<PAGE>
[LOGO] SALOMON BROTHERS
INVESTMENT SERIES
Semi-
Annual
Report
1998
JUNE 30, 1998
. ASIA GROWTH FUND
. CAPITAL FUND
. INVESTORS FUND
. TOTAL RETURN FUND
. HIGH YIELD BOND FUND
. STRATEGIC BOND FUND
. NATIONAL INTERMEDIATE
MUNICIPAL FUND
. U.S. GOVERNMENT INCOME
FUND
. NEW YORK MUNICIPAL
MONEY MARKET FUND
. CASH MANAGEMENT FUND
<PAGE>
TABLE OF CONTENTS
A MESSAGE FROM THE CHAIRMAN.......................................... 1
THE SALOMON BROTHERS INVESTMENT SERIES
ASIA GROWTH FUND................................................... 6
CAPITAL FUND....................................................... 8
INVESTORS FUND..................................................... 12
TOTAL RETURN FUND.................................................. 14
HIGH YIELD BOND FUND............................................... 16
STRATEGIC BOND FUND................................................ 18
NATIONAL INTERMEDIATE MUNICIPAL FUND............................... 22
U.S.GOVERNMENT INCOME FUND......................................... 24
PORTFOLIOS OF INVESTMENTS............................................ 27
STATEMENTS OF ASSETS AND LIABILITIES................................. 72
STATEMENTS OF OPERATIONS............................................. 74
STATEMENTS OF CHANGES IN NET ASSETS.................................. 76
STATEMENTS OF CASH FLOWS............................................. 80
NOTES TO FINANCIAL STATEMENTS........................................ 81
FINANCIAL HIGHLIGHTS................................................. 94
DIRECTORS AND OFFICERS OF
THE SALOMON BROTHERS INVESTMENT SERIES.............................IBC
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[LOGO] THE SALOMON BROTHERS INVESTMENT SERIES
A MESSAGE FROM
THE CHAIRMAN
DEAR SHAREHOLDER:
We are pleased to provide the semi-annual report for the The Salomon Brothers
Investment Series -- Asia Growth Fund, Capital Fund, Investors Fund, Total
Return Fund, High Yield Bond Fund, Strategic Bond Fund, National Intermediate
Municipal Fund, U.S. Government Income Fund, New York Municipal Money Market
Fund and Cash Management Fund ("Funds") for the period ended June 30, 1998.
Below is a chart showing each Fund's Class A share six-month total return for
the period ended June 30, 1998 with and without sales charge. In addition
portfolio information regarding the New York Municipal Money Market Fund and
Cash Management Fund can be found on pages 64 and 68, respectively.
THE PERFORMANCE OF THE SALOMON BROTHERS INVESTMENT SERIES
Class A Shares Total Return for the Six Months Ended June 30, 1998:
WITH WITHOUT
SALES CHARGE/(1)/ SALES CHARGE/(2)/
----------------- -----------------
Asia Growth Fund -27.52% -23.93%
Capital Fund 9.79% 15.24%
Investors Fund 6.75% 12.06%
Total Return Fund 1.34% 6.35%
High Yield Bond Fund -3.09% 1.78%
Strategic Bond Fund -2.57% 2.33%
National Intermediate
Municipal Fund -2.85% 2.00%
U.S. Government Income Fund -1.61% 3.31%
(1) These total return figures assume reinvestment of all dividends and do not
reflect the deduction of a sales charge for each Fund's Class A shares.
(2) These total return figures assume reinvestment of all dividends and reflect
the deduction of the maximum front-end sales charge for each Fund's Class A
shares up to 4.75%.
In addition, both columns of data represent past performance, which is not
indicative of future results. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. This shareholder report
has been prepared for the information of shareholders of the Salomon
Brothers Investment Series and is not authorized for use unless preceded or
accompanied by a current prospectus. The prospectus contains information
regarding each Fund's sales charges, expenses, objectives, policies,
management and performance. Please read it carefully before you invest or
send money. Call your financial advisor or call 1-800-725-6666 to obtain a
copy of the prospectus.
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WEB SITE UPDATE
Information on our newest fund, the Salomon Brothers Small Cap Growth Fund, can
be accessed on our web site at www.sbam.com. Important Small Cap Growth Fund
features and the potential benefits of exposure to the small-capitalization
growth stock arena are now available for electronic viewing. Our web site
provides comprehensive Fund information for all Salomon Investment Series Funds
including daily prices, performance updates and account balances to help you
stay informed about your investments.
INDUSTRY RECOGNITION
Many of the Funds in the Salomon Brothers Investment Series have earned
recognition from Lipper Analytical Services, Inc. and Morningstar Inc., leading
fund tracking and fund rating organizations, as well as several leading industry
publications. The Funds' experienced team of portfolio managers at Salomon
Brothers Asset Management frequently provide their expert commentary on CNNfn,
CNBC and Bloomberg News.
ECONOMIC AND MARKET TRENDS
The U.S. stock market in particular got off to a surprisingly strong start in
the first quarter of 1998. Investors were expecting the worst on the earnings
front in early 1998 in the aftermath of the Asian crisis. The anxiously awaited
fourth quarter earnings season, however, turned out to be better than the "worst
case" scenario. As a result, investors let out a big sigh of relief and embarked
on a furious buying spree. In a broad-based market rally, the S&P 500 Index
gained 14% while the Russell 2000 Index(R) advanced by about 10% in the first
quarter of 1998. (The S&P 500 Index is a capitalization-weighted measure of 500
widely held common stocks. The Russell 2000 Index is made up of 2,000
smaller-capitalized U.S.-based companies whose common stocks trade on either the
New York, American or NASDAQ stock exchanges). For the six months ended June 30,
1998, the S&P 500 Index returned 17.72% and the Russell 2000 Index(R) generated
a total return of 4.93%.
Stock market volatility increased significantly in the second quarter. Investor
focus shifted from the prospects of a Federal Reserve Board ("Fed") monetary
policy tightening due to the Asian crisis and eventually to hopes of reasonable
corporate earnings growth for the second quarter. Large-capitalization stocks
posted a gain for the second quarter while small-capitalization stocks declined
and fell farther behind their large-cap stock counterparts.
In fact, in the second quarter, the largest 50 companies in the S&P 500 Index
had an average total return of about 8%, while the Index's other 450 companies,
on average, declined. This emphasis on large-cap growth stocks means that
value-oriented investment strategies generally lagged the market for the first
six
2
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months of 1998. (Value investing means investing in stocks that are selling
for less than their intrinsic value, in the belief that the market will
eventually recognize their value).
As a nation, we are more affluent than ever before, with much of that wealth
created in the last 15 years. We are benefiting from a world that has been
largely at peace since the official end of the Cold War in 1989. We are reaping
the fruits of the restructuring of American businesses in the 70s and 80s, and
we are benefiting from growth in worldwide demand for our products.
This unparalleled U.S. prosperity today is now being followed closely by Europe.
Companies in Europe are undergoing restructuring similar to that of the U.S. for
the last two decades. More and more, the inefficiencies of state-controlled
institutions in Europe are being replaced with the expansion of a free and more
competitive marketplace. As we approach the dawn of a new millennium, these
positive developments have enabled both the U.S. and most of Europe to
experience the greatest peace and prosperity in generations.
The rapid rise of global markets in recent years has been helped in no small
measure with the aid of sophisticated monetary policy. In the U.S.,
policy-making bodies, such as the Fed, coupled with technology-led productivity
gains, have controlled inflation to the extent that it's not a significant
factor in the U.S. economy today. U.S. bond yields have stayed in a fairly
narrow range as the U.S. economy has continued to grow without any signs of
accelerating inflation. For the six months ended June 30, 1998, the Lehman
Brothers Aggregate Bond Index returned 3.93%. (The Lehman Brothers Aggregate
Bond Index is composed of the Government/Corporate Bond Index, the Asset-Backed
Securities Index and includes U.S. Treasury issues, agency issues, corporate
bond issues and mortgage-backed issues.)
In Europe, the move to a common currency has forced both fiscal and monetary
policy to accomplish the same objective of bringing inflation and interest rates
down significantly in countries such as Italy and Spain. As interest rates have
come down, investment funds have flowed into stock markets, which, in turn, have
helped propel dramatic gains in the U.S. and European financial markets.
Now, the developing world is taking its cue from the U.S. and Europe. Perhaps
the most meaningful example is Latin America, where, after a very rocky period
in the last decade, monetary and fiscal policy reforms have stabilized economies
and established a base for solid and sustainable future growth. Yet, while the
underlying factors are very positive, a large part of the world continues to be
fragile both economically and politically.
Currently, parts of Asia are not enjoying growth and prosperity, particularly
Japan, Southeast Asia and Korea, where extraordinary
3
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economic growth and expansion during the last several decades resulted in
overheated and overextended financial conditions that are currently in the
painful process of readjusting. In addition, Russia is now in difficulty as its
political and financial infrastructure has not been able to keep pace with the
State's rapid conversion to a capitalistic economy.
There are some signs that the bull market in U.S. stocks may be slowing down,
and with market volatility on the rise, unforeseen outside factors are having a
pronounced impact on the markets as the debate between bulls and bears escalates
and investor uncertainty rises. For example, the situation in Iran, year-2000
computer problems, the Clinton scandals and the crisis in Asia and Russia are
all global events that trigger market corrections. On the other hand, U.S.
economic growth is still strong, inflation appears to be subdued and wage
pressures in the U.S. remain moderate, conditions that are generally favorable
for U.S. equities and may cause the unprecedented bull run to continue.
CONCLUSION
We foresee a slower U.S. economy for the remainder of 1998. The absence of
inflationary pressures should keep long-term bond yields below 6% while the
combination of lofty valuations and slower corporate earnings growth could find
stocks at the upper end of a trading range for the rest of the year. Investors
globally continue to be concerned with the implications and opportunities
arising as a result of Asia's economic contraction. Other emerging markets have
also been a source of anxiety - most specifically Russia, which recently
devalued its currency. We think that significant capital must be committed to
Asia to recapitalize wounded financial institutions.
Commentaries from the Funds' managers follows, beginning on page six. On behalf
of everyone here at Salomon Brothers Asset Management, thank you for your
investment in the Salomon Brothers Investment Series. We look forward to helping
you pursue your financial goals in the years to come.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman and President
August 20, 1998
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5
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[LOGO] THE SALOMON BROTHERS
ASIA GROWTH FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon Brothers Asia Growth Fund seeks long-term capital appreciation. The
Fund invests at least 65% of total assets in the equity and equity-related
securities of companies located in Asian countries. Areas considered for
investments includes but are not limited to, China, Hong Kong, India, Indonesia,
South Korea, Malaysia, Philippines,Singapore, Thailand, and Taiwan. In seeking
to capture high long-term returns with volatility in line with or lower than
that usually experienced in the Asian markets, the Fund will allocate its assets
among countries and industries believed by the portfolio manager to be most
likely to benefit from positive regional economic trends.
THE FUND MANAGER
[PHOTO] Giampaolo G.Guarnieri,Director and Head of Salomon Brothers Asset
Management Asia Pacific Limited (SBAM AP), has 12 years of investment industry
experience. SBAM AP is an affiliate of Salomon Brothers Asset Management Inc,
and serves as a sub-advisor to the Fund. Mr. Guarnieri is primarily responsible
for day-to-day Fund management.
PERFORMANCE UPDATE
The Asia Growth Fund's Class A shares returned - 23.93% for the six-month period
ended June 30, 1998. This compares favorably to the Morgan Stanley Capital
International All Country Asia Free Ex-Japan Index total return of - 26.23% for
the same period. In addition, the Lipper Analytical Services, Inc. Pacific
ex-Japan funds had a total return of - 23.69% during the same period. (Lipper is
a major fund-tracking organization.)
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
Asia's markets continued to underperform versus world equity indices as what was
perceived as a slowdown in economic growth in the region last year evolved into
a full-fledged recession and well-publicized financial crisis. South Asian
markets -- especially Indonesia, Malaysia, Thailand, the Philippines and, by
extension, Singapore -- were the most affected with their 1998 economic growth
forecasts significantly reduced to negative levels. Corporations reported poor
results on the back of this depressed growth environment and banks increased
their provisioning significantly to deal with rising non-performing loans.
In contrast, North Asian markets continued to outperform their South Asian
counterparts. The least affected market, Taiwan, reported slightly higher growth
levels and its corporations, especially in the technology industry, continue to
benefit from lower local currency input costs and a buoyant U.S. technology
industry. Korean authorities' efforts to implement International Monetary Fund
(IMF) austerity and reform measures appeared to be paying off with Korean bond
and currency markets strengthening significantly in the first half of 1998.
China continues to be the unknown factor in the area and its stated 8% Gross
Domestic Product (GDP) growth target for 1998 looks increasingly difficult to
achieve given Asia's financial turmoil. As a result, a fair amount of pressure
is being placed on China's currency to be devalued to levels more consistent
with other regional currencies. Overall, most Asian markets are technically well
oversold and seem to be discounting the worst possible business environment in
Asia.
As a result of the region's ongoing volatility, the Fund's portfolio cash
weightings are likely to remain at higher levels than normal. We see value
emerging in China-sensitive markets that have been heavily sold off on the back
of Yuan devaluation worries. For example, shares of companies that have no
exposure to Asia and no currency mismatch for their asset/liabilities mix, and
exhibit earnings growth levels of 10% to 15% are currently selling at extremely
low P/E and cash multiples and steep discount to book values.
MARKET OUTLOOK
In our view, the most important factors for Asia to stage a sustainable economic
recovery are:
. A credible and permanent fiscal stimulus coupled with effective banking
reforms from Japan
. A commitment from the Chinese authorities to continue reforms of state-
owned enterprises and adjust the currency
6
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- ------------------------------
PORTFOLIO HIGHLIGHTS***
- ------------------------------
Composition of portfolio as of
June 30, 1998
Equity-Linked Notes 3%
Cash/Cash Equivalents 10%
Common Stocks 87%
- -------------------------
BREAKDOWN BY COUNTRY***
- -------------------------
Hong Kong 37.60%
..........................
Singapore 14.50%
..........................
Taiwan 12.60%
..........................
South Korea 6.80%
..........................
India 6.00%
..........................
Thailand 5.90%
..........................
Malaysia 4.00%
..........................
China 3.10%
- --------------------------
- ------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS ASIA GROWTH FUND
- ------------------------------------------------------------------
Lipper Category: Pacific Ex-Japan Funds
..................................................................
Year to Date Total Return
Lipper
Class A Shares Average Ranking
..................................................................
- -23.93% -23.69% #40 of 86 funds
..................................................................
One-Year Total Return
Lipper
Class A Shares Average Ranking
..................................................................
- -52.18% -53.18% #27 of 82 funds
- ------------------------------------------------------------------
Deflationary forces in the region mean that the macro outlook is likely to
remain depressed for some time. Moreover, Asia's corporate sector is unlikely to
generate any earnings growth as companies continue to deal with potentially
damaging credit issues and overextended balance sheets. We are likely to witness
increasing pressure on the "last man standing" of regional fixed-exchange-rate
systems -- the Hong Kong Dollar ("HKD") peg as regional currency devaluation
pressures rise. Although we believe that the HKD peg -- should hold for
socio-political reasons such as the stability of Hong Kong's society, it is not
inconceivable that the peg will come under pressure and the patience of
authorities is likely to be tested yet again.
The prospect of higher HKD interest rates in a market dominated by property and
financial assets is not encouraging. We are therefore rethinking our longer-term
overweight stance toward Hong Kong stocks that now seem to deserve significantly
lower weightings in light of current circumstances. Yet, valuations in Asia are
at extremely low levels and seem to discount an indefinite crisis scenario. We
believe that value can be found in select Asian markets and securities given the
severe state of dislocation in most of Asia's financial markets.
We believe that Asia's markets have become an attractive case study for value
investing. If a correction happens in the U.S. stock market, the negative
correlation between Asian market returns and U.S. and European stocks could mean
that Asia's markets may ultimately perform better.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- --------------------------------------------------------------------------------
Class A Net Asset Value(*) Public Offering Price(**)
................................................................................
Since Inception (5/6/96) -21.41% -23.18%
1 year -52.18% -54.44%
................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
................................................................................
Since Inception (5/6/96) -21.97% -23.38%
1 year -52.53% -54.90%
................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
................................................................................
Since Inception (5/6/96) -21.92% -21.92%
1 year -52.49% -52.96%
................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
................................................................................
Since Inception (5/6/96) -21.23% -21.23%
1 year -52.10% -52.10%
- --------------------------------------------------------------------------------
Portfolio holdings may vary See page 26 for all footnotes.
