<PAGE> 1
- --------------------------------------------------------------------------------
SALOMON BROTHERS
INVESTMENT SERIES
ANNUAL REPORT
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
CASH MANAGEMENT FUND
NEW YORK MUNICIPAL
BOND FUND
NATIONAL INTERMEDIATE
MUNICIPAL FUND
U.S. GOVERNMENT
INCOME FUND
HIGH YIELD BOND FUND
STRATEGIC BOND FUND
TOTAL RETURN FUND
INVESTORS FUND
------------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
----------------------------------------
<PAGE> 2
SALOMON BROTHERS INVESTMENT SERIES
February 16, 1996
To Our Shareholders:
We are pleased to provide this annual report for the period ended December 31,
1995 for the Salomon Brothers Investment Series, which includes the Salomon
Brothers Cash Management Fund, Salomon Brothers New York Municipal Bond Fund,
Salomon Brothers National Intermediate Municipal Fund, Salomon Brothers U.S.
Government Income Fund, Salomon Brothers High Yield Bond Fund, Salomon Brothers
Strategic Bond Fund, Salomon Brothers Total Return Fund and Salomon Brothers
Investors Fund. On the following pages, you will find a performance review for
each fund, their audited financial statements for the period ended December 31,
1995, the related report of independent accountants and other information about
the funds.
The stock market enjoyed a banner year in 1995, with the Standard & Poor's
Index of 500 stocks rising by 37.5% on a total return basis. Volatility
remained low for the third year in a row. Moderate economic growth, low
inflation, declining interest rates and strong growth in corporate profits
created ideal conditions for the market. In the U.S., large capitalization
stocks led the advance, and technology, health care and financial services
companies were the best performing groups.
The bond market also experienced an impressive rally in 1995, as the Salomon
Brothers Broad Investment Grade Bond Index increased 18.5% for the year. The
rally was supported by signs of economic growth deceleration and an overall
shift in investor sentiment that the Federal Reserve Board would remain under
pressure to ease monetary policy by lowering interest rates. Investor sentiment
in the municipal bond market turned sharply negative in the second quarter,
when fears of a flat tax surfaced. These concerns began to dissipate at the end
of the year, and the market has performed relatively well versus Treasuries
since then.
Global economic weakness continues to dominate our thinking. In the U.S., there
has been ample confirmation of the uneven quality of the current expansion. Job
growth has slowed. Although housing starts have bounced back somewhat, it will
likely take a substantial drop in mortgage rates to trigger any meaningful
pickup in the months ahead. Despite weakness abroad, exports show surprising
vigor. The dollar's strengthening, however, could slow further growth in that
area. Although external demand for U.S. goods remains solid, domestic demand is
suffering as the economic expansion matures, consumer debt burdens grow and
income gains slow.
Reinforced by fiscal restraint, these factors point to a period of slower
growth that will encourage further easing of monetary policy by the Federal
Reserve. We continue to look for an economic environment characterized by slow
growth and low inflation.
Page 1
<PAGE> 3
All of us at Salomon Brothers Asset Management Inc appreciate the confidence
you have demonstrated in the past and hope to continue to justify such
confidence in the future. Please call us with any questions or to receive a
prospectus containing more complete information regarding the Funds at
1-800-SALOMON (1-800-725-6666).
Cordially,
/S/ MICHAEL S. HYLAND
- ------------------------------------
Michael S. Hyland
Chairman and President
Page 2
<PAGE> 4
SALOMON BROTHERS INVESTMENT SERIES
Portfolio Review
NEW YORK MUNICIPAL BOND FUND
The New York Municipal Bond Fund commenced investment operations on February 1,
1993. On January 3, 1995 the Fund began offering Class A, Class B, Class C and
Class O Shares. The Fund seeks a high level of current income which is exempt
from regular Federal income taxes and New York State and New York City personal
income taxes, consistent with the preservation of capital.
For the period January 3, 1995 through December 31, 1995, the Fund had a total
return exclusive of sales charges of 17.7% for Class A Shares, 17.0% for Class
B Shares, 17.0% for Class C Shares and 18.8% for Class O Shares. Total return
for the Fund including the effects of the maximum 4.75% front-end and any
applicable deferred sales charges was 12.1% for Class A Shares, 12.0% for Class
B Shares, 16.0% for Class C Shares and 18.8% for Class O Shares for the same
period. This compares with a total return of 19.0% for the twelve-month period
ended December 31, 1995 for the Lehman Brothers 7 Year through Long Municipal
Bond Index* and a 16.7% average of 88 New York Municipal Bond Funds tracked by
Lipper Analytical Services, Inc.
The Fund's underperformance, prior to the deduction of applicable sales
charges, relative to the benchmark was caused by our emphasis on income rather
than principal appreciation.
The portfolio contained a large percentage of longer maturity bonds and some
Baa/BBB rated credits. As interest rates fell during the year, investors began
purchasing lower rated investment grade bonds for additional yield. As a
result, the Fund not only benefited from the decline in interest rates, but
also from a relatively strong performance of many lower rated credits. Income
was enhanced by owning long maturity bonds, lower rated credits and by a number
of older high coupon bonds in the portfolio.
As the market rallied during 1995, many of the longer bonds began trading to
shorter calls, thus limiting their upside potential. Since we believed the bond
market would continue to appreciate in price, we repositioned the portfolio by
selling some of those bonds trading to their call. We then purchased current
coupon municipals to allow for continued price appreciation. Additionally, we
upgraded the average credit quality of the portfolio by selling some lower
rated credits which had performed relatively well and in our opinion no longer
offered the same value.
<TABLE>
<CAPTION>
AAA AA A BBB Other Assets
----- ----- ----- --- ------------
<S> <C> <C> <C> <C> <C>
New York Municipal Bond Fund 10.55 10.65 27.03 44 7.77
</TABLE>
* The Lehman Brothers 7 Year through Long Municipal Bond Index is an average
of the 7, 10, 15, 20 and Long Bond Indices.
Page 3
<PAGE> 5
SALOMON BROTHERS INVESTMENT SERIES
Portfolio Review (continued)
NATIONAL INTERMEDIATE MUNICIPAL FUND
The National Intermediate Municipal Fund seeks to achieve a high level of
current income which is exempt from regular Federal income taxes by investing
primarily in a portfolio of municipal securities.
For the period February 22, 1995 (commencement of investment operations)
through December 31, 1995, the Fund had a total return exclusive of sales
charges of 8.7% for Class A Shares, 8.0% for Class B Shares, 8.0% for Class C
Shares and 9.0% for Class O Shares. Total return for the Fund including the
effects of the maximum 4.75% front-end and any applicable deferred sales
charges was 3.6% for Class A Shares, 3.0% for Class B Shares, 7.0% for Class C
Shares and 9.0% for Class O Shares for the same period. This compares with a
total return of 9.2% for the Lehman Brothers 1-10 year Municipal Bond Index*
and an 8.4% average of 31 Intermediate Municipal Bond Funds tracked by Lipper
Analytical Services, Inc.
The Fund's modest underperformance, prior to the deduction of applicable sales
charges, relative to the benchmark was caused by our emphasis on current income
rather than principal appreciation.
During 1995, the average maturity of the Fund was toward the longer end of its
ten-year maturity constraint. The Fund's longer maturity bias enabled it to
participate in 1995's bond market rally. However, in accordance with its
investment objective, the Fund also held a significant number of higher coupon
bonds to bolster current income.
<TABLE>
<CAPTION>
AAA AA A BBB Other Assets
----- ----- ----- ----- ------------
<S> <C> <C> <C> <C> <C>
National Intermediate Municipal Fund 47.71 16.27 18.94 12.99 4.09
</TABLE>
* The Lehman Brothers 1-10 year Municipal Bond Index is the weighted average
of the 1, 3, 5, 7 and 10 year indexes. The Lehman Brothers 1-10 year
Municipal Bond 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
February 22, 1995 through December 31, 1995, the Index returns are for the
period March 1, 1995 through December 31, 1995.
Page 4
<PAGE> 6
SALOMON BROTHERS INVESTMENT SERIES
U.S. GOVERNMENT INCOME FUND
The U.S. Government Income Fund seeks to obtain a high level of current income
by investing under normal circumstances 100% of its assets in debt obligations
and mortgage-backed securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
For the period February 22, 1995 (commencement of investment operations)
through December 31, 1995, the Fund had a total return exclusive of sales
charges of 9.5% for Class A Shares, 8.8% for Class B Shares, 8.8% for Class C
Shares and 9.7% for Class O Shares. Total return for the Fund including the
effects of the maximum 4.75% front-end and any applicable deferred sales
charges was 4.3% for Class A Shares, 3.8% for Class B Shares, 7.8% for Class C
Shares and 9.7% for Class O Shares for the same period. This compares with a
total return of 9.1% for the Salomon Brothers 1-5 year Treasury Bond Index* and
a 7.8% average of 138 Short-Term U.S. Government Bond Funds tracked by Lipper
Analytical Services, Inc.
The Fund, prior to the deduction of applicable sales charges, relative to the
benchmark, outperformed for Class A Shares and Class O Shares while
underperformed for Class B Shares and Class C Shares. The portfolio's average
maturity was relatively long compared to the benchmark during 1995. This
structure contributed significantly to the Fund's results. The Fund's
performance also benefited from its position in discount mortgage
pass-throughs. The Fund's strategy will continue to emphasize longer-term
instruments, given our view that interest rates will fall further.
<TABLE>
<CAPTION>
US MORTG SHORT TERM
-- ----- ----------
<S> <C> <C> <C>
U.S. Government Income Fund 59 36 5
</TABLE>
* The Salomon Brothers 1-5 Treasury Bond 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 February 22, 1995 through December 31, 1995, the Index
returns are for the period March 1, 1995 through December 31, 1995.
Page 5
<PAGE> 7
SALOMON BROTHERS INVESTMENT SERIES
Portfolio Review (continued)
HIGH YIELD BOND FUND
The High Yield Bond Fund seeks to maximize current income by investing
primarily in a diversified portfolio of high yield fixed-income securities
rated in medium or lower rating categories or determined by the investment
manager to be of comparable quality.
For the period February 22, 1995 (commencement of investment operations)
through December 31, 1995, the Fund had a total return exclusive of sales
charges of 16.6% for Class A Shares, 15.7% for Class B Shares, 15.8% for Class
C Shares and 16.8% for Class O Shares. Total return for the Fund including the
effects of the maximum 4.75% front-end and any applicable deferred sales
charges was 11.0% for Class A Shares, 10.7% for Class B Shares, 14.8% for Class
C Shares and 16.8% for Class O Shares for the same period. This compares with a
total return of 14.2% for the Salomon Brothers High Yield Market Index* and a
13.0% average of 153 High Yield Market Funds tracked by Lipper Analytical
Services, Inc.
The Fund's out-performance relative to the benchmark, prior to the deduction of
applicable sales charges, relative to the benchmark, was the result of the 20%
portfolio allocation to emerging market and high yield sovereign debt
securities during the year. Both were strong performers during the period. The
Fund started buying emerging markets and sovereign debt securities in
early 1995. The market at that time was declining as a result of the large
sell-off that followed the devaluation of the Mexican peso in December 1994.
The Fund's allocation to this sector is in U.S. dollar-denominated government
debt or Brady Bonds which declined as a side effect of the peso-denominated
market sell-off. From February 28, 1995 to December 31, 1995 Brady Bonds
generally returned 38.11% as measured by the Salomon Brothers Brady Bond Index.
Also contributing to the Fund's out-performance was a rotation in the portfolio
to more defensive, non-cyclical corporate debt issues. Non-cyclical debt
issues totaled 33.2% of the corporate bond portion of the portfolio at December
31, 1995. As U.S. economic growth slowed, non-cyclical issues out-performed
cyclical corporate debt issues significantly.
We continue to maintain a defensive posture in the Fund with a 15.7% allocation
in U.S. dollar-denominated international investments. We expect to rotate the
corporate debt exposure to more cyclical companies when the U.S. economy shows
signs of strengthening. We will reduce the allocation to emerging market
government bonds when we feel the market has completely recovered from last
year's sell-off.
<TABLE>
<CAPTION>
CORPORATE SOVEREIGN LOAN SHORT TERM
--------- --------- ---- ----------
<S> <C> <C> <C> <C>
High Yield Bond Fund 76.9 15.7 1.1 6.3
</TABLE>
* The Salomon Brothers 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 February 22, 1995 through December 31, 1995, the Index
returns are for the period March 1, 1995 through December 31, 1995.
Page 6
<PAGE> 8
SALOMON BROTHERS INVESTMENT SERIES
STRATEGIC BOND FUND
The Strategic Bond Fund seeks a high level of current income by investing in a
globally diverse portfolio of fixed-income investments and by giving the
investment manager broad discretion to deploy the Fund's assets among certain
segments of the fixed income market that the investment manager believes will
best contribute to the achievement of the Fund's objective. As a secondary
objective, the Fund seeks capital appreciation.
For the period February 22, 1995 (commencement of investment operations)
through December 31, 1995, the Fund had a total return exclusive of sales
charges of 16.8% for Class A Shares, 16.1% for Class B Shares, 16.1% for Class
C Shares and 17.0% for Class O Shares. Total return for the Fund including the
effects of the maximum 4.75% front-end and any applicable deferred sales
charges was 11.3% for Class A Shares, 11.1% for Class B Shares, 15.1% for Class
C Shares and 17.0% for Class O Shares for the same period. This compares with a
total return of 13.5% for the Salomon Brothers Broad Investment Grade Index*
and a 14.5% average of 161 General Bond Funds tracked by Lipper Analytical
Services, Inc.
The Fund's out-performance, prior to deduction of applicable sales charges,
relative to the benchmark, was driven by significant positions in high yield
and emerging markets debt. The two sectors, accounting for 70% to 75% of
holdings in 1995, were the best performers in the fixed income markets last
year. The emerging debt markets achieved particularly strong performance in the
fourth quarter. The Fund's investment strategy continues to emphasize positions
in high yield bonds which should continue to perform well in a slow-growing
economic environment. The Fund also maintains positions in emerging debt
markets which are likely to benefit from increasing investor confidence and
participation.
<TABLE>
<CAPTION>
HIGH YIELD INVESTMENT GRADE EMERGING SOVEREIGN US GOV MORTGAGED SHORT TERM
---------- ---------------- -------- --------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Strategic Bond Fund 43.47 1.65 19.19 7.06 0.44 12.96 15.23
</TABLE>
* The Salomon Brothers Broad Investment Grade 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 February 22, 1995 through December 31, 1995,
the Index returns are for the period March 1, 1995 through December 31,
1995.
Page 7
<PAGE> 9
SALOMON BROTHERS INVESTMENT SERIES
Portfolio Review (continued)
TOTAL RETURN FUND
The Total Return Fund seeks to obtain above-average income compared to a
portfolio entirely invested in equity securities by investing in a broad
variety of securities including equity securities, fixed income securities and
short-term obligations. As a secondary objective, the Fund will seek to take
advantage of opportunities for growth of capital and income.
For the period September 11, 1995 (commencement of investment operations)
through December 31, 1995, the Fund had a total return exclusive of sales
charges of 6.7% for Class A Shares, 6.4% for Class B Shares, 6.5% for Class C
Shares and 6.9% for Class O Shares. Total return for the Fund including the
effects of the maximum 4.75% front-end and any applicable deferred sales
charges was 1.6% for Class A Shares, 1.4% for Class B Shares, 5.5% for Class C
Shares and 6.9% for Class O Shares for the same period. This compares with a
total return of 6.5% for a composite index of 50% Standard and Poor's 500
Composite Stock Price Index and 50% Salomon Brothers Broad Investment Grade
Bond Index and a 5.0% average of 30 Balanced Funds tracked by Lipper Analytical
Services, Inc.
The Fund's out-performance, prior to deduction of applicable sales charges,
relative to the benchmark was driven, in part, by portfolio allocations such as
high yield bonds and convertible securities. Significant sector concentrations
in the equity portfolio including an overweighted position in energy stocks
also contributed to positive performance. This diversification between stocks
and bonds is aimed at reducing the volatility of the Fund's performance over
the long term and at producing above-average current income compared to a
portfolio of stocks only.
In 1995, the stock market rose to historically high valuation levels. The high
levels were supported by record corporate profitability and substantially lower
interest rates. In 1996, we believe that earnings in cyclical stocks, such as
auto, paper, chemical and technology companies, may be disappointing in the
context of a slowing economy.
As a result of the large gains in the stock market in 1995, the Fund has
developed a somewhat conservative stance. Our current portfolio allocations are
approximately 45% equities, 40% bonds, 10% convertible and preferred securities
and 5% short-term investments. In terms of the bond allocation, we believe that
high yield bonds offer the most attractive relative value at this time. The
equity portfolio is overweighted in oil companies such as Amoco, Royal Dutch
Petroleum and Exxon due to an improving outlook for this industry sector as
well as the defensive character of their relatively high dividend yields. Other
major equity positions are in utilities and Real Estate Investment Trusts
(REITs).
<TABLE>
<CAPTION>
CMMN ST IVST GRD HIGH CONVERTIBLE PREFERRED US SHORT TERM
------- -------- ---- ----------- --------- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return Fund 43.2 3.8 15.5 7 4.6 15.3 10.6
</TABLE>
Page 8
<PAGE> 10
SALOMON BROTHERS INVESTMENT SERIES
INVESTORS FUND
The Investors Fund commenced operations on May 29, 1958. On January 3, 1995 the
Fund began offering Class A, Class B, Class C and Class O Shares. The Investors
Fund seeks long-term growth of capital by investing primarily in common stocks
of well-known companies with current income as a secondary goal.
Allan R. White, who previously shared primary responsibility for the day-to-day
portfolio management of the Fund with another senior portfolio manager, has
assumed sole responsibility for these matters. He is aided by Pamela Milunovich
as junior portfolio manager. A Vice President with the Fund's investment
advisor, Salomon Brothers Asset Management Inc, Ms. Milunovich brings 10 years
of experience to the Fund. In her role as Senior Analyst for Salomon Brothers
Asset Management Inc, Ms. Milunovich has been responsible for stock selection
in the financial, retail and computer service sectors.
For the period January 3, 1995 through December 31, 1995, the Fund had a total
return exclusive of sales charges of 35.3% for Class A Shares, 34.5% for Class
B Shares, 34.5% for Class C Shares and 35.4% for Class O Shares. Total return
for the Fund including the effects of the maximum 4.75% front-end and any
applicable deferred sales charges was 28.9% for Class A Shares, 29.5% for Class
B Shares, 33.5% for Class C Shares and 35.4% for Class O Shares for the same
period. This compares with a total return of 37.5% for the twelve months ended
December 31, 1995 for the Standard and Poor's 500 Composite Stock Price Index
and a 30.8% average of 439 Growth and Income Funds tracked by Lipper Analytical
Services, Inc.
The Fund's under-performance, prior to the deduction of the applicable sales
charges, relative to the benchmark was due in part to the result of the Fund's
cash position. Our holdings in financial stocks performed well. Technology
holdings were pared to a below-market weight in the second quarter -- a
position that underperformed initially, but helped results in the last part of
the year. The Fund's position in retail stocks is divided between department
stores (Federated Department Stores and Sears, Roebuck) and food retailers
(Penn Traffic, Kroger, Stop & Shop Companies and Albertson's). Despite
the challenging consumer environment, department store stocks were strong
performers in 1995. In fact, Sears, Roebuck was the second best performing
stock in the Dow Jones Industrial Average Index for the year.
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE
CMMN ST PREFERRED BONDS US SHORT TERM
------- ----------- ----------- -- ----------
<S> <C> <C> <C> <C> <C>
Investors Fund 88.3 1.8 1.2 1 7.7
</TABLE>
Page 9
<PAGE> 11
SALOMON BROTHERS INVESTMENT SERIES
Portfolio Review (concluded)
With the chance of earnings disappointments increasing in a slowing economy,
the Fund is emphasizing companies with less cyclical exposure and more
predictable earnings growth. SmithKline Beecham-ADR, First Data and The Bank of
New York are among the Fund's top ten holdings. We consider companies that are
restructuring such as Ball, Federated Department Stores and Sears, Roebuck to
be defensive holdings in a decelerating economy since they are less dependent
on top line growth to achieve their earnings estimates. In addition, we
have added holdings of companies with middle-size capitalizations ($500 million
to $5 billion) to the Fund's portfolio over the past several months. These
companies typically have less overseas exposure than larger firms, and thus
these holdings should help insulate the portfolio from potential negative
effects of decelerating European markets and the impact of a stronger dollar.
Page 10
<PAGE> 12
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE (NOTE
AMOUNT DESCRIPTION PURCHASE* DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL PAPER -- 29.4%
CONSUMER NON-CYCLICALS -- 3.6%
$ 400,000 Heinz (HJ)................................. 5.600% 02/06/96 $ 397,760
-----------
FINANCIAL SERVICES -- 7.3%
400,000 BIL North America.......................... 5.750 01/16/96 399,042
400,000 Ford Motor Credit.......................... 5.550 02/13/96 397,348
-----------
796,390
-----------
MEDIA -- 3.7%
400,000 Gannett.................................... 5.630 01/26/96 398,436
-----------
MUNICIPAL -- 7.4%
400,000 De Kalb County, Georgia Development
Authority................................ 5.950 01/25/96 400,000
400,000 Methodist Hospital (Houston, Texas)........ 5.950 01/02/96 400,000
-----------
800,000
-----------
TELECOMMUNICATIONS & UTILITIES -- 3.7%
400,000 U.S. West Communications................... 5.700 01/25/96 398,480
-----------
TRANSPORTATION -- 3.7%
400,000 Daimler-Benz NA............................ 5.670 01/26/96 398,425
-----------
TOTAL COMMERCIAL PAPER
(cost $3,189,491)........................ 3,189,491
-----------
FLOATING RATE NOTES -- 60.0%
ALABAMA -- 3.7%
400,000 Selma, Alabama Industrial Development Board
VR....................................... 6.280 01/09/96 400,000
-----------
CALIFORNIA -- 3.7%
400,000 Pasadena, California Certificates of
Participation VR......................... 6.000 01/02/96 400,000
-----------
FLORIDA -- 3.7%
400,000 Florida Housing Finance Agency VR.......... 5.860 01/03/96 400,000
-----------
ILLINOIS -- 3.7%
400,000 Illinois Student Assistance Commission
VR....................................... 6.160 01/03/96 400,000
-----------
MICHIGAN -- 1.8%
200,000 Genesis Health Systems VR.................. 5.930 01/03/96 200,000
-----------
NEW JERSEY -- 5.1%
260,000 New Jersey Economic Development
Authority VR............................. 6.070 01/02/96 260,000
300,000 New Jersey Economic Development
Authority VR............................. 6.190 01/02/96 300,000
-----------
560,000
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 11
<PAGE> 13
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS CASH MANAGEMENT FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE (NOTE
AMOUNT DESCRIPTION PURCHASE* DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK -- 19.8%
$ 400,000 Fulton County, New York Industrial
Development Agency VR.................... 6.000% 01/04/96 $ 400,000
400,000 Health Insurance Plan,
Greater New York VR...................... 5.950 01/03/96 400,000
400,000 New York, New York
Industrial Development Agency VR......... 6.000 01/03/96 400,000
150,000 New York, New York
Industrial Development Agency VR......... 6.000 01/03/96 150,000
400,000 New York, New York GO VR................... 6.000 01/03/96 400,000
400,000 Syracuse, New York GO VR................... 7.000 01/03/96 400,000
-----------
2,150,000
-----------
NORTH CAROLINA -- 3.7%
400,000 Greensboro, North Carolina GO VR........... 6.050 01/03/96 400,000
-----------
TENNESSEE -- 3.7%
400,000 Community Health Systems VR................ 6.100 01/03/96 400,000
-----------
TEXAS -- 7.4%
400,000 Texas State GO VR.......................... 5.860 01/03/96 400,000
400,000 Tyler, Texas Health Facilities
Development VR........................... 6.100 01/03/96 400,000
-----------
800,000
-----------
VIRGINIA -- 3.7%
400,000 Virginia State, Housing Development
Authority VR............................. 5.950 01/03/96 400,000
-----------
TOTAL FLOATING RATE NOTES
(cost $6,510,000)........................ 6,510,000
-----------
TOTAL INVESTMENTS -- 89.4%
(cost $9,699,491)........................ 9,699,491
REPURCHASE AGREEMENT -- 9.5%
1,036,551 Repurchase Agreement dated 12/29/95, with
J.P. Morgan, collateralized by $795,000
U.S. Treasury Bonds, 8.500%, due
02/15/20, valued at $1,058,344; proceeds:
$1,037,213 (cost $1,036,551)............. 5.750 01/02/96 1,036,551
Other assets in excess of
liabilities -- 1.1%...................... 124,762
-----------
NET ASSETS -- 100.0%....................... $10,860,804
============
</TABLE>
* Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR), whose yields are determined on date of last interest rate
change. For Variable Rate Demand Notes, maturity date shown is the date of
next interest rate change.
