS............................................ $51,414,670 $62,429,469
----------- -----------
----------- -----------

NET ASSETS:
Par value of capital shares............................. $ 6,769 $ 9,891
Capital paid in excess of par value..................... 58,438,919 60,993,774
Undistributed net investment income..................... 781,050 662,002
Accumulated net realized loss from security
transactions.......................................... (2,270,758) (5,128,878)
Net unrealized appreciation (depreciation) of
investments........................................... (5,541,310) 5,892,680
----------- -----------
TOTAL NET ASSETS............................................ $51,414,670 $62,429,469
----------- -----------
----------- -----------
SHARES OUTSTANDING.......................................... 6,769,075 9,891,082
----------- -----------
----------- -----------
NET ASSET VALUE, PER SHARES................................. $7.60 $6.31
----------- -----------
----------- -----------
</TABLE>

Authorized shares of 10,000,000,000 for the Institutional Series Funds, with a
par value of $0.001.

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 16

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 2000
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................ $ 4,221,293 $ 5,524,820
----------- -----------

EXPENSES:
Management fees (Note 2)................................ 205,822 325,695
Registration fees....................................... 39,865 30,608
Audit fees.............................................. 28,172 27,662
Custody and administration fees (Note 2)................ 21,387 29,209
Shareholder and system servicing fees................... 19,347 8,678
Shareholder communications.............................. 15,156 10,815
Amortization of deferred organization costs (Note 1).... 12,854 12,854
Legal................................................... 9,966 14,852
Directors' fees......................................... 7,103 5,703
Other................................................... 6,948 6,896
----------- -----------
TOTAL EXPENSES.......................................... 366,620 472,972
Less: Management fee waiver (Note 2).................... (140,213) (124,013)
----------- -----------
NET EXPENSES............................................ 226,407 348,959
----------- -----------
NET INVESTMENT INCOME....................................... 3,994,886 5,175,861
----------- -----------

REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3):
Realized Gain (Loss) From Security Transactions
(excluding short-term securities):
Proceeds from sales..................................... 15,249,139 89,473,074
Cost of securities sold................................. 16,799,743 84,771,325
----------- -----------
NET REALIZED GAIN (LOSS).................................. (1,550,604) 4,701,749
----------- -----------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year....................................... (1,501,513) (178,749)
End of year............................................. (5,541,310) 5,892,680
----------- -----------
INCREASE IN NET UNREALIZED APPRECIATION (DEPRECIATION).... (4,039,797) 6,071,429
----------- -----------
NET GAIN (LOSS) ON INVESTMENTS.............................. (5,590,401) 10,773,178
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........... $(1,595,515) $15,949,039
----------- -----------
----------- -----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 17

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED FEBRUARY 29, 2000
AND THE YEAR ENDED FEBRUARY 28, 1999
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income................................... $ 3,994,886 $ 2,225,924
Net realized loss....................................... (1,550,604) (745,282)
Increase in net unrealized depreciation................. (4,039,797) (1,609,615)
------------ -------------
DECREASE IN NET ASSETS FROM OPERATIONS.................. (1,595,515) (128,973)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (3,600,480) (1,949,062)
Net realized gains...................................... -- (111,156)
------------ -------------
DECREASE IN NET ASSETS FROM DISTRIBUTION TO
SHAREHOLDERS.......................................... (3,600,480) (2,060,218)
------------ -------------
FUND SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of shares............................ 19,230,876 36,988,414
Net asset value of shares issued reinvestment of
dividends............................................. 3,477,771 2,056,414
Cost of shares reacquired............................... (3,464,575) (22,152,804)
------------ -------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS..... 19,244,072 16,892,024
------------ -------------
INCREASE IN NET ASSETS...................................... 14,048,077 14,702,833
NET ASSETS:
Beginning of year....................................... 37,366,593 22,663,760
------------ -------------
END OF YEAR*............................................ $ 51,414,670 $ 37,366,593
------------ -------------
------------ -------------
*Includes undistributed net investments income of........... $781,050 $397,722
------------ -------------
------------ -------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 18