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[LOGO] THE SALOMON BROTHERS
CAPITAL FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Capital Fund seeks capital appreciation through investment primarily in
common stocks or securities convertible into common stocks. The Fund seeks to
achieve its investment objective through investments in securities that are
believed to have above-average price appreciation potential. Such investments
may also involve above-average risk. The Fund may invest in seasoned,
established companies, relatively small new companies as well as new issues. The
Fund will not invest more than 25% of its assets in any particular industry.
THE FUND MANAGER
[PHOTO] Ross Margolies, Managing Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 17 years of investment industry experience in
the equity, convertible and high yield markets. Mr. Margolies is primarily
responsible for day-to-day Fund management.
PERFORMANCE UPDATE
The Capital Fund's Class A shares returned 15.24% for the six months ended June
30, 1998. This compares with a return of 15.11% for the Russell 3000 Index((R)),
17.72% for the S&P 500 Index and 12.85% for the Lipper Analytical Services, Inc.
capital appreciation average. (The Russell 3000 Index(R) is a market
capitalization weighted index made up of the 3000 largest U.S. stocks in terms
of market capitalization and is the Fund's performance benchmark.)
MARKET REVIEW
The U.S. equity market continued its march onward and upward during the first
half of 1998. It was, however, a fractured market with a handful of large
capitalization company stocks accounting for an even more disproportionate
amount of the returns than they had over the last few years. This was due to the
perceived safety of these large, growing companies as well as their inclusion in
popular indices such as the S&P 500 Index.
We expect many of these stocks to continue to outperform as long as the market
continues to reward companies that play the Orwellian doublespeak game of
announcing that they will miss their earnings targets only to exceed the new
lower targets. Additionally, the current investment psychology of buying stocks
for the long term without regard to price and, in the extreme, simply buying the
stocks in a popular index in the exact proportions that they appear in the
index, has led to a "commodization" of both stocks and the equity market. Thus,
the large capitalization portion of the stock market attracts capital from
investors whose intent is to buy "stock," as opposed to shares in companies.
This is one of the few possible explanations for the market's rise in the face
of weaker earnings prospects and the higher risk business environment that most
companies with global exposure face.
PORTFOLIO HIGHLIGHTS
The Capital Fund -- which uses a bottom-up approach to stock selection --
maintained its strategy of owning attractive stocks in all categories. The
first-half performance of the Capital Fund largely reflects our strategy of
weighing risk and potential reward as well as our focus on a diversified all
capitalization ("cap") investment strategy.
As of June 30, 1998, 59% of our positions were in small- or mid-cap company
stocks. We were particularly satisfied with the first half outperformance of the
Fund in light of the fact that the small- and mid-cap market sectors materially
underperformed large-cap stocks. Our stock selection within the small- and
mid-cap sections led to the Fund's outperformance.
8
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Key contributors to the Fund's first half of performance included cable, media
and telecom stocks such as Cablevision, Frontier Corp., NTL Inc., WorldCom and
Viacom, and retailers such as Costco, Food Lion and Federated. Our biggest drag
on performance was our large weighting in tobacco stocks such as Philip Morris,
RJR Nabisco and Loews. Technology was generally a positive contributor as our
largest weighted positions (including Plantronics and Seagate) were winners.
Lastly, we cut our losses in Fine Host common stock and moved up in the capital
structure into its distressed convertible bonds.
MARKET OUTLOOK
The near-term outlook for corporate earnings is weak while the ongoing macro
environment of low interest rates and low inflation is very positive for
equities. Weakness in Asian and other economies seems to finally be biting into
the strength of many Western economies. As portfolio managers, we are walking a
tightrope that seems to get stretched further and thinner each quarter. While
the returns are exhilarating, missteps are punished by dramatic falls in price.
Cash is at low levels as we have found many attractive ideas. We believe that
the best way to manage in the current environment is to count on the twin safety
nets of valuation discipline and broad diversification among different types of
companies to help cushion our missteps. While individual position concentration
has risen, as we expect it to when we have strong confidence in our stock
selections, the Fund's portfolio has low sector concentration other than in
tobacco. The Fund's portfolio is currently skewed towards smaller-sized company
stocks and relatively low P/E multiple stocks.
For the balance of the year, we expect the Fund's weightings in technology to
continue to grow and we expect an opportunity to rebuild our energy positions.
We also expect to maintain or increase our tobacco positions. During the next 12
to 18 months, we expect to see a resolution to the debate between health
officials' position regarding the dangers of cigarette smoking and the tobacco
industry's civil libertarian position for the right of adults to use a dangerous
but still legal product. Our current view is that this resolution will not cause
the tobacco holding companies to go bankrupt and will allow them to engage in
financial and restructuring transactions, which will unlock value for their
shareholders.
9
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- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30,1998
[PIE CHART APPEARS HERE]
Cash/Cash Equivalents 3%
Convertible Bonds 5%
Common Stocks and Preferred Stocks 92%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value(*) Public Offering Price(**)
.........................................................................................................
Since Inception (11/1/96) 31.19% 27.39%
1 year 27.48% 21.43%
.........................................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (11/1/96) 30.34% 27.80%
1 year 26.58% 21.58%
.........................................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (11/1/96) 30.39% 30.39%
1 year 26.54% 25.54%
.........................................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
10 year 15.00% 15.00%
5 year 20.09% 20.09%
1 year 27.80% 27.80%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
TOP HOLDINGS
- ----------------------
Plantronics
......................
Food Lion
......................
RJR Nabisco
......................
Hormel Foods
......................
Philip Morris
- ----------------------
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS CAPITAL FUND
- ---------------------------------------------------------------------
Lipper Category: Capital Appreciation Fund
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
15.24% 12.85% #88 of 259 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
27.48% 22.12% #90 of 231 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
10
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11
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THE SALOMON BROTHERS
INVESTORS FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon Brothers Investors Fund seeks long-term growth of capital. Current
income is a secondary objective. The Fund invests primarily in common stocks
listed on the New York Stock Exchange and other U.S. exchanges. The portfolio
managers generally favor large-capitalization stocks representing well-known
companies with good growth potential at a reasonable price.
PERFORMANCE UPDATE
The Investors Fund's Class A shares returned 12.06% for the six-month period
ended June 30, 1998 compared to the S&P 500 Index, which returned 17.72% and the
Lipper Analytical Services, Inc. growth and income fund peer group average,
which returned 12.11%.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
Although the Fund performed in line with its peer group average, the performance
lagged the S&P 500 Index. The S&P 500 benefited from the continued leadership of
large-capitalization growth stocks. Five stocks alone -- Microsoft, Lucent,
General Electric, Wal-Mart and Coca-Cola -- accounted for almost one quarter of
the S&P 500's six-month return. Beyond a select group of large-cap growth
stocks, however, most stocks underperformed the benchmark indices.
While Morningstar Inc.'s large-cap growth index returned 20.3% in the six-month
period, the large-cap value index returned only 10.3%. The Russell 2000
Index(R) -- which is made up of smaller-sized companies -- returned an even
lower 4.93%. Despite the recent outperformance of large-cap growth stocks, we
remain committed to our discipline of identifying value in the marketplace. We
believe that strict adherence to our investment principles should prove to be
rewarding for our shareholders over time.
Economic turmoil in Asia affected investment performance in the United States as
investors focused on defensive sectors of the market, including pharmaceuticals,
consumer products and telecommunications companies. Commodity and cyclical
companies underperformed in the second quarter as commodity prices continued to
fall and GDP growth in the U.S. slowed to only 1.4%. Disinflation and slower
growth kept the Fed from raising interest rates, despite a tight labor market.
Significant contributors to the Fund's performance during the period under
review included Cablevision Systems, Warner Lambert, Liberty Media and WorldCom.
We believe the Fund's portfolio is well diversified, with overweighted positions
in sectors such as basic industries and transportation and underweighted
positions in the technology and health care sectors.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] Allan R. White, Managing Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 17 years of investment industry experience in
the equity, convertible and fixed-income markets. Mr. White is primarily
responsible for the Fund's day-to-day management.
[PHOTO] John B. Cunningham, Vice President and Portfolio Manager at Salomon
Brothers Asset Management Inc, has nine years of financial industry experience.
Mr. Cunningham assists in day-to-day management of the Fund.
12
<PAGE>
- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30, 1998
[PIE CHART APPEARS HERE]
Cash/Cash Equivalents 6%
Convertible Securities 2%
Common Stocks 92%
MARKET OUTLOOK
In the near term, our outlook for the market is cautious. In our opinion,
coporate earnings growth expectations for the second half of 1998 are still too
high. We believe the industries most vulnerable to further estimate cuts include
energy, basic industry and technology. Defensive sectors of the market with more
earnings stability remain expensive. We are also focusing on cyclical companies
where we believe that price declines are overdone. On a positive note, low
commodity prices and the strong U.S. dollar should keep inflation low, allowing
the favorable interest-rate environment to continue. Overall, the U.S. economy
is slowing but remains healthy. We therefore do not foresee a recession.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value(*) Public Offering Price(**)
.........................................................................................................
Since Inception (1/3/95) 29.93% 28.12%
1 year 23.07% 17.22%
.........................................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (1/3/95) 28.99% 28.53%
1 year 22.20% 17.20%
.........................................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (1/3/95) 28.99% 28.99%
1 year 22.19% 21.19%
.........................................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
10 year 16.69% 16.69%
5 year 21.45% 21.45%
1 year 23.38% 23.38%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
TOP HOLDINGS
- ----------------------
Viacom
......................
Bank of New York
......................
Travelers Group
......................
Cytec Industries
......................
Tyco International
- ----------------------
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS STRATEGIC BOND FUND
- ---------------------------------------------------------------------
Lipper Category: Growth & Income Funds
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
12.06% 12.11% #371 of 754 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
23.07% 22.86% #323 of 668 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
13
<PAGE>
[LOGO] THE SALOMON BROTHERS
TOTAL RETURN FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to obtain above-average income compared to a portfolio that
invests only in stocks. The Fund's secondary objective is to take advantage of
opportunities for growth of capital and income by investing in a variety of
asset classes including stocks, bonds and short-term obligations.
The Fund's equity investments have been in large-capitalization stocks that are
paying dividends greater than the S&P 500 Index average. With assets allocated
to investment-grade, high-yield and convertible securities, the bond portion of
the Fund's portfolio is distributed across a broader range of fixed income
instruments than most balanced funds. The Fund's strategic approach in the bond
market tends to raise its income potential and the variety of its bond holdings
also provides diversification benefits that the portfolio manager believes could
help to limit its volatility.
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] Richard Dahlberg, Managing Director and Portfolio Manager at Salomon
Brothers Asset Management Inc, has 38 years of investment industry experience in
the equity markets. Mr. Dahlberg is primarily responsible for day-to-day Fund
management.
PERFORMANCE UPDATE
The Total Return Fund's Class A shares posted a return of 6.35% for the
six-month period ended June 30, 1998. This compares with a 10.80% total return
for a composite index of 50% Salomon Brothers Broad Investment Grade Bond Index
and 50% S&P 500, and 8.95% for the Lipper Analytical Services, Inc. balanced
fund peer group average.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
The stock market has developed a split personality of late. The very largest-
capitalization company stocks have run away from the pack while many other kinds
of stocks have been in a bear market for some months. The Total Return Fund has
been influenced by these recent events. We follow a value investment strategy
with an emphasis on seeking to deliver above-average income. This investment
style has been temporarily out of fashion, but we believe this is just another
market cycle. The Fund's performance benefited when value investing was in favor
in 1995 and 1996. Therefore, we plan to stick to our value investing style and
identify situations that are currently under stress but still have, in our
opinion, good long-term prospects. Examples of investments we have made that
typify this approach include real estate investment trusts ("REITs"), Amerada
Hess and Union Pacific.
In the bond portion of the Fund, we have continued to move toward high-grade
bonds and have decreased our exposure to high-yield bonds where yield spreads
had narrowed. Toward the end of the second quarter, when yield spreads widened,
we saw some opportunities to move back into some high-yield securities.
MARKET OUTLOOK
The U.S. stock market is fully priced without any visible acceleration in
earnings. We expect corporate earnings to slow for the next several quarters
and, therefore, we expect the stock market to become more volatile. We believe
the merits of investing in a balanced fund like the Total Return Fund that
offers less potential volatility should become more apparent in the months
ahead.
14
<PAGE>
- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30, 1998
[PIE CHART APPEARS HERE]
Cash/Cash Equivalents 6%
High Yield Securities 9%
Convertible Securities 11%
Investment Grade Debt 29%
Common Stocks 45%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value* Public Offering Price**
.........................................................................................................
Since Inception (9/11/95) 18.15% 16.11%
1 year 15.49% 10.02%
.........................................................................................................
Class B Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (9/11/95) 17.24% 16.16%
1 year 14.58% 9.58%
.........................................................................................................
Class C Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (9/11/95) 17.30% 17.30%
1 year 14.55% 13.55%
.........................................................................................................
Class O Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (9/11/95) 18.65% 18.65%
1 year 15.74% 15.74%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
TOP STOCK HOLDINGS
- ---------------------------
Canadian National Railway
...........................
BCE Inc.
...........................
Suncor Inc.
...........................
Sears Roebuck
...........................
Avon Products
- ---------------------------
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS TOTAL RETURN FUND
- ---------------------------------------------------------------------
Lipper Category: Balanced Funds
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
6.35% 8.95% #343 of 409 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
15.49% 17.57% #249 of 373 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
15
<PAGE>
[LOGO] THE SALOMON BROTHERS
HIGH YIELD BOND FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon High Yield Bond Fund seeks to maximize current income by investing
primarily in a diversified portfolio of high-yield bonds rated in medium of
lower categories. As a secondary objective, the Fund seeks capital appreciation.
Under normal market conditions, the Fund intends to invest at least 65% of its
assets in securities rated Baa or lower by Moody's Investors Services Inc., or
those rated BBB or lower by Standard & Poor's. (Moody's and S&P are two major
credit reporting and bond rating agencies.) A key component of the Fund's
overall investment strategy is to determine the optimal asset allocation between
domestic high-yield bonds and international U.S. dollar-denominated bonds such
as Brady Bonds and lower-rated sovereign debt.
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] Peter J. Wilby, CFA, Managing Director and Senior Portfolio Manager at
Salomon Brothers Asset Management Inc, has 18 years of investment industry
experience principally in the high-yield and emerging debt markets. Mr. Wilby is
primarily responsible for the day-to-day management of the High Yield Bond Fund.
PERFORMANCE UPDATE
During the six-month period ended June 30, 1998, the Salomon Brothers High Yield
Bond Fund's Class A shares posted a return of 1.78%. This performance compares
with the 5.14% return for the high-yield bond market, as measured by the Salomon
Brothers High Yield Market Index, and a 4.42% return for the Lipper Analytical
Services, Inc. high current yield fund peer group average. In addition, this
compares to a -1.08% return for the J.P. Morgan Emerging Market Bond Index Plus,
a standard benchmark for the emerging debt market. During the reporting period,
the Fund's performance was hurt by its allocation in emerging markets debt,
which accounted for approximately 27% of the Fund's total net assets.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
In the first part of the six months ended June 30, 1998, corporate earnings and
credit quality were generally very good and supported credit spread tightening,
or reduction of the risk premium over U.S. Treasury bills. The high-yield bond
market's firmness appeared to be due to several factors, including a high level
of cash in the market, a strong rally in the U.S. Treasury market and strong
demand from both retail and institutional buyers. High-yield mutual funds were
aggressive buyers, as most funds experienced record inflows during the period.
Collateralized Bond Obligations (CBOs), insurance companies, pension funds and
other institutional buyers have also been active participants in the high-yield
bond market.
The high-yield bond market reversed its positive trend in the second quarter of
1998. Investors became increasingly concerned with the impact of fundamental
problems in Japan, Russia and Southeast Asia, and a "flight-to-quality," or a
reduction in investors' risk appetites, ensued. Technical conditions in the
high-yield bond market were also weak, due to heavy new issuance of more U.S.
high-yield bonds against a backdrop of heightened investor concerns. Toward
quarter-end, however, new issuance began to slow, bringing supply and demand
closer to equilibrium. In addition, the proposed buyout of TCI by AT&T and
continued merger and acquisition activity in the cable/media sector helped
provide a more positive tone to the market.
Leisure/lodging, retail stores, technology, cable & media and gaming were
outperforming industries during the six months ended June 30, 1998. The
performance of these industries was driven by the continued strength of U.S.
consumer spending, which was buoyed by rising incomes and double-digit gains in
the U.S. stock market. Underperforming industries during the reporting period
included auto manufacturing, energy, publishing, supermarkets and textile &
apparel. Reasons for the sectors underperforming were varied, but a continued
theme is economic weakness in Asia.