Abbreviation used in this statement:
GO -- General Obligation
See accompanying notes to financial statements.
PAGE 12
<PAGE> 14
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL SECURITIES -- 92.2%
NEW YORK -- 78.9%
$150,000 Metropolitan Transportation Authority New
York FSA................................... 5.700% 07/01/24 $ 152,012
300,000 New York City, New York
Municipal Water Finance Authority.......... 6.000 06/15/17 307,992
300,000 New York City, New York GO................... 7.375 08/15/13 340,968
300,000 New York City, New York GO................... 6.750 10/01/17 318,246
200,000 New York State GO............................ 6.000 03/15/20 208,436
250,000 New York State,
Local Government Assistance
Corporation................................ 6.000 04/01/18 261,725
100,000 New York State,
Medical Care Facilities Finance Agency..... 6.000 02/15/11 100,955
100,000 New York State,
Medical Care Facilities Finance Agency
MBIA....................................... 5.900 02/15/21 104,357
150,000 New York State,
Urban Development Corporation.............. 5.500 01/01/19 148,263
100,000 New York State, Dormitory Authority
(City University System of New York)....... 5.750 07/01/18 102,034
315,000 New York State, Dormitory Authority
(State University Educational
Facilities)................................ 6.000 05/15/17 316,777
200,000 New York State, Mortgage Agency.............. 6.500 04/01/13 208,236
250,000 New York State, Thruway Authority............ 6.000 04/01/10 254,083
200,000 Suffolk County, New York
Industrial Development Agency VR........... 5.850 01/02/96 200,000
----------
3,024,084
----------
PUERTO RICO -- 13.3%
250,000 Puerto Rico Commonwealth, GO................. 6.000 07/01/14 258,058
250,000 Puerto Rico Commonwealth, Highway Authority.. 6.000 07/01/20 254,033
----------
512,091
----------
TOTAL INVESTMENTS -- 92.2%
(cost $3,385,615).......................... 3,536,175
Other assets in excess of
liabilities -- 7.8%........................ 297,776
----------
NET ASSETS -- 100.0%......................... $3,833,951
==========
</TABLE>
Abbreviations used in this statement:
FSA -- Insured as to principal and interest by the Financial Security Assurance
Corporation.
GO -- General Obligation
MBIA -- Insured as to principal and interest by the Municipal Bond Insurance
Association.
VR -- Variable Rate Demand Note. Maturity date shown is the date of next
interest rate change.
See accompanying notes to financial statements.
PAGE 13
<PAGE> 15
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL SECURITIES -- 95.9%
CALIFORNIA -- 2.8%
$ 285,000 Los Angeles, California AMBAC.............. 6.000% 08/01/03 $ 309,162
-----------
CONNECTICUT -- 4.7%
500,000 Connecticut State GO....................... 5.250 03/15/06 518,365
-----------
FLORIDA -- 1.7%
180,000 Florida Housing Finance Agency............. 6.150 07/01/06 187,245
-----------
ILLINOIS -- 6.8%
300,000 Chicago, Illinois Metropolitan Water GO.... 5.900 12/01/06 326,454
400,000 Illinois Student Assistance Commission..... 6.400 03/01/04 418,316
-----------
744,770
-----------
INDIANA -- 9.3%
300,000 Indiana Secondary Market for Education..... 5.550 12/01/05 305,715
650,000 Indiana Transportation Finance Authority... 6.250 11/01/03 709,592
-----------
1,015,307
-----------
LOUISIANA -- 4.5%
450,000 Louisiana Public Facilities Authority...... 6.750 09/01/06 487,548
-----------
MASSACHUSETTS -- 4.1%
400,000 Commonwealth of Massachusetts,
Health & Educational Facilities
Authority................................ 6.500 12/01/05 445,140
-----------
MICHIGAN -- 4.3%
475,000 Michigan State,
Housing Development Authority FGIC....... 6.300 04/01/03 476,036
-----------
MISSISSIPPI -- 4.6%
480,000 Mississippi Higher Education............... 6.050 09/01/07 500,323
-----------
NEW JERSEY -- 4.4%
450,000 Passaic Valley, New Jersey
Sewer Commission AMBAC................... 5.750 12/01/07 478,026
-----------
NEW YORK -- 23.8%
700,000 New York State, Dormitory Authority
MBIA..................................... 5.600 07/01/06 732,249
400,000 New York State, Dormitory Authority
(State University of New York)........... 6.625 07/01/04 454,676
500,000 New York State, Mortgage Agency............ 5.900 10/01/06 508,310
400,000 New York State, Thruway Authority MBIA..... 6.000 01/01/04 435,752
450,000 New York, New York GO...................... 6.500 02/01/02 476,564
-----------
2,607,551
-----------
PENNSYLVANIA -- 8.4%
400,000 Geisinger Authority, Pennsylvania Health
System................................... 6.000 07/01/01 428,168
500,000 Monroeville, Pennsylvania Hospital
Authority................................ 5.750 10/01/05 490,815
-----------
918,983
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 14
<PAGE> 16
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOUTH CAROLINA -- 7.7%
$ 750,000 South Carolina State,
Public Service Authority FGIC.............. 6.500% 01/01/05 $ 845,257
-----------
TEXAS -- 8.8%
500,000 Austin, Texas Airport Systems MBIA......... 6.500 11/15/05 560,770
400,000 Central Texas Higher Education Authority... 5.200 12/01/04 405,112
-----------
965,882
-----------
TOTAL INVESTMENTS -- 95.9%
(cost $10,075,715)....................... 10,499,595
Other assets in excess of
liabilities -- 4.1%...................... 447,445
-----------
NET ASSETS -- 100.0%....................... $10,947,040
============
</TABLE>
Abbreviations used in this statement:
AMBAC -- Insured as to principal and interest by the American Municipal Bond
Assurance Corporation.
FGIC -- Insured as to principal and interest by the Financial Guaranty
Insurance Company.
GO -- General Obligation
MBIA -- Insured as to principal and interest by the Municipal Bond Insurance
Association.
See accompanying notes to financial statements.
PAGE 15
<PAGE> 17
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. TREASURY NOTES -- 59.2%
$ 300,000 U.S. Treasury Note........................ 7.750% 01/31/00 $ 325,875
150,000 U.S. Treasury Note........................ 6.750 04/30/00 157,851
1,000,000 U.S. Treasury Note........................ 6.500 08/15/05 1,065,310
1,350,000 U.S. Treasury Note........................ 6.125 05/31/97 1,366,457
3,200,000 U.S. Treasury Note........................ 7.125 02/29/00 3,406,496
-----------
TOTAL U.S. TREASURY NOTES
(cost $6,077,872)....................... 6,321,989
-----------
U.S. GOVERNMENT AGENCY -- 36.1%
100,000 Federal Home Loan Bank.................... 5.940 06/13/00 101,547
78,138 Federal Home Loan Mortgage Corporation.... 6.000 07/01/10 77,306
715,249 Federal Home Loan Mortgage Corporation.... 6.000 08/01/10 707,632
386,959 Federal Home Loan Mortgage Corporation.... 6.000 09/01/10 382,838
565,229 Federal Home Loan Mortgage Corporation.... 6.000 10/01/10 560,096
41,051 Federal Home Loan Mortgage Corporation.... 6.000 10/01/10 40,678
264,190 Federal National Mortgage Association..... 11.500 02/01/20 301,200
1,500,000 Federal National Mortgage
Association(a).......................... 6.500 ** 1,480,781
200,000 Government National Mortgage Association.. 7.000 01/22/26 202,094
-----------
TOTAL U.S. GOVERNMENT AGENCY
(cost $3,772,885)....................... 3,854,172
-----------
TOTAL INVESTMENTS -- 95.3%
(cost $9,850,757)....................... 10,176,161
-----------
REPURCHASE AGREEMENTS -- 19.4%
1,032,000 Repurchase Agreement dated 12/29/95, with
J.P. Morgan, collateralized by $791,000
U.S. Treasury Bonds, 8.500%, due
02/15/20, valued at $1,053,019;
proceeds: $1,032,659.................... 5.750 01/02/96 1,032,000
1,032,000 Repurchase Agreement dated 12/29/95, with
Merrill Lynch, collateralized by
$1,040,000 U.S. Treasury Notes, 5.625%,
due 10/31/97, valued at $1,056,900;
proceeds: $1,032,642.................... 5.600 01/02/96 1,032,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,064,000)....................... 2,064,000
-----------
Liabilities in excess of other
assets -- (14.7%)....................... (1,565,222)
-----------
NET ASSETS -- 100.0%...................... $10,674,939
============
</TABLE>
(a) Mortgage Dollar Roll. See Note 1.
** TBA -- To be announced.
See accompanying notes to financial statements.
PAGE 16
<PAGE> 18
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 76.9%
BASIC INDUSTRIES -- 19.9%
$ 500,000 Asia Pulp & Paper International Finance... 11.750% 10/01/05 $ 490,000
400,000 Crown Paper............................... 11.000 09/01/05 350,000
250,000 Foamex.................................... 11.875 10/01/04 245,000
500,000 Harris Chemical (Zero Coupon until
01/15/96, 10.25% thereafter)(a)......... 11.109 07/15/01 475,000
250,000 Indah Kiat International Finance.......... 12.500 06/15/06 250,000
1,000,000 International Semi-Technology (Zero Coupon
until 08/15/00, 11.50% thereafter)(a)... 13.420 08/15/03 536,250
500,000 Norcal Waste Systems*..................... 12.500 11/15/05 505,000
500,000 Outdoor Systems........................... 10.750 08/15/03 475,000
500,000 RBX....................................... 11.250 10/15/05 495,000
250,000 Renco Metals.............................. 12.000 07/15/00 271,250
500,000 Repap Wisconsin........................... 9.875 05/01/06 472,500
500,000 Specialty Equipment....................... 11.375 12/01/03 507,500
500,000 Terex..................................... 13.750 05/15/02 433,750
500,000 Valcor.................................... 9.625 11/01/03 460,000
-----------
5,966,250
-----------
CONSUMER CYCLICALS -- 9.4%
500,000 Cole National............................. 11.250 10/01/01 501,250
500,000 Flagstar.................................. 10.750 09/15/01 455,000
500,000 Herff Jones............................... 11.000 08/15/05 533,750
500,000 Hines Horticulture........................ 11.750 10/15/05 518,750
500,000 Revlon Worldwide(a)....................... 13.247 03/15/98 371,250
500,000 Specialty Retailer........................ 11.000 08/15/03 455,000
-----------
2,835,000
-----------
CONSUMER NON-CYCLICALS -- 25.5%
500,000 American Safety Razor..................... 9.875 08/01/05 508,750
500,000 Bally's Grand............................. 10.375 12/15/03 510,000
500,000 Berry Plastics............................ 12.250 04/15/04 537,500
500,000 Borg-Warner............................... 9.125 05/01/03 450,000
500,000 Carr-Gottstein Foods...................... 12.000 11/15/05 505,000
250,000 Dade International........................ 13.000 02/01/05 280,000
500,000 Empress River Casino...................... 10.750 04/01/02 516,250
500,000 Grand Casinos............................. 10.125 12/01/03 524,375
500,000 Hollywood Casino.......................... 12.750 11/01/03 457,500
450,000 Jordan Industries (Zero Coupon until
08/01/98, 11.75% thereafter)(a)......... 14.013 08/01/05 261,000
500,000 Pathmark Stores........................... 9.625 05/01/03 486,250
500,000 Penn Traffic.............................. 9.625 04/15/05 390,000
500,000 Samsonite................................. 11.125 07/15/05 480,000
500,000 Selmer.................................... 11.000 05/15/05 492,500
250,000 Specialty Foods........................... 11.125 10/01/02 242,500
250,000 Telex Communications...................... 12.000 07/15/04 256,875
256,912 Trump Taj Mahal(b)........................ 11.350 11/15/99 247,278
500,000 Williamhouse Regency...................... 13.000 11/15/05 518,750
-----------
7,664,528
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 17
<PAGE> 19
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MEDIA -- 15.6%
$ 500,000 Adelphia Communications................... 12.500% 05/15/02 $ 490,000
1,000,000 Comcast UK Cable (Zero Coupon until
11/15/00, 11.20% thereafter)(a)......... 11.200 11/15/07 585,000
1,000,000 Diamond Cable (Zero Coupon until 12/15/00,
11.75% thereafter)(a)................... 11.750 12/15/05 587,500
250,000 Katz...................................... 12.750 11/15/02 267,500
1,000,000 Marcus Cable (Zero Coupon until 12/15/00,
14.25% thereafter)(a)................... 12.867 12/15/05 680,000
500,000 People's Choice TV (Zero Coupon until
06/01/00, 13.125% thereafter)(a)........ 13.125 06/01/04 290,000
500,000 Rogers Cablesystems....................... 10.000 12/01/07 538,750
500,000 Sinclair Broadcast Group.................. 10.000 09/30/05 510,000
750,000 United International Holdings(a).......... 13.371 11/15/99 465,000
250,000 Wireless One.............................. 13.000 10/15/03 261,250
-----------
4,675,000
-----------
TELECOMMUNICATIONS & UTILITIES -- 4.3%
500,000 A+ Network................................ 11.875 11/01/05 505,000
900,000 In Flight Phone, including 900 attached
warrants (Zero Coupon until 05/15/98,
14.00% thereafter)(a)................... 19.691 05/15/02 297,000
300,000 Winstar Communications (Zero Coupon until
10/15/00, 14.00% thereafter)(a)......... 14.000 10/15/05 475,500
-----------
1,277,500
-----------
TRANSPORTATION -- 2.2%
250,000 Petro PSC Properties...................... 12.500 06/01/02 240,000
500,000 Venture Holdings Trust.................... 9.750 04/01/04 417,500
-----------
657,500
-----------
TOTAL CORPORATE BONDS
(cost $23,018,520)...................... 23,075,778
-----------
SOVEREIGN BONDS -- 15.7%
ARGENTINA -- 4.6%
1,750,000 Republic of Argentina FRB*................ 6.813 03/31/05 1,249,063
250,000 Republic of Argentina, Par Bonds, Series
L*...................................... 5.000 03/31/23 141,875
-----------
1,390,938
-----------
BRAZIL -- 3.9%
902,027 Republic of Brazil, C Bond(b)............. 8.000 04/15/14 517,537
142,500 Republic of Brazil, IDU Bonds*............ 6.688 01/01/01 122,906
750,000 Republic of Brazil, Series EI*............ 6.813 04/15/06 515,625
-----------
1,156,068
-----------
BULGARIA -- 1.3%
750,000 Republic of Bulgaria, Discount Bonds,
Series A*............................... 6.750 07/28/24 399,844
-----------
ECUADOR -- 1.5%
1,379,003 Republic of Ecuador, PDI Bonds*(b)........ 6.813 02/27/15 461,966
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 18
<PAGE> 20
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS HIGH YIELD BOND FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MEXICO -- 1.1%
$ 500,000 United Mexican States, Par Bonds, Series
A, including 500,000 attached
warrants................................ 6.250% 12/31/19 $ 328,750
-----------
POLAND -- 3.3%
1,250,000 Republic of Poland, PDI Bonds*............ 3.750 10/27/14 814,063
350,000 Republic of Poland, Series RSTA*.......... 2.750 10/27/24 174,125
-----------
988,188
-----------
TOTAL SOVEREIGN BONDS
(cost $4,340,570)....................... 4,725,754
-----------
LOAN PARTICIPATION -- 1.1%
500,000 Kingdom of Morocco, Tranche A* (c) (Chase
Manhattan Bank, N.A. and Morgan Guaranty
Trust Company)
(cost $317,724)......................... 6.594 01/01/09 336,250
-----------
TOTAL INVESTMENTS -- 93.7%
(cost $27,676,814)...................... 28,137,782
-----------
REPURCHASE AGREEMENTS -- 7.9%
1,187,000 Repurchase Agreement dated 12/29/95, with
J.P. Morgan, collateralized by $910,000
U.S. Treasury Bonds, 8.500%, due
02/15/20, valued at $1,211,438;
proceeds: $1,187,758.................... 5.750 01/02/96 1,187,000
1,187,000 Repurchase Agreement dated 12/29/95, with
Merrill Lynch, collateralized by
$1,195,000 U.S. Treasury Notes, 5.625%,
due 10/31/97, valued at $1,214,419;
proceeds: $1,187,739.................... 5.600 01/02/96 1,187,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,374,000)....................... 2,374,000
-----------
Liabilities in excess of other
assets -- (1.6%)........................ (486,048)
-----------
NET ASSETS -- 100.0%...................... $30,025,734
============
</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.
(b) Payment-in-kind security for which part of the interest earned is paid by
the issuance of additional bonds.
(c) Participation interest was acquired through the financial institutions
indicated parenthetically.
Abbreviations used in this statement:
EI -- Eligible Interest.
FRB -- Floating Rate Bond.
IDU -- Interest Due and Unpaid.
PDI -- Past Due Interest.
See accompanying notes to financial statements.
PAGE 19
<PAGE> 21
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 49.1%
BASIC INDUSTRIES -- 9.6%
$ 250,000 Foamex.................................... 11.875% 10/01/04 $ 245,000
250,000 RBX....................................... 11.250 10/15/05 247,500
250,000 Renco Metals.............................. 12.000 07/15/00 271,250
250,000 Terex..................................... 13.750 05/15/02 216,875
250,000 Valcor.................................... 9.625 11/01/03 230,000
-----------
1,210,625
-----------
CONSUMER CYCLICALS -- 5.9%
250,000 Cole National............................. 11.250 10/01/01 250,625
250,000 Hines Horticulture........................ 11.750 10/15/05 259,375
200,000 U.S. Leasing International................ 8.450 01/25/05 226,250
-----------
736,250
-----------
CONSUMER NON-CYCLICALS -- 20.5%
250,000 American Safety Razor..................... 9.875 08/01/05 254,375
250,000 Bally's Grand............................. 10.375 12/15/03 255,000
250,000 Berry Plastics............................ 12.250 04/15/04 268,750
250,000 Dade International........................ 13.000 02/01/05 280,000
250,000 Hollywood Casino.......................... 12.750 11/01/03 228,750
450,000 Jordan Industries (Zero Coupon until
08/01/98, 11.75% thereafter)(a)......... 14.013 08/01/05 261,000
250,000 Pathmark Stores........................... 9.625 05/01/03 243,125
250,000 Penn Traffic.............................. 9.625 04/15/05 195,000
100,000 Samsonite................................. 11.125 07/15/05 96,000
250,000 Selmer.................................... 11.000 05/15/05 246,250
256,912 Trump Taj Mahal(b)........................ 11.350 11/15/99 247,278
-----------
2,575,528
-----------
MEDIA -- 8.2%
250,000 Adelphia Communications................... 12.500 05/15/02 245,000
500,000 Marcus Cable (Zero Coupon until 12/15/00,
14.25% thereafter)(a)................... 12.813 12/15/05 340,000
500,000 People's Choice TV (Zero Coupon until
06/01/00, 13.125% thereafter)(a)........ 13.125 06/01/04 290,000
250,000 United International Holdings(a).......... 13.893 11/15/99 155,000
-----------
1,030,000
-----------
TELECOMMUNICATIONS & UTILITIES -- 4.9%
250,000 A+ Network................................ 11.875 11/01/05 252,500
400,000 In Flight Phone, including 400 attached
warrants (Zero Coupon until 05/15/98,
14.00% thereafter)(a)................... 14.000 05/15/02 132,000
150,000 Winstar Communications (Zero Coupon until
10/15/00, 14.00% thereafter)(a)......... 14.000 10/15/05 237,750
-----------
622,250
-----------
TOTAL CORPORATE BONDS
(cost $6,138,570)....................... 6,174,653
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 20
<PAGE> 22
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SOVEREIGN BONDS -- 25.9%
ARGENTINA -- 1.1%
$ 250,000 Republic of Argentina, Par Bonds,
Series L*......................... 5.000% 03/31/23 $ 141,875
-----------
BELGIUM -- 0.3%
BEF 1,000,000 Kingdom of Belgium, Series 19....... 6.500 03/31/05 33,537
-----------
BRAZIL -- 5.3%
$ 1,167,329 Republic of Brazil, C Bond(b)....... 8.000 04/15/14 669,755
-----------
BULGARIA -- 2.1%
$ 500,000 Republic of Bulgaria, Discount
Bonds, Series A*.................. 6.750 07/28/24 266,563
-----------
CANADA -- 0.4%
CAD 39,000 Government of Canada................ 9.000 12/01/04 32,203
CAD 19,000 Government of Canada................ 6.250 02/01/98 14,004
-----------
46,207
-----------
DENMARK -- 0.2%
DKK 50,000 Kingdom of Denmark.................. 7.000 12/15/04 9,486
DKK 90,000 Kingdom of Denmark.................. 9.000 11/15/98 17,639
-----------
27,125
-----------
ECUADOR -- 2.5%
$ 850,000 Republic of Ecuador, Par Bonds*..... 3.000 02/28/25 308,125
-----------
GERMANY -- 3.6%
DEM 300,000 Government of Germany, Series 91.... 8.375 05/21/01 239,185
DEM 120,000 Government of Germany, Series 95.... 7.375 01/03/05 91,018
DEM 160,000 Government of Germany, Series 106... 6.000 02/20/98 116,096
-----------
446,299
-----------
ITALY -- 0.7%
ITL 45,000,000 Government of Italy Treasury........ 9.500 01/01/05 26,521
ITL 105,000,000 Government of Italy Treasury........ 9.500 12/01/97 65,352
-----------
91,873
-----------
JAPAN -- 0.8%
JPY 10,000,000 Government of Japan, Series 29...... 4.200 09/21/15 103,413
-----------
MEXICO -- 2.6%
$ 500,000 United Mexican States, Par Bonds,
Series A, including 500,000
attached warrants................. 6.250 12/31/19 328,750
-----------
NETHERLANDS -- 0.5%
NLG 45,000 Netherlands Government.............. 7.000 06/15/05 29,472
NLG 60,000 Netherlands Government.............. 6.250 07/15/98 39,136
-----------
68,608
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 21
<PAGE> 23
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
POLAND -- 4.6%
$ 500,000 Republic of Poland, PDI Bonds*...... 3.750% 10/27/14 $ 325,625
$ 500,000 Republic of Poland, Series RSTA*.... 2.750 10/27/24 248,750
-----------
574,375
-----------
SPAIN -- 0.3%
ESP 590,000 Government of Spain................. 10.000 02/28/05 4,922
ESP 3,210,000 Government of Spain................. 11.450 08/30/98 27,734
-----------
32,656
-----------
UNITED KINGDOM -- 0.9%
GBP 75,000 United Kingdom Treasury............. 7.000 11/06/01 116,581
-----------
TOTAL SOVEREIGN BONDS
(cost $2,784,100)................. 3,255,742
-----------
LOAN PARTICIPATION -- 2.7%
$ 500,000 Kingdom of Morocco, Tranche A*(c)
(Chase Manhattan Bank, N.A. and
Morgan Guaranty Trust Company)
(cost $317,724)................... 6.594 01/01/09 336,250
-----------
U.S. GOVERNMENT & AGENCY -- 14.6%
$ 638,310 Federal Home Loan Mortgage
Corporation....................... 6.000 09/01/10 631,512
$ 57,397 Federal Home Loan Mortgage
Corporation....................... 6.000 10/01/10 56,785
$ 1,100,000 Federal National Mortgage
Association(d).................... 6.500 ** 1,085,906
$ 60,000 U.S. Treasury Note.................. 6.125 05/31/97 60,731
-----------
1,834,934
-----------
TOTAL U.S. GOVERNMENT & AGENCY
(cost $1,794,702)................. 1,834,934
-----------
TOTAL INVESTMENTS -- 92.3%
(cost $11,035,096)................ 11,601,579
-----------
REPURCHASE AGREEMENTS -- 16.6%
$ 1,042,000 Repurchase Agreement dated 12/29/95,
with J.P. Morgan, collateralized
by $799,000 U.S. Treasury Bonds,
8.500%, due 02/15/20, valued at
$1,063,669; proceeds:
$1,042,666........................ 5.750 01/02/96 1,042,000
</TABLE>
See accompanying notes to financial statements.