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED FEBRUARY 29, 2000
AND THE YEAR ENDED FEBRUARY 28, 1999
EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
OPERATIONS:
Net investment income................................... $ 5,175,861 $ 3,107,909
Net realized gain (loss)................................ 4,701,749 (9,546,894)
Increase (decrease) in net unrealized appreciation...... 6,071,429 (630,939)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS....... 15,949,039 (7,069,924)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................... (4,900,147) (2,596,533)
Net realized gains...................................... -- (401)
------------ ------------
DECREASE IN NET ASSETS FROM DISTRIBUTION TO
SHAREHOLDERS.......................................... (4,900,147) (2,596,934)
------------ ------------
FUND SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of shares............................ 26,831,439 31,958,146
Net asset value of shares issued reinvestment of
dividends............................................. 4,405,082 2,594,879
Cost of shares reacquired............................... (10,379,302) (8,959,144)
------------ ------------
INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS..... 20,857,219 25,593,881
------------ ------------
INCREASE IN NET ASSETS...................................... 31,906,111 15,927,023
NET ASSETS:
Beginning of year....................................... 30,523,358 14,596,335
------------ ------------
END OF YEAR*............................................ $ 62,429,469 $ 30,523,358
------------ ------------
------------ ------------
*Includes undistributed net investments income of........... $662,002 $574,399
------------ ------------
------------ ------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 19

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Salomon Brothers Institutional High Yield Bond Fund ('High Yield Bond Fund') and
Salomon Brothers Institutional Emerging Markets Debt Fund ('Emerging Markets
Debt Fund') are portfolios constituting the Salomon Brothers Institutional
Series Funds Inc ('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 the
Fund are valued at amortized cost which approximates market value. If the
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 the 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 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 takes 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 20

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (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 total cost of
the Emerging Markets Debt Fund's loan participations at February 29, 2000
was $3,219,380.

(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) DEFERRED ORGANIZATION 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 Salomon
Brothers Asset Management Inc ('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 21

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

(k) YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be
distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. At February 29,
2000, reclassifications were made to the capital accounts of the High Yield
Bond Fund and Emerging Markets Debt Fund to reflect permanent book/tax
differences and income and gains available for distributions under income
tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.

(l) 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. 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 based on the following annual percentages of each Fund's average daily
net assets: 0.50% for the High Yield Bond Fund and 0.70% for the Emerging
Markets Debt Fund. SBAM also acts as the administrator of each Fund for which it
receives a fee calculated at an annual rate of 0.05% of each Fund's average
daily net assets. These fees are calculated daily and paid monthly.

For the year ended February 29, 2000, SBAM waived management fees of $140,213
and $124,013 for the High Yield Bond Fund and Emerging Markets Debt Fund,
respectively.

3. PORTFOLIO ACTIVITY

For the year ended February 29, 2000, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Purchases......................................... $33,595,431 $106,159,259
----------- ------------
----------- ------------
Sales............................................. $15,249,139 $ 89,473,074
----------- ------------
----------- ------------
</TABLE>

At February 29, 2000, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Gross unrealized appreciation..................... $ 227,049 $ 6,350,091
Gross unrealized depreciation..................... (5,768,359) (457,411)
----------- ------------
Net unrealized appreciation (depreciation)........ $(5,541,310) $ 5,892,680
----------- ------------
----------- ------------
</TABLE>

PAGE 22

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

4. 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.

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.

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.