The emerging debt markets were slightly negative during the six months ended
June 30, 1998 and posted a return of -1.08% as measured by the J.P. Morgan
Emerging Market Bond Index Plus during that period. In comparison, the Salomon
Brothers Broad Investment Grade Bond Index, a proxy for investment-grade bonds,
posted a return of 3.97%.
16
<PAGE>
- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30, 1998
[PIE CHART APPEARS HERE]
Cash/Cash Equivalents 3%
Emerging Markets Debt 23%
High Yield Securities 74%
During the reporting period, we continued to believe that the market risk in
Asia had not disappeared. Events leading up to January 1998, however, increased
our confidence in global emerging market bond prospects. It seemed to us that
Asian countries were beginning to take tangible steps to combat the weakness in
their currencies. For example, Korea exchanged over $20 billion in maturing
short-term debt for longer-term bonds and subscribed to an IMF reform package;
Thailand and Malaysia began to implement many IMF reforms; and China reaffirmed
its commitment to maintaining Hong Kong's U.S. dollar currency peg.
Consequently, we began to increase our exposure to the market. We increased our
exposure to those countries that had solid fundamentals and were not excessively
reliant on the international capital markets, but were sold off in sympathy with
Asia. Additionally, we continued to focus our investing in the U.S. dollar debt
sector of the market, as opposed to the local currency markets.
For the six-month period ended June 30, 1998, outperformers in the emerging debt
market included Argentina, Brazil, Mexico, Panama, The Philippines, Morocco,
Bulgaria and Poland. Underperformers for the period included Ecuador, Venezuela,
Peru and Russia, all driven down by world events and declined in commodity
prices.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value(*) Public Offering Price(**)
.........................................................................................................
Since Inception (2/22/95) 15.75% 14.09%
1 year 7.09% 1.99%
.........................................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 14.91% 14.26%
1 year 6.73% 1.53%
.........................................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 14.88% 14.88%
1 year 6.28% 5.32%
.........................................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 16.00% 16.00%
1 year 7.38% 7.38%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------
TOP FIVE OVERWEIGHTED INDUSTRIES++
- ------------------------------------
Consumer Products & Services
....................................
Manufacturing
....................................
Energy
....................................
Containers/Packaging
....................................
Publishing
- ------------------------------------
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS HIGH YIELD BOND FUND
- ---------------------------------------------------------------------
Lipper Category: High Yield Bond Fund
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
1.78% 4.42% #232 of 245 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
7.09% 11.45% #200 of 215 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
17
<PAGE>
[LOGO] THE SALOMON BROTHERS
STRATEGIC BOND FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon Brothers Strategic Bond Fund seeks a high level of current income.
The Fund seeks to achieve its objective by investing in a globally diverse
portfolio of fixed-income securities. As a secondary objective, the Fund seeks
capital appreciation. Assets of the Fund may be deployed among various sectors
of the global bond markets, depending on portfolio managers' analysis of current
economic and market conditions and the relative risks and opportunities
presented by the various market segments.
PERFORMANCE UPDATE
For the six-month period ended June 30, 1998, the Strategic Bond Fund's Class A
shares posted a 2.33% total return without sales charge. This compares with the
3.96% return for the Salomon Brothers Broad Investment Grade Bond Index and the
2.71% return for the Lipper Analytical Services, Inc. multi-sector income fund
peer group average.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
The performance of the U.S. economy exceeded expectations during the first six
months of 1998. Low long-term interest rates, abundant money supply growth and
new highs in the stock markets were some of the factors that contributed to the
U.S. economy's healthy performance. In addition, investors concerned about
developments in Asia gravitated to the U.S. Treasury securities market as a
"safe haven."
As a result, the yield on the long bond reached its lowest level -- 5.57% --
since the U.S. government began regular sales of securities in 1977. The yield
curve flattened with spreads between the two-year U.S. Treasury note and 30-year
U.S. Treasury bond tightening to 15 basis points as of June 30, 1998. (The yield
curve shows the difference between short- and long-term rates. A basis point is
one one-hundredth of a percent.) This enabled long-term U.S. Treasuries to
out perform shorter term bonds.
During the first half of the year, all major credit-sensitive bond sectors
experienced heightened volatility. Emerging markets debt, which rallied in the
first quarter based on an optimistic outlook for reforms in Asia, gave up its
gains as attempts to implement reforms in the troubled region met with some
resistance. Events in Russia, India and Pakistan that unfolded in the second
quarter compounded existing challenges in Southeast Asia. Moreover, Japan's
economic and banking system problems have become more prominent and led to a
weakening of the Japanese yen versus the U.S. dollar. In addition to Asia's
economic problems, the markets had to endure a crisis of confidence in Russia.
Russia raised interest rates on overnight money to 150% at one point in order to
fund their liabilities. Russia's problems led to a sector-wide sell-off of
emerging markets debt.
- --------------------------------------------------------------------------------
THE FUND MANAGERS
- --------------------------------------------------------------------------------
[PHOTO] Peter J. Wilby, CFA, Managing Director and Senior Portfolio Manager at
Salomon Brothers Asset Management Inc, has 18 years of investment industry
experience principally in the high-yield and emerging debt markets. Mr. Wilby is
primarily responsible for day-to-day Fund management of the U.S. high-yield and
emerging markets debt portions of the Fund.
[PHOTO] Roger Lavan, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 13 years of investment industry experience.
[PHOTO] David J. Scott, Director and Portfolio Manager at Salomon Brothers Asset
Management LTD, has 15 years of investment industry experience in the global
fixed-income markets. SBAM LTD provides certain advisory services to SBAM Inc
relating to currency transactions and investments in non-dollar denominated
securities for the Fund.
18
<PAGE>
In the emerging markets debt sector, the Fund lightened up on its Russian
exposure and added to holdings in Bulgaria and Peru. Mexico and Argentina
continue to be core Fund holdings as we believe the fundamentals behind
these Latin American countries remain strong.
During the six months ended June 30, 1998, the high-yield bond market posted a
5.1% return. However, volatility in the high-yield bond market in the second
quarter increased. In addition, many corporations issued record levels of debt
to take advantage of low interest rates. This pressured the high-yield bond
market and, as a result, the yield spreads on high-yield bonds versus comparable
U.S. Treasuries rose to about 380 basis points, about 100 basis points higher
than the lows set in August of 1997. We were not deterred by the technically
induced spread widening and maintained the Fund's weightings in high-yield
bonds. In addition, we maintained the Fund's high credit quality standards
although a large number of new deals came to market with weaker underlying
fundamentals. We continue to seek opportunities to upgrade the Fund's credit
quality and we remain positive on high-yield bonds.
MARKET OUTLOOK
We believe that the Fed's monetary policy is firmly on hold for the time being
supported by few signs of inflation and the persistent crisis in Asia. We intend
to continue our strategy of investing in higher-yielding bond sectors that we
believe will provide superior returns over time.
19
<PAGE>
- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30,1998
[PIE CHART APPEARS HERE]
Investment Grade Bonds 40%
High Yield Bonds 33%
Emerging Markets Debt Bonds 16%
Non-U.S. Dollar Gov't. Bonds 9%
Short-Term Investments 2%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value(*) Public Offering Price(**)
.........................................................................................................
Since Inception (2/22/95) 13.19% 11.56%
1 year 8.03% 2.93%
.........................................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 12.29% 11.61%
1 year 7.13% 2.19%
.........................................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 12.34% 12.34%
1 year 7.23% 6.24%
.........................................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 13.42% 13.42%
1 year 8.19% 8.19%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS STRATEGIC BOND FUND
- ---------------------------------------------------------------------
Lipper Category: Multi-Sector Income Funds
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
2.33% 2.71% #67 of 95 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
8.03% 7.05% #32 of 83 funds
- ---------------------------------------------------------------------
See page 26 for all footnotes.
Portfolio holdings may vary.
20
<PAGE>
[This page intentionally left blank]
21
<PAGE>
[LOGO] THE SALOMON BROTHERS
NATIONAL INTERMEDIATE
MUNICIPAL FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon Brothers National Intermediate Municipal Fund seeks to achieve a
high level of current income exempt from regular federal income taxes. Under
normal circumstances, at least 80% of the Fund's net assets will be invested in
municipal obligations, the interest on which is exempt from regular federal
income tax. Please note that all or a portion of the Fund's income may be
subject to the federal alternative minimum tax (AMT).
- --------------------------------------------------------------------------------
THE FUND MANAGER
- --------------------------------------------------------------------------------
[PHOTO] Marybeth Whyte, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 20 years of investment industry experience. Ms. Whyte is
responsible for day-to-day Fund management.
PERFORMANCE UPDATE
For the six-month period ended June 30, 1998, the National Intermediate
Municipal Fund's Class A shares had a total return of 2.00% and slightly
underperformed versus the return of 2.05% for the average intermediate
municipal debt fund as measured by Lipper Analytical Services, Inc. and the
2.34% return for the weighted average of the Lehman Brothers 1-10 year Municipal
Bond Index.
MARKET REVIEW
Returns for municipal bonds were favorable during the first half of 1998. U.S.
fixed-income securities benefited from benign inflation and the economic and
political turmoil in Asia. Treasuries were sought as a safe-haven by worldwide
investors and it was anticipated that the Asian problems would slow our economy.
Price advances for municipal bonds were tempered as compared to Treasuries due
to a near record pace of tax-exempt new issuance for the first six months of the
year. State and local governments took advantage of the current low interest
rate environment by issuing almost $146 billion of new debt during this time
period. Demand for municipals remains concentrated by property and casualty
insurance companies, corporations, mutual funds and, to a lesser degree,
individual investors. Year-to-date municipal bond new issue supply is 51% ahead
of 1997 levels.
Our philosophy of focusing on long-term fundamentals, rigorous credit analysis
and sector selection remains the credo for managing the Fund. Purchases in the
Fund have been concentrated in seven- to ten-year maturities and on high-quality
issues as credit quality spreads remained narrow.
MARKET OUTLOOK
The municipal new issue supply is likely to slow somewhat as is typical in the
summer months. We do expect a resurgence in the new issue calendar after the
Labor Day holiday through the early fall. Municipals are historically
undervalued due to the heavy supply this year. We expect them to remain
extremely attractive as supply is plentiful.
22
<PAGE>
- ---------------------------------
PORTFOLIO HIGHLIGHTS***
- ---------------------------------
Quality Breakdown as of
June 30,1998
[PIE CHART APPEARS HERE]
AA 13%
A 15%
AAA 48%
BBB 24%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value* Public Offering Price**
.........................................................................................................
Since Inception (2/22/95) 6.77% 5.23%
1 year 6.76% 1.67%
.........................................................................................................
Class B Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (2/22/95) 5.82% 5.03%
1 year 5.95% 0.95%
.........................................................................................................
Class C Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (2/22/95) 5.82% 5.82%
1 year 5.85% 4.85%
.........................................................................................................
Class O Return If Not Redeemed* Return If Redeemed**
.........................................................................................................
Since Inception (2/22/95) 6.89% 6.89%
1 year 7.01% 7.01%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------
COMPOSITION OF PORTFOLIO AS
OF JUNE 30, 1998****
- -------------------------------------
New York 23%
.....................................
Pennsylvania 12%
.....................................
Illinois 10%
.....................................
Indiana 10%
.....................................
South Carolina 7%
.....................................
Virginia 6%
.....................................
Texas 5%
.....................................
California 4%
.....................................
Mississippi 4%
.....................................
New Jersey 3%
.....................................
Ohio 3%
.....................................
Massachusetts 3%
.....................................
District of
Columbia (D.C.) 3%
.....................................
Louisiana 2%
.....................................
Michigan 2%
.....................................
Hawaii 2%
.....................................
Florida 1%
- -------------------------------------
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS NATIONAL INTER. MUNI. FUND
- ---------------------------------------------------------------------
Lipper Category: Intermediate Municipal Debt Funds
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
2.00% 2.05% #79 of 151 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
6.76% 6.69% #67 of 143 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
23
<PAGE>
[LOGO] THE SALOMON BROTHERS
U.S. GOVERMENT
INCOME FUND
INVESTMENT OBJECTIVE AND STRATEGY
The Salomon Brothers U.S. Government Income Fund seeks to obtain a high level of
current income. Under normal conditions the Fund invests 100% of its net assets
in debt obligations and mortgage-backed securities issued by or guaranteed by
the U.S. government, its agencies or instrumentalities. The Fund expects to
maintain an average portfolio duration of two to four years. (Duration is a
rough measure of a fund's sensitivity to changes in interest rates.)
THE FUND MANAGER
[PHOTO] Roger Lavan, Director and Portfolio Manager at Salomon Brothers Asset
Management Inc, has 13 years of investment industry experience. Mr. Lavan is
responsible for day-to-day Fund management.
PERFORMANCE UPDATE
During the first half of 1998, the Salomon Brothers U.S. Government Income
Fund's Class A shares posted a 3.31% total return. The Fund's performance
compares favorably with the Lipper Analytical Services, Inc. short-intermediate
U.S. government bond fund peer group average return of 2.84% for the same
period.
MARKET REVIEW AND PORTFOLIO HIGHLIGHTS
The U.S. bond market began the first quarter of 1998 in dramatic fashion as the
continuation of late 1997's flight to quality trade pushed interest rates lower.
By the end of the first full week of trading, short-term interest rates were
down 50 basis points as the Asian financial crisis showed no signs of abating.
Yet, to the surprise of many market participants, the Asian financial crisis
appeared to be resolved later in January when Asian currencies stabilized and
their equity markets began to rally. As a result, interest rates reversed course
and rose both in February and March to end the quarter barely changed from
January 1, 1998 levels.
Turbulence in world financial markets reappeared and the U.S. bond market
registered solid gains in the second quarter of 1998. Weakness in Japan took
center stage with the U.S. dollar/yen exchange rate serving as a barometer for
market sentiment. The yen deteriorated by 4.3% versus the U.S. dollar over the
quarter despite concerted foreign currency exchange intervention by the U.S. and
Japan. All of the Asian difficulties, plus instability in Russia, rattled equity
markets and sent capital surging into the safe haven of U.S. Treasuries.
Due to the economic problems in Asia, we began the year with a fairly
constructive view of U.S. fixed-income markets. We believed Asia would slow U.S.
economic growth and push inflation lower, which would enable interest rates, in
particular long-term rates, to move modestly lower, pushing bond prices higher
during 1998. To take advantage of our expectations for lower rates and a flatter
yield curve, we kept the Fund's assets in longer maturities and over weighted
discount mortgage pass-throughs. These strategies were key to the Fund's
out performance thus far in 1998.
MARKET OUTLOOK
Looking ahead, Asian turmoil appears to have overshadowed feint warnings of
tightening from the Fed Chairman Alan Greenspan. Near term, current interest
rate levels will be difficult to sustain without a significant pullback in
equities or a further sharp rise in the U.S. dollar. However, any backups in
yields will likely be met with substantial buying interest. Overall, we expect a
relatively benign interest rate environment during the next six to twelve month
period and we expect mortgages to outperform U.S. Treasuries.
24
<PAGE>
- -------------------------------------
PORTFOLIO HIGHLIGHTS***
- -------------------------------------
Composition of portfolio as of
June 30, 1998
[PIE CHART APPEARS HERE]
Short-Term Investments 13%
Agency CMOs 15%
Treasury & Agency Debentures 24%
Agency Pass-Throughs 48%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIOD THROUGH JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Net Asset Value(*) Public Offering Price(**)
.........................................................................................................
Since Inception (2/22/95) 7.22% 5.67%
1 year 8.45% 3.30%
.........................................................................................................
Class B Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 6.41% 5.63%
1 year 7.63% 2.63%
.........................................................................................................
Class C Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 6.41% 6.41%
1 year 7.63% 6.63%
.........................................................................................................
Class O Return If Not Redeemed(*) Return If Redeemed(**)
.........................................................................................................
Since Inception (2/22/95) 7.47% 7.47%
1 year 8.81% 8.81%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------------------------------------
LIPPER COMPARATIVE PERFORMANCE+
SALOMON BROTHERS U.S. GOVERNMENT FUNDS
- ---------------------------------------------------------------------
Lipper Category: Short/Intermediate U.S. Government Income Fund
.....................................................................
Year to Date Total Return
Class A Shares Lipper Average Ranking
.....................................................................
3.31% 2.84% #9 of 101 funds
.....................................................................
One-Year Total Return
Class A Shares Lipper Average Ranking
.....................................................................
8.45% 7.00% #4 of 99 funds
- ---------------------------------------------------------------------
Portfolio holdings may vary. See page 26 for all footnotes.
25
<PAGE>
FOOTNOTES
(*) Return does not reflect the deduction of sales charge.
(**) Class A shares reflect the deduction of the maximum 4.75% sales charge.