PAGE 22
<PAGE> 24
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS STRATEGIC BOND FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- ------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,042,000 Repurchase Agreement dated 12/29/95,
with Merrill Lynch, collateralized
by $1,050,000 U.S. Treasury Notes,
5.625%, due 10/31/97, valued at
$1,067,063; proceeds:
$1,042,648........................ 5.600% 01/02/96 $ 1,042,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,084,000)................. 2,084,000
-----------
Liabilities in excess of other
assets -- (8.9%).................. (1,119,166)
-----------
NET ASSETS -- 100.0%................ $12,566,413
============
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
MATURITY CONTRACTS TO CONTRACTS APPRECIATION
DATES DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES
01/22/96 $ 272,728 DEM 389,518 $271,712 $(1,016)
01/22/96 to 01/24/96 218,035 FRF 1,072,831 218,954 919
01/22/96 106,995 GBP 69,840 108,293 1,298
01/22/96 61,174 ITL 98,716,411 61,911 737
SALES
01/22/96 BEF 952,364 $ 31,452 32,406 (954)
01/22/96 GBP 142,788 222,561 221,404 1,157
01/22/96 CAD 59,932 43,785 43,929 (144)
01/22/96 DKK 145,898 25,492 26,266 (774)
01/22/96 FRF 1,052,926 210,037 214,885 (4,848)
01/22/96 DEM 1,045,092 724,418 729,013 (4,595)
01/22/96 ITL 243,985,473 149,511 153,019 (3,508)
01/22/96 JPY 11,118,743 110,415 107,999 2,416
01/22/96 NLG 110,912 67,897 69,148 (1,251)
01/22/96 ESP 3,840,396 30,008 31,501 (1,493)
-----------
$(12,056)
===========
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
** TBA -- To be announced.
(a) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(b) Payment-in-kind security for which 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) Mortgage Dollar Roll. See Note 1.
Abbreviations used in this statement:
PDI -- Past Due Interest
BEF -- Belgian Franc
CAD -- Canadian Dollar
DEM -- German Deutschemark
DKK -- Danish Krone
ESP -- Spanish Peseta
FRF -- French Franc
GBP -- British Pound Sterling
ITL -- Italian Lira
JPY -- Japanese Yen
NLG -- Netherlands Guilder
See accompanying notes to financial statements.
PAGE 23
<PAGE> 25
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS TOTAL RETURN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 43.2%
BASIC INDUSTRIES -- 2.3%
1,600 Dow Chemical........................................................... $ 112,600
3,000 Dupont (E.I.) de Nemours............................................... 209,625
----------
322,225
----------
CAPITAL GOODS -- 4.1%
2,800 Boeing................................................................. 219,450
6,000 Deere.................................................................. 211,500
2,200 Textron................................................................ 148,500
----------
579,450
----------
CONSUMER CYCLICALS -- 5.9%
6,000 Ball................................................................... 165,000
4,000 Eastman Kodak.......................................................... 268,000
6,000 Ford Motor............................................................. 174,000
5,100 May Department Stores.................................................. 215,475
----------
822,475
----------
CONSUMER NON-CYCLICALS -- 1.7%
1,500 Philip Morris Companies................................................ 135,750
2,000 Tambrands.............................................................. 95,500
----------
231,250
----------
ENERGY -- 10.7%
3,500 Amoco.................................................................. 251,559
3,000 Exxon.................................................................. 240,375
2,000 Mobil.................................................................. 224,000
1,000 Royal Dutch Petroleum, 5 Guilder....................................... 141,125
3,000 Texaco................................................................. 235,500
7,000 Ultramar............................................................... 180,250
5,000 Williams Companies..................................................... 219,375
----------
1,492,184
----------
FINANCIAL SERVICES -- 5.0%
2,500 American General....................................................... 87,188
3,300 Citicorp............................................................... 221,925
7,000 Prudential Reinsurance Holdings........................................ 163,625
4,200 UNUM................................................................... 231,000
----------
703,738
----------
HEALTH CARE -- 2.9%
1,200 American Home Products................................................. 116,400
5,200 SmithKline Beecham -- ADR.............................................. 288,600
----------
405,000
----------
REAL ESTATE INVESTMENT TRUSTS -- 2.3%
7,000 Beacon Properties...................................................... 161,000
6,200 Patriot American Hospitality........................................... 159,650
----------
320,650
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 24
<PAGE> 26
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS TOTAL RETURN FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES DESCRIPTION (NOTE 1A)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS & UTILITIES -- 6.4%
5,000 American Electric Power................................................ $ 202,500
3,000 Ameritech.............................................................. 177,000
4,600 BellSouth.............................................................. 200,100
3,000 Boston Edison.......................................................... 88,500
5,000 GTE.................................................................... 220,000
----------
888,100
----------
TRANSPORTATION -- 1.9%
18,000 Canadian National Railway.............................................. 270,000
----------
TOTAL COMMON STOCKS
(cost $5,687,214).................................................... 6,035,072
----------
CONVERTIBLE PREFERRED STOCKS -- 4.6%
CAPITAL GOODS -- 1.1%
3,000 Browning-Ferris 7.25%, 6/30/98......................................... 94,125
4,000 Coopers Industries 6.00%, 01/01/99..................................... 55,000
----------
149,125
----------
CONSUMER CYCLICALS -- 0.2%
2,500 MascoTech, $1.20, 07/01/97............................................. 31,250
----------
CONSUMER NON-CYCLICALS -- 0.3%
1,500 James River 9.00%, 07/01/98............................................ 35,063
----------
ENERGY -- 1.9%
1,000 Ashland, $3.125, 12/31/49.............................................. 58,875
1,000 Diamond Shamrock 5.00%, 12/31/49....................................... 55,375
1,000 Tejas Gas 5.25%, 12/31/49.............................................. 47,500
2,000 Unocal 7.00%, 12/31/49................................................. 107,250
----------
269,000
----------
MEDIA -- 0.4%
2,500 Times Mirror, Class A.................................................. 64,531
----------
TECHNOLOGY -- 0.7%
2,000 Elsag Bailey 5.50%, 12/31/49........................................... 100,250
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $651,064)..................... 649,219
----------
</TABLE>
See accompanying notes to financial statements.
PAGE 25
<PAGE> 27
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS TOTAL RETURN FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 19.3%
BASIC INDUSTRIES -- 3.6%
$ 100,000 Acetex..................................... 9.750% 10/01/03 $ 104,500
100,000 Crown Paper................................ 11.000 09/01/05 87,500
200,000 International Semi-Technology (Zero coupon
until 08/15/00, 11.50% thereafter)(a).... 13.420 08/15/03 107,250
100,000 RBX........................................ 11.250 10/15/05 99,000
100,000 Silgan Holdings............................ 11.750 06/15/02 107,000
-----------
505,250
-----------
CONSUMER CYCLICALS -- 2.2%
100,000 Cole National.............................. 11.250 10/01/01 100,250
100,000 Grand Casinos.............................. 10.125 12/01/03 104,875
100,000 Herff Jones................................ 11.000 08/15/05 106,750
-----------
311,875
-----------
CONSUMER NON-CYCLICALS -- 5.7%
100,000 American Safety Razor...................... 9.875 08/01/05 101,750
100,000 Bally's Grand.............................. 10.375 12/15/03 102,000
100,000 Berry Plastics............................. 12.250 04/15/04 107,500
100,000 Carr-Gottstein Foods....................... 12.000 11/15/05 101,000
100,000 Jordan Industries.......................... 10.375 08/01/03 89,000
100,000 Pathmark Stores............................ 9.625 05/01/03 97,250
100,000 Samsonite.................................. 11.125 07/15/05 96,000
100,000 Selmer..................................... 11.000 05/15/05 98,500
-----------
793,000
-----------
ENERGY -- 0.7%
100,000 Public Service Electric & Gas.............. 6.500 05/01/04 100,598
-----------
FINANCIAL SERVICES -- 3.8%
50,000 Commercial Credit.......................... 6.875 05/01/02 52,281
100,000 Ford Motor Credit.......................... 8.200 02/15/02 110,758
150,000 Household Finance.......................... 6.750 06/01/00 155,096
100,000 Standard Credit Card Master Trust.......... 6.750 06/07/00 102,718
100,000 USL Capital................................ 8.125 02/15/00 107,878
-----------
528,731
-----------
MEDIA -- 3.3%
200,000 Diamond Cable (Zero coupon until 12/15/00,
11.750% thereafter)(a)................... 11.750 12/15/05 117,500
200,000 Marcus Cable (Zero coupon until 12/15/00,
14.25% thereafter)(a).................... 12.921 12/15/05 136,000
100,000 Rogers Cablesystems........................ 10.000 12/01/07 107,750
150,000 United International Holdings(a)........... 13.187 11/15/99 93,000
-----------
454,250
-----------
TOTAL CORPORATE BONDS
(cost $2,642,343)........................ 2,693,704
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 26
<PAGE> 28
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS TOTAL RETURN FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- --------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE CORPORATE BONDS -- 7.0%
BASIC INDUSTRIES -- 3.5%
$ 50,000 Albany International....................... 5.250% 03/15/02 $ 44,500
50,000 Allegheny Ludlum........................... 5.875 03/15/02 51,500
150,000 Exide...................................... 2.900 12/15/05 108,750
75,000 Magna International........................ 5.000 10/15/02 76,500
150,000 Roche Holdings(a).......................... 6.218 04/20/10 66,375
100,000 RPM(a)..................................... 5.110 09/30/12 42,875
100,000 Unifi...................................... 6.000 03/15/02 100,500
-----------
491,000
-----------
CONSUMER CYCLICALS -- 1.9%
125,000 Federated Department Stores................ 5.000 10/01/03 124,688
50,000 MascoTech.................................. 4.500 12/15/03 39,000
125,000 Proffitt's................................. 4.750 11/01/03 106,250
-----------
269,938
-----------
ENERGY -- 0.4%
50,000 Pennzoil................................... 4.750 10/01/03 50,625
-----------
FINANCIAL SERVICES -- 1.2%
100,000 Liberty Property Trust..................... 8.000 07/01/01 102,750
50,000 Trenwick Group............................. 6.000 12/15/99 57,750
-----------
160,500
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost $962,876).......................... 972,063
-----------
U.S. GOVERNMENT & AGENCY -- 15.3%
48,636 Federal National Mortgage Association...... 6.500 10/01/10 48,894
119,850 Federal National Mortgage Association...... 7.500 08/01/23 122,860
97,811 Federal National Mortgage Association...... 7.000 09/01/25 98,637
98,000 Federal National Mortgage Association...... 6.500 12/01/25 96,959
350,000 U.S. Treasury Note......................... 7.750 01/31/00 380,188
450,000 U.S. Treasury Note......................... 5.750 10/31/00 456,467
650,000 U.S. Treasury Note......................... 7.875 11/15/04 752,375
150,000 U.S. Treasury Bond......................... 7.625 02/15/25 183,422
-----------
TOTAL U.S. GOVERNMENT & AGENCY
(cost $2,096,216)........................ 2,139,802
-----------
TOTAL INVESTMENTS -- 89.4%
(cost $12,039,713)....................... 12,489,860
-----------
</TABLE>
See accompanying notes to financial statements.
PAGE 27
<PAGE> 29
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS TOTAL RETURN FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY VALUE (NOTE
AMOUNT DESCRIPTION RATE DATE 1A)
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS -- 20.1%
$1,405,000 Repurchase Agreement dated 12/29/95, with
J.P. Morgan, collateralized by
$1,077,000 U.S. Treasury Bonds, 8.500%,
due 02/15/20, valued at $1,433,756;
proceeds: $1,405,898.................... 5.750% 01/02/96 $ 1,405,000
1,405,000 Repurchase Agreement dated 12/29/95, with
Merrill Lynch, collateralized by
$1,415,000 U.S. Treasury Notes, 5.625%,
due 10/31/97, valued at $1,437,994;
proceeds: $1,405,874.................... 5.600 01/02/96 1,405,000
-----------
TOTAL REPURCHASE AGREEMENTS
(cost $2,810,000)....................... 2,810,000
-----------
Liabilities in excess of other
assets -- (9.5%)........................ (1,325,621)
-----------
NET ASSETS -- 100.0%...................... $13,974,239
============
</TABLE>
(a) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
Abbreviations used in this statement:
ADR American Depository Receipt.
See accompanying notes to financial statements.
PAGE 28
<PAGE> 30
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS INVESTORS FUND INC
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES DESCRIPTION 1A)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 88.3%
BASIC INDUSTRIES -- 7.9%
104,000 Dupont (E.I.) de Nemours........................................ $ 7,267,000
117,400 Hanna (M.A.).................................................... 3,287,200
125,000 Hercules........................................................ 7,046,875
141,500 OM Group........................................................ 4,687,188
345,000 Praxair......................................................... 11,600,625
------------
33,888,888
------------
CAPITAL GOODS -- 12.6%
150,000 AlliedSignal.................................................... 7,125,000
220,000 Browning-Ferris Industries...................................... 6,490,000
35,000 Champion Enterprises............................................ 1,080,625
280,500 Deere........................................................... 9,887,625
107,500 General Electric................................................ 7,740,000
242,000 Raytheon........................................................ 11,434,500
300,500 Tyco International.............................................. 10,705,313
------------
54,463,063
------------
CONSUMER CYCLICALS -- 11.4%
150,000 Ball............................................................ 4,125,000
10,000 Centex.......................................................... 347,500
37,000 Chrysler........................................................ 2,048,875
100,000 Eastman Kodak................................................... 6,700,000
235,000 Federated Department Stores*.................................... 6,462,500
150,000 Ford Motor...................................................... 4,350,000
320,000 Host Marriott*.................................................. 4,240,000
25,000 Lennar.......................................................... 628,125
137,500 MascoTech....................................................... 1,495,313
212,500 Sears, Roebuck.................................................. 8,287,500
157,300 Sherwin-Williams................................................ 6,409,975
229,000 U.S. Industries*................................................ 4,207,875
------------
49,302,663
------------
CONSUMER NON-CYCLICALS -- 11.7%
195,000 ConAgra......................................................... 8,043,750
60,000 Estee Lauder Companies, Class A................................. 2,092,500
147,300 Hormel Foods.................................................... 3,627,263
60,000 Kimberly-Clark.................................................. 4,965,000
206,200 Kroger*......................................................... 7,732,500
99,000 Penn Traffic*................................................... 1,485,000
85,000 Philip Morris Companies......................................... 7,692,500
488,800 Stop & Shop Companies*.......................................... 11,303,500
100,000 Sysco........................................................... 3,250,000
------------
50,192,013
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 29
<PAGE> 31
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS INVESTORS FUND INC (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES DESCRIPTION 1A)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
ENERGY -- 14.0%
113,500 Amoco........................................................... $ 8,157,813
85,000 Chevron......................................................... 4,462,500
105,000 Mobil........................................................... 11,760,000
93,000 Royal Dutch Petroleum, 5 Guilder................................ 13,124,625
73,000 Texaco.......................................................... 5,730,500
130,117 TOTAL -- ADR.................................................... 4,423,978
51,600 Union Pacific Resources Group................................... 1,309,350
75,000 Union Texas Petroleum Holdings.................................. 1,453,125
230,000 Williams Companies.............................................. 10,091,250
------------
60,513,141
------------
FINANCIAL SERVICES -- 13.5%
147,500 American Express................................................ 6,102,813
47,000 Amerin*......................................................... 1,257,250
207,200 Bank of New York................................................ 10,101,000
37,500 BayBanks........................................................ 3,684,375
73,500 Federal Home Loan Mortgage Corporation.......................... 6,137,250
27,500 Federal National Mortgage Association........................... 3,413,438
60,000 MGIC Investment................................................. 3,255,000
163,500 Prudential Reinsurance Holdings................................. 3,821,808
103,400 St. Paul Companies.............................................. 5,751,625
120,000 SunAmerica...................................................... 5,700,000
138,843 Travelers Group................................................. 8,729,763
------------
57,954,322
------------
HEALTH CARE -- 6.7%
230,000 Columbia/HCA Healthcare......................................... 11,672,500
225,000 SmithKline Beecham -- ADR....................................... 12,487,500
100,000 U.S. HealthCare................................................. 4,650,000
------------
28,810,000
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.8%
75,000 Beacon Properties............................................... 1,725,000
40,000 Crescent Real Estate Equities................................... 1,365,000
75,000 Highwoods Properties............................................ 2,118,750
96,500 Patriot American Hospitality.................................... 2,484,875
------------
7,693,625
------------
TECHNOLOGY -- 3.7%
30,500 DST Systems*.................................................... 869,250
179,500 First Data...................................................... 12,004,063
30,000 National Data................................................... 742,500
60,000 Plantronics*.................................................... 2,167,500
------------
15,783,313
------------
TELECOMMUNICATIONS & UTILITIES -- 1.2%
190,000 AirTouch Communications*........................................ 5,367,500
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 30
<PAGE> 32
SALOMON BROTHERS INVESTMENT SERIES
SALOMON BROTHERS INVESTORS FUND INC (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES DESCRIPTION 1A)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION -- 3.8%
188,000 Canadian National Railway....................................... $ 2,820,000
52,000 Norfolk Southern................................................ 4,127,500
200,000 Pittston Services Group......................................... 6,275,000
45,000 Union Pacific................................................... 2,970,000
------------
16,192,500
------------
TOTAL COMMON STOCKS (cost $281,370,713)......................... 380,161,028
------------
CONVERTIBLE PREFERRED STOCKS -- 1.8%
CONSUMER CYCLICALS -- 0.2%
75,000 MascoTech, $1.20, 07/01/97...................................... 937,500
------------
FINANCIAL SERVICES -- 0.2%
20,000 Merrill Lynch 6.50%............................................. 1,037,500
------------
TECHNOLOGY -- 1.4%
62,500 Ceridian 5.50%.................................................. 5,781,250
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $5,317,287)............ 7,756,250
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
CONVERTIBLE BONDS -- 1.2%
BASIC INDUSTRIES -- 0.2%
$ 1,000,000 Unifi, 6.00%, due 03/15/02...................................... 983,750
------------
CONSUMER CYCLICALS -- 1.0%
2,000,000 Federated Department Stores, 5.00%, due 10/01/03................ 2,022,500
2,000,000 Time Warner, 8.75%, due 01/10/15................................ 2,072,500
------------
4,095,000
------------
TOTAL CONVERTIBLE BONDS (cost $5,091,250)....................... 5,078,750
------------
U.S. TREASURY OBLIGATION -- 1.0%
4,295,000 U.S. Treasury Bill, 6.81%, 01/11/96 (cost $4,286,875)........... 4,288,257
------------
TOTAL INVESTMENTS -- 92.3% (cost $296,066,125).................. 397,284,285
------------
REPURCHASE AGREEMENTS -- 8.5%
18,268,000 Repurchase Agreement, 5.750% due 01/02/96, dated 12/29/95, J.P.
Morgan, collateralized by $14,687,000 U.S. Treasury Bonds,
8.125%, due 05/15/21 valued at $18,634,131; proceeds:
$18,279,671................................................... 18,268,000
18,267,000 Repurchase Agreement, 5.600% due 01/02/96, dated 12/29/95,
Merrill Lynch, collateralized by $18,335,000 U.S. Treasury
Bonds, 5.625%, due 10/31/97, valued at $18,632,944; proceeds:
$18,278,366................................................... 18,267,000
------------
TOTAL REPURCHASE AGREEMENTS (cost $36,535,000).................. 36,535,000
------------
Liabilities in excess of other assets -- (0.8%)................. (3,405,679)
------------
NET ASSETS -- 100.0%............................................ $430,413,606
=============
</TABLE>
* Non-income producing security.
Abbreviations used in this statement:
ADR American Depository Receipt.
See accompanying notes to financial statements.