PAGE 23

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

5. CAPITAL STOCK

At February 29, 2000, the Institutional Series had 10,000,000,000 shares of
authorized capital stock, par value $0.001 per share. Transactions in Fund
shares for the periods indicated were as follows:

For the Year Ended February 29, 2000:

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Shares sold........................................... 2,408,383 4,702,059
Shares issued as reinvestment......................... 452,246 734,180
Shares reacquired..................................... (437,990) (1,708,096)
--------- ----------
Net increase.......................................... 2,422,639 3,728,143
--------- ----------
--------- ----------
</TABLE>

For the Year Ended February 28, 1999:

<TABLE>
<CAPTION>
EMERGING
HIGH YIELD MARKETS
BOND FUND DEBT FUND
--------- ---------
<S> <C> <C>
Shares sold........................................... 4,118,675 5,392,844
Shares issued as reinvestment......................... 243,651 530,921
Shares reacquired..................................... (2,359,589) (1,783,891)
---------- ----------
Net increase.......................................... 2,002,737 4,139,874
---------- ----------
---------- ----------
</TABLE>

6. CAPITAL LOSS CARRYFORWARDS

At February 29, 2000, the High Yield Bond Fund and the Emerging Markets Debt
Fund had, for Federal income tax purposes, approximately $1,611,000 and
$4,446,000, respectively, of capital loss carryforwards available to offset
future capital gains. To the extent that these carryforward losses can be used
to offset realized capital gains, it is probable that the gains so offset will
not be distributed. Expirations occur on February 28, of the years below:

<TABLE>
<CAPTION>
2007 2008
---- ----
<S> <C> <C>
High Yield Bond Fund................................. $ 112,000 $1,499,000
Emerging Markets Debt Fund........................... 4,446,000 --
</TABLE>

PAGE 24

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR ENDED
FEBRUARY 28, EXCEPT WHERE NOTED:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
HIGH YIELD BOND FUND
-------------------------------------
2000(a) 1999 1998 1997(b)
------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR................... $ 8.60 $ 9.67 $ 11.13 $ 10.00
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.............................. 0.80* 1.04 1.51 0.57
Net realized and unrealized gain (loss)............ (1.11) (1.05) (0.34) 0.93
------- ------- ------- -------
Total Income (Loss) From Operations.................. (0.31) (0.01) 1.17 1.50
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income.............................. (0.69) (1.00) (1.66) (0.36)
Net realized gains................................. -- (0.06) (0.97) (0.01)
------- ------- ------- -------
Total Distributions.................................. (0.69) (1.06) (2.63) (0.37)
------- ------- ------- -------
NET ASSET VALUE, END OF YEAR......................... $ 7.60 $ 8.60 $ 9.67 $ 11.13
------- ------- ------- -------
------- ------- ------- -------
NET ASSETS, END OF YEAR (000S)....................... $51,415 $37,367 $22,664 $ 6,575
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN......................................... (3.7)% 0.1% 11.1% 15.1%'DD'
RATIOS TO AVERAGE NET ASSETS:
Expenses(c)........................................ 0.55% 0.55% 0.55% 0.55%'D'
Net investment income.............................. 9.70% 8.80% 9.10% 9.36%'D'
PORTFOLIO TURNOVER RATE.............................. 39% 102% 189% 151%
Before waiver of management fee, expenses reimbursed
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.................. $0.77* $0.94 $0.93 $0.29
Expense ratio.................................... 0.89% 1.39% 4.03% 5.22%'D'
</TABLE>

- -------------------
(a) For the year ended February 29, 2000.
(b) For the period from May 15, 1996 (inception date) to February 28, 1997.
(c) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.55%.
* Per share amounts have been calculated using the monthly average shares
method.
'DD' Total return is not annualized, as it may not be representative of the
total return for the year.
'D' Annualized.