Class B & C shares reflect the maximum contingent deferred sales charge
of 5.00% and 1.00%, respectively. Class O shares have no initial or
contingent deferred sales charge.
(***) As a percentage of net assets.
(****) As a percentage of market value.
+ Lipper Analytical Services, Inc., an industry recognized analysis
company, calculates rankings based on total return performance of funds
within each category. Lipper rankings change monthly and do not reflect
the effect of sales charges. Accordingly, the result in this table for
the Class A, Class B and Class C shares of each Fund do not reflect the
effects of the sales charges applicable to each Class. Lipper performance
results represent changes in net asset value, adjusted to reflect
reinvestment of dividends and capital gains.
++ When measured against the Fund's benchmark, the Salomon Brothers High-
Yield Market Index, these industries have a greater percentage allocation
within the Fund, and are therefore considered "overweighted."
GENERAL PERFORMANCE AND RANKING NOTES
Average annual total returns are based on changes in net asset value and assume
the reinvestment of all dividends, and/or capital gains distributions in
additional shares with and without the effect of the maximum sales charge (Class
A) and the contingent deferred sales charge (Class B and C). Class A shares
reflect the deduction of an annual 0.25% 12b-1fee. Class B & C shares are
subject to an annual 12b-1 service and distribution fee of 1.00%. Class O shares
are not subject to an annual 12b-1 fee. Class O shares are only available to
existing Class O shareholders. Past performance does not guarantee future
results. Investment return and principal value fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Returns reflect a voluntary expense cap imposed by SBAM to limit total Fund
operating expenses. Absent this expense cap, Fund returns would be lower.
Expense caps may be revised or terminated at any time.
26
<PAGE>
PORTFOLIO OF INVESTMENTS
(June 30, 1998) (unaudited)
SALOMON BROTHERS ASIA GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.3%
CHINA -- 3.1%
296,250 Heilongjiang Electric Power, Class B*.................... $ 112,575
152,000 Shenzhen Fangda, Class B................................. 112,229
899,800 Southeastern Power, Class B.............................. 251,944
----------
476,748
----------
HONG KONG -- 37.0%
60,000 Cheung Kong.............................................. 295,082
829,000 China Merchants Hai Hong Holdings........................ 505,618
206,000 China Resources Enterprises.............................. 212,728
254,000 China Telecom*........................................... 440,984
652,000 Cosco Pacific............................................ 233,548
200,000 Dairy Farm International Holdings........................ 214,000
300,000 Guangdong Kelon Electronics*............................. 236,220
100,000 Hong Kong Electric....................................... 309,797
204,200 Hong Kong Telecom........................................ 383,518
137,000 Hong Kong & China Gas.................................... 155,622
127,000 Hutchison Whampoa........................................ 670,491
52,000 Jardine Matheson Holdings................................ 140,400
1,004,000 Legend Holdings*......................................... 301,317
216,000 Li & Fung................................................ 348,522
181,000 New World Development.................................... 350,458
1,820,000 Quality Healthcare Asia*................................. 150,355
146,000 Shanghai Industrial Holdings............................. 343,940
930,000 Shenzhen Expressway*..................................... 171,666
60,000 Vtech Holdings*.......................................... 223,441
----------
5,687,707
----------
INDIA -- 5.5%
10,000 Hindalco Industries--GDR*................................ 140,000
35,800 Mahanagar Tele Nigam--GDR*............................... 375,005
30,500 Reliance Industries--GDR*................................ 199,013
12,000 State Bank of India--GDR................................. 142,200
----------
856,218
----------
MALAYSIA -- 4.0%
157,000 Malaysia Assurance Alliance*............................. 137,010
169,000 Malaysia International Shipping (a)...................... 247,852
190,000 Tenaga Nasional.......................................... 230,289
----------
615,151
----------
SINGAPORE -- 12.4%
276,000 DBS Land*................................................ 229,727
36,300 Development Bank of Singapore (a)........................ 201,787
92,000 GP Batteries International*.............................. 168,466
293,000 Lindeteves--Jacoberg*.................................... 148,068
257,000 Marco Polo Developments*................................. 194,049
63,000 Overseas Chinese Banking................................. 215,369
22,001 Singapore Press Holdings (a)............................. 147,807
354,000 Singapore Technologies Engineering*...................... 250,452
242,000 Singapore Telecommunications*............................ 345,303
----------
1,901,028
----------
</TABLE>
See accompanying notes to financial statements
27
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS ASIA GROWTH FUND (continued)
<TABLE>
- --------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C> <C> <C>
- --------------------------------------------------------------
SOUTH KOREA -- 6.8%
5,040 Dae Duck Electronics*.................. $ 293,664
29,020 Medison*............................... 255,748
3,450 Pohang Iron & Steel*................... 97,495
7,898 Samsung Display Devices*............... 215,714
334 Samsung Electronic*.................... 10,339
994 Samsung Fire & Marine Insurance........ 165,787
----------
1,038,747
----------
TAIWAN -- 12.6%
90,000 Aurora*................................ 137,513
316,800 BES Engineering*....................... 191,774
333,600 China Steel............................ 203,881
100,600 Compal Electronics*.................... 270,820
243,600 Everest Textile*....................... 265,858
36,000 Hon Hai Precision Industry*............ 182,302
18,750 Kinpo Electronics*..................... 29,740
133,100 Shin Kong Life Insurance............... 267,281
375,000 Taishin International Bank*............ 220,457
84,000 Taiwan Liton Electronic*............... 168,682
----------
1,938,308
----------
THAILAND -- 5.9%
462,000 Bangkok Expressway (a)*................ 186,335
42,600 BEC World Public Company*.............. 162,719
198,000 Electricity Generating Public
Company*.............................. 253,665
53,400 Hana Microelectronics (a)*............. 136,826
23,000 PTT Exploration & Production Public
Company (a)*.......................... 174,614
----------
914,159
----------
TOTAL COMMON STOCKS
(cost -- $16,306,080).................. 13,428,066
----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C> <C> <C>
EQUITY-LINKED NOTES -- 2.6%
INDIA -- 0.5%
$ 100,000 Reliance Industries Index Note due
11/06/20 (b).......................... 69,718
----------
SINGAPORE -- 2.1%
315,861 DBS Bank Equity Linked Note due
07/24/01 ............................. 324,899
----------
TOTAL EQUITY-LINKED NOTES
(cost -- $429,837)..................... 394,617
----------
<CAPTION>
WARRANTS
--------
<C> <S> <C> <C> <C>
WARRANTS* -- 0.2%
HONG KONG -- 0.2%
1,190,000 Shanghai Industries Warrants (cost --
$206,537)............................ 27,342
----------
</TABLE>
See accompanying notes to financial statements
28
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS ASIA GROWTH FUND (concluded)
<TABLE>
- -----------------------------------------------------------
<CAPTION>
RIGHTS DESCRIPTION VALUE
<C> <S> <C> <C> <C>
- -----------------------------------------------------------
RIGHTS* -- 0.0%
TAIWAN -- 0.0%
16,240 Everest Textile Rights (cost --
$0).............................. $ 5,435
-----------
<CAPTION>
CONTRACTS
---------
<C> <S> <C> <C> <C>
PURCHASED OPTIONS* -- 0.4%
HONG KONG -- 0.4%
398 Hang Seng OTC Index Put (expiring
09/29/98, exercise price 8,000
HKD).............................. 23,324
1,050 Hang Seng OTC Index Put (expiring
07/30/98, exercise price 8,000
HKD).............................. 35,782
-----------
TOTAL PURCHASED OPTIONS
(cost -- $103,314)................. 59,106
-----------
TOTAL INVESTMENTS -- 90.5%
(cost -- $17,045,768).............. 13,914,566
-----------
Other assets in excess of
liabilities -- 9.5%............... 1,466,485
-----------
NET ASSETS -- 100.0%............... $15,381,051
===========
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
- ---------------------------------------------------------------------------
<CAPTION>
UNREALIZED
MATURITY CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
DATES RECEIVE/DELIVER FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------
PURCHASES
07/02/98 SGD 343,196 $206,284 $204,004 $ (2,280)
07/06/98 SGD 440,167 259,839 261,693 1,854
07/02/98 THB 31,290,161 743,256 741,122 (2,134)
SALES
07/01/98 HKD 2,242,777 289,435 289,502 (67)
07/06/98 SGD 466,308 275,306 277,270 (1,964)
07/15/98 SGD 1,634,000 938,433 970,165 (31,732)
07/02/98 THB 24,780,000 600,000 586,926 13,074
08/03/98 THB 24,780,000 572,286 571,934 352
----------
$ (22,897)
==========
</TABLE>
* Non-income producing security.
(a) Foreign Shares.
(b) Each $100,000 note is equivalent to 19,526 shares of Reliance Industries
Ltd. Redemption proceeds will be determined at date of redemption based on
the change in (1) the value of the shares of Reliance Industries Ltd. and
(2) the exchange rate between the U.S. Dollar and Indian Rupee. Interest on
the notes is equal to the amount of dividends paid on the underlying shares
of Reliance Industries Ltd.
Abbreviations used in this statement:
GDRGlobal Depository Receipt.
HKDHong Kong Dollar.
SGDSingapore Dollar.
THBThai Baht.
OTCOver the Counter.
See accompanying notes to financial statements
29
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS CAPITAL FUND
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.8%
BASIC INDUSTRIES -- 7.9%
90,000 Cytec Industries*.................................... $ 3,982,500
150,000 Geon................................................. 3,440,625
50,000 Martin Marietta Materials............................ 2,250,000
125,000 OM Group............................................. 5,156,250
24,100 Vulcan Materials..................................... 2,571,169
------------
17,400,544
------------
CAPITAL GOODS -- 0.7%
40,000 Sealed Air*.......................................... 1,470,000
------------
CONSUMER CYCLICALS -- 9.8%
100,000 Champion Enterprises*................................ 2,937,500
100,000 Costco Companies*.................................... 6,306,250
75,000 Dura Automotive Systems*............................. 2,409,375
50,000 Federated Department Stores*......................... 2,690,621
160,000 Gerber Childrenswear*................................ 2,470,000
75,000 Star Buffet*......................................... 618,750
100,000 Tower Automotive*.................................... 4,287,500
------------
21,719,996
------------
CONSUMER NON-CYCLICALS -- 30.1%
75,000 Aurora Foods*........................................ 1,584,375
50,000 Cablevision Systems*................................. 4,175,000
75,000 Emmis Broadcasting, Class A*......................... 3,585,938
175,100 Food Lion, Class A................................... 1,593,750
750,000 Food Lion, Class B................................... 7,546,875
200,000 Hormel Foods......................................... 6,912,500
240,000 John B. Sanfilippo & Sons*........................... 1,170,000
30,000 Loews................................................ 2,613,750
84,900 Michael Foods........................................ 2,493,938
125,000 News Corporation--ADR*............................... 3,531,250
175,000 Philip Morris Companies.............................. 6,890,625
375,000 RJR Nabisco Holdings................................. 8,906,250
150,000 Tele-Communications TCI Ventures Group, Class A*..... 3,009,375
175,000 Tyson Foods, Class A................................. 3,795,313
275,000 U.S. Satellite Broadcasting*......................... 3,214,063
100,000 Viacom, Class B*..................................... 5,825,000
------------
66,848,002
------------
ENERGY -- 3.3%
20,000 Amerada Hess......................................... 1,086,250
125,000 Halter Marine Group*................................. 1,882,813
100,000 Nuevo Energy*........................................ 3,212,500
150,000 Paradigm Geophysical*................................ 1,054,680
------------
7,236,243
------------
FINANCIAL SERVICES -- 8.4%
75,000 Bank of New York..................................... 4,551,563
40,000 BankBoston........................................... 2,225,000
40,000 Fleet Financial Group................................ 3,340,000
60,000 Mercantile Bankshares................................ 2,088,750
</TABLE>
See accompanying notes to financial statements
30
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS CAPITAL FUND (continued)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- (CONTINUED)
75,000 Provident Companies.................................. $ 2,587,500
52,500 Travelers Group...................................... 3,182,813
30,000 Waddell & Reed Financial, Class A.................... 718,125
------------
18,693,751
------------
HEALTH CARE -- 3.8%
80,000 Centocor*............................................ 2,900,000
160,000 Combichem*........................................... 1,110,000
60,000 Wellpoint Health Networks*........................... 4,440,000
------------
8,450,000
------------
REAL ESTATE INVESTMENT TRUSTS -- 0.2%
20,000 Glenborough Realty Trust............................. 527,500
------------
TECHNOLOGY -- 15.3%
26,000 ADC Telecommunications*.............................. 949,811
85,000 Applied Materials*................................... 2,507,500
50,000 Applied Micro Circuits*.............................. 1,293,750
125,000 Aspect Telecommunications*........................... 3,421,875
125,000 Cabletron Systems*................................... 1,679,688
200,000 Integrated Process Equipment*........................ 2,250,000
25,000 International Business Machines...................... 2,870,313
50,000 LSI Logic*........................................... 1,153,125
175,000 Plantronics*......................................... 9,012,500
250,000 Seagate Technology*.................................. 5,953,125
50,000 Texas Instruments.................................... 2,915,625
------------
34,007,312
------------
TELECOMMUNICATIONS & UTILITIES -- 7.3%
100,000 Frontier............................................. 3,150,000
50,000 NTL*................................................. 2,675,000
300,000 Rogers Cantel Mobile Communications, Class B*........ 3,750,000
125,000 Williams Companies................................... 4,218,750
50,000 Worldcom*............................................ 2,421,875
------------
16,215,625
------------
TRANSPORTATION -- 1.0%
50,000 Union Pacific........................................ 2,206,250
------------
TOTAL COMMON STOCKS
(cost -- $164,322,996).............................. 194,775,223
------------
PREFERRED STOCKS -- 0.5%
CONSUMER CYCLICALS -- 0.5%
178,940 Hollinger International, Series B, 7.000%
(cost -- $1,220,475)................................ 1,168,156
------------
CONVERTIBLE PREFERRED STOCKS -- 3.7%
CONSUMER CYCLICALS -- 3.7%
175,000 Hollinger International 9.750%....................... 2,756,250
125,000 BTI Capital Trust 6.500%............................. 5,421,875
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost -- $8,528,444)................................ 8,178,125
------------
</TABLE>
See accompanying notes to financial statements
31
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS CAPITAL FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT DESCRIPTION VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
<CAPTION>
CONVERTIBLE CORPORATE BONDS -- 5.4%
<C> <S> <C>
CONSUMER CYCLICALS -- 5.4%
$8,500,000 Fine Host, 5.000%, due 11/01/04..................... $ 6,800,000
4,000,000 Hollinger, Zero Coupon, due 10/05/13................ 1,660,000
15,000,000 Sunbeam, Zero Coupon, due 03/25/18.................. 3,487,500
------------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost -- $10,824,308).............................. 11,947,500
------------
<CAPTION>
CONTRACTS
--------- PURCHASED OPTIONS* -- 0.1%
<C> <S> <C>
20,000 Nasdaq 100 Index Put (expiring July 1998, exercise
price $1,220)...................................... 62,500
10,000 S&P 500 Index Put (expiring July 1998, exercise
price $1,100)...................................... 65,000
------------
TOTAL PURCHASED OPTIONS
(cost -- $358,400)................................. 127,500
------------
TOTAL INVESTMENTS -- 97.5%
(cost -- $185,254,623)............................. 216,196,504
------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
REPURCHASE AGREEMENT -- 2.4%
$5,301,000 Repurchase Agreement, 5.650%, due 07/01/98, dated
06/30/98, with Merrill Lynch, Pierce, Fenner &
Smith, collateralized by $4,935,000 U.S. Treasury
Bonds, 8.750%, due 08/15/00, valued at $5,409,994;
proceeds: $5,301,832 (cost -- $5,301,000).......... 5,301,000
------------
Other assets in excess of liabilities -- 0.1%....... 278,626
------------
NET ASSETS -- 100.0%................................ $221,776,130
============
</TABLE>
* Non-income producing security.
Abbreviation used in this statement:
ADR American Depository Receipt.