PAGE 31
<PAGE> 33
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
CASH NEW YORK
MANAGEMENT MUNICIPAL
FUND BOND FUND
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note A).................................. $ 9,699,491 $3,536,175
Repurchase agreements, at value and cost........................ 1,036,551 --
Cash............................................................ 5,048 35,613
Receivable for securities sold.................................. -- --
Receivable for fund shares sold................................. 19,469 130,016
Interest and dividends receivable............................... 37,309 56,833
Receivable from investment advisor.............................. 75,716 63,088
Deferred organization expense................................... -- 27,895
Other assets.................................................... 10,582 --
----------- ----------
Total assets.................................................... 10,884,166 3,849,620
----------- ----------
LIABILITIES:
Payable for:
Securities purchased.......................................... -- --
Fund shares redeemed.......................................... -- --
Dividends and distributions declared.......................... 16,946 4,509
Affiliate transactions:
Management fees............................................. -- --
Service and distribution fees............................... -- 736
Net unrealized depreciation of forward foreign currency
contracts..................................................... -- --
Accrued expenses and other liabilities.......................... 6,416 10,424
----------- ----------
Total Liabilities............................................... 23,362 15,669
----------- ----------
NET ASSETS...................................................... $10,860,804 $3,833,951
============ ===========
NET ASSETS CONSIST OF:
Paid-in capital................................................. $10,862,918 $4,303,977
Undistributed net investment income or (distributions in excess
of net investment income)..................................... -- 3,359
Accumulated net realized gain (loss) on investments, options and
foreign currency transactions or (distributions in excess of
net realized gains)........................................... (2,114) (623,945)
Net unrealized appreciation on investments, foreign currency
transactions and other assets................................. -- 150,560
----------- ----------
NET ASSETS...................................................... $10,860,804 $3,833,951
=========== ==========
Class A......................................................... $ 1,755,547 $ 545,852
=========== ==========
Class B......................................................... $ 2,238,486 $ 528,143
=========== ==========
Class C......................................................... $ 182,541 $ 265,612
=========== ==========
Class O......................................................... $ 6,684,230 $2,494,344
=========== ==========
SHARES OUTSTANDING:
Class A......................................................... 1,755,547 53,980
=========== ==========
Class B......................................................... 2,238,486 52,234
=========== ==========
Class C......................................................... 182,541 26,267
=========== ==========
Class O......................................................... 6,686,344 246,653
=========== ==========
NET ASSET VALUE:
CLASS A SHARES
Net asset value and redemption price per share.................. $ 1.00 $ 10.11
=========== ==========
Maximum offering price per share (based on maximum sales charge
of 4.75%, except Cash Management Fund)........................ $ 1.00 $ 10.61
=========== ==========
CLASS B SHARES
Net asset value and offering price per share *.................. $ 1.00 $ 10.11
=========== ==========
CLASS C SHARES
Net asset value and offering price per share *.................. $ 1.00 $ 10.11
=========== ==========
CLASS O SHARES
Net asset value, offering price and redemption price per
share......................................................... $ 1.00 $ 10.11
=========== ==========
Note A: Cost of investments..................................... $ 9,699,491 $3,385,615
=========== ==========
</TABLE>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See accompanying notes to financial statements.
PAGE 32
<PAGE> 34
SALOMON BROTHERS INVESTMENT SERIES
- ------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
NATIONAL U.S.
INTERMEDIATE GOVERNMENT HIGH YIELD STRATEGIC TOTAL INVESTORS
MUNICIPAL FUND INCOME FUND BOND FUND BOND FUND RETURN FUND FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$10,499,595 $10,176,161 $28,137,782 $11,601,579 $12,489,860 $397,284,285
-- 2,064,000 2,374,000 2,084,000 2,810,000 36,535,000
136,414 162 552 461 784 467
72,129 -- -- -- -- 4,984,053
-- -- 464,168 19,033 117,005 3,207
181,612 137,503 577,083 219,734 105,572 713,554
35,803 39,324 -- 11,822 4,346 --
101,185 104,594 126,477 126,910 89,854 --
10,608 10,608 15,358 10,608 7,182 31
--------------- ------------ ----------- ----------- ------------ -------------
11,037,346 12,532,352 31,695,420 14,074,147 15,624,603 439,520,597
--------------- ------------ ----------- ----------- ------------ -------------
-- 1,680,094 1,266,635 1,084,417 1,562,019 304,968
-- -- 858 -- 901 22,011
71,326 157,141 335,268 385,850 77,289 8,243,742
-- -- 29,150 -- -- 477,789
712 730 10,793 1,891 5,055 947
-- -- -- 12,056 -- --
18,268 19,448 26,982 23,520 5,100 57,534
--------------- ------------ ----------- ----------- ------------ -------------
90,306 1,857,413 1,669,686 1,507,734 1,650,364 9,106,991
--------------- ------------ ----------- ----------- ------------ -------------
$10,947,040 $10,674,939 $30,025,734 $12,566,413 $13,974,239 $430,413,606
=============== ============= =========== =========== ============= ============
$10,509,907 $10,354,517 $29,486,368 $12,033,429 $13,514,968 $314,330,433
3,929 -- 28,464 (29,376) -- --
9,324 (4,982) 62,774 12,072 9,124 14,865,013
423,880 325,404 448,128 550,288 450,147 101,218,160
--------------- ------------ ----------- ----------- ------------ -------------
$10,947,040 $10,674,939 $30,025,734 $12,566,413 $13,974,239 $430,413,606
=============== ============= =========== =========== ============= ============
$ 569,222 $ 277,961 $10,789,155 $ 512,897 $ 3,658,044 $ 441,420
=============== ============= =========== =========== ============= ============
$ 431,688 $ 572,178 $10,108,061 $ 1,879,195 $ 5,378,037 $ 715,646
=============== ============= =========== =========== ============= ============
$ 270,683 $ 273,265 $ 1,274,433 $ 411,135 $ 444,641 $ 306,499
=============== ============= =========== =========== ============= ============
$ 9,675,447 $ 9,551,535 $ 7,854,085 $ 9,763,186 $ 4,493,517 $428,950,041
=============== ============= =========== =========== ============= ============
54,591 26,945 1,024,197 48,705 346,685 26,563
=============== ============= =========== =========== ============= ============
41,423 55,470 960,116 178,426 510,399 43,089
=============== ============= =========== =========== ============= ============
25,972 26,488 121,069 39,045 42,109 18,455
=============== ============= =========== =========== ============= ============
928,011 925,812 75,520 927,028 425,125 25,828,464
=============== ============= =========== =========== ============= ============
$ 10.43 $ 10.32 $ 10.53 $ 10.53 $ 10.55 $ 16.62
=============== ============= =========== =========== ============= ============
$ 10.95 $ 10.83 $ 11.06 $ 11.06 $ 11.08 $ 17.45
=============== ============= =========== =========== ============= ============
$ 10.42 $ 10.32 $ 10.53 $ 10.53 $ 10.54 $ 16.61
=============== ============= =========== =========== ============= ============
$ 10.42 $ 10.32 $ 10.53 $ 10.53 $ 10.56 $ 16.61
=============== ============= =========== =========== ============= ============
$ 10.43 $ 10.32 $ 10.54 $ 10.53 $ 10.57 $ 16.61
=============== ============= =========== =========== ============= ============
$10,075,715 $ 9,850,757 $27,676,814 $11,035,096 $12,039,713 $296,066,125
=============== ============= =========== =========== ============= ============
</TABLE>
See accompanying notes to financial statements.
PAGE 33
<PAGE> 35
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
CASH NEW YORK
MANAGEMENT MUNICIPAL
FUND BOND FUND
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME (Note A):
Interest.................................................... $ 765,757 $ 227,209
Dividends................................................... -- --
----------- ----------
765,757 227,209
EXPENSES:
Management fee.............................................. 25,505 19,069
Registration and filing fees................................ 40,284 7,001
Custody and administration fees............................. 30,009 9,059
Legal....................................................... 26,692 24,399
Printing and postage........................................ 15,750 14,702
Shareholder services........................................ 10,700 3,101
Amortization of organization expenses....................... 9,071 14,001
Audit and tax return preparation fees....................... 9,000 7,201
Directors' fees and expenses................................ 1,618 1,551
Other....................................................... 2,740 2,900
----------- ----------
171,369 102,984
Management fee waived and expenses absorbed by investment
advisor................................................... (101,221) (82,157)
Credits earned from custodian on cash balances.............. (9) (1,758)
----------- ----------
70,139 19,069
Distribution and service fees:
Class A Shares.............................................. -- 577
Class B Shares.............................................. -- 3,044
Class C Shares.............................................. -- 2,153
----------- ----------
Net expenses................................................ 70,139 24,843
----------- ----------
Net investment income....................................... 695,618 202,366
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments and options................................... -- (65,526)
Foreign currency transactions............................. -- --
----------- ----------
Net realized gain (loss)................................ -- (65,526)
----------- ----------
Net change in unrealized appreciation (depreciation) on:
Investments and options................................... -- 481,771
Foreign currency transactions and other assets............ -- --
----------- ----------
Net unrealized appreciation during the period........... -- 481,771
----------- ----------
NET REALIZED AND UNREALIZED GAIN............................ -- 416,245
----------- ----------
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 695,618 $ 618,611
============= ============
Note A: Net of foreign withholding tax of:.................. -- --
</TABLE>
* Fund's commencement of investment operations was February 22, 1995.
** Fund's commencement of investment operations was September 11, 1995.
See accompanying notes to financial statements.
PAGE 34
<PAGE> 36
SALOMON BROTHERS INVESTMENT SERIES
<TABLE>
<CAPTION>
NATIONAL U.S.
INTERMEDIATE GOVERNMENT HIGH YIELD STRATEGIC TOTAL INVESTORS
MUNICIPAL FUND* INCOME FUND* BOND FUND* BOND FUND* RETURN FUND** FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 481,522 $576,679 $1,684,232 $1,016,101 $ 116,200 $ 2,303,702
-- -- -- -- 39,659 6,950,103
-------- -------------- ------------ ------------ --------------- ------------
481,522 576,679 1,684,232 1,016,101 155,859 9,253,805
44,953 53,073 108,535 71,026 15,069 1,614,897
6,000 6,000 6,000 6,000 -- 67,860
15,181 21,781 29,162 27,129 4,315 68,894
8,000 8,000 10,000 10,000 1,000 159,055
5,000 4,000 7,000 5,000 1,000 250,950
21,200 21,281 23,800 21,500 1,000 344,650
20,904 21,606 26,114 26,205 5,868 --
5,000 5,000 7,500 5,000 3,000 74,855
2,250 2,250 2,275 2,250 1,375 69,450
2,500 2,500 3,000 2,700 500 60,000
-------- -------------- ------------ ------------ --------------- ------------
130,988 145,491 223,386 176,810 33,127 2,710,611
(80,756) (92,397) (79,385) (82,848) (19,415) --
(5,279) (21) (735) (208) (13) (529)
-------- -------------- ------------ ------------ --------------- ------------
44,953 53,073 143,266 93,754 13,699 2,710,082
948 561 10,394 794 1,287 725
2,914 3,304 22,829 6,487 7,696 3,443
2,193 2,231 4,457 2,672 1,086 2,402
-------- -------------- ------------ ------------ --------------- ------------
51,008 59,169 180,946 103,707 23,768 2,716,652
-------- -------------- ------------ ------------ --------------- ------------
430,514 517,510 1,503,286 912,394 132,091 6,537,153
-------- -------------- ------------ ------------ --------------- ------------
39,589 110,378 472,003 217,956 24,049 49,873,105
-- -- -- 60,525 -- 63
-------- -------------- ------------ ------------ --------------- ------------
39,589 110,378 472,003 278,481 24,049 49,873,168
-------- -------------- ------------ ------------ --------------- ------------
423,880 325,404 460,968 566,483 450,147 62,151,251
-- -- (12,840) (16,195) -- --
-------- -------------- ------------ ------------ --------------- ------------
423,880 325,404 448,128 550,288 450,147 62,151,251
-------- -------------- ------------ ------------ --------------- ------------
463,469 435,782 920,131 828,769 474,196 112,024,419
-------- -------------- ------------ ------------ --------------- ------------
$ 893,983 $953,292 $2,423,417 $1,741,163 $ 606,287 $118,561,572
================== ================ ============= ============= ================ ============
-- -- -- $ 589 $ 282 $ 91,274
============= ================ ============
</TABLE>
See accompanying notes to financial statements.
PAGE 35
<PAGE> 37
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
CASH NEW YORK
MANAGEMENT MUNICIPAL
FUND BOND FUND
- --------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income...................................... $ 695,618 $ 202,366
Net realized gain (loss) on investments, options, and
foreign currency transactions............................ -- (65,526)
Net change in unrealized appreciation (depreciation) on
investments, options, foreign currency transactions and
other assets............................................. -- 481,771
------------ -----------
Net increase in net assets from operations................. 695,618 618,611
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A.................................................. (40,161) (11,538)
Class B.................................................. (26,516) (12,739)
Class C.................................................. (2,693) (9,206)
Class O.................................................. (626,248) (165,524)
------------ -----------
(695,618) (199,007)
------------ -----------
Distributions from net realized gains:
Class A.................................................. -- --
Class B.................................................. -- --
Class C.................................................. -- --
Class O.................................................. -- --
------------ -----------
-- --
------------ -----------
Distributions in excess of net realized gains:
Class A.................................................. -- --
Class B.................................................. -- --
Class C.................................................. -- --
Class O.................................................. -- --
------------ -----------
-- --
------------ -----------
NET FUND CAPITAL SHARE TRANSACTIONS:
Class A.................................................. 1,755,547 528,982
Class B.................................................. 2,238,486 504,427
Class C.................................................. 182,541 250,059
Class O.................................................. (12,442,586) (1,202,551)
------------ -----------
Net increase (decrease) in net assets derived from
share transactions................................... (8,266,012) 80,917
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS........................ (8,266,012) 500,521
NET ASSETS:
Beginning of period........................................ 19,126,816 3,333,430
------------ -----------
End of period (a).......................................... $10,860,804 $3,833,951
============= ============
(a) Including undistributed net investment income or
distributions in excess of net investment income of: -- $ 3,359
============
</TABLE>
* Fund's commencement of investment operations was February 22, 1995.
** Fund's commencement of investment operations was September 11, 1995.
See accompanying notes to financial statements.
PAGE 36
<PAGE> 38
SALOMON BROTHERS INVESTMENT SERIES
<TABLE>
<CAPTION>
NATIONAL U.S.
INTERMEDIATE GOVERNMENT HIGH YIELD STRATEGIC TOTAL INVESTORS
MUNICIPAL FUND* INCOME FUND* BOND FUND* BOND FUND* RETURN FUND** FUND
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 430,514 $ 517,510 $ 1,503,286 $ 912,394 $ 132,091 $ 6,537,153
39,589 110,378 472,003 278,481 24,049 49,873,168
423,880 325,404 448,128 550,288 450,147 62,151,251
---------------- ------------- ----------- ----------- -------------- ------------
893,983 953,292 2,423,417 1,741,163 606,287 118,561,572
---------------- ------------- ----------- ----------- -------------- ------------
(17,376) (12,734) (428,959) (30,591) (35,724) (4,087)
(11,207) (16,038) (212,975) (59,198) (47,121) (2,179)
(8,442) (10,967) (42,228) (23,725) (3,465) (1,577)
(389,560) (477,771) (790,660) (804,713) (45,781) (6,529,373)
---------------- ------------- ----------- ---------- -------------- ------------
(426,585) (517,510) (1,474,822) (918,227) (132,091) (6,537,216)
---------------- ------------- ----------- ----------- -------------- ------------
(1,569) (2,801) (146,101) (11,724) (3,900) (37,569)
(1,193) (4,374) (137,393) (42,853) (5,711) (61,264)
(749) (2,795) (17,451) (9,338) (469) (26,879)
(26,754) (100,408) (108,284) (226,037) (4,845) (36,419,464)
---------------- ------------- ----------- ----------- -------------- ------------
(30,265) (110,378) (409,229) (289,952) (14,925) (36,545,176)
---------------- ------------- ----------- ----------- -------------- ------------
-- (216) -- -- -- --
-- (1,765) -- -- -- --
-- (174) -- -- -- --
-- (2,827) -- -- -- --
---------------- ------------- ----------- ----------- -------------- ------------
-- (4,982) -- -- -- --
---------------- ------------- ----------- ----------- -------------- ------------
551,191 269,838 10,746,292 498,371 3,580,176 396,175
417,842 561,475 10,103,804 1,866,229 5,255,708 675,659
260,067 265,054 1,264,713 397,920 424,084 264,858
9,280,727 9,258,070 7,371,479 9,270,829 4,250,000 5,383,498
---------------- ------------- ----------- ----------- -------------- ------------
10,509,827 10,354,437 29,486,288 12,033,349 13,509,968 6,720,190
---------------- ------------- ----------- ----------- -------------- ------------
10,946,960 10,674,859 30,025,654 12,566,333 13,969,239 82,199,370
80 80 80 80 5,000 348,214,236
---------------- ------------- ----------- ----------- -------------- ------------
$ 10,947,040 $10,674,939 $30,025,734 $12,566,413 $13,974,239 $430,413,606
================= =============== ============= ============= ================ ============
$ 3,929 -- $ 28,464 $ (29,376) -- --
================= ============= =============
</TABLE>
See accompanying notes to financial statements.
PAGE 37
<PAGE> 39
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
CASH NEW YORK
MANAGEMENT MUNICIPAL
FUND BOND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................... $ 551,304 $ 416,648
Net realized gain (loss) on investments, options, and
foreign currency transactions.......................... (415) (552,459)
Net change in unrealized appreciation on
investments and options................................ -- (636,046)
----------- -----------
Net increase (decrease) in net assets from operations.... 550,889 (771,857)
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A................................................ -- --
Class B................................................ -- --
Class C................................................ -- --
Class O................................................ (551,304) (416,648)
----------- -----------
(551,304) (416,648)
----------- -----------
Distributions from net realized gains:
Class A................................................ -- --
Class B................................................ -- --
Class C................................................ -- --
Class O................................................ -- --
----------- -----------
-- --
----------- -----------
NET FUND CAPITAL SHARE TRANSACTIONS:
Class A................................................ -- --
Class B................................................ -- --
Class C................................................ -- --
Class O................................................ 4,077,861 (3,842,334)
----------- -----------
Net increase (decrease) in net assets
derived from share transactions.................... 4,077,861 (3,842,334)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS...................... 4,077,446 (5,030,839)
NET ASSETS:
Beginning of year........................................ 15,049,370 8,364,269
----------- -----------
End of year.............................................. $19,126,816 $ 3,333,430
============= ============
</TABLE>
* Fund commenced investment operations in 1995.
See accompanying notes to financial statements.
PAGE 38
<PAGE> 40
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1994
<TABLE>
<CAPTION>
NATIONAL U.S.
INTERMEDIATE GOVERNMENT HIGH YIELD STRATEGIC TOTAL INVESTORS
MUNICIPAL FUND* INCOME FUND* BOND FUND* BOND FUND* RETURN FUND* FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-- -- -- -- -- $ 6,507,464
-- -- -- -- -- 26,937,166
-- -- -- -- -- (38,268,999)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- (4,824,369)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- (6,555,567)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- (6,555,567)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- (36,204,568)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- (36,204,568)
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- 9,651,539
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- 9,651,539
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- (37,932,965)
-- -- -- -- -- 386,147,201
----------------- --------------- ------------ ------------ ------------- ------------
-- -- -- -- -- $348,214,236
================= ================ ============ ============ ============== ============
</TABLE>
See accompanying notes to financial statements.
PAGE 39
<PAGE> 41
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For the period ended December 31, 1995*
U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Purchases of short-term portfolio investments, net............................... $ (2,064,000)
Purchases of long-term portfolio investments..................................... (25,786,224)
Proceeds from disposition of long-term portfolio investments and principal
paydowns....................................................................... 17,724,056
------------
(10,126,168)
Net investment income............................................................ 517,510
Net amortization of premium/discount on investments.............................. 1,883
Amortization of organization expenses............................................ 21,606
Net change is receivables/payables related to operations......................... (293,456)
------------
Net cash flows used by operating activities.................................... (9,878,625)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold........................................................ 10,348,090
Payments on shares redeemed...................................................... (9,286)
Cash dividends paid.............................................................. (460,097)
------------
Net cash flows provided by financing activities................................ 9,878,707
------------
Net increase in cash............................................................... 82
Cash at beginning of period........................................................ 80
------------
Cash at end of period.............................................................. $ 162
============
</TABLE>
* Fund's commencement of investment operations was February 22, 1995.
Note: Other non-cash activity includes mortgage dollar roll transactions. See
Note 1.
See accompanying notes to financial statements.
PAGE 40
<PAGE> 42
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Salomon Brothers Investment Series (the "Investment Series") consists of
certain portfolios of the Salomon Brothers Series Funds Inc (the "Series
Funds"), as indicated below, and the Salomon Brothers Investors Fund Inc (the
"Investors Fund"). The Series Funds were incorporated in Maryland on April 17,
1990 as an open-end management investment company, and currently operates as a
series company comprised of nine portfolios: Salomon Brothers Cash Management
Fund (the "Cash Management Fund"), Salomon Brothers New York Municipal Money
Market Fund, (the "New York Municipal Money Fund"), Salomon Brothers U.S.
Treasury Securities Money Market Fund (the "U.S. Treasury Fund"), Salomon
Brothers New York Municipal Bond Fund (the "New York Municipal Bond Fund"),
Salomon Brothers National Intermediate Municipal Fund (the "National
Intermediate Municipal Fund"), Salomon Brothers U.S. Government Income Fund (the
"U.S. Government Income Fund"), Salomon Brothers High Yield Bond Fund (the "High
Yield Bond Fund"), Salomon Brothers Strategic Bond Fund (the "Strategic Bond
Fund"), and Salomon Brothers Total Return Fund (the "Total Return Fund").
Separate financial statements are prepared for the New York Municipal Money Fund
and U.S. Treasury Fund which are not part of the Investment Series. All of the
other portfolios of the Series Funds are included in the Investment Series,
which also includes the Investors Fund, a diversified open-end management
investment company incorporated in Maryland on April 2, 1958. The Investment
Series operates under a multiple class pricing structure, with each portfolio of
the Investment Series (individually, a "Fund") offering Class A, Class B, Class
C, and Class O shares, each with their own expense structure. Each fund has a
specific investment objective: the Cash Management Fund's objective is to seek
as high a level of current income as is consistent with liquidity and the
stability of principal; the New York Municipal Bond Fund's objective is to
achieve a high level of current income which is exempt from regular federal
income taxes and New York State and New York City personal income taxes,
consistent with the preservation of capital; the National Intermediate Municipal
Fund's objective is to achieve a high level of current income which is exempt
from regular federal income taxes; the U.S. Government Income Fund's objective
is to obtain a high level of current income; the High Yield Bond Fund's
objective is to maximize current income; the Strategic Bond Fund's objective is
to seek a high level of current income; the Total Return Fund's objective is to
obtain above-average income (compared to a portfolio entirely invested in equity
securities); the Investors Fund's objective is to seek long-term growth of
capital.
Certain costs incurred in connection with each Fund's organization, which were
payable to Salomon Brothers Asset Management Inc ("SBAM") have been deferred and
are being amortized by the Funds over a 60 month period from the date each Fund
commenced
PAGE 41
<PAGE> 43
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
investment operations. A summary of those expenditures that remain as of
December 31, 1995 for each Fund is as follows:
<TABLE>
<CAPTION>
EXPIRATION OF
FUND AMORTIZATION AMOUNT
<S> <C> <C>
- -----------------------------------------------------------------------------------
New York Municipal Bond Fund...................... February 1998 $27,895
National Intermediate Municipal Fund.............. February 2000 $101,185
U.S. Government Income Fund....................... February 2000 $104,594
High Yield Bond Fund.............................. February 2000 $126,477
Strategic Bond Fund............................... February 2000 $126,910
Total Return Fund................................. September 2000 $89,854
</TABLE>
The following is a summary of significant accounting policies followed by the
Investment Series in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles ("GAAP"). The
preparation of financial statements in accordance with GAAP requires management
to make estimates of certain reported amounts in the financial statements.