PAGE 25

<PAGE>

<TABLE>
<CAPTION>
EMERGING MARKETS DEBT FUND
-------------------------------------
2000(a) 1999 1998 1997(b)
------- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR................... $ 4.95 $ 7.21 $ 10.91 $ 10.00
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.............................. 0.65* 0.62 1.69 0.35
Net realized and unrealized gain (loss)............ 1.32 (2.29) (0.27) 0.78
------- ------- ------- -------
Total Income (Loss) From Operations.................. 1.97 (1.67) 1.42 1.13
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income.............................. (0.61) (0.59) (1.77) (0.20)
Net realized gains................................. -- (0.00)** (3.35) ( 0.02)
------- ------- ------- -------
Total Distributions.................................. (0.61) (0.59) (5.12) (0.22)
------- ------- ------- -------
NET ASSET VALUE, END OF YEAR......................... $ 6.31 $ 4.95 $ 7.21 $ 10.91
------- ------- ------- -------
------- ------- ------- -------
NET ASSETS, END OF YEAR (000S)....................... $62,429 $30,523 $14,596 $ 6,211
------- ------- ------- -------
------- ------- ------- -------
TOTAL RETURN......................................... 40.4% (23.1)% 14.6% 11.4%'DD'
RATIOS TO AVERAGE NET ASSETS:
Expenses(c)........................................ 0.75% 0.75% 0.75% 0.75%'D'
Net investment income.............................. 11.12% 13.61% 8.53% 8.94%'D'
PORTFOLIO TURNOVER RATE.............................. 203% 295% 549% 136%
Before waiver of management fee, expenses reimbursed
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.................. $0.63* $0.59 $1.18 $0.08
Expense ratio.................................... 1.02% 1.50% 3.34% 7.57%'D'
</TABLE>

- -------------------
(a) For the year ended February 29, 2000.
(b) For the period from October 17, 1996 (inception date) to February 28, 1997.
(c) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.75%.
* Per share amounts have been calculated using the monthly average shares
method.
** Amount represents less than $0.01 per share.
'DD' Total return is not annualized, as it may not be representative of the
total return for the year.
'D' Annualized.

PAGE 26

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC

In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and financial highlights present fairly, in all material
respects, the financial position of the Salomon Brothers Institutional High
Yield Bond Fund and Salomon Brothers Institutional Emerging Markets Debt Fund
(constituting Salomon Brothers Institutional Series Funds Inc, hereafter
referred to as the 'Fund') at February 29, 2000, the results of each of their
operations for the year then ended, the changes in each of their net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
February 29, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
New York, New York
April 12, 2000

PAGE 27

<PAGE>

SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
OTHER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------

Year 2000 Issue. As the year 2000 began, there were few problems caused by the
inability of certain computer systems to tell the difference between the year
2000 and the year 1900 (commonly known as the 'Year 2000' issue). It is still
possible that some computer systems could malfunction in the future because of
the year 2000 issue or as a result of actions taken to address the Year 2000
issue. The Investment Adviser does not anticipate that its services or those of
the Funds' other service providers will be adversely affected, but the
Investment Adviser will continue to monitor the situation. If malfunctions
related to the Year 2000 issue do arise, the Funds and their investments could
be negatively affected.

PAGE 28

<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
PNC Bank
8800 Tinicom Blvd.
Suite 200
Philadelphia, Pennsylvania 19153

DIVIDEND DISBURSING AND TRANSFER AGENT
PFPC Global Fund Services
P.O. Box 9764
Providence, RI 02940-9764

LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman;
ASARCO Inc.

CAROL L. COLMAN
Consultant, Colman Consulting

DANIEL P. CRONIN
Vice President-General Counsel,
Pfizer International Inc.

HEATH B. MCLENDON
Chairman and President, Managing Director,
Salomon Smith Barney Inc.; President and Director,
SSB Citi Fund Management LLC and Travelers Investment Adviser, 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
Controller

CHRISTINA T. SYDOR
Secretary

- -----------------------------------------------------------------
SALOMON BROTHERS INSTITUTIONAL SERIES FUNDS INC
-------------------------------------------------------------

STATEMENT OF DIFFERENCES

The dagger symbol shall be expressed as..............................`D'
The doublt dagger symbol shall be expressed as......................`DD'