See accompanying notes to financial statements
32
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS INVESTORS FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS -- 91.9%
BASIC INDUSTRIES -- 9.0%
445,000 Cytec Industries*...................................... $19,691,250
211,500 IMC Global............................................. 6,371,438
200,000 Martin Marietta Materials.............................. 9,000,000
420,000 OM Group............................................... 17,325,000
195,000 Unifi.................................................. 6,678,750
125,000 Union Camp............................................. 6,203,125
76,800 Vulcan Materials....................................... 8,193,600
-----------
73,463,163
-----------
CAPITAL GOODS -- 4.2%
160,000 AlliedSignal........................................... 7,100,000
195,800 Chicago Bridge & Iron.................................. 3,034,900
104,300 Cooper Industries...................................... 5,729,981
290,000 Tyco International..................................... 18,270,000
-----------
34,134,881
-----------
CONSUMER CYCLICALS -- 10.7%
120,000 Avon Products.......................................... 9,300,000
293,300 Champion Enterprises*.................................. 8,615,688
250,000 Costco Companies*...................................... 15,765,625
140,000 Federated Department Stores*........................... 7,533,750
141,000 Lear*.................................................. 7,235,063
162,600 Sears, Roebuck......................................... 9,928,763
230,000 Sherwin-Williams....................................... 7,618,750
351,500 Tower Automotive*...................................... 15,070,563
270,000 U.S. Industries........................................ 6,682,500
-----------
87,750,702
-----------
CONSUMER NON-CYCLICALS -- 13.8%
100,000 Cablevision Systems*................................... 8,350,000
823,500 Food Lion, Class A..................................... 8,749,688
75,000 Loews.................................................. 6,534,375
405,000 News Corporation--ADR*................................. 11,441,250
435,700 Philip Morris Companies................................ 17,155,688
307,000 RJR Nabisco Holdings................................... 7,291,250
712,070 Tele-Communications, TCI Ventures Group, Class A*...... 14,285,904
211,000 Tele-Communications, Liberty Media Group, Class A*..... 8,189,438
360,000 Tyson Foods, Class A................................... 7,807,500
390,900 Viacom, Class B*....................................... 22,769,925
-----------
112,575,018
-----------
ENERGY -- 8.3%
114,500 Amerada Hess*.......................................... 6,218,781
152,600 Mobil.................................................. 11,692,975
204,000 Royal Dutch Petroleum, 5 Guilder....................... 11,181,750
98,000 Schlumberger........................................... 6,694,625
400,000 Suncor................................................. 13,900,000
325,000 Talisman Energy*....................................... 9,465,625
133,557 TOTAL--ADR............................................. 8,731,289
-----------
67,885,045
-----------
FINANCIAL SERVICES -- 16.0%
85,600 American Express....................................... 9,758,400
70,300 Associates First Capital............................... 5,404,313
</TABLE>
See accompanying notes to financial statements
33
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS INVESTORS FUND (continued)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- (CONTINUED)
364,400 Bank of New York........................................ $22,114,525
19,000 BankAmerica............................................. 1,642,313
303,600 BankBoston.............................................. 16,887,750
127,800 Dime Bancorp............................................ 3,826,013
294,000 Federal Home Loan Mortgage.............................. 13,836,375
245,100 Nationwide Financial Services, Class A.................. 12,500,100
202,600 Provident Companies..................................... 6,989,700
265,050 SunAmerica.............................................. 15,223,809
334,027 Travelers Group......................................... 20,250,387
85,200 Waddell & Reed Financial, Class A....................... 2,039,475
-----------
130,473,160
-----------
HEALTH CARE -- 7.8%
220,000 Abbott Laboratories..................................... 8,992,500
185,000 American Home Products.................................. 9,573,750
561,000 HEALTHSOUTH............................................. 14,971,688
120,000 Johnson & Johnson....................................... 8,850,000
125,000 Warner-Lambert Company.................................. 8,671,875
174,100 Wellpoint Health Networks*.............................. 12,883,400
-----------
63,943,213
-----------
REAL ESTATE INVESTMENT TRUSTS -- 4.8%
235,000 Arden Realty Group...................................... 6,080,625
169,000 Brandywine Realty Trust................................. 3,781,369
225,000 Crescent Real Estate Equities........................... 7,565,625
234,800 Glenborough Realty Trust................................ 6,192,850
146,200 Mills................................................... 3,508,800
174,002 Patriot American Hospitality............................ 4,165,173
160,000 Starwood Hotels & Resorts............................... 7,730,000
-----------
39,024,442
-----------
TECHNOLOGY -- 9.2%
37,000 ADC Telecommunications*................................. 1,351,654
114,000 Applied Materials*...................................... 3,363,000
62,000 ASM Lithography Holdings*............................... 1,801,875
292,000 Aspect Telecommunications*.............................. 7,993,500
240,000 Cognizant............................................... 15,120,000
90,000 Intel................................................... 6,671,250
120,000 International Business Machines......................... 13,777,500
113,200 Plantronics*............................................ 5,829,800
110,000 Quantum................................................. 2,282,500
292,500 Seagate Technology*..................................... 6,965,156
180,000 Texas Instruments....................................... 10,496,250
-----------
75,652,485
-----------
TELECOMMUNICATIONS & UTILITIES -- 4.7%
258,000 Bell Atlantic........................................... 11,771,250
261,800 Frontier................................................ 8,246,700
236,400 Williams Companies...................................... 7,978,500
215,000 Worldcom*............................................... 10,414,063
-----------
38,410,513
-----------
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS INVESTORS FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- -------------------------------------------------------------------------------
TRANSPORTATION -- 3.4%
126,500 Canadian National Railway........................... $ 6,720,313
612,500 Canadian Pacific*................................... 17,379,688
86,000 Union Pacific....................................... 3,794,750
------------
27,894,751
------------
TOTAL COMMON STOCKS
(cost -- $501,885,991)............................. 751,207,373
------------
CONVERTIBLE PREFERRED STOCKS -- 1.5%
CAPITAL GOODS -- 0.8%
150,000 Sealed Air 4.000%................................... 6,300,000
------------
TRANSPORTATION -- 0.7%
125,000 Union Pacific Capital Trust 6.250%.................. 5,765,625
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost -- $14,900,167).............................. 12,065,625
------------
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- ------
CONVERTIBLE CORPORATE BONDS -- 0.4%
CONSUMER CYCLICALS -- 0.4%
$2,000,000 Federated Department Stores, 5.000%, due 10/01/03
(cost -- $2,000,000)............................... 3,188,750
------------
TOTAL INVESTMENTS -- 93.8%
(cost -- $518,786,158).............................. 766,461,748
------------
REPURCHASE AGREEMENTS -- 5.4%
21,696,000 Repurchase Agreement, 5.480%, due 07/01/98, dated
06/30/98, with J.P. Morgan Securities,
collateralized by $22,298,000 U.S. Treasury Bonds,
5.375%, due 06/30/03, valued at $22,130,765;
proceeds: $21,699,303.............................. 21,696,000
23,000,000 Repurchase Agreement, 5.650%, due 07/01/98, dated
06/30/98, with Merrill Lynch, Pierce, Fenner &
Smith, collateralized by $21,405,000 U.S. Treasury
Bonds, 8.750%, due 08/15/00, valued at $23,465,231;
proceeds: $23,003,610.............................. 23,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(cost -- $44,696,000).............................. 44,696,000
------------
Other assets in excess of liabilities -- 0.8%....... 6,161,788
------------
NET ASSETS -- 100.0%................................ $817,319,536
============
</TABLE>
* Non-income producing security.
Abbreviation used in this statement:
ADRAmerican Depository Receipt.
See accompanying notes to financial statements
35
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
COMMON STOCKS -- 45.2%
BASIC INDUSTRIES -- 5.0%
22,000 Aluminum Company of America......................... $ 1,450,625
75,000 Geon................................................ 1,720,303
60,000 Lyondell Petrochemical.............................. 1,826,250
10,000 Monsanto............................................ 558,750
16,000 Nalco Chemical...................................... 562,000
20,000 Union Camp.......................................... 992,500
15,800 Vulcan Materials.................................... 1,685,663
20,000 Weyerhauser......................................... 923,750
26,000 Willamette Industries............................... 832,000
------------
10,551,841
------------
CAPITAL GOODS -- 1.2%
15,000 Fluor............................................... 765,000
43,000 Stone & Webster..................................... 1,703,875
------------
2,468,875
------------
CONSUMER CYCLICALS -- 4.1%
30,000 Chrysler............................................ 1,691,250
20,726 Cooper Industries................................... 1,138,635
19,000 Eastman Kodak....................................... 1,388,188
22,100 May Department Stores............................... 1,447,550
48,000 Sears, Roebuck...................................... 2,931,000
------------
8,596,623
------------
CONSUMER NON-CYCLICALS -- 4.2%
35,000 Avon Products....................................... 2,712,500
67,000 Food Lion, Class A.................................. 711,875
83,000 Food Lion, Class B.................................. 835,188
50,000 Hormel Foods........................................ 1,728,125
30,000 Philip Morris Companies............................. 1,181,250
15,000 Ralston-Purina...................................... 1,752,188
------------
8,921,126
------------
ENERGY -- 6.5%
25,000 Amerada Hess........................................ 1,357,813
23,000 Amoco............................................... 957,375
50,000 Dresser Industries.................................. 2,203,125
23,000 Exxon............................................... 1,640,188
14,000 Mobil............................................... 1,072,750
16,000 Royal Dutch Petroleum, 5 Guilder.................... 877,000
20,000 Schlumberger........................................ 1,366,250
95,000 Suncor.............................................. 3,301,250
12,000 Texaco.............................................. 716,250
------------
13,492,001
------------
</TABLE>
See accompanying notes to financial statements
36
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
SHARES DESCRIPTION VALUE
<C> <S> <C>
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 4.5%
15,000 Allstate............................................ $ 1,373,438
20,000 Bay View Capital.................................... 635,000
18,000 Chubb............................................... 1,446,750
30,000 Cigna............................................... 2,070,000
15,000 Fleet Financial Group............................... 1,252,500
23,000 Marsh & McLennan.................................... 1,390,063
14,300 Merrill Lynch....................................... 450,450
5,700 Nationwide Financial Services, Class A.............. 290,700
20,300 Waddell & Reed Financial, Class A................... 485,931
------------
9,394,832
------------
HEALTH CARE -- 1.6%
42,000 American Home Products.............................. 2,173,500
26,000 Bausch & Lomb....................................... 1,303,250
------------
3,476,750
------------
REAL ESTATE INVESTMENT TRUSTS -- 6.9%
67,500 Arden Realty Group.................................. 1,746,563
35,000 Bedford Property Investors.......................... 638,750
55,000 Brandywine Realty Trust............................. 1,230,625
28,600 Crescent Real Estate Equities....................... 961,675
45,000 Duke Realty Investments............................. 1,063,125
70,000 Excel Realty Trust.................................. 2,016,875
65,000 Glenborough Realty Trust............................ 1,714,375
31,300 JDN Realty.......................................... 997,688
75,000 Mid Atlantic Realty Trust........................... 923,438
30,000 Patriot American Hospitality........................ 718,125
18,000 Prentiss Properties Trust........................... 437,625
35,000 Reckson Associates Realty........................... 826,875
5,600 Reckson Service Industries*......................... 19,425
35,000 Sun Communities..................................... 1,159,375
------------
14,454,539
------------
TECHNOLOGY -- 0.8%
36,000 Pitney Bowes........................................ 1,732,500
------------
TELECOMMUNICATIONS & UTILITIES -- 7.2%
80,000 BCE................................................. 3,415,000
40,000 Bell Atlantic....................................... 1,825,000
40,000 Edison International................................ 1,182,500
60,000 Frontier............................................ 1,890,000
28,000 GTE................................................. 1,557,500
45,000 Houston Industries.................................. 1,389,375
50,000 SBC Communications.................................. 2,000,000
58,000 Williams Companies.................................. 1,957,500
------------
15,216,875
------------
TRANSPORTATION -- 3.2%
70,000 Canadian National Railway........................... 3,718,750
25,000 Canadian Pacific.................................... 709,375
50,000 Union Pacific....................................... 2,206,250
------------
6,634,375
------------
TOTAL COMMON STOCKS
(cost -- $80,230,544).............................. 94,940,337
------------
</TABLE>
See accompanying notes to financial statements
37
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
INTEREST MATURITY
SHARES DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS -- 3.3%
CAPITAL GOODS -- 0.1%
4,000 Sealed Air 4.000%................................... $ 168,000
-----------
CONSUMER CYCLICALS -- 0.6%
15,000 BTI Capital Trust 6.500%............................ 650,625
25,000 Hollinger International 9.750%...................... 393,750
3,000 Host Marriott 6.750%................................ 158,625
-----------
1,203,000
-----------
CONSUMER NON-CYCLICALS --
0.3%
10,000 Ralston Purina 7.000%............................... 635,000
-----------
ENERGY -- 0.3%
15,000 Chesapeake Energy 7.000%............................ 635,625
-----------
FINANCIAL SERVICES -- 0.9%
10,000 Finova Finance Trust 5.500%......................... 785,000
12,500 Fleetwood Capital Trust 6.000%...................... 662,500