Actual amounts could differ from those estimates.
(A) INVESTMENT VALUATION. Portfolio securities listed or traded on
national securities exchanges, or reported on the NASDAQ national market
system, are valued at the last sale price, or if there have been no sales
on that day, at the mean of the current bid and asked price which
represents the current value of the security. Over-the-counter securities
are valued at the mean of the current bid and asked price. Debt securities
are valued by using either market quotations or independent pricing
services which use prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Publicly traded sovereign bonds are typically
traded internationally on the over-the-counter market and are valued at the
mean of the last current bid and asked price as of the close of business of
that market. Short-term securities with less than 60 days remaining to
maturity when acquired by a Fund will be valued at amortized cost which
approximates market value. If a Fund, other than the Cash Management Fund,
acquires such securities with more than 60 days remaining to maturity, they
will be valued at current market value (using the bid price), until the
60th day prior to maturity, and will then be valued on an amortized cost
basis.
Portfolio securities for the Cash Management Fund are valued using the
amortized cost method, which involves initially valuing an investment at
its cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value.
Foreign securities quoted in a foreign currency are translated into
U.S. dollars using exchange rates at 2:30 p.m. Eastern time or at such
other rates as SBAM may determine to be appropriate in computing net asset
value.
PAGE 42
<PAGE> 44
SALOMON BROTHERS INVESTMENT SERIES
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 will be valued at their
respective fair value as determined in good faith by, or under procedures
established by, the Board of Directors.
(B) FUTURES CONTRACTS. The New York Municipal Bond Fund, National
Intermediate Municipal Fund, High Yield Bond Fund, Strategic Bond Fund,
Total Return Fund and Investors Fund may enter into futures contracts for
hedging purposes, which involves paying or receiving variation margin,
which will be recorded as unrealized gain or loss until the contract is
closed. When the contract is closed, a realized gain or loss will be
recognized. Outstanding contracts involve elements of market risk in excess
of amounts reported in the financial statements.
(C) 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.
(D) MORTGAGE ROLLS. The U.S. Government Income Fund and the Strategic
Bond Fund may enter into mortgage "dollar rolls" in which a Fund sells
mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. The Fund is
compensated by a fee paid by the counterparty. Dollar rolls are accounted
for as financing arrangements; the fee is accrued into interest income
ratably over the term of the dollar roll and any gain or loss on the roll
is deferred until disposition of the rolled security. The average daily
balance of dollar rolls outstanding during the period ended December 31,
1995 was approximately $2,150,000 and $1,052,000 for the U.S. Government
Income Fund and the Strategic Bond Fund, respectively.
(E) 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 always 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.
(F) FOREIGN CURRENCY TRANSLATION. The accounting records of each Fund
are maintained in U.S. dollars. Investment securities and other assets and
liabilities of the High Yield Bond Fund, Strategic Bond Fund, Total Return
Fund and Investors
PAGE 43
<PAGE> 45
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Fund denominated in a foreign currency are translated into U.S. dollars at
the prevailing rates of exchange each day. Purchases and sales of
securities, income receipts and expense payments are translated into U.S.
dollars at the prevailing exchange rate on the respective dates of the
transactions. Net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of
forward currency contracts, disposition of foreign currencies, currency
gains and losses realized between the trade and settlement dates on
securities transactions and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effect of changes in foreign currency exchange rates on investments in
securities are not segregated in the Statements of Operations from the
effects of changes in market prices of those securities, but are included
with the net realized and unrealized gain or loss on investments.
(G) FORWARD FOREIGN CURRENCY CONTRACTS. The High Yield Bond Fund,
Strategic Bond Fund, Total Return Fund and Investors 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.
(H) LOAN PARTICIPATIONS. The High Yield Bond Fund, Strategic Bond Fund
and Total Return 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 values of the High Yield
Bond Fund and the Strategic Bond Fund's loan participations at December 31,
1995 were $336,250 each.
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.
(I) FEDERAL INCOME TAXES. Each Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies, including the distribution requirements of the Tax
Reform Act of 1986, and to distribute all of its income, including any net
realized gains, to shareholders. Therefore, no Federal income tax or excise
tax provision is required.
(J) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net
investment income for each of the Funds (except the Investors Fund) are
declared each business day to shareholders of record that day, and are paid
on the last business
PAGE 44
<PAGE> 46
SALOMON BROTHERS INVESTMENT SERIES
day of the month. Dividends from net investment income for the Investors
Fund are declared on a quarterly basis. Distributions of net realized gains
to shareholders of each Fund, if any, are declared at least annually.
Dividends and distributions to shareholders of each Fund are recorded on
the ex-dividend date and are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles
due primarily to differences in the treatment of foreign currency
gains/losses and 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
distributions in excess of net investment income and distributions in
excess of net realized capital gains.
(K) CLASS ACCOUNTING. Investment income, common expenses and gain
(loss) on investments are allocated to the various classes of a Fund on the
basis of daily net assets of each class. Distribution and shareholder
servicing fees relating to a specific class are charged directly to that
class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
(L) EXPENSES. Direct expenses are charged to the Fund that incurred
them, and general expenses of the Investment Series are allocated to the
Funds based on each Fund's relative net assets.
(M) OTHER. Investment transactions are recorded as of the trade date.
Dividend income is recorded on the ex-dividend 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.
(N) CASH FLOW INFORMATION. Statement of Financial Accounting Standards
Number 102 generally exempts entities such as the Funds from reporting a
Statement of Cash Flows. However, the amount and nature of certain
activities entered into by the U.S. Government Income Fund and Strategic
Bond Fund may be considered financing arrangements, which may require the
presentation of a Statement of Cash Flows. General investing and operating
activities of the Funds are reported in the Statement of Changes in Net
Assets and additional information on cash receipts and cash payments are
presented in the Statement of Cash Flows. Accounting practices that do not
affect reporting activities on a cash basis include carrying investments at
value and amortizing discounts or premiums on debt obligations.
2. MANAGEMENT FEE AND OTHER AGREEMENTS
Each Fund retains SBAM, an indirect wholly owned subsidiary of Salomon Inc, to
act as investment manager, subject to the supervision by the Board of Directors
of each Fund. SBAM furnishes each Fund in the Investment Series with office
space and certain
PAGE 45
<PAGE> 47
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
services and facilities required for conducting the business of the Investment
Series and pays the compensation of its officers. The management fee for these
services for each Fund (except the Investors Fund) is payable monthly and is
based on the following annual percentages of each Funds' average daily net
assets: .20% for the Cash Management Fund, .50% for the New York Municipal Bond
Fund and the National Intermediate Municipal Fund, .60% for the U.S. Government
Income Fund, .75% for the High Yield Bond Fund and Strategic Bond Fund, and .55%
for the Total Return Fund. SBAM Limited provides certain advisory services to
SBAM for the benefit of the Strategic Bond Fund. SBAM Limited is compensated by
SBAM at no additional expense to the Strategic Bond Fund.
The Investors Fund pays SBAM a base fee subject to an increase or decrease
depending on the extent, if any, to which the investment performance of the
Investors Fund exceeds or is exceeded by the investment record of the Standard &
Poor's 500 Index of Composite Stocks ("S&P 500 Index"). The base fee is paid
quarterly based on the following annual rates:
<TABLE>
<CAPTION>
ANNUAL
FEE
AVERAGE DAILY NET ASSETS RATE
<S> <C>
- -----------------------------------------------------------------------------------
First $350 million......................................................... .500%
Next $150 million.......................................................... .400%
Next $250 million.......................................................... .375%
Next $250 million.......................................................... .350%
Over $1 billion............................................................ .300%
</TABLE>
The performance adjustment is paid quarterly based on a rolling one year period.
A performance adjustment will only be made after the investment performance of
the Investors Fund exceeds or is exceeded by the investment record of the S&P
500 Index by at least one percentage point. For each percentage point by which
the investment performance of the Investors Fund exceeds or is exceeded by the
investment record of the S&P 500 Index, the base fee will be adjusted upward or
downward by .01% (annualized). The maximum annual adjustment is .10% which would
occur if the Investors Fund's performance exceeds or is exceeded by the S&P 500
Index by ten or more percentage points. The first performance adjustment
reducing the management fee by $267,836 was made on September 30, 1995,
representing a seven percent higher performance by the S&P 500 Index for the
period from October 1, 1994 through September 30, 1995. An additional reduction
in the base management fee of $31,182 was recorded for the quarter ended
December 31, 1995, representing a three percent higher performance by the S&P
500 Index.
For the year ended December 31, 1995, SBAM waived management fees of $25,505,
$19,069, $44,953, $53,073, $79,385, $71,026 and $15,069 for the Cash Management
Fund, New York Municipal Bond Fund, National Intermediate Municipal Fund, U.S.
Government Income Fund, High Yield Bond Fund, Strategic Bond Fund and Total
Return Fund, respectively, and voluntarily absorbed expenses of $75,716,
$63,088, $35,803, $39,324, $11,822 and $4,346 for the Cash Management Fund, New
York Municipal Bond
PAGE 46
<PAGE> 48
SALOMON BROTHERS INVESTMENT SERIES
Fund, National Intermediate Municipal Fund, U.S. Government Income Fund,
Strategic Bond Fund and Total Return Fund, respectively.
If in any fiscal year total expenses of any Fund, excluding taxes, interest,
brokerage and extraordinary expenses, but including the management fee, exceed
the most stringent expense limitations imposed by state securities regulations
applicable to the Fund, SBAM will pay or reimburse the Fund for the excess.
Currently, the most restrictive of these limitations on an annual basis is 2.5%
of the first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of average daily net assets in
excess of $100 million. No such expense reimbursement was required for the year
ending December 31, 1995.
Investors Bank & Trust Company serves as custodian and administrator for each
Fund, which includes performing certain administrative services in connection
with the operation of each Fund. During the year ended December 31, 1995,
credits earned on outstanding cash balances were used to reduce custodian fees
by $9, $1,758, $5,279, $21, $735, $208, $13 and $529 for the Cash Management
Fund, New York Municipal Bond Fund, National Intermediate Municipal Fund, U.S.
Government Income Fund, High Yield Bond Fund, Strategic Bond Fund, Total Return
Fund and Investors Fund, respectively.
Each Fund has an agreement with Salomon Brothers Inc ("Salomon Brothers"), an
affiliate of the Investment Adviser, to distribute its shares pursuant to a
multiple pricing system. Each class (except for Class O) of each Fund (except
for the Cash Management Fund) is authorized pursuant to a services and
distribution plan applicable to that class of shares (the "Class A Plan," the
"Class B Plan," and the "Class C Plan," collectively, the "Plans") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"1940 Act"), to pay Salomon Brothers an annual service fee with respect to Class
A, Class B, and Class C shares of the applicable Funds at the rate of .25% of
the value of the average daily net assets of the respective class. Salomon
Brothers is also paid an annual distribution fee with respect to Class B and
Class C shares of each Fund (except for the Cash Management Fund) at the rate of
.75% of the value of the average daily net assets of the respective class. Class
O shares are not subject to a services and distribution plan fee.
Brokerage commissions of $210 and $95,179 were paid by the Total Return Fund and
Investors Fund, respectively, to Salomon Brothers, the Funds' distributor and an
indirect wholly-owned subsidiary of Salomon Inc, for transactions executed on
behalf of the Funds for the period ended December 31, 1995.
Salomon Brothers received $1,990 as its portion of the front-end sales charge on
sales of Class A shares of the Funds. In addition, contingent deferred sales
charges of $2,290 were paid to Salomon Brothers in connection with redemptions
of certain Class B and Class C shares of the Funds during the year ended
December 31, 1995.
PAGE 47
<PAGE> 49
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
3. CAPITAL STOCK
At December 31, 1995, the Series Funds had 10,000,000,000 shares of authorized
capital stock, par value $.001 per share, of which the Cash Management Fund, New
York Municipal Bond Fund, National Intermediate Municipal Fund, U.S. Government
Income Fund, High Yield Bond Fund and Strategic Bond Fund each had 1,111,111,112
shares authorized, and the Total Return Fund had 1,111,111,104 shares
authorized. The Investors Fund had 50,000,000 shares of authorized capital
stock, par value $1.00 per share. Transactions in Fund shares for the periods
indicated were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH MANAGEMENT FUND
Sold.................. 8,291,614 $ 8,291,614 -- -- 3,213,151 $ 3,213,151 -- --
Issued as
reinvestment........ 4,672 4,672 -- -- 24,262 24,262 -- --
Redeemed.............. (6,540,739) (6,540,739) -- -- (998,927) (998,927) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase
(decrease).......... 1,755,547 $ 1,755,547 -- -- 2,238,486 $ 2,238,486 -- --
=========== ============ =========== ============ =========== ============ =========== ============
NEW YORK MUNICIPAL
BOND FUND
Sold.................. 53,966 $ 528,846 -- -- 52,010 $ 502,220 -- --
Issued as
reinvestment........ 16 157 -- -- 226 2,229 -- --
Redeemed.............. (2) (21) -- -- (2) (22) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase
(decrease).......... 53,980 $ 528,982 -- -- 52,234 $ 504,427 -- --
=========== ============ =========== ============ =========== ============ =========== ============
NATIONAL INTERMEDIATE
MUNICIPAL FUND
Sold.................. 54,100 $ 546,146 -- -- 41,260 $ 416,180 -- --
Issued as
reinvestment........ 710 7,331 -- -- 163 1,682 -- --
Redeemed.............. (221) (2,286) -- -- (2) (20) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 54,589 $ 551,191 -- -- 41,421 $ 417,842 -- --
=========== ============ =========== ============ =========== ============ =========== ============
U.S. GOVERNMENT INCOME
FUND
Sold.................. 26,869 $ 269,137 -- -- 54,833 $ 554,953 -- --
Issued as
reinvestment........ 76 721 -- -- 637 6,542 -- --
Redeemed.............. (2) (20) -- -- (2) (20) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 26,943 $ 269,838 -- -- 55,468 $ 561,475 -- --
=========== ============ =========== ============ =========== ============ =========== ============
HIGH YIELD BOND FUND
Sold.................. 1,019,841 $10,701,496 -- -- 946,768 $ 9,961,848 -- --
Issued as
reinvestment........ 40,936 430,949 -- -- 15,920 168,888 -- --
Redeemed.............. (36,582) (386,153) -- -- (2,574) (26,932) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 1,024,195 $10,746,292 -- -- 960,114 $10,103,804 -- --
=========== ============ =========== ============ =========== ============ =========== ============
STRATEGIC BOND FUND
Sold.................. 53,771 $ 551,616 -- -- 174,744 $ 1,827,448 -- --
Issued as
reinvestment........ 1,158 12,171 -- -- 3,737 39,371 -- --
Redeemed.............. (6,226) (65,416) -- -- (57) (590) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 48,703 $ 498,371 -- -- 178,424 $ 1,866,229 -- --
=========== ============ =========== ============ =========== ============ =========== ============
TOTAL RETURN FUND
Sold.................. 343,940 $ 3,552,510 -- -- 518,625 $ 5,342,405 -- --
Issued as
reinvestment........ 2,713 28,624 -- -- 3,801 40,062 -- --
Redeemed.............. (93) (958) -- -- (12,152) (126,759) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 346,560 $ 3,580,176 -- -- 510,274 $ 5,255,708 -- --
=========== ============ =========== ============ =========== ============ =========== ============
INVESTORS FUND
Sold.................. 27,922 $ 420,791 -- -- 41,769 $ 654,082 -- --
Issued as
reinvestment........ 760 12,451 -- -- 1,335 21,837 -- --
Redeemed.............. (2,119) (37,067) -- -- (15) (260) -- --
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
Net increase.......... 26,563 $ 396,175 -- -- 43,089 $ 675,659 -- --
=========== ============ =========== ============ =========== ============ =========== ============
</TABLE>
PAGE 48
<PAGE> 50
SALOMON BROTHERS INVESTMENT SERIES
<TABLE>
<CAPTION>
CLASS C CLASS O
----------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
180,044 $ 180,044 -- -- 47,254,877 $ 47,254,877 75,796,036 $ 75,796,036
2,497 2,497 -- -- 431,706 431,706 401,895 401,895
-- -- -- -- (60,129,169) (60,129,169) (72,120,070) (72,120,070)
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
182,541 $ 182,541 -- -- (12,442,586) $(12,442,586) 4,077,861 $ 4,077,861
=========== ============ =========== ============ ============ ============= ============ =============
26,263 $ 250,020 -- -- 14,323 $ 137,924 194,976 $ 1,960,677
6 60 -- -- 17,711 169,082 40,650 390,961
(2) (21) -- -- (156,388) (1,509,557) (665,997) (6,193,972)
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
26,267 $ 250,059 -- -- (124,354) $ (1,202,551) (430,371) $ (3,842,334)
=========== ============ =========== ============ ============ ============= ============ =============
25,963 $ 260,000 -- -- 927,748 $ 9,278,117 -- --
9 87 -- -- 263 2,630 -- --
(2) (20) -- -- (2) (20) -- --
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
25,970 $ 260,067 -- -- 928,009 $ 9,280,727 -- --
=========== ============ =========== ============ ============ ============= ============ =============
27,164 $ 272,000 -- -- 925,200 $ 9,252,000 -- --
20 206 -- -- 816 8,164 -- --
(698) (7,152) -- -- (206) (2,094) -- --
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
26,486 $ 265,054 -- -- 925,810 $ 9,258,070 -- --
=========== ============ =========== ============ ============ ============= ============ =============
124,291 $ 1,298,229 -- -- 926,518 $ 9,265,788 -- --
1,229 12,925 -- -- 791 7,911 -- --
(4,453) (46,441) -- -- (181,791) (1,902,220) -- --
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
121,067 $ 1,264,713 -- -- 745,518 $ 7,371,479 -- --
=========== ============ =========== ============ ============ ============= ============ =============
38,420 $ 391,367 -- -- 926,274 $ 9,263,323 -- --
625 6,573 -- -- 754 7,526 -- --
(2) (20) -- -- (2) (20) -- --
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
39,043 $ 397,920 -- -- 927,026 $ 9,270,829 -- --
=========== ============ =========== ============ ============ ============= ============ =============
41,886 $ 423,053 -- -- 425,000 $ 4,250,000 -- --
99 1,041 -- -- -- -- -- --
(1) (10) -- -- -- -- -- --
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
41,984 $ 424,084 -- -- 425,000 $ 4,250,000 -- --
=========== ============ =========== ============ ============ ============= ============ =============
18,595 $ 267,020 -- -- 245,958 $ 3,783,857 1,535,504 $ 22,813,829
60 980 -- -- 2,017,845 32,672,713 2,324,823 32,449,031
(200) (3,142) -- -- (1,987,122) (31,073,072) (3,057,955) (45,611,321)
---------- ----------- ---------- ----------- ----------- ------------ ----------- ------------
18,455 $ 264,858 -- -- 276,681 $ 5,383,498 802,372 $ 9,651,539
=========== ============ =========== ============ ============ ============= ============ =============
</TABLE>
PAGE 49
<PAGE> 51
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
At December 31, 1995, Salomon Brothers owned approximately the following
percentages of total shares outstanding of the following Funds:
<TABLE>
<S> <C>
New York Municipal Bond Fund................................................. 21%
National Intermediate Municipal Fund......................................... 95%
U.S. Government Income Fund.................................................. 97%
High Yield Bond Fund......................................................... 29%
Strategic Bond Fund.......................................................... 84%
Total Return Fund............................................................ 38%
</TABLE>
4. PORTFOLIO ACTIVITY
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the period ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- -----------------------------------------------------------------------------------------
<S> <C> <C>
New York Municipal Bond Fund........................ $ 787,738 $ 1,438,362
============= =============
National Intermediate Municipal Fund................ $ 12,789,131 $ 2,738,946
============= =============
U.S. Government Income Fund
U.S. Government Securities........................ $ 27,466,318 $ 17,724,056
============= =============
High Yield Bond Fund................................ $ 44,314,086 $ 17,461,424
============= =============
Strategic Bond Fund
U.S. Government Securities........................ $ 8,520,260 $ 6,824,704
Other Investments................................. 17,916,013 9,025,947
------------ ------------
$ 26,436,273 $ 15,850,651
============= =============
Total Return Fund
U.S. Government Securities........................ $ 2,461,806 $ 364,527
Other Investments................................. 10,798,038 884,107
------------ ------------
$ 13,259,844 $ 1,248,634
============= =============
Investors Fund
U.S. Government Securities........................ -- $ 3,962,031
Other Investments................................. $317,547,885 364,164,543
------------ ------------
$317,547,885 $368,126,574
============= =============
</TABLE>
PAGE 50
<PAGE> 52
SALOMON BROTHERS INVESTMENT SERIES
Transactions in options written for the Investors Fund during the year ended
December 31, 1995 were as follows:
<TABLE>
<CAPTION>
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
<S> <C> <C>
- --------------------------------------------------------------
Options outstanding at December 31, 1994...................... (1,825) (428,151)
Options written............................................... (1,115) (289,198)
Options terminated in closing purchase transactions........... 2,765 681,423
Options expired............................................... -- --
Options exercised............................................. 175 35,926
------ --------
Options outstanding at December 31, 1995...................... -- --
====== =========
</TABLE>
During the year ended December 31, 1995, net realized loss from written option
transactions for the Investors Fund amounted to $268,953 and net realized loss
from purchased option transactions amounted to $113,136, for a net realized loss
on all option transactions for the Investors Fund of $382,089.
During the period ended December 31, 1995, net realized gain from forward
foreign currency contracts for the Strategic Bond Fund amounted to $67,840, and
net realized gains on mortgage dollar rolls amounted to $57,813 and $17,359 for
the U.S. Government Income Fund and the Strategic Bond Fund, respectively.
During the year ended December 31, 1995, permanent book/tax differences of
$(23,543) and $63 for the Strategic Bond Fund and Investors Fund, respectively,
arising primarily from foreign currency gains (losses) have been reclassified
from accumulated gain (loss) on investments to undistributed net investment
income. Net investment income, net realized losses and net assets were not
affected by this reclassification.
5. PORTFOLIO INVESTMENT RISKS
CREDIT AND MARKET RISK. Funds that invest in high yield and emerging market
instruments are subject to certain credit and market risks. The yields of high
yield and emerging market debt obligations reflect, among other things,
perceived credit risk. The Funds' investment in securities rated below
investment grade typically involve risks not associated with higher rated
securities including, among others, greater risk of timely and ultimate payment
of interest and principal, greater market price volatility and less liquid
secondary market trading. The consequences of political, social, economic or
diplomatic changes may have 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.
The Cash Management Fund invests in money market instruments maturing in
thirteen months or less whose credit ratings are within the highest ratings
category of two nationally recognized statistical rating organizations
("NRSROs") or if rated by only one
PAGE 51
<PAGE> 53
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NRSRO, the highest rating of that NRSRO, or, if not rated, are believed by the
investment manager to be of comparable quality. The New York Municipal Bond Fund
pursues its investment objectives by investing at least 80% of its net assets in
obligations the interest on which is exempt from regular federal income taxes
and at least 65% of its net assets in obligations the interest on which is
exempt from personal income taxes of the State and City of New York. Because the
New York Municipal Bond Fund invests primarily in obligations of the State and
City of New York, it is more susceptible to factors adversely affecting issuers
of such obligations than a fund that is more diversified.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK. Certain Funds 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.
Funds that enter into mortgage dollar rolls are subject to the risk that the
market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a mortgage dollar roll files for bankruptcy or becomes
insolvent, the Fund's use of proceeds of the dollar roll may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
Consistent with their objective to seek high current income, the High Yield Bond
Fund and the Strategic Bond Fund may invest in instruments whose values and
interest rates may be linked to foreign currencies, interest rates, indices or
some other financial indicator. The value at maturity or interest rates for
these instruments will increase or decrease according to the change in the
indicator to which it is indexed. These securities are generally more volatile
in nature and the risk of loss of principal is greater.
A risk in writing a covered call option is that the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. A risk in writing a put option is that the Fund may
incur a loss if the market price of the underlying security decreases and the
option is exercised. In addition, there is the risk that the Fund may not be
able to enter a closing transaction because of an illiquid secondary market.
PAGE 52
<PAGE> 54
SALOMON BROTHERS INVESTMENT SERIES
6. TAX INFORMATION
At December 31, 1995, the Cash Management Fund and New York Municipal Bond Fund
had net capital loss carry-forwards available to offset future capital gains as
follows:
<TABLE>
<CAPTION>
CASH NEW YORK
YEAR OF MANAGEMENT MUNICIPAL
EXPIRATION FUND BOND FUND
<S> <C> <C>
- -------------------------------------------------------------
1999......................................................... $ 894 --
2000......................................................... 396 --
2001......................................................... 409 --
2002......................................................... 415 $305,822
2003......................................................... -- 318,123
---------- ---------
$2,114 $623,945
============= ==========
</TABLE>
At December 31, 1995, as permitted under federal income tax regulations, the
Strategic Bond Fund has elected to defer $14,806 of Post-October net capital
losses and $41,069 of Post-October net foreign currency losses to the next
taxable year.
At December 31, 1995, the cost for Federal income tax purposes and gross
unrealized appreciation and depreciation in value of investments and repurchase
agreements held in each Fund were as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
AGGREGATE UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION (DEPRECIATION) APPRECIATION
<S> <C> <C> <C> <C>
- ----------------------------
New York Municipal Bond..... $ 3,385,615 $ 150,560 -- $ 150,560
National Intermediate
Municipal................. 10,075,715 427,222 $ (3,342) 423,880
U.S. Government Income...... 11,920,393 319,768 -- 319,768
High Yield Bond............. 30,050,814 964,094 (503,126) 460,968
Strategic Bond.............. 13,120,041 813,804 (248,266) 565,538
Total Return................ 14,849,713 508,518 (58,371) 450,147
Investors................... 332,596,925 104,734,626 (3,512,266) 101,222,360
</TABLE>
PAGE 53
<PAGE> 55
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each period:
CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1995
<S> <C> <C> <C>
- ---------------------------------------------------
Net asset value, beginning of period............... $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Net investment income.............................. 0.044 0.043 0.043
Dividends from net investment income............... (0.044) (0.043) (0.043)
------- ------- -------
Net asset value, end of period..................... $ 1.000 $ 1.000 $ 1.000
======= ======= =======
Net assets, end of period (thousands).............. $ 1,756 $ 2,238 $ 183
Total return*...................................... +4.5% +4.4% +4.4%
Ratios to average net assets:
Expenses........................................... 0.55% 0.55% 0.55%
Net investment income.............................. 5.42% 5.38% 5.40%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.037 $ 0.037 $ 0.036
Expense ratio...................................... 1.35% 1.34% 1.34%
</TABLE>
NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1995
<S> <C> <C> <C>
- ---------------------------------------------------
Net asset value, beginning of period............... $ 8.96 $ 8.96 $ 8.96
------- ------- -------
Net investment income.............................. 0.42 0.36 0.36
Net gain (loss) on securities and futures
(both realized and unrealized)................... 1.14 1.14 1.14
------- ------- -------
Total from investment operations................... 1.56 1.50 1.50
------- ------- -------
Dividends from net investment income............... (0.41) (0.35) (0.35)
Distributions from net realized gain on securities
and futures...................................... -- -- --
------- ------- -------
Total dividends and distributions.................. (0.41) (0.35) (0.35)
------- ------- -------
Net asset value, end of period..................... $ 10.11 $ 10.11 $ 10.11
======= ======= =======
Net assets, end of period (thousands).............. $ 546 $ 528 $ 266
Total return*...................................... +17.7% +17.0% +17.0%
Ratios to average net assets:
Expenses........................................... 0.75% 1.50% 1.50%
Net investment income.............................. 5.12% 4.30% 4.38%
Portfolio turnover rate............................ 22% 22% 22%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.24 $ 0.17 $ 0.18
Expense ratio...................................... 2.96% 3.70% 3.71%
</TABLE>
(a) February 1, 1993, commencement of investment operations, through December
31, 1993.
* 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 payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return. Total return calculated for
a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements.
PAGE 54
<PAGE> 56
SALOMON BROTHERS INVESTMENT SERIES
- ------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each period:
CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS O
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
0.055 0.038 0.027 0.033 0.055
(0.055) (0.038) (0.027) (0.033) (0.055)
------- ------- ------- ------- -------
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
$ 6,684 $19,127 $15,049 $11,613 $22,982
+5.6% +3.9% +2.7% +3.4% +5.7%
0.55% 0.61% 0.65% 0.65% 0.65%
5.46% 3.79% 2.68% 3.41% 5.43%
$ 0.047 $ 0.036 $ 0.025 $ 0.030 $ 0.053
1.34% 0.81% 0.85% 0.85% 0.85%
</TABLE>
NEW YORK MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS O
------------------------------
PERIOD
YEAR ENDED ENDED
DECEMBER 31, DECEMBER
------------------ 31,
1995 1994 1993(a)
------------------------------
<S> <C> <C>
$ 8.98 $ 10.44 $ 10.00
------ ------- -------
0.53 0.55 0.46
1.12 (1.46) 0.46
------ ------- -------
1.65 (0.91) 0.92
------ ------- -------
(0.52) (0.55) (0.46)
-- -- (0.02)
------ ------- -------
(0.52) (0.55) (0.48)
------ ------- -------
$10.11 $ 8.98 $ 10.44
====== ======= =======
$2,494 $ 3,333 $ 8,364
+18.8% -8.8% +9.4%
0.50% 0.50% 0.50%**
5.50% 5.72% 4.99%**
22% 63% 24%
$ 0.32 $ 0.49 $ 0.40
2.71% 1.17% 1.24%**
</TABLE>
See accompanying notes to financial statements.
PAGE 55
<PAGE> 57
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each period:
NATIONAL INTERMEDIATE MUNICIPAL FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS O
-------------------------------------------
PERIOD ENDED DECEMBER 31, 1995(a)
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.00 $10.00 $10.00 $10.00
------- ------- ------- -------
Net investment income.............................. 0.40 0.34 0.34 0.42
Net gain on investments (both realized and
unrealized)...................................... 0.46 0.45 0.45 0.46
------- ------- ------- -------
Total from investment operations................... 0.86 0.79 0.79 0.88
------- ------- ------- -------
Dividends from net investment income............... (0.40) (0.34) (0.34) (0.42)
Distributions from net realized gain on
investments...................................... (0.03) (0.03) (0.03) (0.03)
------- ------- ------- -------
Total dividends and distributions.................. (0.43) (0.37) (0.37) (0.45)
------- ------- ------- -------
Net asset value, end of period..................... $10.43 $10.42 $10.42 $10.43
======= ======= ======= =======
Net assets, end of period (thousands).............. $ 569 $ 432 $ 271 $9,675
Total return*...................................... +8.7 % +8.0 % +8.0 % +9.0 %
Ratios to average net assets:
Expenses........................................... 0.75%** 1.50%** 1.50%** 0.50%**
Net investment income.............................. 4.63%** 3.85%** 3.85%** 4.86%**
Portfolio turnover rate............................ 29% 29% 29% 29%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.32 $ 0.25 $ 0.25 $ 0.34
Expense ratio...................................... 1.71%** 2.45%** 2.46%** 1.46%**
</TABLE>
U.S. GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS O
-------------------------------------------
PERIOD ENDED DECEMBER 31, 1995(a)
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.00 $10.00 $10.00 $10.00
------- ------- ------- -------
Net investment income.............................. 0.49 0.43 0.43 0.52
Net gain on investments
(both realized and unrealized)................... 0.43 0.43 0.43 0.42
------- ------- ------- -------
Total from investment operations................... 0.92 0.86 0.86 0.94
------- ------- ------- -------
Dividends from net investment income............... (0.49) (0.43) (0.43) (0.52)
Distributions from net realized gain on
investments...................................... (0.10) (0.10) (0.10) (0.10)
Distributions in excess of net realized gain on
investments...................................... (0.01) (0.01) (0.01) --
------- ------- ------- -------
Total dividends and distributions.................. (0.60) (0.54) (0.54) (0.62)
------- ------- ------- -------
Net asset value, end of period..................... $10.32 $10.32 $10.32 $10.32
======= ======= ======= =======
Net assets, end of period (thousands).............. $ 278 $ 572 $ 273 $9,552
Total return*...................................... +9.5 % +8.8 % +8.8 % +9.7 %
Ratios to average net assets:
Expenses........................................... 0.85%** 1.60%** 1.60%** 0.60%**
Net investment income.............................. 5.67%** 4.85%** 4.92%** 5.92%**
Portfolio turnover rate............................ 230% 230% 230% 230%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.40 $ 0.34 $ 0.34 $ 0.42
Expense ratio...................................... 1.90%** 2.64%** 2.64%** 1.64%**
</TABLE>
(a) February 22, 1995, commencement of investment operations, through December
31, 1995.
* 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 payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return. Total return calculated for
a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements.
PAGE 56
<PAGE> 58
SALOMON BROTHERS INVESTMENT SERIES
- ------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each period:
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS O
-------------------------------------------
PERIOD ENDED DECEMBER 31, 1995(a)
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.00 $10.00 $10.00 $10.00
------- ------- ------- -------
Net investment income.............................. 0.92 0.85 0.85 0.95
Net gain on investments
(both realized and unrealized)................... 0.67 0.68 0.68 0.67
------- ------- ------- -------
Total from investment operations................... 1.59 1.53 1.53 1.62
------- ------- ------- -------
Dividends from net investment income............... (0.91) (0.85) (0.85) (0.93)
Distributions from net realized gain on
investments...................................... (0.15) (0.15) (0.15) (0.15)
------- ------- ------- -------
Total dividends and distributions.................. (1.06) (1.00) (1.00) (1.08)
------- ------- ------- -------
Net asset value, end of period..................... $10.53 $10.53 $10.53 $10.54
======= ======= ======= =======
Net assets, end of period (thousands).............. $10,789 $10,108 $1,274 $7,854
Total return*...................................... +16.6 % +15.7 % +15.8 % +16.8 %
Ratios to average net assets:
Expenses........................................... 1.24%** 1.96%** 1.98%** 1.00%**
Net investment income.............................. 10.58%** 9.53%** 9.61%** 10.59%**
Portfolio turnover rate............................ 109% 109% 109% 109%
Before waiver of management fee by SBAM and credits
earned on custodian cash balances, net investment
income per share and expense ratios would have
been:
Net investment income per share.................... $ 0.87 $ 0.80 $ 0.80 $ 0.90
Expense ratio...................................... 1.80%** 2.51%** 2.54%** 1.55%**
</TABLE>
STRATEGIC BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS O
-------------------------------------------
PERIOD ENDED DECEMBER 31, 1995(a)
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.00 $10.00 $10.00 $10.00
------- ------- ------- -------
Net investment income.............................. 0.84 0.76 0.77 0.87
Net gain on investments
(both realized and unrealized)................... 0.78 0.79 0.78 0.77
------- ------- ------- -------
Total from investment operations................... 1.62 1.55 1.55 1.64
------- ------- ------- -------
Dividends from net investment income............... (0.85) (0.78) (0.78) (0.87)
Distributions from net realized gain on
investments...................................... (0.24) (0.24) (0.24) (0.24)
------- ------- ------- -------
Total dividends and distributions.................. (1.09) (1.02) (1.02) (1.11)
------- ------- ------- -------
Net asset value, end of period..................... $10.53 $10.53 $10.53 $10.53
======= ======= ======= =======
Net assets, end of period (thousands).............. $ 513 $1,879 $ 411 $9,763
Total return*...................................... +16.8 % +16.1 % +16.1 % +17.0 %
Ratios to average net assets:
Expenses........................................... 1.23%** 1.97%** 1.99%** 0.99%**
Net investment income.............................. 9.51%** 8.75%** 8.77%** 9.74%**
Portfolio turnover rate............................ 161% 161% 161% 161%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.76 $ 0.69 $ 0.70 $ 0.79
Expense ratio...................................... 2.11%** 2.85%** 2.87%** 1.87%**
</TABLE>
(a) February 22, 1995, commencement of investment operations, through December
31, 1995.
* 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 payable date, and a sale at net asset value on the last day of each
period reported. Initial sales charge or contingent deferred sales charge is
not reflected in the calculation of total return. Total return calculated for
a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements.
PAGE 57
<PAGE> 59
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data per share of capital stock outstanding throughout each period:
TOTAL RETURN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS O
-------------------------------------------
PERIOD ENDED DECEMBER 31, 1995(a)+
- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $10.00 $10.00 $10.00 $10.00
------- ------- ------- -------
Net investment income.............................. 0.15 0.13 0.14 0.17
Net gain on investments
(both realized and unrealized)................... 0.52 0.51 0.51 0.52
------- ------- ------- -------
Total from investment operations................... 0.67 0.64 0.65 0.69
------- ------- ------- -------
Dividends from net investment income............... (0.11) (0.09) (0.08) (0.11)
Distributions from net realized gain on
investments...................................... (0.01) (0.01) (0.01) (0.01)
------- ------- ------- -------
Total dividends and distributions.................. (0.12) (0.10) (0.09) (0.12)
------- ------- ------- -------
Net asset value, end of period..................... $10.55 $10.54 $10.56 $10.57
======= ======= ======= =======
Net assets, end of period (thousands).............. $3,658 $5,378 $ 445 $4,494
Total return*...................................... +6.7 % +6.4 % +6.5 % +6.9 %
Ratios to average net assets:
Expenses........................................... 0.74%** 1.49%** 1.51%** 0.51%**
Net investment income.............................. 4.82%** 4.06%** 4.26%** 5.30%**
Portfolio turnover rate............................ 16% 16% 16% 16%
Before waiver of management fee, expenses absorbed
by SBAM and credits earned on custodian cash
balances, net investment income per share and
expense ratios would have been:
Net investment income per share.................... $ 0.13 $ 0.11 $ 0.11 $ 0.15
Expense ratio...................................... 1.45%** 2.19%** 2.22%** 1.22%**
</TABLE>
INVESTORS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1995
- ---------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period............... $ 13.61 $ 13.61 $ 13.61
------- ------- -------
Net investment income.............................. 0.19 0.10 0.09
Net gain (loss) on investments (both realized and
unrealized)...................................... 4.55 4.54 4.55
------- ------- -------
Total from investment operations................... 4.74 4.64 4.64
------- ------- -------
Dividends from net investment income............... (0.23) (0.14) (0.14)
Distributions from net realized gain on
investments...................................... (1.50) (1.50) (1.50)
------- ------- -------
Total dividends and distributions.................. (1.73) (1.64) (1.64)
------- ------- -------
Net asset value, end of period..................... $ 16.62 $ 16.61 $ 16.61
======= ======= =======
Net assets, end of period (thousands).............. $ 441 $ 716 $ 306
Total return*...................................... +35.3% +34.5% +34.5%
Ratios to average net assets:
Expenses........................................... 0.94% 1.71% 1.68%
Net investment income.............................. 1.41% 0.63% 0.66%
Portfolio turnover rate............................ 86% 86% 86%
</TABLE>
(a) September 11, 1995, commencement of investment operations, through December
31, 1995.
+ Per share information calculated using the average shares outstanding
method, which more accurately represent amounts.
* 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. Initial sales charge or contingent deferred sales
charge is not reflected in the calculation of total return. Total return
calculated for a period of less than one year is not annualized.
** Annualized.
See accompanying notes to financial statements.
PAGE 58
<PAGE> 60
SALOMON BROTHERS INVESTMENT SERIES
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS O
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
$ 13.63 $ 15.60 $ 16.10 $ 17.10 $ 14.54
-------- -------- -------- -------- --------
0.27 0.27 0.32 0.41 0.44
4.48 (0.48) 2.03 0.79 3.68
-------- -------- -------- -------- --------
4.75 (0.21) 2.35 1.20 4.12
-------- -------- -------- -------- --------
(0.27) (0.27) (0.33) (0.41) (0.46)
(1.50) (1.49) (2.52) (1.79) (1.10)
-------- -------- -------- -------- --------
(1.77) (1.76) (2.85) (2.20) (1.56)
-------- -------- -------- -------- --------
$ 16.61 $ 13.63 $ 15.60 $ 16.10 $ 17.10
-------- -------- -------- -------- --------
$428,950 $348,214 $386,147 $370,350 $378,615
+35.4% -1.3% +15.1% +7.4% +29.3%
0.69% 0.69% 0.68% 0.68% 0.70%
1.67% 1.75% 1.90% 2.47% 2.67%
86% 66% 79% 48% 44%
</TABLE>
See accompanying notes to financial statements.
PAGE 59
<PAGE> 61
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Boards of Directors and Shareholders of
Salomon Brothers Cash Management Fund
Salomon Brothers New York Municipal Bond Fund
Salomon Brothers National Intermediate Municipal Fund
Salomon Brothers U.S. Government Income Fund
Salomon Brothers High Yield Bond Fund
Salomon Brothers Strategic Bond Fund
Salomon Brothers Total Return Fund
Salomon Brothers Investors Fund Inc
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, of cash
flows (for Salomon Brothers U.S. Government Income Fund) and of changes in net
assets and the financial highlights present fairly, in all material respects,
the financial position of the Salomon Brothers Cash Management Fund, Salomon
Brothers New York Municipal Bond Fund, Salomon Brothers National Intermediate
Municipal Fund, Salomon Brothers U.S. Government Income Fund, Salomon Brothers
High Yield Bond Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers
Total Return Fund (seven of the portfolios constituting Salomon Brothers Series
Funds Inc) and Salomon Brothers Investors Fund Inc (hereafter referred to as the
"Funds") at December 31, 1995, the results of each of their operations, the cash
flows (for Salomon Brothers U.S. Government Income Fund), the changes in each of
their net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' 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 generally
accepted auditing standards 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 December 31, 1995 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 16, 1996
PAGE 60
<PAGE> 62
[This page intentionally left blank]
PAGE 61
<PAGE> 63
[This page intentionally left blank]
PAGE 62
<PAGE> 64
SALOMON BROTHERS INVESTMENT SERIES
Fund Performance
The following graph depicts the performance of the New York Municipal Bond Fund
versus the Lehman Brothers 7 Year through Long Municipal Bond Index. It is
important to note that the New York Municipal Bond 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.
<TABLE>
<CAPTION>
CLASS O INDEX
------- -----
<S> <C> <C>
2/1/93 10000 10000
10038.3 10326
10527 10356
10331.3 10408
10529.1 10528
10486.2 10596
10736.1 10816
10854.3 10939
10861.6 10960
10763.4 10864
12/31/93 10909.2 11093
11039 11219
10715.5 10928
9882.44 10483
10172.2 10572
10092.7 10664
10237.5 10599
10512.8 10793
10563.4 10831
10224 10672
9845.28 9922
9685.23 9742
12/31/94 9950.27 9956
10308.4 10241
10716 10539
10729.2 10660
10711.5 10672
11202.7 11012
10980.1 10916
11086.7 11019
11226.6 11159
11261.9 11229
11472.3 11391
11695.2 11580
12/31/95 11837.5 11691
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C
----- ------- ------- -------
<S> <C> <C> <C> <C>
1/3/95 10000 9525 10000 10000
10286 10165.7 10672.2 10627.2
10404 10176.8 10677.3 10677.3
10416 10159 10652.1 10652.1
10748 10611.9 11120 11120
6/30/95 10654 10398.6 10889.7 10889.7
10755 10508.3 10997.1 10997.6
10891 10638.7 11115.4 11127.3
10959 10670 11153 11153.4
11117 10867.2 11340.8 11352.6
11302 11076.2 11552.2 11564.1
12/31/95 11410 11208.7 11195.1 11595.5
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% 18.76% N/A% N/A% N/A% 18.76%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 17.68% 16.95% 16.95% 5.97% 12.05% 11.95% 15.95% 5.97%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was January 3, 1995 for Class A, B
and C and February 1, 1993 for Class O shares, respectively.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have initial
or contingent deferred sales charges or ongoing distribution and
service fees.
During the periods shown above, the Fund's investment adviser waived
fees and/or reimbursed certain expenses of the Fund, as shown in the
preceding audited financial statements. Absent such waivers and/or
reimbursements, 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 63
<PAGE> 65
SALOMON BROTHERS INVESTMENT SERIES
Fund Performance (continued)
The following graph depicts the performance of the National Intermediate
Municipal Fund versus the Lehman Brothers 1-10 Year Municipal Bond Index.@
It is important to note that the National Intermediate Municipal 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.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C CLASS O
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
2/22/95 10000 9525 10000 10000 10000
10110 9597.36 10068.3 10068.3 10078.5
10136 9617.58 10083 10083.3 10101.8
10384 9878.24 10349.8 10350.1 10377.8
6/30/95 10370 9812.03 10274.1 10274.5 10310.4
10501 9918.87 10369.4 10380 10424.9
10615 10006.3 10465 10465.4 10518.8
10659 10063.6 10508.7 10519.3 10581
10747 10161.5 10604.9 10605.3 10686
10858 10279.4 10722 10732.6 10812.1
12/31/95 10915 10357.2 10297 10697.3 10895.9
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 8.74% 7.97% 7.97% 8.96% 3.56% 2.97% 6.97% 8.96%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was February 22, 1995 for Class A,
B, C and O shares.
@ The Lehman Brothers 1-10 Year Municipal Bond 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 February 22, 1995 through December 31, 1995,
the Index returns are for the period March 1, 1995 through December 31,
1995.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
During its fiscal year ended December 31, 1995, the Fund's
investment adviser reimbursed certain expenses of the Fund, as shown
in the preceding audited financial statements. Absent such
reimbursements, 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 64
<PAGE> 66
SALOMON BROTHERS INVESTMENT SERIES
The following graph depicts the performance of the U.S. Government Income Fund
versus the Salomon Brothers 1-5 Year Treasury Bond Index.@ It is important to
note that the U.S. Government Income 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.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C CLASS O
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
2/22/95 10000 9525 10000 10000 10000
10052 9562.14 10031.4 10031.4 10041.5
10179 9649.66 10117 10117 10135.5
10496 9892.36 10365.1 10365 10392.6
6/30/95 10560 9959.15 10428.6 10428.5 10464.8
10569 9956.83 10419.5 10419.4 10464.6
10663 10034 10493.6 10493.5 10547.7
10743 10090.4 10546.1 10546 10609
10856 10197.9 10651.8 10651.7 10724.1
10996 10315.8 10768.2 10768.1 10850.2
12/31/95 11117 10428.7 10379.3 10779.2 10971
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 9.49% 8.79% 8.79% 9.71% 4.27% 3.79% 7.79% 9.71%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was February 22, 1995 for Class A,
B, C and O shares.