5,000 Morgan Stanley Amat Reset Performance $2.37......... 168,750
12,000 Sun Financing 7.000%................................ 272,250
-----------
1,888,500
-----------
MEDIA -- 0.3%
10,000 Cablevision Systems 8.500%.......................... 639,375
-----------
TECHNOLOGY -- 0.1%
12,000 Sensormatic Electrictronics 6.500%.................. 289,500
-----------
TELECOMMUNICATIONS &
UTILITIES -- 0.4%
20,000 Skytel Communications $2.25......................... 710,000
-----------
TRANSPORTATION -- 0.3%
15,000 Union Pacific Capital Trust 6.250%.................. 691,875
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost -- $6,455,298)............................... 6,860,875
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C> <C> <C>
CORPORATE BONDS -- 21.5%
BASIC INDUSTRIES -- 2.3%
$ 200,000 Berry Plastics............... 12.250% 04/15/04 218,000
125,000 Commonwealth Aluminum........ 10.750 10/01/06 128,750
200,000 Doman Industries Limited..... 8.750 03/15/04 195,500
250,000 Envirosource................. 9.750 06/15/03 252,500
125,000 Indesco International........ 9.750 04/15/08 124,375
250,000 Millar Western Forest........ 9.875 05/15/08 245,000
575,000 Pohang Iron & Steel.......... 7.500 08/01/02 496,886
1,200,000 Praxair...................... 6.150 04/15/03 1,200,492
250,000 P&L Coal Holdings............ 9.625 05/15/08 258,125
200,000 Radnor Holdings.............. 10.000 12/01/03 209,000
910,000 Raytheon..................... 5.950 03/15/01 906,615
100,000 Renco Metals................. 11.500 07/01/03 106,000
250,000 Stone Container.............. 12.250 04/01/02 258,750
150,000 Tekni-Plex................... 11.250 04/01/07 165,750
-----------
4,765,743
-----------
</TABLE>
See accompanying notes to financial statements
38
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 1.1%
$ 250,000 Cole National Group.......... 8.625% 08/15/07 $ 252,500
100,000 Collins & Aikman Flooring.... 10.000 01/15/07 104,250
250,000 Prime Hospitality............ 9.750 04/01/07 265,625
1,700,000 Staples...................... 7.125 08/15/07 1,760,639
-----------
2,383,014
-----------
CONSUMER NON - CYCLICALS --
2.5%
350,000 American Safety Razor........ 9.875 08/01/05 374,500
250,000 Ameriserve Food.............. 10.125 07/15/07 258,750
250,000 B&G Foods.................... 9.625 08/01/07 253,750
100,000 Carr-Gottstein Foods......... 12.000 11/15/05 111,000
200,000 CFP Holdings................. 11.625 01/15/04 188,500
250,000 Dade International........... 11.125 05/01/06 282,500
250,000 Delta Beverage............... 9.750 12/15/03 261,875
250,000 Ekco Group................... 9.250 04/01/06 260,625
125,000 Fisher Scientific
International............... 9.000 02/01/08 124,375
125,000 French Fragrances............ 10.375 05/15/07 133,125
100,000 Fresenius Medical Care....... 9.000 12/01/06 103,250
250,000 Grand Casinos................ 9.000 10/15/04 271,250
200,000 Hines Horticulture........... 11.750 10/15/05 220,000
150,000 Integrated Health Services... 9.500 09/15/07 157,125
250,000 Jitney-Jungle Stores......... 12.000 03/01/06 281,250
250,000 North Altlantic Trading...... 11.000 06/15/04 251,250
400,000 Revlon Worldwide (a)......... 10.906-11.591 03/15/01 311,000
250,000 Ridell Sports................ 10.500 07/15/07 253,125
250,000 SC International Services.... 9.250 09/01/07 260,000
100,000 Selmer....................... 11.000 05/15/05 109,000
250,000 Shop Vac..................... 10.625 09/01/03 276,250
200,000 Stroh Brewery................ 11.100 07/01/06 121,250
375,000 Vencor....................... 9.875 05/01/05 366,563
-----------
5,230,313
-----------
DATA TECHNOLOGY/INFORMATION
SERVICES -- 1.4%
250,000 Decisionone.................. 9.750 08/01/07 242,500
1,725,000 First Data................... 6.375 12/15/07 1,755,326
250,000 Unisys....................... 7.875 04/01/08 255,000
750,000 Xilinx....................... 5.250 11/01/02 701,250
-----------
2,954,076
-----------
ENERGY -- 1.9%
250,000 Bellwether Exploration....... 10.875 04/01/07 263,750
200,000 Benton Oil & Gas............. 11.625 05/01/03 213,000
150,000 Clark Refining & Marketing... 8.875 11/15/07 150,375
200,000 Cliffs Drilling.............. 10.250 05/15/03 214,000
250,000 Dailey International......... 9.500 02/15/08 244,375
250,000 Dawson Product Services...... 9.375 02/01/07 252,500
850,000 Empresa Electric............. 7.300 05/01/03 828,716
200,000 National Energy.............. 10.750 11/01/06 180,000
1,350,000 Norsk Hydro.................. 6.700 01/15/18 1,377,500
200,000 Transamerican Energy (Zero
Coupon until 06/15/99,
13.000% thereafter) (a)..... 13.000 06/15/02 164,000
-----------
3,888,216
-----------
</TABLE>
See accompanying notes to financial statements
39
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
FINANCIAL/LEASING -- 5.5%
$ 500,000 Banc One..................... 7.600% 05/01/07 $ 542,550
1,185,419 Banc One Auto Grantor Trust
(c)......................... 6.290 07/20/04 1,192,365
2,275,000 Ford Credit Auto Owner Trust
(c)......................... 5.850 10/15/01 2,272,156
785,264 Green Tree Financial......... 7.070 02/15/16 812,748
275,000 Maylayan Bank................ 7.125 09/15/05 232,647
1,875,000 Merrill Lynch................ 6.000 02/12/03 1,867,725
2,800,000 Nationsbank Credit Card
Master Trust (c)............ 6.450 04/15/03 2,831,500
1,350,000 Sears Roebuck Acceptance..... 7.000 06/15/07 1,408,685
250,000 Williams Scotsman............ 9.875 06/01/07 260,000
-----------
11,420,376
-----------
HOUSING RELATED -- 0.2%
250,000 CB Richard Ellis............. 8.875 06/01/06 248,125
250,000 Nortek....................... 9.125 09/01/07 253,750
-----------
501,875
-----------
MANUFACTURING -- 1.8%
100,000 Alvey Systems................ 11.375 01/31/03 107,500
250,000 Axiohm Transaction Solution.. 9.750 10/01/07 254,375
250,000 BE Aerospace................. 8.000 03/01/08 249,375
250,000 Burke Industries............. 10.000 08/15/07 252,500
1,300,000 Dana......................... 6.500 03/15/08 1,320,345
250,000 High Voltage Engineering..... 10.500 08/15/04 258,750
250,000 Insilco...................... 10.250 08/15/07 257,500
250,000 International Knife & Saw.... 11.375 11/15/06 266,250
250,000 Navistar International....... 8.000 02/01/08 252,500
200,000 Packard Bioscience........... 9.375 03/01/07 194,000
250,000 Polymer Group................ 9.000 07/01/07 254,063
250,000 Venture Holding Trust........ 9.500 07/01/05 254,375
-----------
3,921,533
-----------
MEDIA -- 3.6%
200,000 Adelphia Communications...... 10.500 07/15/04 218,500
200,000 American Media Operation..... 11.625 11/15/04 216,000
1,825,000 Belo (A.H.).................. 7.250 09/15/27 1,934,683
500,000 Century Communications (a)... 8.592-8.878 01/15/08 226,875
250,000 Cinemark USA................. 9.625 08/01/08 258,750
250,000 Comcast Cellular............. 9.500 05/01/07 259,375
250,000 Diamond Cable (Zero Coupon
until 12/15/00, 11.750%
thereafter) (a)............. 10.594-11.750 12/15/05 207,500
250,000 Falcon Holding Group......... 8.375 04/15/10 247,500
250,000 Granite Broadcasting......... 8.875 05/15/08 252,813
1,700,000 GTE.......................... 6.940 04/15/28 1,713,260
1,000,000 Hollinger (a)................ 5.928-6.637 10/05/13 415,000
125,000 ICG Holdings (Zero Coupon
until 09/15/00, 13.500%
thereafter) (a)............. 12.725 09/15/05 106,875
250,000 Intermedia Communication..... 8.600 06/01/08 251,875
400,000 International CableTel (Zero
Coupon until 02/01/01,
11.500% thereafter) (a)..... 9.866-11.804 02/01/06 327,000
375,000 LIN Holdings (a)............. 9.915 03/01/08 251,250
200,000 Marcus Cable (Zero Coupon
until 06/15/00, 14.125%
thereafter) (a)............. 12.642-12.921 12/15/05 186,000
250,000 Rogers Communications........ 8.875 07/15/07 251,875
200,000 SFX Broadcasting............. 10.750 05/15/06 220,500
-----------
7,545,631
-----------
</TABLE>
See accompanying notes to financial statements
40
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
SERVICES/OTHER -- 0.8%
$ 250,000 Allied Waste(Zero Coupon until 06/01/02, 11.300%
thereafter) (a)...................................... 10.742% 06/01/07 $ 183,750
250,000 American Eco.......................................... 9.625 05/15/08 253,750
100,000 Borg-Warner........................................... 9.125 05/01/03 104,250
200,000 CSC Holdings.......................................... 10.500 05/15/16 233,000
250,000 Iron Mountain......................................... 10.125 10/01/06 271,250
125,000 LES................................................... 9.250 06/01/08 126,875
250,000 Loomis Fargo.......................................... 10.000 01/15/04 250,000
200,000 Norcal Waste Systems*................................. 13.500 11/15/05 234,000
-----------
1,656,875
-----------
TRANSPORTATION -- 0.4%
250,000 Enterprises Shipholding............................... 8.875 05/01/08 248,125
200,000 Holt Group............................................ 9.750 01/15/06 201,000
200,000 Ryder TRS............................................. 10.000 12/01/06 232,000
400,000 TFM(Zero Coupon until 06/15/02, 11.750% thereafter)
(a).................................................. 11.398 06/15/09 251,000
-----------
932,125
-----------
TOTAL CORPORATE BONDS
(cost -- $44,790,143)................................ 45,199,777
-----------
CONVERTIBLE CORPORATE
BONDS -- 7.2%
CONSUMER CYCLICALS -- 0.9%
1,000,000 Costco Companies (a).................................. 1.414 - 3.500 08/19/17 766,250
500,000 Fine Host............................................. 5.000 11/01/04 400,000
750,000 Tower Automotive...................................... 5.000 08/01/04 775,876
-----------
1,942,126
-----------
CONSUMER NON-CYCLICALS -- 0.9%
100,000 Alberto - Culver...................................... 5.500 06/30/05 157,875
1,750,000 AMF Bowling (a)....................................... 7.000 - 7.313 05/12/18 455,000
1,500,000 First Boston/RJR Nabisco.............................. 1.000 04/02/05 1,282,500
-----------
1,895,375
-----------
FINANCIAL/LEASING -- 0.4%
750,000 Xerox Credit.......................................... 2.875 07/01/02 860,625
-----------
HEALTH CARE -- 0.6%
750,000 Centocor.............................................. 4.750 02/15/05 749,063
600,000 HEALTHSOUTH........................................... 3.250 04/01/03 599,250
-----------
1,348,313
-----------
MANUFACTURING -- 0.3%
750,000 Mark IV Industries.................................... 4.750 11/01/04 694,688
-----------
MEDIA -- 0.3%
600,000 Clear Channel Communications.......................... 2.625 04/01/03 643,500
-----------
</TABLE>
See accompanying notes to financial statements
41
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (continued)
<TABLE>
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------
TECHNOLOGY -- 2.1%
$ 750,000 Cypress Semiconductor............. 6.000% 10/01/02 $ 660,000
750,000 Emcor Group....................... 5.750 04/01/05 723,750
900,000 Integrated Process Equipment...... 6.250 09/15/04 726,000
850,000 Micron Technology................. 7.000 07/01/04 796,875
750,000 Quantum........................... 7.000 08/01/04 706,875
600,000 VLSI Technology................... 8.250 10/01/05 589,500
-----------
4,203,000
-----------
TELECOMMUNICATIONS & UTILITIES --
1.4%
750,000 Bell Atlantic..................... 5.750 04/01/03 769,688
750,000 DSC Communications................ 7.000 08/01/04 790,781
750,000 Synoptics Communications.......... 5.250 05/15/03 762,188
750,000 Tele-Communications............... 4.500 02/15/06 674,063
-----------
2,996,720
-----------
TRANSPORTATION -- 0.3%
750,000 Halter Marine Group............... 4.500 09/15/04 608,438
-----------
TOTAL CONVERTIBLE CORPORATE BONDS
(cost -- $15,218,473)............ 15,192,785
-----------
U.S. GOVERNMENT & AGENCY -- 15.7%
1,156,521 Federal Home Loan Mortgage
Corporation...................... 8.000 07/01/20 1,212,277
516,979 Federal Home Loan Mortgage
Corporation...................... 6.500 03/01/26 516,286
381,752 Federal Home Loan Mortgage
Corporation...................... 6.500 05/01/26 381,569
2,500,000 Federal Home Loan Mortgage
Corporation Gold (b)............. 6.500 ** 2,492,969
2,425,000 Federal National Mortgage
Association (b).................. 7.000 ** 2,459,859
36,531 Federal National Mortgage
Association...................... 6.500 10/01/10 36,890
263,836 Federal National Mortgage
Association...................... 6.500 10/01/11 265,648
1,885,000 Federal National Mortgage
Association (b).................. 6.500 ** 1,896,192
83,765 Federal National Mortgage
Association...................... 7.500 08/01/23 85,949
1,294,507 Federal National Mortgage
Association...................... 9.000 01/01/24 1,379,439
735,038 Federal National Mortgage
Association...................... 7.574 11/01/24 756,972
2,475,000 Federal National Mortgage
Association (b).................. 8.000 ** 2,561,625
74,008 Federal National Mortgage
Association...................... 7.000 09/01/25 75,088
76,885 Federal National Mortgage
Association...................... 6.500 12/01/25 76,752
260,045 Federal National Mortgage
Association...................... 7.000 03/01/26 264,024
461,204 Federal National Mortgage
Association...................... 6.500 06/01/26 460,406
3,050,000 Federal National Mortgage
Association (b).................. 7.500 ** 3,129,109
3,260,000 Federal National Mortgage
Association (b).................. 6.500 ** 3,246,756
429,498 Federal National Mortgage
Association...................... 7.000 03/01/27 436,071
639,722 Government National Mortgage
Association...................... 7.000 09/20/22 654,717
68,427 Government National Mortgage
Association...................... 7.500 01/15/23 70,423
167,403 Government National Mortgage
Association...................... 7.500 03/15/26 172,164
412,286 Government National Mortgage
Association...................... 7.500 03/15/27 423,925
800,000 U.S. Treasury Note (c)............ 6.500 10/15/06 849,496
555,000 U.S. Treasury Note (c)............ 6.625 05/15/07 596,103
5,025,000 U.S. Treasury Note (c)............ 6.125 08/15/07 5,228,362
1,160,000 U.S. Treasury Note (d)............ 5.625 05/15/08 1,175,764
1,850,000 U.S. Treasury Note (d)............ 6.125 11/15/27 1,982,386
-----------
TOTAL U.S. GOVERNMENT & AGENCY
(cost -- $32,430,162)............ 32,887,221
-----------
</TABLE>
See accompanying notes to financial statements
42
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS TOTAL RETURN FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES --
1.2%
FINANCIAL/LEASING -- 1.2%
$ 2,500,000 Contimortgage Home Equity Loan
Trust (c)
(cost -- $2,499,640).......... 6.130% 03/15/13 $ 2,505,078
------------
TOTAL INVESTMENTS -- 94.1%
(cost -- $181,624,260)........ 197,586,073
------------
REPURCHASE AGREEMENT -- 15.6%
32,973,000 Repurchase Agreement dated
06/30/98, with J.P. Morgan
Securities, collateralized by
$33,887,000 U.S. Treasury
Bonds, 5.375%, due 06/30/03,
valued at $33,632,848;
proceeds: $32,978,019 (cost --
$32,973,000) ................ 5.480 07/01/98 32,973,000
------------
Liabilities in excess of other
assets -- (9.7%).............. (20,481,708)
------------
NET ASSETS -- 100.0%........... $210,077,365
============
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate or
step coupon rate.
** To be announced.
(a) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(b) Mortgage dollar roll. See Note 1.
(c) All or part of the security is segregated as collateral for mortgage dollar
rolls.
(d) All or part of the security is subject to repurchase under reverse repur-
chase agreements as of June 30, 1998.
Abbreviation used in this statement:
ADRAmerican Depository Receipt.