@ The Salomon Brothers 1-5 Treasury Bond 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 February 22, 1995 through December 31, 1995,
the Index returns are for the period March 1, 1995 through December 31,
1995.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
During its fiscal year ended December 31, 1995, the Fund's
investment adviser reimbursed certain expenses of the Fund, as shown
in the preceding audited financial statements. Absent such
reimbursements, 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 65
<PAGE> 67
SALOMON BROTHERS INVESTMENT SERIES
Fund Performance (continued)
The following graph depicts the performance of the High Yield Bond Fund versus
the Salomon Brothers High Yield Market Index.@ It is important to note that the
High Yield Bond 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.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C CLASS O
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
2/22/95 10000 9525 10000 10000 10000
10103 9516.64 9983.68 9973.64 9993.73
10340 9908.81 10339 10389 10407.8
10412 10297.8 10788.4 10789.2 10818.1
6/30/95 10537 10313.7 10798.1 10800.3 10837.3
10600 10442 10925.5 10927.5 10974
10722 10495.2 10974.9 10977 11031.5
10812 10656.2 11126.7 11128.8 11191.7
10903 10730.6 11208.7 11210.9 11282.1
11001 10887.3 11355.4 11357.4 11448.5
12/31/95 11176 11102.4 11073.4 11475.5 11676.3
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 16.56% 15.73% 15.75% 16.76% 11.01% 10.73% 14.75% 16.76%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1 year,
respectively. Class B and Class C shares bear ongoing 12b-1 distribution and
service fees.
+ Commencement of investment operations was February 22, 1995 for Class A, B,
C and O shares.
@ The Salomon Brothers 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 February 22, 1995 through December 31, 1995, the Index
returns are for the period March 1, 1995 through December 31, 1995.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
During its fiscal year ended December 31, 1995, the Fund's
investment adviser reimbursed certain expenses of the Fund, as shown
in the preceding audited financial statements. Absent such
reimbursements, 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 66
<PAGE> 68
SALOMON BROTHERS INVESTMENT SERIES
The following graph depicts the performance of the Strategic Bond Fund versus
the Salomon Brothers Broad Investment Grade Index.@ It is important to note
that the Strategic Bond 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.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C CLASS O
----- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
2/22/95 10000 9525 10000 10000 10000
10058 9537.26 10005.3 10005.3 10015.4
10196 9851.43 10328.7 10328.7 10347.4
10600 10231.7 10720.3 10720.2 10749.1
6/30/95 10674 10280.8 10764.6 10765.5 10802.8
10676 10350.5 10830.5 10831.5 10878.3
10799 10422.8 10898.9 10899.9 10956.3
10899 10622.7 11101 11101.9 11168.6
11045 10676.1 11149.4 11150.3 11226.8
11217 10841.3 11314.5 11315.5 11402.7
12/31/95 11371 11126.4 11113.8 11507.4 11703.9
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 16.81% 16.14% 16.07% 17.04% 11.25% 11.14% 15.07% 17.04%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was February 22, 1995 for Class A,
B, C and O shares.
@ The Salomon Brothers Broad Investment Grade 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 February 22, 1995 through December 31, 1995,
the Index returns are for the period March 1, 1995 through December 31,
1995.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
During its fiscal year ended December 31, 1995, the Fund's
investment adviser reimbursed certain expenses of the Fund, as shown
in the preceding audited financial statements. Absent such
reimbursements, 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 67
<PAGE> 69
SALOMON BROTHERS INVESTMENT SERIES
Fund Performance (continued)
The following graph depicts the performance of the Total Return Fund versus the
50% Standard and Poor's 500 Stock Index and 50% Salomon Brothers Broad
Investment Grade Index. It is important to note that the Total Return 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.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C CLASS O
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
9/11/95 10000 9525 10000 10000 10000
10/31/95 10175 9705 10170 10180 10200
10478 9971 10450 10460 10490
12/31/95 10651 10158 10144 10554 10689
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% N/A% N/A% N/A% N/A% N/A%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+ 6.65% 6.44% 6.54% 6.89% 1.58% 1.44% 5.54% 6.89%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was September 11, 1995 for Class A,
B, C and O shares.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
During its fiscal year ended December 31, 1995, the Fund's
investment adviser reimbursed certain expenses of the Fund, as shown
in the preceding audited financial statements. Absent such
reimbursements, 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.
FEDERAL TAX STATUS OF DISTRIBUTIONS
For corporate taxpayers 11% of the ordinary income distribution paid during the
year 1995 qualify for the corporate dividends received deduction.
Page 68
<PAGE> 70
SALOMON BROTHERS INVESTMENT SERIES
The following graph depicts the performance of the Investors Fund versus the
Standard and Poor's 500 Stock Index. It is important to note that the Investors
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.
<TABLE>
<CAPTION>
Salomon Brothers S&P 500
----------------- -------
<S> <C> <C>
12/31/85 10000 10000
11522 12489
13466 14557
16407 19162
15342 18568
12/31/90 19838 24260
21311 26105
24547 28729
24237 29108
12/31/95 32816 40040
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
INDEX CLASS A CLASS B CLASS C
----- ------- ------- -------
<S> <C> <C> <C> <C>
1/3/95 10000 9525 10000 10000
10659 10079 10582 10582
10974 10360 10870 10870
11297 10561 11070 11070
11749 10899 11425 11425
6/30/95 12022 11132 11655 11655
12421 11585 12122 12122
12452 11627 12159 12159
12977 12031 12575 12575
12930 11768 12293 12293
13498 12472 13021 13021
12/31/95 13757 12890 13351 12950
</TABLE>
Past performance is not predictive of future performance. Performance reflects
returns after deduction of applicable maximum sales charge.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Average Annual Return
------------------------------------------------------------------------------------------
% Return after Deducting
% Return Without Sales Charge Maximum Sales Charge
------------------------------------------------------------------------------------------
Class Class
------------------------------------------------------------------------------------------
A* B** C** O A* B** C** O
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twelve months
ended 12/31/95 N/A% N/A% N/A% 35.39% N/A% N/A% N/A% 35.39%
- ----------------------------------------------------------------------------------------------------------------------
Five years ended 12/31/95 N/A% N/A% N/A% 16.42% N/A% N/A% N/A% 16.42%
- ----------------------------------------------------------------------------------------------------------------------
Commencement of
investment operations
through 12/31/95+# 35.34% 34.50% 34.51% 12.62% 28.90% 29.50% 33.51% 12.62%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 69
<PAGE> 71
SALOMON BROTHERS INVESTMENT SERIES
Fund Performance (concluded)
* Maximum sales charge for Class A shares is 4.75% of the public offering
price. Class A shares bear ongoing 12b-1 service fees.
** Maximum contingent deferred sales charge for Class B and Class C shares
are 5% and 1%, respectively, and is reduced to 0% after 6 years and 1
year, respectively. Class B and Class C shares bear ongoing 12b-1
distribution and service fees.
+ Commencement of investment operations was January 3, 1995 for Class A, B
and C shares.
# The average annual return for Class O Shares is for the ten years ended
December 31, 1995.
Note: The average annual total returns reflect investment of dividends
and/or capital gains distributions in additional shares with and
without the effect of the maximum sales charge (Class A) or
contingent deferred sales charge (Class B and C). The average annual
return for a period less than a year has not been annualized.
The Fund offers Class O shares to the existing shareholders of Class
O shares in the Investment Series. Class O shares do not have
initial or contingent deferred sales charges or ongoing distribution
and service fees.
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.
FEDERAL TAX STATUS OF DISTRIBUTIONS
For corporate taxpayers 19% of the ordinary income distribution paid during the
year 1995 qualify for the corporate dividends received deduction.
Page 70
<PAGE> 72
[This page intentionally left blank]
PAGE 71
<PAGE> 73
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
SALOMON BROTHERS INVESTMENT SERIES
- -----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
ANDREW L. BREECH*
President, Dealer Operating Control
Service, Inc
THOMAS W. BROCK*
Chairman and Chief Executive Officer,
Salomon Brothers Asset Management
Inc; Managing Director, Salomon
Brothers Inc
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN**
Vice President-General Counsel,
Pfizer International Inc.
WILLIAM R. DILL*
President, Anna Maria College; formerly
Consultant and Director of the Office of
Global Enterprise,
University of Southern Maine
MICHAEL S. HYLAND
Chairman and President; President,
Salomon Brothers Asset Management Inc;
Managing Director, Salomon Brothers Inc
CLIFFORD M. KIRTLAND, JR.*
Formerly Chairman,
Cox Communications, Inc.
ROBERT W. LAWLESS*
President and Chief Executive Officer,
Texas Tech University
LOUIS P. MATTIS*
Formerly Chairman and President,
Sterling Winthrop, Inc.
THOMAS F. SCHLAFLY*
Of counsel to law firm of Peper, Martin,
Jensen, Maichel & Hetlage; President,
The Saint Louis Brewery, Inc.
- ------------------------
HONORARY DIRECTOR
EDWIN A. GEE*
Formerly Chairman,
International Paper Company
- ---------
OFFICERS
MICHAEL S. HYLAND
Chairman and President
RICHARD E. DAHLBERG
Executive Vice President
STEVEN GUTERMAN**
Executive Vice President
MARYBETH WHYTE**
Executive Vice President
ALLAN R. WHITE, III*
Executive Vice President
PETER J. WILBY**
Executive Vice President
ROSS S. MARGOLIES*
Executive Vice President
LAWRENCE H. KAPLAN
Executive Vice President
and General Counsel
PAMELA MILUNOVICH*
Vice President
ALAN M. MANDEL
Treasurer
TANA E. TSELEPIS
Secretary
JANET S. TOLCHIN
Assistant Treasurer
REJI PAUL
Assistant Treasurer
JENNIFER G. MUZZEY
Assistant Secretary
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
DISTRIBUTOR
Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
- --------------------------------------------------------------------------------
*Only on The Salomon Brothers Investors Fund Inc
**Only on The Salomon Brothers Series Funds Inc
<PAGE> 74
SALOMON BROTHERS INVESTMENT SERIES
- --------------------------------------------------------------------------------
THE SALOMON BROTHERS INVESTMENT SERIES *
Seven World Trade Center
New York, New York 10048
1-800-SALOMON (1-800-725-6666)
SALOMON BROTHERS CASH MANAGEMENT FUND
A GENERAL PURPOSE MONEY MARKET FUND that aims to produce as high a level of
current income as is consistent with liquidity and stability of principal. The
fund invests only in high-quality, short-term money market instruments.
SALOMON BROTHERS NEW YORK MUNICIPAL BOND FUND
A MUNICIPAL BOND FUND that seeks to achieve a high level of current income which
is exempt from regular Federal income taxes and New York State and New York City
personal income taxes as is consistent with the preservation of capital. Income
may not be exempt from certain state or local taxes.
SALOMON BROTHERS NATIONAL INTERMEDIATE
MUNICIPAL FUND
A MUNICIPAL BOND FUND that invests towards the goal of achieving a high level of
current income which is exempt from regular federal income taxes. The Fund
expects to maintain a dollar-weighted average portfolio maturity of 3 to 10
years.
SALOMON BROTHERS U.S. GOVERNMENT
INCOME FUND
THE FUND seeks to maintain a high level of current income by investing under
normal market conditions 100% of its assets in debt obligations and mortgage-
backed securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Fund expects to maintain an average portfolio duration of
three to fives years.
SALOMON BROTHERS HIGH YIELD BOND FUND
THE FUND seeks to maximize current income by investing in a diversified
portfolio of high yield fixed-income securities rated in medium or lower rating
categories or determined by the investment manager to be of comparable quality.
The Fund may invest up to 35% of its assets in foreign securities.
SALOMON BROTHERS STRATEGIC BOND FUND
THE FUND seeks capital appreciation by investing in a globally diverse portfolio
of fixed-income investments and by giving the investment manager broad
discretion to deploy the Fund's assets among segments of the fixed-income
markets that the investment manager believes will best contribute to the
achievement of the Fund's objectives.
SALOMON BROTHERS TOTAL RETURN FUND
THE FUND seeks to obtain above average income, compared to a portfolio invested
entirely in equity securities, and to take advantage of opportunities for growth
of capital and income. The Fund invests in a broad variety of securities
including equity securities, fixed income securities and short-term obligations.
SALOMON BROTHERS INVESTORS FUND INC
PRIMARILY AN EQUITY FUND emphasizing long-term growth of capital with income as
a secondary goal. The Fund invests primarily in securities listed on the New
York Stock Exchange or other national securities exchanges.
- --------------------------------------------------------------------------------
* For more complete information about the Salomon Brothers Investment Series
Funds, you may obtain a prospectus by calling the telephone number listed
above.
This report is submitted for the general information of the shareholders of
Salomon Brothers Investment Series Funds. It is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus for the Funds, which contains information concerning the
Fund's investment policies and expenses as well as other pertinent
information.
<PAGE> 75
<TABLE>
<S> <C>
Salomon Brothers Asset Management Inc ------------------
P.O. Box 9109 BULK RATE
Boston, MA 02205-9109 U.S. POSTAGE
PAID
BOSTON, MA
PERMIT NO.
54201
------------------
</TABLE>
<PAGE> 76
SALOMON BROTHERS
NEW YORK MUNICIPAL
MONEY MARKET FUND
SALOMON BROTHERS
U.S. TREASURY SECURITIES
MONEY MARKET FUND
ANNUAL REPORT
DECEMBER 31, 1995
______________________________________
SALOMON BROTHERS ASSET MANAGEMENT
_______________________________________
<PAGE> 77
<TABLE>
<S> <C>
SALOMON BROTHERS ASSET MANAGEMENT INC ---------------------
P.O. BOX 9109 BULK RATE
BOSTON, MA 02205-9109 U.S. POSTAGE
PAID
BOSTON, MA
PERMIT NO.
54201
---------------------
</TABLE>
<PAGE> 78
SALOMON BROTHERS
NEW YORK MUNICIPAL MONEY MARKET FUND
SALOMON BROTHERS
February 20, 1996 U.S. TREASURY SECURITIES MONEY MARKET FUND
To Our Shareholders:
WE ARE PLEASED to provide this annual report for the period ended December 31,
1995 for the Salomon Brothers New York Municipal Money Market Fund and the
Salomon Brothers U.S. Treasury Securities Money Market Fund.
ANNUALIZED YIELDS for the seven days ended February 15, 1996 were 3.04% for the
New York Municipal Money Market Fund and 4.28% for the U.S. Treasury Securities
Money Market Fund. For the same period, shareholders reinvesting their dividends
obtained compounded effective annualized yields for the Funds of 3.09% and
4.38%, respectively.
THE BOND MARKET experienced an impressive rally in 1995. The Salomon Brothers
Broad Investment Grade Bond Index increased 18.5% for the year. The rally was
supported by signs of economic deceleration and an overall shift in investor
sentiment that the Fed would remain under pressure to ease monetary policy by
lowering interest rates. Investor sentiment in the municipal bond market turned
sharply negative in the second quarter, when fears of a flat tax structure
surfaced. These concerns began to dissipate at the end of the year, and the
market has performed well since then.
GLOBAL ECONOMIC WEAKNESS continues to dominate our thinking. In the United
States, there has been ample confirmation of the uneven quality of the current
expansion. Job growth has slowed. Although housing starts have bounced back
somewhat, it will likely take a substantial drop in mortgage rates to trigger
any meaningful pickup in the months ahead. Despite weakness abroad, exports show
surprising vigor. The dollar's strengthening, however, could slow further growth
in that area. Although external demand for U.S. goods remains solid, domestic
demand is suffering as the economic expansion matures, consumer debt burdens
grow and income gains slow.
REINFORCED BY FISCAL restraint, these factors point to a period of slower growth
that will encourage further easing of monetary policy by the Federal Reserve. We
continue to look for an economic environment characterized by slow growth and
low inflation.
<PAGE> 79
ALL OF US at Salomon Brothers Asset Management Inc appreciate the confidence you
have demonstrated in the past and hope to continue to justify such confidence in
the future. Please call us with any questions or to receive a prospectus
containing more complete information regarding the Funds at 1-800-SALOMON
(1-800-725-6666).
Cordially,
[SIG]
MICHAEL S. HYLAND
Chairman and President
SPECIAL NOTICE TO OUR SHAREHOLDERS OF THE
U.S. TREASURY SECURITIES MONEY MARKET FUND
We are pleased to inform you that the Board of Directors of Salomon Brothers
Series Funds Inc has approved changes for the Salomon Brothers U.S. Treasury
Securities Money Market Fund aimed at attracting new investors. The Board
believes that implementation of these changes will benefit all of the Fund's
shareholders and make the Fund a more attractive and valuable investment
opportunity. Specifically, as explained in the proxy statement being mailed to
shareholders, the Board has approved a proposal from the Funds' investment
manager, Salomon Brothers Asset Management Inc ("SBAM"), to restructure the Fund
as a general purpose, money market fund to be marketed primarily to
institutions. Under SBAM's proposal, all existing investors would continue to be
entitled to remain in the Fund and add to their investments.
In connection with this restructuring, through the proxy materials, shareholders
are being asked to approve an amendment to the Fund's investment objective, an
amendment to the Fund's investment limitations and an amendment to the
investment management contract with SBAM to change the management fee from .10%
of average daily net assets to .20%. However, SBAM will impose a voluntary cap
on the total expenses of the Fund at .18% of average daily net assets for at
least the next year, and at no more than .25% thereafter. For the year ended
December 31, 1995, the expense ratio was .65%. Therefore, the expense ratio of
the Fund will decline substantially from its current rate.
I ENCOURAGE YOU TO REVIEW THE DETAILS ON THE PROPOSED AMENDMENTS COVERED IN THE
PROXY STATEMENT. PLEASE CALL US AT 1-800-SALOMON (1-800-725-6666) WITH ANY
QUESTIONS.
PAGE 2
<PAGE> 80
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 98.8%
NEW YORK -- 92.8%
$ 1,050,000 Albany County, New York
Industrial Development Agency PUT....................... 4.150% 12/01/96 $ 1,050,000
800,000 Albany County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 800,000
1,139,000 Albany, New York
Housing Authority VR.................................... 3.900 01/03/96 1,139,000
2,410,000 Albany, New York
Industrial Development Agency PUT....................... 4.250 07/01/96 2,410,000
2,600,000 Amherst, New York
Industrial Development Agency VR........................ 5.300 01/04/96 2,600,000
400,000 Amherst, New York
Industrial Development Agency VR........................ 5.250 01/04/96 400,000
950,000 Auburn, New York
Industrial Development Agency VR........................ 5.450 01/03/96 950,000
875,000 Babylon, New York
Industrial Development Agency VR........................ 5.350 01/04/96 875,000
2,025,000 Broome County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 2,025,000
650,000 Broome County, New York
Industrial Development Agency VR........................ 4.800 01/03/96 650,000
2,250,000 Chautaqua County, New York
Industrial Development Agency VR........................ 5.450 01/03/96 2,250,000
3,000,000 Chemung County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 3,000,000
730,000 Colonie, New York
Housing Development Corporation VR...................... 3.900 01/03/96 730,000
3,525,000 Colonie, New York
Industrial Development Agency PUT....................... 4.150 12/01/96 3,525,000
585,000 Colonie, New York
Industrial Development Agency VR........................ 5.250 01/04/96 585,000
5,000,000 Connetquot Central School District, New York GO TAN....... 3.900 06/27/96 5,011,220
1,275,000 Dutchess County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 1,275,000
1,210,000 Erie County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 1,210,000
500,000 Erie County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 500,000
400,000 Erie County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 400,000
</TABLE>
See accompanying notes to financial statements.
PAGE 3
<PAGE> 81
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 388,400 Erie County, New York
Industrial Development Agency VR........................ 5.250% 01/04/96 $ 388,400
1,140,000 Fulton County, New York
Industrial Development Agency PUT....................... 4.150 12/01/96 1,140,000
1,860,000 Fulton County, New York
Industrial Development Agency VR........................ 5.150 01/04/96 1,860,000
3,000,000 Islip, New York
Industrial Development Agency VR........................ 5.225 01/04/96 3,000,000
500,000 Lewis County, New York
Development Agency VR .................................. 4.900 01/03/96 500,000
1,820,000 Monroe County, New York
Industrial Development Agency PUT....................... 4.000 06/01/96 1,820,000
700,000 Monroe County, New York
Industrial Development Agency PUT....................... 4.400 06/15/96 700,000
6,500,000 Monroe County, New York
Industrial Development Agency VR........................ 5.450 01/03/96 6,500,000
4,375,000 Monroe County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 4,375,000
4,300,000 Monroe County, New York
Industrial Development Agency VR........................ 5.000 01/04/96 4,300,000
3,325,000 Monroe County, New York
Industrial Development Agency VR........................ 5.300 01/04/96 3,325,000
2,370,000 Monroe County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 2,370,000
2,200,000 Monroe County, New York
Industrial Development Agency VR........................ 4.150 01/02/96 2,200,000
1,740,000 Monroe County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 1,740,000
1,700,000 Monroe County, New York
Industrial Development Agency VR........................ 5.500 01/03/96 1,700,000
1,580,000 Monroe County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 1,580,000
945,000 Monroe County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 945,000
225,000 Monroe County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 225,000
</TABLE>
See accompanying notes to financial statements.
PAGE 4
<PAGE> 82
SALOMON BROTHERS MONEY MARKET FUNDS
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,475,000 Mount Pleasant, New York
Industrial Development Agency VR........................ 5.200% 01/02/96 $ 4,475,000
3,000,000 Nassau County, New York GO BAN............................ 3.450 08/15/96 3,014,478
2,000,000 Nassau County, New York GO TAN............................ 3.700 04/15/96 2,004,309
1,090,000 Nassau County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 1,090,000
800,000 New York City, New York
Housing Development Corporation VR...................... 5.250 01/03/96 800,000
16,330,000 New York City, New York
Housing Development Corporation VR...................... 5.750 01/04/96 16,330,000
2,000,000 New York City, New York
Housing Development Corporation VR...................... 5.800 01/04/96 2,000,000
1,000,000 New York City, New York
Housing Development Corporation VR...................... 5.750 01/04/96 1,000,000
9,500,000 New York City, New York
Industrial Development Agency VR........................ 6.250 01/02/96 9,500,000
6,000,000 New York City, New York
Industrial Development Agency VR........................ 5.500 01/04/96 6,000,000
2,100,000 New York City, New York
Industrial Development Agency VR........................ 6.100 01/02/96 2,100,000
1,650,000 New York City, New York
Industrial Development Agency VR........................ 5.350 01/04/96 1,650,000
1,300,000 New York City, New York
Industrial Development Agency VR........................ 5.250 01/04/96 1,300,000
780,000 New York City, New York
Industrial Development Agency VR........................ 5.350 01/04/96 780,000
600,000 New York City, New York
Industrial Development Agency VR........................ 5.350 01/04/96 600,000
505,000 New York City, New York
Industrial Development Agency VR........................ 5.250 01/04/96 505,000
400,000 New York City, New York
Industrial Development Agency VR........................ 5.800 01/04/96 400,000
115,000 New York City, New York
Industrial Development Agency VR........................ 5.250 01/04/96 115,000
1,200,000 New York City, New York
Trust for Cultural Resources VR......................... 5.550 01/03/96 1,200,000
</TABLE>
See accompanying notes to financial statements.
PAGE 5
<PAGE> 83
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000,000 New York City, New York GO VR............................. 6.100% 01/02/96 $ 5,000,000
8,000,000 New York City, New York GO VR............................. 6.250 01/02/96 8,000,000
6,900,000 New York City, New York GO VR............................. 5.500 01/03/96 6,900,000
3,800,000 New York City, New York GO VR............................. 6.250 01/02/96 3,800,000
1,100,000 New York City, New York GO VR............................. 5.350 01/03/96 1,100,000
1,050,000 New York State, Dormitory Authority FGIC.................. 3.800 07/01/96 1,063,100
13,674,000 New York State, Dormitory Authority TECP.................. 4.900 01/03/96 13,674,000
500,000 New York State,
Energy Research & Development VR........................ 3.550 01/02/96 500,000
3,390,000 New York State,
Job Development Authority VR............................ 4.400 01/02/96 3,390,000
1,620,000 New York State,
Job Development Authority VR............................ 4.400 01/02/96 1,620,000
925,000 New York State,
Job Development Authority VR............................ 4.300 01/02/96 925,000
420,000 New York State,
Job Development Authority VR............................ 4.300 01/02/96 420,000
125,000 New York State,
Job Development Authority VR............................ 4.300 01/02/96 125,000
100,000 New York State,
Job Development Authority VR............................ 4.300 01/02/96 100,000
1,000,000 New York State,
Urban Development Corporation BIG P/R................... 3.500 01/01/96 1,020,000
1,350,000 New York State,
Urban Development Corporation P/R....................... 3.500 01/01/96 1,377,000
1,000,000 New York State,
Urban Development Corporation P/R....................... 5.750 01/01/96 1,020,000
600,000 New York State,
Urban Development Corporation P/R....................... 5.750 01/01/96 612,000
1,600,000 Newburgh, New York
Industrial Development Agency VR........................ 4.800 01/03/96 1,600,000
1,180,000 Niagara County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 1,180,000
2,050,000 Oneida County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 2,050,000
</TABLE>
See accompanying notes to financial statements.
PAGE 6
<PAGE> 84
SALOMON BROTHERS MONEY MARKET FUNDS
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 379,000 Oneida County, New York
Industrial Development Agency VR........................ 5.100% 01/04/96 $ 379,000
3,900,000 Onondaga County, New York
Industrial Development Agency VR........................ 5.400 01/03/96 3,900,000
1,300,000 Onondaga County, New York
Industrial Development Agency VR........................ 5.400 01/03/96 1,300,000
3,500,000 Ontario County, New York
Industrial Development Agency VR........................ 6.650 01/02/96 3,500,000
1,650,000 Rockland County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 1,650,000
345,000 Schoharie County, New York
Industrial Development Agency VR........................ 5.100 01/04/96 345,000
75,000 St. Lawrence County, New York
Industrial Development Agency VR........................ 5.450 01/04/96 75,000
1,675,000 Suffolk County, New York GO AMBAC......................... 3.750 10/15/96 1,684,606
1,500,000 Syracuse, New York
Industrial Development Agency PUT....................... 4.400 06/15/96 1,500,000
3,550,000 Syracuse, New York
Industrial Development Agency VR........................ 5.500 01/03/96 3,550,000
2,000,000 Triborough Bridge & Tunnel Authority
New York P/R............................................ 4.000 01/01/96 2,040,000
6,660,000 Wyoming County, New York
Industrial Development Agency VR........................ 5.350 01/04/96 6,660,000
640,000 Wyoming County, New York
Industrial Development Agency VR........................ 5.250 01/04/96 640,000
1,440,000 Yates County, New York
Industrial Development Agency VR........................ 5.150 01/04/96 1,440,000
1,080,000 Yonkers, New York
Industrial Development Agency VR........................ 5.250 01/04/96 1,080,000
------------
210,137,113
</TABLE>
See accompanying notes to financial statements.
PAGE 7
<PAGE> 85
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL ON DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE* DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
PUERTO RICO -- 6.0%
$13,600,000 Puerto Rico Industrial, Tourist, Educational,
Medical & Environmental Control Facilities VR........... 5.400% 01/03/96 $ 13,600,000
------------
TOTAL INVESTMENTS -- 98.8% (COST $223,737,113)............ 223,737,113
Other assets in excess of liabilities -- 1.2%............. 2,811,482
------------
NET ASSETS -- 100.0%...................................... $226,548,595
============
</TABLE>
*Yield to maturity on date of purchase, except in the case of Variable Rate
Demand Notes (VR) and Put Bonds, whose yields are determined on date of the
last interest rate change. For Variable Rate Demand Notes and Put Bonds,
maturity date shown is the date of next interest rate change.
Abbreviations used in this statement:
<TABLE>
<S> <C> <C>
AMBAC -- Insured as to principal and interest by the American Municipal Bond Assurance Corporation.
BAN -- Bond Anticipation Note
BIG -- Insured as to principal and interest by the Bond Investors Guaranty Insurance Company.
FGIC -- Insured as to principal and interest by the Financial Guaranty Insurance Company.
GO -- General Obligation
P/R -- Pre-refunded in U.S. Treasury Securities.
PUT -- Optional or mandatory put. Maturity date shown is the put date as well as the date of the
next interest rate change.
TAN -- Tax Anticipation Note
TECP -- Tax Exempt Commercial Paper
</TABLE>
See accompanying notes to financial statements.
PAGE 8
<PAGE> 86
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $223,737,113).................................................... $223,737,113
Cash......................................................................................... 22,069
Receivable for Fund shares sold.............................................................. 1,934,480
Interest receivable.......................................................................... 1,210,552
------------
Total assets......................................................................... 226,904,214
------------
LIABILITIES
Payable for Fund shares redeemed............................................................. 266,863
Dividend payable............................................................................. 15,997
Management fee payable....................................................................... 35,265
Accrued expenses............................................................................. 37,494
------------
Total liabilities.................................................................... 355,619
------------
NET ASSETS (equivalent to $1.00 per share on 226,776,791 shares of $.001 par value
capital stock outstanding)................................................................. $226,548,595
============
</TABLE>
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCOME
Interest.................................................................................... $9,231,307
EXPENSES
Management fee................................................................. $ 449,809
Custody and administration fees................................................ 258,054
Shareholder services........................................................... 113,900
Audit and tax return preparation fees.......................................... 77,282
Legal.......................................................................... 40,000
Printing....................................................................... 27,718
Amortization of organization expenses.......................................... 9,071
Directors' fees and expenses................................................... 1,617
Other.......................................................................... 30,000
----------
1,007,451
Management fee waived by investment advisor.................................... (31,455)
Credits earned from custodian on cash balances................................. (6,021) 969,975
---------- ----------
Net investment income....................................................................... 8,261,332
NET REALIZED GAIN ON SECURITIES SOLD............................................................ 27,905
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS...................................................... $8,289,237
==========
</TABLE>
See accompanying notes to financial statements.
PAGE 9
<PAGE> 87
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income.............................................. $ 8,261,332 $ 6,160,954
Net realized gain (loss) on securities sold........................ 27,905 (65,622)
------------- -------------
Net increase in net assets from operations......................... 8,289,237 6,095,332
------------- -------------
DIVIDENDS FROM NET INVESTMENT INCOME................................... (8,261,332) (6,160,954)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares...................................... 298,776,320 424,692,601
Net asset value of shares issued in reinvestment of dividends...... 7,924,931 5,955,238
Payment for redemption of shares................................... (349,968,556) (423,206,832)
------------- -------------
Net increase (decrease) in net assets derived from share
transactions..................................................... (43,267,305) 7,441,007
------------- -------------
Net increase (decrease) in net assets.............................. (43,239,400) 7,375,385
NET ASSETS
Beginning of year.................................................. 269,787,995 262,412,610
------------- -------------
End of year........................................................ $ 226,548,595 $ 269,787,995
============= =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Net investment income................................. 0.037* 0.027 0.023 0.031 0.047
Dividends from net investment income.................. (0.037) (0.027) (0.023) (0.031) (0.047)
-------- -------- -------- -------- --------
Net asset value, end of year.......................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Net assets end of year (thousands).................... $226,549 $269,788 $262,413 $263,685 $154,782
Total investment return............................... +3.7% +2.7% +2.3% +3.1% +4.8%
Ratios to average net assets:
Expenses.......................................... 0.43%* 0.41% 0.41% 0.42% 0.60%
Net investment income............................. 3.67% 2.63% 2.31% 3.07% 4.63%
</TABLE>
* Net investment income per share would have been $.037 and the expense ratio
to average net assets would have been .45% before waiver of management fee
and credits earned on custodian cash balances.
See accompanying notes to financial statements.
PAGE 10
<PAGE> 88
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
SALOMON BROTHERS U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY VALUE
AMOUNT DESCRIPTION PURCHASE DATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
U.S. TREASURY BILLS -- 99.9%
$ 898,000 U.S. Treasury Bill......................................... 5.350% 01/11/96 $ 896,665
870,000 U.S. Treasury Bill......................................... 5.270 01/18/96 867,835
190,000 U.S. Treasury Bill......................................... 4.800 02/08/96 189,037
9,190,000 U.S. Treasury Bill......................................... 4.880 02/08/96 9,142,662
315,000 U.S. Treasury Bill......................................... 5.270 02/08/96 313,248
-----------
TOTAL INVESTMENTS -- 99.9% (COST $11,409,447)........................................ 11,409,447
Other assets in excess of liabilities -- 0.1%........................................ 16,021
-----------
NET ASSETS -- 100.0%................................................................. $11,425,468
===========
</TABLE>
See accompanying notes to financial statements.
PAGE 11
<PAGE> 89
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
SALOMON BROTHERS U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $11,409,447)...................................................... $11,409,447
Cash.......................................................................................... 7,304
Receivable from investment advisor............................................................ 5,394
Receivable for Fund shares sold............................................................... 28,974
-----------
Total assets.......................................................................... 11,451,119
-----------
LIABILITIES
Payable for Fund shares redeemed.............................................................. 8,000
Dividend payable.............................................................................. 10,635
Accrued expenses.............................................................................. 7,016
-----------
Total liabilities..................................................................... 25,651
-----------
NET ASSETS (equivalent to $1.00 per share on 11,425,379 shares of $.001 par value
capital stock outstanding).................................................................. $11,425,468
===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
SALOMON BROTHERS U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INCOME
Interest..................................................................................... $843,023
EXPENSES
Management fee.................................................................... $ 15,217
Custody and administration fees................................................... 26,631
Registration and filing fees...................................................... 13,359
Amortization of organization expenses............................................. 11,241
Shareholder services.............................................................. 11,079
Audit and tax return preparation fees............................................. 9,200
Legal............................................................................. 7,144
Printing.......................................................................... 6,000
Directors' fees and expenses...................................................... 1,618
Other............................................................................. 4,551
--------
106,040
Management fee waived by investment advisor....................................... (7,096)
Credits earned from custodian on cash balances.................................... (31) 98,913
-------- --------
Net investment income........................................................................ 744,110
NET REALIZED GAIN ON SECURITIES SOLD............................................................. 6,443
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS....................................................... $750,553
========
</TABLE>
See accompanying notes to financial statements.
PAGE 12
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SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
SALOMON BROTHERS U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income............................................... $ 744,110 $ 1,045,249
Net realized gain (loss) on securities sold......................... 6,443 (2,037)
------------ -------------
Net increase in net assets from operations.......................... 750,553 1,043,212
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................ (744,110) (1,045,249)
Distributions from net realized gains............................... (959) --
------------ -------------
(745,069) (1,045,249)
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares....................................... 79,773,668 127,781,043
Net asset value of shares issued in reinvestment of dividends....... 555,617 881,270
Payment for redemption of shares.................................... (96,624,438) (135,113,944)
------------ -------------
Net decrease in net assets derived from share transactions.......... (16,295,153) (6,451,631)
------------ -------------
Contribution from investment advisor (Note 2)....................... 48,447 --
------------ -------------
Net decrease in net assets.......................................... (16,241,222) (6,453,668)
NET ASSETS
Beginning of year................................................... 27,666,690 34,120,358
------------ -------------
End of year (including undistributed net investment income of $265
for 1995)......................................................... $ 11,425,468 $ 27,666,690
============ =============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
SALOMON BROTHERS U.S. TREASURY SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
Net investment income..................................... 0.049* 0.036 0.028 0.034 0.054*
Dividends from net investment income...................... (0.049) (0.036) (0.028) (0.034) (0.054)
------- ------- ------- ------- -------
Net asset value, end of year.............................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Net assets end of year (thousands)........................ $11,425 $27,667 $34,120 $50,554 $35,414
Total investment return................................... +5.0% +3.6% +2.9% +3.4% +5.5%
Ratios to average net assets:
Expenses.............................................. 0.65%* 0.45% 0.35% 0.44% 0.54%*
Net investment income................................. 4.89% 3.53% 2.83% 3.42% 5.23%
</TABLE>
* Net investment income per share would have been $.049 and $.052 and the
expense ratios to average net assets would have been .70% and .64%,
respectively, for the years ended December 31, 1995 and 1991 before
applicable waiver of management fee, expenses absorbed by SBAM and credits
earned on custodian cash balances.
See accompanying notes to financial statements.
PAGE 13
<PAGE> 91
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Series Funds Inc (the "Company") was incorporated in Maryland
on April 17, 1990 as an open-end management investment company, and currently
operates as a series company comprised of nine portfolios: Salomon Brothers Cash
Management Fund (the "Cash Management Fund"), Salomon Brothers New York
Municipal Money Market Fund, (the "New York Municipal Money Fund"), Salomon
Brothers U.S. Treasury Securities Money Market Fund (the "U.S. Treasury Fund"),
Salomon Brothers New York Municipal Bond Fund (the "New York Municipal Bond
Fund"), Salomon Brothers National Intermediate Municipal Fund (the "National
Intermediate Municipal Fund"), Salomon Brothers U.S. Government Income Fund (the
"U.S. Government Income Fund"), Salomon Brothers High Yield Bond Fund (the "High
Yield Bond Fund"), Salomon Brothers Strategic Bond Fund (the "Strategic Bond
Fund"), and Salomon Brothers Total Return Fund (the "Total Return Fund"). The
New York Municipal Money Fund and the U.S. Treasury Fund (individually, a
"Fund", collectively, the "Funds") are included in this report. The New York
Municipal Money Fund's objective is to seek as high a level of current income
exempt from federal, New York State and New York City personal income taxes as
is consistent with liquidity and the stability of principal. The U.S. Treasury
Fund's objective is to seek a high level of current income by investing only in
short-term United States government and government agency securities. The Cash
Management Fund, New York Municipal Bond Fund, National Intermediate Municipal
Fund, U.S. Government Income Fund, High Yield Bond Fund, Strategic Bond Fund,
and Total Return Fund are reported in a separate report and are not included
herein.
Following is a summary of significant accounting policies followed by each Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles ("GAAP"). The preparation of
financial statements in accordance with GAAP requires management to make
estimates of certain reported amounts in the financial statements. Actual
amounts could differ from those estimates.
(A) SECURITIES VALUATION. Portfolio securities are valued using the
amortized cost method, which involves initially valuing an investment at
its cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value and does not include unrealized gains or losses.
(B) FEDERAL INCOME TAXES. Each Fund has complied and intends to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies, including the distribution
requirements of the Tax Reform Act of 1986, and to distribute all of its
income, including any net realized gains, to shareholders. Therefore, no
Federal income tax or excise tax provision is required.
PAGE 14
<PAGE> 92
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends on the
shares of each Fund are declared each business day to shareholders of
record that day, and paid on the last business day of the month.
Distributions of net realized gains to shareholders, if any, are declared
annually and recorded on the ex-dividend date. Dividends and distributions
are determined in accordance with income tax regulations, which may differ
from GAAP.
(D) EXPENSES. Direct expenses are charged to the Fund that incurred
them, and general expenses of the Company are allocated to the Funds based
on relative average net assets for the period the expense was incurred.
(E) OTHER. Investment transactions are recorded as of the trade date.
Interest income, including the accretion of discounts or the amortization
of premiums, is recognized when earned. Gains or losses on sales of
securities are calculated on the identified cost basis.
2. MANAGEMENT FEE AND OTHER AGREEMENTS
The Company retains Salomon Brothers Asset Management Inc ("SBAM"), an indirect
wholly owned subsidiary of Salomon Inc, to act as investment manager of each
Fund, subject to the supervision by the Board of Directors of the Company. SBAM
furnishes the Company with office space and certain services and facilities
required for conducting the business of the Company and pays the compensation of
its officers. The management fee for these services is payable monthly and is
based on the following annual percentages of the Funds' average daily net
assets: .20% for the New York Municipal Money Fund and .10% for the U.S.
Treasury Fund. For the year ended December 31, 1995, SBAM voluntarily waived
management fees of $31,455 and $7,096 for the New York Municipal Money Fund and
U.S. Treasury Fund, respectively.
If in any fiscal year total expenses of any Fund, excluding taxes, interest,
brokerage and extraordinary expenses, but including the management fee, exceed
the most stringent expense limitations imposed by state securities regulations
applicable to the Fund, SBAM will pay or reimburse the Fund for the excess.
Currently, the most restrictive of these limitations on an annual basis is 2.5%
of the first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets and 1.5% of average daily net assets in
excess of $100 million. No such expense reimbursement was required for the year
ended December 31, 1995.
PAGE 15
<PAGE> 93
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
The U.S. Treasury Fund incurred realized losses on the sale of certain
securities in current and previous years. In order to maintain a $1 net asset
value per share, SBAM contributed $48,447 to offset cumulative net realized
losses. For tax purposes, this contribution was applied against the realized
losses for the year ended December 31, 1995. Accordingly, such amount has been
reclassified from paid-in-capital to accumulated net realized loss on
investments in the composition of net assets detailed in Note 3.
Investors Bank & Trust Company serves as custodian and administrator for each
Fund, which includes performing custodial and certain administrative services in
connection with the operation of each Fund. During the year ended December 31,
1995, custodian fees were reduced by $6,021 and $31 for the New York Municipal
Money Fund and U.S. Treasury Fund, respectively, relating to credits earned on
cash balances held by the custodian.
Each Fund has an agreement with Salomon Brothers Inc to distribute its shares.
3. CAPITAL STOCK
At December 31, 1995, the Company had 10,000,000,000 shares of authorized
capital stock, par value $.001 per share, of which the New York Municipal Money
Fund and the U.S. Treasury Fund each had 1,111,111,112 shares authorized.
Net assets, after re-classification of book/tax differences, consist of:
<TABLE>
<CAPTION>
NEW YORK U.S.
MUNICIPAL TREASURY
MONEY FUND FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Par value....................................................................... $ 226,777 $ 11,425
Paid-in capital in excess of par................................................ 226,549,157 11,413,954
Undistributed net investment income............................................. -- 265
Accumulated net realized loss on investments.................................... (227,339) (176)
------------ -----------
Net assets...................................................................... $226,548,595 $11,425,468
============ ===========
</TABLE>
PAGE 16
<PAGE> 94
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
4. PORTFOLIO ACTIVITY
The New York Municipal Money Fund invests in money market instruments maturing
in thirteen months or less whose credit ratings are within the highest ratings
category of two nationally recognized statistical rating organizations
("NRSROs") or if rated by only one NRSRO, the highest rating of that NRSRO, or,
if not rated, are believed by the investment manager to be of comparable
quality. The U.S. Treasury Fund invests in U.S. Treasury Securities maturing in
thirteen months or less. The New York Municipal Money Fund pursues its
investment objectives by investing at least 65% of its net assets in obligations
that are exempt from regular Federal income tax and from personal income taxes
of the State and City of New York. Because the New York Municipal Money Fund
invests primarily in obligations of the State and City of New York, it is more
susceptible to factors adversely affecting issuers of such obligations than a
fund that is more diversified.
During the year ended December 31, 1995, the New York Municipal Money Fund and
U.S. Treasury Fund utilized $27,604 and $6,411, respectively, of capital loss
carry-forwards to offset net realized capital gains. At December 31, 1995, the
Funds had net capital loss carry-forwards available to offset future capital
gains as follows:
<TABLE>
<CAPTION>
NEW YORK U.S.
MUNICIPAL TREASURY
YEAR OF EXPIRATION MONEY FUND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1999.............................................................................. $ 67,240 --
2000.............................................................................. 94,778 --
2002.............................................................................. 65,321 $ 176
--------- -----
$ 227,339 $ 176
========= =====
</TABLE>
PAGE 17
<PAGE> 95
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Salomon Brothers New York Municipal Money Market Fund and
Salomon Brothers U.S. Treasury Securities Money Market Fund
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Salomon Brothers New York Municipal
Money Market Fund and Salomon Brothers U.S. Treasury Securities Money Market
Fund (two of the portfolios constituting Salomon Brothers Series Funds Inc,
hereafter referred to as the "Funds") at December 31, 1995, 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 generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' 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 generally accepted
auditing standards 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 December 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 16, 1996
PAGE 18
<PAGE> 96
SALOMON BROTHERS MONEY MARKET FUNDS
- -------------------------------------------------------------------------------
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.
MICHAEL S. HYLAND
President,
Salomon Brothers Asset Management Inc;
Managing Director, Salomon Brothers Inc
- -------------------------------------------------------------------------------
OFFICERS
MICHAEL S. HYLAND
Chairman and President
RICHARD E. DAHLBERG
Executive Vice President
STEVEN GUTERMAN
Executive Vice President
MARYBETH WHYTE
Executive Vice President
PETER J. WILBY
Executive Vice President
LAWRENCE H. KAPLAN
Executive Vice President
and General Counsel
ALAN M. MANDEL
Treasurer
TANA E. TSELEPIS
Secretary
JANET S. TOLCHIN
Assistant Treasurer
REJI PAUL
Assistant Treasurer
JENNIFER G. MUZZEY
Assistant Secretary
- --------------------------------------------------------------------------------
SALOMON BROTHERS MONEY MARKET FUNDS
7 World Trade Center
New York, New York 10048
1-800-SALOMON (1-800-725-6666)
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
DISTRIBUTOR
Salomon Brothers Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
<PAGE> 97
SALOMON BROTHERS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
THE SALOMON BROTHERS FAMILY OF FUNDS *
SALOMON BROTHERS CAPITAL FUND INC
PRIMARILY AN EQUITY FUND emphasizing capital appreciation. Current income is
incidental. The Fund invests in securities believed to have above-average
appreciation possibilities and may involve above-average risk.
SALOMON BROTHERS OPPORTUNITY FUND INC
AN EQUITY FUND that invests for long-term capital appreciation. Current income
is secondary. The Fund may employ speculative investment techniques to attain
its goals.
- --------------------------------------------------------------------------------
*For more complete information about the Salomon Brothers Family of Funds, you
may obtain a Prospectus by calling 1-800-SALOMON (1-800-725-6666).
This report is submitted for the general information of the shareholders of
Salomon Brothers Family of Funds. It is not authorized for distribution to
prospective investors unless accompanied or preceded by an effective Prospectus
for the Fund, which contains information concerning the Fund's investment
policies and expenses as well as other pertinent information.