See accompanying notes to financial statements
43
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 74.0%
BASIC INDUSTRIES -- 9.6%
$1,500,000 AEI Holding..................... 10.000% 11/15/07 $ 1,492,500
3,000,000 Asia Pulp & Paper............... 12.000 12/29/49 2,070,000
500,000 Asia Pulp & Paper International
Finance........................ 11.750 10/01/05 440,000
1,500,000 Berry Plastics.................. 12.250 04/15/04 1,635,000
2,500,000 Commonwealth Aluminum........... 10.750 10/01/06 2,575,000
1,500,000 Doman Industries Limited........ 8.750 03/15/04 1,466,250
4,000,000 Envirosource.................... 9.750 06/15/03 4,037,500
2,000,000 Glencore Nickel Property........ 9.000 12/01/14 1,920,000
2,000,000 Huntsman Packaging.............. 9.125 10/01/07 2,040,000
5,000,000 Indesco International........... 9.750 04/15/08 4,975,000
3,000,000 Murrin Murrin................... 9.375 08/31/07 2,940,000
6,000,000 PCI Chemicals (f)............... 9.250 10/15/07 5,940,000
3,000,000 Pindo Deli Fin Mauritius........ 10.750 10/01/07 2,107,500
2,500,000 Plastic Containers.............. 10.000 12/15/06 2,675,000
2,250,000 Polytama (a).................... 11.250 06/15/07 953,438
2,000,000 P&L Coal Holdings............... 9.625 05/15/08 2,065,000
4,000,000 Radnor Holdings................. 10.000 12/01/03 4,180,000
1,000,000 Renco Metals.................... 11.500 07/01/03 1,060,000
2,000,000 Stone Container................. 12.250 04/01/02 2,070,000
4,000,000 Tekni-Plex...................... 11.250 04/01/07 4,420,000
4,300,000 Tembec Finance.................. 9.875 09/30/05 4,536,500
3,500,000 Texas Petrochemical............. 11.125 07/01/06 3,815,000
5,000,000 Tjiwi Kimia Financial........... 10.000 08/01/04 3,562,500
1,500,000 Wheeling-Pittsburgh............. 9.250 11/15/07 1,530,000
------------
64,506,188
------------
CONSUMER CYCLICALS -- 4.2%
3,800,000 Advance Holdings (Zero Coupon
until 04/15/03, 12.875%
thereafter) (b)................ 12.875 04/15/09 2,261,000
3,300,000 Cole National Group............. 9.875 12/31/06 3,564,000
1,000,000 Cole National Group............. 8.625 08/15/07 1,010,000
5,000,000 Collins & Aikman Flooring (f)... 10.000 01/15/07 5,212,500
2,000,000 Hills Stores.................... 12.500 07/01/03 1,985,000
2,500,000 Leslie's Poolmart............... 10.375 07/15/04 2,662,500
2,000,000 Maxim Group..................... 9.250 10/15/07 2,055,000
5,000,000 Musicland Group................. 9.875 03/15/08 4,975,000
3,250,000 Polysindo International
Finance........................ 9.375 07/30/07 1,105,000
3,000,000 Prime Hospitality............... 9.750 04/01/07 3,187,500
------------
28,017,500
------------
</TABLE>
See accompanying notes to financial statements
44
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS --
14.9%
$ 2,375,000 Aurora Foods............... 8.750% 07/01/08 $ 2,404,688
3,500,000 B&G Foods.................. 9.625 08/01/07 3,552,500
1,000,000 Carr-Gottstein Foods....... 12.000 11/15/05 1,110,000
2,000,000 CFP Holdings............... 11.625 01/15/04 1,885,000
1,000,000 Dade International......... 11.125 05/01/06 1,130,000
2,000,000 Delta Beverage............. 9.750 12/15/03 2,095,000
1,500,000 Doane Products............. 10.625 03/01/06 1,635,000
1,000,000 Ekco Group................. 9.250 04/01/06 1,042,500
1,150,000 Fleming Companies.......... 10.500 12/01/04 1,196,000
1,000,000 Fleming Companies.......... 10.625 07/31/07 1,055,000
1,000,000 Fresenius Medical Care..... 9.000 12/01/06 1,032,500
1,500,000 Graham-Field Health
Products.................. 9.750 08/15/07 1,395,000
3,000,000 Grand Casinos.............. 9.000 10/15/04 3,255,000
2,000,000 Hines Horticulture......... 11.750 10/15/05 2,200,000
1,300,000 IMED....................... 9.750 12/01/06 1,339,000
4,000,000 Imperial Holly............. 9.750 12/15/07 4,030,000
3,500,000 Integrated Health
Services.................. 9.500 09/15/07 3,666,250
1,500,000 Integrated Health
Services.................. 9.250 01/15/08 1,558,125
5,000,000 International Semi-
Technology (Zero Coupon
until 08/15/00, 11.500%
thereafter) (b)........... 14.977 08/15/03 1,500,000
2,000,000 Iowa Select Farms.......... 10.750 12/01/05 2,020,000
3,500,000 Jafra Cosmetics
International............. 11.750 05/01/08 3,517,500
1,500,000 Jitney-Jungle Stores....... 12.000 03/01/06 1,687,500
4,000,000 Kinetic Concepts........... 9.625 11/01/07 4,060,000
1,000,000 Maxxim Medical............. 10.500 08/01/06 1,102,500
4,500,000 Moll Industries............ 10.500 07/01/08 4,612,500
7,000,000 Nebco Evans Holding (Zero
Coupon until 07/15/02,
12.375% thereafter) (b)... 10.875-11.041 07/15/07 4,760,000
4,000,000 North Atlantic Trading..... 11.000 06/15/04 4,020,000
1,000,000 Packaged Ice............... 9.750 02/01/05 1,020,000
6,000,000 Revlon Worldwide (b)....... 10.750-11.566 03/15/01 4,665,000
2,000,000 SC International Services.. 9.250 09/01/07 2,080,000
2,500,000 Sealy Mattress............. 9.875 12/15/07 2,650,000
2,405,000 Selmer..................... 11.000 05/15/05 2,621,450
2,000,000 Stroh Brewery.............. 11.100 07/01/06 1,212,500
3,000,000 Sun International Hotels... 8.625 12/15/07 3,090,000
32,500,000 Sunbeam Corporation (b).... 7.355-7.613 03/25/18 7,556,250
4,000,000 Universal Hospital
Services.................. 10.250 03/01/08 4,000,000
5,000,000 Vencor (f)................. 9.875 05/01/05 4,887,500
2,750,000 Windy Hill Pet............. 9.750 05/15/07 2,887,500
------------
99,531,763
------------
</TABLE>
See accompanying notes to financial statements
45
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
DATA TECHNOLOGY/INFORMATION
SERVICES -- 2.3%
$ 1,500,000 Decisionone................ 9.750% 08/01/07 $ 1,455,000
4,000,000 Decisionone (Zero Coupon
until 08/01/05, 11.500%
thereafter) (b)........... 10.092-11.500 08/01/08 2,440,000
1,500,000 HADCO...................... 9.500 06/15/08 1,500,000
5,750,000 Jordan Telecom Products
(Zero Coupon until
08/01/00, 11.750%
thereafter) (b)........... 11.750 08/01/07 4,743,750
4,500,000 Unisys (f)................. 11.750 10/15/04 5,197,500
------------
15,336,250
------------
ENERGY -- 8.4%
3,000,000 Bellwether Exploration..... 10.875 04/01/07 3,165,000
3,000,000 Benton Oil & Gas........... 11.625 05/01/03 3,195,000
1,500,000 Clark Refining &
Marketing................. 8.875 11/15/07 1,503,750
1,500,000 Cliffs Drilling............ 10.250 05/15/03 1,605,000
3,000,000 Companhia Energetica Sao
Paul*..................... 9.125 06/26/07 2,707,500
5,000,000 Costilla Energy............ 10.250 10/01/06 5,055,000
1,000,000 Cross Timbers Oil.......... 8.750 11/01/09 1,005,000
2,000,000 Cross Timbers Oil, Series
B......................... 9.250 04/01/07 2,060,000
3,000,000 Dailey International....... 9.500 02/15/08 2,932,500
1,000,000 Dawson Product Services.... 9.375 02/01/07 1,010,000
1,000,000 DI Industries.............. 8.875 07/01/07 960,000
2,250,000 Hvide Marine............... 8.375 02/15/08 2,160,000
2,000,000 ICO........................ 10.375 06/01/07 2,050,000
3,000,000 Lomak Petroleum............ 8.750 01/15/07 2,955,000
1,000,000 Magnum Hunter Resources.... 10.000 06/01/07 1,020,000
2,000,000 National Energy............ 10.750 11/01/06 1,800,000
2,000,000 Northern Offshore Asia..... 10.000 05/15/05 1,920,000
3,500,000 Parker Drilling............ 9.750 11/15/06 3,576,250
4,000,000 RAM Energy................. 11.500 02/15/08 4,060,000
1,000,000 Transamerican Energy....... 11.500 06/15/02 920,000
5,000,000 Transamerican Energy (Zero
Coupon until 6/15/02,
13.000% thereafter) (b)... 13.000-18.293 06/15/02 4,100,000
3,000,000 Trico Marine............... 8.500 08/01/05 2,932,500
3,500,000 United Refining............ 10.750 06/15/07 3,465,000
------------
56,157,500
------------
FINANCIAL/LEASING -- 2.2%
500,000 Airplanes Pass Through
Trust..................... 10.875 03/15/19 547,500
1,000,000 ATC Group Services......... 12.000 01/15/08 925,000
1,500,000 DVI........................ 9.875 02/01/04 1,590,000
1,000,000 Imperial Credit
Industries................ 9.875 01/15/07 995,000
5,000,000 Morgan Stanley Aircraft
Finance (f)............... 8.700 03/15/23 4,962,500
1,250,000 Nationwide Credit.......... 10.250 01/15/08 1,262,500
4,000,000 Williams Scotsman.......... 9.875 06/01/07 4,160,000
------------
14,442,500
------------
</TABLE>
See accompanying notes to financial statements
46
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
HOUSING RELATED -- 0.9%
$ 1,000,000 American Architecture........... 11.750% 12/01/07 $ 1,030,000
5,000,000 Nortek (f)...................... 9.125 09/01/07 5,075,000
------------
6,105,000
------------
MANUFACTURING -- 8.8%
1,250,000 Alvey Systems................... 11.375 01/31/03 1,343,750
2,500,000 Aqua Chemicals.................. 11.250 07/01/08 2,543,750
5,000,000 Axiohm Transaction Solution
(f)............................ 9.750 10/01/07 5,087,500
4,000,000 Burke Industries................ 10.000 08/15/07 4,040,000
4,001,478 Clark-Schwebel.................. 12.500 07/15/07 4,261,570
3,250,000 Foamex.......................... 9.875 06/15/07 3,575,000
1,000,000 Furon........................... 8.125 03/01/08 1,002,500
5,000,000 High Voltage Engineering (f).... 10.500 08/15/04 5,175,000
4,500,000 Insilco......................... 10.250 08/15/07 4,635,000
2,250,000 International Knife & Saw....... 11.375 11/15/06 2,396,250
1,750,000 International Utility
Structures..................... 10.750 02/01/08 1,793,750
2,000,000 JH Heafner...................... 10.000 05/15/08 2,045,000
2,010,483 Jordan Industries (Zero Coupon
until 04/01/02, 11.750%
thereafter) (b)................ 11.750 04/01/09 1,296,762
2,000,000 L-3 Communications.............. 10.375 05/01/07 2,220,000
1,000,000 Neenah.......................... 11.125 05/01/07 1,095,000
2,000,000 Packard Bioscience.............. 9.375 03/01/07 1,940,000
4,000,000 Polymer Group................... 9.000 07/01/07 4,065,000
3,500,000 Stellex Industries.............. 9.500 11/01/07 3,482,500
3,000,000 Trident Automotive.............. 10.000 12/15/05 3,270,000
3,250,000 Venture Holdings Trust.......... 9.500 07/01/05 3,306,875
------------
58,575,207
------------
MEDIA -- 15.7%
2,000,000 Adelphia Communications......... 10.500 07/15/04 2,185,000
1,600,000 Adelphia Communications......... 9.250 10/01/02 1,656,000
1,500,000 Adelphia Communications, Series
B.............................. 9.875 03/01/07 1,623,750
2,250,000 Advanstar Communications........ 9.250 05/01/08 2,275,313
2,500,000 American Media Operation........ 11.625 11/15/04 2,700,000
1,000,000 Big Flower Press................ 8.875 07/01/07 1,015,000
2,500,000 Century Communications.......... 8.750 10/01/07 2,631,250
1,750,000 Century Communications.......... 8.375 12/15/07 1,785,000
2,000,000 Century Communications (b)...... 8.793 01/15/08 907,500
1,500,000 Chancellor Media (f)............ 9.375 10/01/04 1,582,500
3,000,000 Cinemark USA.................... 9.625 08/01/08 3,105,000
2,000,000 Citadel Broadcasting............ 10.250 07/01/07 2,205,000
2,000,000 Comcast Cellular................ 9.500 05/01/07 2,075,000
1,450,000 Crown Castle International (b).. 10.625 11/15/07 996,875
3,000,000 CSC Holdings.................... 10.500 05/15/16 3,495,000
2,000,000 Diamond Cable (Zero Coupon until
12/15/00, 11.750% thereafter)
(b)............................ 11.150 12/15/05 1,660,000
3,000,000 DTI Holdings (Zero Coupon until
03/01/03, 12.500% thereafter)
(b)............................ 12.500 03/01/08 1,620,000
3,250,000 Facilicom International......... 10.500 01/15/08 3,217,500
1,500,000 Falcon Holding Group............ 8.375 04/15/10 1,485,000
5,500,000 Falcon Holdings Group (Zero
Coupon until 04/15/03, 9.280%
thereafter) (b)................ 9.285 04/15/10 3,478,750
5,000,000 Fox Family World (Zero Coupon
until 11/01/02, 10.250%
thereafter) (b)................ 10.250 11/01/07 3,250,000
2,000,000 Frontiervision Holdings (Zero
Coupon until 09/15/01, 11.875%
thereafter) (b)................ 11.875 09/15/07 1,580,000
3,000,000 Garden State Newspapers......... 8.750 10/01/09 3,060,000
1,000,000 Hollinger International
Publishing..................... 9.250 03/15/07 1,055,000
1,000,000 Hollinger International
Publishing..................... 9.250 02/01/06 1,046,250
</TABLE>
See accompanying notes to financial statements
47
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MEDIA -- (CONTINUED)
$ 4,800,000 Hollinger (b).............. 6.062-6.091% 10/05/13 $ 1,992,000
2,250,000 ICG Holdings (Zero Coupon
until 05/01/01, 12.500%
thereafter) (b)........... 11.459-12.725 05/01/06 1,788,750
2,500,000 ICG Holdings (Zero Coupon
until 09/15/00, 13.500%
thereafter) (b)........... 10.430-12.111 09/15/05 2,137,500
4,250,000 Intermedia Commission of
Florida (Zero Coupon until
05/15/01, 12.500%
thereafter) (b)........... 9.984-12.271 05/15/06 3,474,375
3,000,000 International CableTel
(Zero Coupon until
02/01/01, 11.500%
thereafter) (b)........... 10.420-12.111 02/01/06 2,452,500
1,810,000 Jacor Communications....... 9.750 12/15/06 1,936,700
1,000,000 Liberty Group Operating.... 9.375 02/01/08 1,025,000
1,750,000 Liberty Group (Zero Coupon
until 02/01/03, 11.625%
thereafter) (b)........... 11.625 02/01/09 1,058,750
5,000,000 LIN Holdings (b)........... 9.892-9.915 03/01/08 3,350,000
2,000,000 LIN Television............. 8.375 03/01/08 2,040,000
2,000,000 Marcus Cable (Zero Coupon
until 06/15/00, 14.250%
thereafter) (b)........... 12.813-12.938 12/15/05 1,860,000
2,000,000 Mediacom................... 8.500 04/15/08 1,992,500
8,000,000 Metronet Communications
(Zero Coupon until
06/15/03, 9.950%
thereafter) (b)........... 9.778-9.950 06/15/08 4,950,000
4,900,000 Nextel Communications (Zero
Coupon until 02/15/99,
9.750% thereafter) (b).... 9.874-10.430 08/15/04 4,765,250
2,000,000 Nextel Communications (Zero
Coupon until 10/31/02,
9.750% thereafter) (b).... 9.429 10/31/07 1,305,000
1,000,000 Perry - Judd............... 10.625 12/15/07 1,055,000
2,500,000 Price Communications Wire.. 9.125 12/15/06 2,509,375
1,000,000 Rogers Cable Systems....... 10.000 03/15/05 1,110,000
1,250,000 Rogers Communications...... 8.875 07/15/07 1,259,375
5,000,000 SFX Broadcasting........... 10.750 05/15/06 5,512,500
1,949,000 Sun Media.................. 9.500 02/15/07 2,056,195
1,000,000 Transwestern Publishing.... 9.625 11/15/07 1,025,000
5,000,000 United International
Holdings (Zero Coupon
until 02/15/03, 10.750%
thereafter) (b)........... 10.369 02/15/08 3,087,500
------------
105,433,958
------------
SERVICES/OTHER -- 4.4%
2,500,000 Allied Waste (Zero Coupon
until 06/01/02, 11.300%
thereafter) (b)........... 10.708 06/01/07 1,837,500
1,750,000 American Eco............... 9.625 05/15/08 1,776,250
2,500,000 Comforce Operations........ 12.000 12/01/07 2,687,500
3,200,000 Dyncorp.................... 9.500 03/01/07 3,312,000
3,000,000 Employee Solutions......... 10.000 10/15/04 2,970,000
3,250,000 Federal Data............... 10.125 08/01/05 3,315,000
2,000,000 Intertek Finance........... 10.250 11/01/06 2,070,000
1,000,000 Iron Mountain.............. 10.125 10/01/06 1,085,000
1,000,000 Kindercare Learning
Centers................... 9.500 02/15/09 1,005,000
4,000,000 LES........................ 9.250 06/01/08 4,060,000
3,000,000 Loomis Fargo............... 10.000 01/15/04 3,000,000
2,000,000 Norcal Waste Systems*...... 13.500 11/15/05 2,340,000
------------
29,458,250
------------
TRANSPORTATION -- 2.6%
2,000,000 Atlantic Express
Transportation............ 10.750 02/01/04 2,140,000
1,500,000 Holt Group................. 9.750 01/15/06 1,507,500
3,950,000 Ryder TRS.................. 10.000 12/01/06 4,582,000
6,500,000 TFM (Zero Coupon until
06/15/02, 11.750%
thereafter) (b)........... 11.499-11.767 06/15/09 4,078,750
5,785,740 Varig...................... 9.600 02/10/05 5,424,131
------------
17,732,381
------------
TOTAL CORPORATE BONDS
(cost -- $496,410,830).... 495,296,497
------------
</TABLE>
See accompanying notes to financial statements
48
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
SOVEREIGN BONDS -- 16.6%
ARGENTINA -- 1.6%
$ 5,000,000 Republic of Argentina, Global
Bond........................... 11.375% 01/30/17 $ 5,330,000
5,000,000 Republic of Argentina, Global
Bond........................... 11.000 10/09/06 5,316,250
------------
10,646,250
------------
BRAZIL -- 2.6%
11,457,074 Federal Republic of Brazil,
Capitalization Bond (c)........ 8.000 04/15/14 8,435,270
6,225,000 Federal Republic of Brazil,
Global Bond.................... 9.375 04/07/08 5,596,275
3,880,000 Federal Republic of Brazil,
Global Bond*................... 6.625 04/15/06 3,191,300
------------
17,222,845
------------
BULGARIA -- 1.8%
19,500,000 Republic of Bulgaria FLIRB,
Series A*...................... 2.250 07/28/12 12,126,563
------------
CROATIA -- 0.6%
4,500,000 Republic of Croatia, FRN Series
A*............................. 6.500 07/31/10 3,892,500
------------
ECUADOR -- 1.8%
19,805,437 Republic of Ecuador, PDI Bond*
(c)............................ 6.625 02/27/15 11,412,883
1,112,678 Republic of Ecuador, Registered
PDI Bond* (c).................. 6.625 02/27/15 641,181
------------
12,054,064
------------
MEXICO -- 0.1%
650,000 United Mexico States, Global
Bond........................... 11.375 09/15/16 724,913
------------
PANAMA -- 0.6%
5,750,000 Government of Panama IRB*....... 3.750 07/17/14 4,298,125
------------
PERU -- 1.2%
13,200,000 Republic of Peru, PDI Bond*..... 4.000 03/07/17 8,167,500
------------
PHILIPPINES -- 1.4%
3,500,000 Republic of the Philippines,
Treasury Bond.................. 8.750 10/07/16 3,272,500
6,250,000 Republic of the Philippines,
Treasury Bond.................. 8.875 04/15/08 5,968,750
------------
9,241,250
------------
RUSSIA -- 0.6%
4,200,000 Russian Government Ministry of
Finance........................ 12.750 06/24/28 3,764,250
546,922 Russian Government, IAN*........ 6.625 12/15/15 303,886
------------
4,068,136
------------
SOUTH KOREA -- 2.2%
2,275,000 Export - Import Bank of Korea,
Global Bond.................... 7.250 06/25/01 2,021,793
1,000,000 Export - Import Bank of Korea,
Global Bond.................... 6.500 02/10/02 847,000
1,750,000 Korea Development Bank, Global
Bond........................... 7.900 02/01/02 1,562,750
2,150,000 Korea Development Bank, Global
Bond........................... 7.375 09/17/04 1,747,735
9,525,000 Republic of Korea, Global Bond.. 8.875 04/15/08 8,734,901
------------
14,914,179
------------
VENEZUELA -- 2.1%
9,240,000 Republic of Venezuela, Global
Bond........................... 9.250 09/15/27 7,158,690
4,071,415 Republic of Venezuela FLIRB,
Series A*...................... 6.625 03/31/07 3,417,444
4,071,415 Republic of Venezuela FLIRB,
Series B*...................... 6.625 03/31/07 3,417,444
------------
13,993,578
------------
TOTAL SOVEREIGN BONDS
(cost -- $118,288,671)......... 111,349,903
------------
</TABLE>
See accompanying notes to financial statements
49
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
LOAN PARTICIPATIONS -- 6.0%
ALGERIA -- 1.6%
$ 5,877,273 The People's Democratic Republic
of Algeria, Tranche 1* (d)
(Chase Manhattan Bank)......... 6.938% 09/04/06 $ 4,459,381
3,918,182 The People's Democratic Republic
of Algeria, Tranche A* (d)
(Chase Manhattan Bank)......... 6.938 03/06/00 3,683,091
3,500,000 The People's Democratic Republic
of Algeria,
Tranche A* (d) (J.P. Morgan
Securities).................... 6.688 03/04/10 2,563,750
------------
10,706,222
------------
JAMAICA -- 0.2%
1,406,250 Republic of Jamaica* (d) (Chase
Manhattan Bank)................ 6.500 11/15/04 1,251,563
------------
MOROCCO -- 2.0%
15,700,000 Kingdom of Morocco, Tranche A*
(d) (Chase Manhattan Bank and
Morgan Guaranty Trust
Company)....................... 6.563 01/01/09 13,433,313
------------
RUSSIA -- 2.2%
31,250,000 Russian Government, Principal
Loan* (d)(e) (Chase Manhattan
Bank, Goldman Sachs, ING Bank,
J.P. Morgan and Morgan Guaranty
Trust Company)................. 6.625 12/15/20 14,759,904
------------
TOTAL LOAN PARTICIPATIONS
(cost -- $44,040,374).......... 40,151,002
------------
<CAPTION>
SHARES
------
<C> <S> <C> <C> <C>
PREFERRED STOCKS -- 0.3%
FINANCIAL SERVICES -- 0.3%
80,000 California Federal Capital,
Series A, 9.125% (cost --
$2,000,000)................... 2,185,000
------------
<CAPTION>
WARRANTS
--------
<C> <S> <C> <C> <C>
WARRANTS+ -- 0.0%
4,000 Glasstech Warrants, expiring
06/30/04....................... 0
900 In Flight Phone Warrants,
expiring 08/31/02.............. 0
750 Wireless One Warrants, expiring
10/19/00....................... 0
------------
TOTAL WARRANTS
(cost -- $50,391).............. 0
------------
<CAPTION>
RIGHTS
------
<C> <S> <C> <C> <C>
RIGHTS+ -- 0.0%
2,000 Terex Stock Appreciation Rights,
expiring 05/15/02 (cost --
$0)........................... 46,250
------------
TOTAL INVESTMENTS -- 96.9%
(cost -- $660,790,266)......... 649,028,652
------------
</TABLE>
See accompanying notes to financial statements
50
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS HIGH YIELD BOND FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.4%
$16,190,000 Repurchase Agreement dated
06/30/98, with J.P. Morgan
Securities, collateralized by
$15,380,000 U.S. Treasury
Bonds, 8.500%, due 11/15/00,
valued at $16,514,275;
proceeds: $16,192,464 (cost --
$16,190,000).................. 5.480% 07/01/98 $ 16,190,000
------------
Other assets in excess of
liabilities -- 0.7%............ 4,513,428
------------
NET ASSETS -- 100.0%............ $669,732,080
============
</TABLE>
* Interest rate shown reflects current rate on instrument with variable rate or
step coupon rate.
+ Non-income producing security.
(a) In default of its most recent interest payment.
(b) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(c) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(d) Participation interest was acquired through the financial institutions in-
dicated parenthetically.
(e) Portion if income earned is capitalized as Russian Government Interest in
Arrears Notes.
(f) All or part of the security is segregated as collateral for Loan Participa-
tions.
Abbreviations used in this statement:
FLIRBFront-Loaded Interest Reduction Bonds.
FRNFloating Rate Notes.
IDUInterest Due and Unpaid.
IRBInterest Reduction Bonds.
PDIPast Due Interest.
See accompanying notes to financial statements
51
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
CORPORATE BONDS -- 43.4%
BASIC INDUSTRIES -- 5.6%
250,000 Berry Plastics..................... 12.250% 04/15/04 $ 272,500
250,000 Envirosource....................... 9.750 06/15/03 252,500
400,000 Harnischfeger Industries........... 6.875 02/15/27 425,996
250,000 Huntsman Packaging................. 9.125 10/01/07 255,000
1,000,000 Hylsa S.A. de C.V. ................ 9.250 09/15/07 932,500
500,000 Indesco International (f).......... 9.750 04/15/08 497,500
250,000 Millar Western Forest.............. 9.875 05/15/08 245,000
250,000 Murrin Murrin Holdings............. 9.375 08/31/07 245,000
600,000 Praxair............................ 6.150 04/15/03 600,246
225,000 P&L Coal Holdings.................. 9.625 05/15/08 232,313
250,000 Radnor Holdings.................... 10.000 12/01/03 261,250
200,000 Raytheon........................... 5.950 03/15/01 199,256
250,000 Renco Metals....................... 11.500 07/01/03 265,000
250,000 Stone Container.................... 12.250 04/01/02 258,750
250,000 Tekni-Plex......................... 11.250 04/01/07 276,250
250,000 Texas Petrochemical................ 11.125 07/01/06 272,500
500,000 Wheeling-Pittsburgh................ 9.250 11/15/07 510,000
-----------
6,001,561
-----------
CONSUMER CYCLICALS -- 3.2%
250,000 Advance Stores..................... 10.250 04/15/08 258,750
250,000 Cole National Group................ 8.625 08/15/07 252,500
250,000 Collins & Aikman Flooring.......... 10.000 01/15/07 260,625
500,000 Maxim Group........................ 9.250 10/15/07 513,750
500,000 Musicland Group.................... 9.875 03/15/08 497,500
250,000 Prime Hospitality.................. 9.750 04/01/07 265,625
850,000 Staples............................ 7.125 08/15/07 880,320
500,000 Worldtex........................... 9.625 12/15/07 502,500
-----------
3,431,570
-----------
CONSUMER NON-CYCLICALS -- 8.0%
500,000 Aetna Services..................... 7.625 08/15/26 533,450
250,000 Ameriserve Food.................... 10.125 07/15/07 258,750
250,000 B&G Foods.......................... 9.625 08/01/07 253,750
250,000 CFP Holdings....................... 11.625 01/15/04 235,625
250,000 Dade International................. 11.125 05/01/06 282,500
300,000 Delta Beverage..................... 9.750 12/15/03 314,250
250,000 Doane Products..................... 10.625 03/01/06 272,500
200,000 Dole Foods......................... 6.750 07/15/00 201,580
300,000 Ekco Group......................... 9.250 04/01/06 312,750
250,000 French Fragrances.................. 10.375 05/15/07 266,250
250,000 Graham-Field Health Products....... 9.750 08/15/07 232,500
250,000 Grand Casinos...................... 9.000 10/15/04 271,250
250,000 Hines Horticulture................. 11.750 10/15/05 275,000
250,000 Imperial Holly..................... 9.750 12/15/07 251,875
250,000 Integrated Health Services......... 9.500 09/15/07 261,875
250,000 Integrated Health Services......... 9.250 01/15/08 259,688
250,000 International Semi-Technology
(Zero Coupon until 08/15/00,
11.500% thereafter) (b)........... 11.737 08/15/03 75,000
500,000 Iowa Select Farms.................. 10.750 12/01/05 505,000
</TABLE>
See accompanying notes to financial statements
52
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS --
(CONTINUED)
250,000 Jitney-Jungle Stores............... 12.000% 03/01/06 $ 281,250
375,000 Nebco Evans Holding
(Zero Coupon until 07/15/02,
12.375% thereafter)(b)............ 10.773 07/15/07 255,000
250,000 North Altlantic Trading............ 11.000 06/15/04 251,250
250,000 Prime Medical Services............. 8.750 04/01/08 247,500
350,000 Revlon Worldwide (b)............... 10.750 03/15/01 272,125
250,000 Ridell Sports...................... 10.500 07/15/07 253,125
250,000 SC International Services.......... 9.250 09/01/07 260,000
250,000 Selmer............................. 11.000 05/15/05 272,500
205,000 Shop Vac........................... 10.625 09/01/03 226,525
250,000 Stroh Brewery...................... 11.100 07/01/06 151,563
250,000 Sun International Hotels........... 8.625 12/15/07 257,500
375,000 Universal Hospital Services........ 10.250 03/01/08 375,000
500,000 Vencor............................. 9.875 05/01/05 488,750
-----------
8,655,681
-----------
DATA TECHNOLOGY/INFORMATION
SERVICES -- 2.0%
250,000 Amphenol........................... 9.875 05/15/07 266,250
250,000 Decisionone........................ 9.750 08/01/07 242,500
600,000 First Data(f)...................... 6.375 12/15/07 610,548
500,000 Jordan Telecom Products(f)......... 9.875 08/01/07 512,500
500,000 Unisys............................. 7.875 04/01/08 510,000
-----------
2,141,798
-----------
ENERGY -- 3.5%
200,000 Benton Oil & Gas................... 11.625 05/01/03 213,000
250,000 Clark USA.......................... 10.875 12/01/05 275,000
250,000 Cliffs Drilling.................... 10.250 05/15/03 267,500
500,000 Costilla Energy.................... 10.250 10/01/06 505,000
250,000 Dailey International............... 9.500 02/15/08 244,375
250,000 Dawson Product Services............ 9.375 02/01/07 252,500
250,000 National Energy.................... 10.750 11/01/06 225,000
300,000 Norsk Hydro........................ 6.700 01/15/18 306,111
400,000 Occidental Petroleum............... 9.250 08/01/19 498,112
350,000 Parker Drilling.................... 9.750 11/15/06 357,000
250,000 Transamerican Energy............... 11.500 06/15/02 230,000
250,000 Transamerican Energy
(Zero Coupon until 06/15/99,
13.000% thereafter)(b)............ 13.000 06/15/02 205,000
250,000 Wainoco Oil........................ 9.125 02/15/06 252,500
-----------
3,831,098
-----------
FINANCIAL/LEASING -- 4.0%
250,000 Airplanes Pass Through Trust....... 10.875 03/15/19 273,750
500,000 Banc One(f)........................ 7.600 05/01/07 542,550
1,079,737 Green Tree Financial............... 7.070 02/15/16 1,117,522
525,000 Maylayan Bank...................... 7.125 09/15/05 444,145
450,000 Merrill Lynch...................... 6.000 02/12/03 448,254
831,442 Mid States Trust................... 7.340 07/01/35 864,176
150,000 Paine Webber Group................. 7.000 03/01/00 151,893
200,000 U.S. Leasing International......... 8.450 01/25/05 223,324
250,000 Williams Scotsman.................. 9.875 06/01/07 260,000
-----------
4,325,614
-----------
HOUSING RELATED -- 0.5%
250,000 CB Richard Ellis................... 8.875 06/01/06 248,125
250,000 Nortek............................. 9.125 09/01/07 253,750
-----------
501,875
-----------
</TABLE>
See accompanying notes to financial statements
53
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MANUFACTURING -- 4.6%
125,000 Alvey Systems.................. 11.375% 01/31/03 $ 134,375
300,000 Axiohm Transaction Solution.... 9.750 10/01/07 305,250
500,000 BE Aerospace................... 8.000 03/01/08 498,750
250,000 Burke Industries............... 10.000 08/15/07 252,500
400,000 Dana........................... 6.500 03/15/08 406,260
200,000 Foamex......................... 9.875 06/15/07 220,000
250,000 Insilco........................ 10.250 08/15/07 257,500
250,000 International Knife & Saw...... 11.375 11/15/06 266,250
250,000 Jordan Industries.............. 10.375 08/01/07 255,000
402,096 Jordan Industries
(Zero Coupon until 04/01/02,
11.750 thereafter)(b)......... 11.750 04/01/09 259,352
250,000 Key Plastics................... 10.250 03/15/07 262,500
335,000 Motors and Gears............... 10.750 11/15/06 360,125
250,000 Packard Bioscience............. 9.375 03/01/07 242,500
250,000 Polymer Group.................. 9.000 07/01/07 254,063
250,000 Stellex Industries............. 9.500 11/01/07 248,750
500,000 Trident Automotive............. 10.000 12/15/05 545,000
250,000 Venture Holding Trust.......... 9.500 07/01/05 254,375
-----------
5,022,550
-----------
MEDIA -- 7.7%
150,000 Adelphia Communications........ 10.500 07/15/04 163,875
100,000 Adelphia Communications, Series
B............................. 9.875 03/01/07 108,250
250,000 American Media Operation....... 11.625 11/15/04 270,000
1,270,000 British Telecom(f)............. 7.000 05/23/07 1,359,898
500,000 Century Communications......... 8.375 12/15/07 510,000
1,000,000 Century Communications(b)...... 8.878 01/15/08 453,750
250,000 Cinemark USA................... 9.625 08/01/08 258,750
250,000 Comcast Cellular............... 9.500 05/01/07 259,375
750,000 Crown Castle International(b).. 10.625 11/15/07 515,625
250,000 CSC Holdings................... 10.500 05/15/16 291,250
250,000 Diamond Cable
(Zero Coupon until 12/15/00,
11.750% thereafter)(b)........ 11.087 12/15/05 207,500
500,000 Falcon Holding Group........... 8.375 04/15/10 495,000
500,000 Fox Family World
(Zero Coupon until 11/01/02,
10.250% thereafter)(b)........ 10.250 11/01/07 325,000
250,000 Garden State Newspapers........ 8.750 10/01/09 255,000
275,000 Hollinger International
Publishing.................... 9.250 02/01/06 287,719
350,000 ICG Holdings
(Zero Coupon until 09/15/00,
13.500% thereafter)(b)........ 11.459 09/15/05 299,250
250,000 Intermedia Communication....... 8.600 06/01/08 251,875
325,000 International CableTel
(Zero Coupon until 02/01/01,
11.500% thereafter)(b)........ 11.029 02/01/06 265,688
500,000 LIN Holdings(b)................ 9.915 03/01/08 335,000
250,000 Marcus Cable
(Zero Coupon until 06/15/00,
14.125% thereafter)(b)........ 12.813 12/15/05 232,500
500,000 Mediacom....................... 8.500 04/15/08 498,125
250,000 Nextel Communications
(Zero Coupon until 02/15/03,
9.950% thereafter)(b)......... 8.876 02/15/08 159,375
250,000 Nextel Communications
(Zero Coupon until 02/15/99,
9.750% thereafter)(b)......... 9.874-9.900 08/15/04 243,125
250,000 SFX Broadcasting............... 10.750 05/15/06 275,625
-----------
8,321,555
-----------
</TABLE>
See accompanying notes to financial statements
54
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
SERVICES/OTHER -- 2.0%
400,000 Allied Waste
(Zero Coupon until 06/01/02,
11.300% thereafter) (b)....... 10.837% 06/01/07 $ 294,000
250,000 Dyncorp........................ 9.500 03/01/07 258,750
250,000 Iron Mountain.................. 10.125 10/01/06 271,250
500,000 Kindercare Learning Centers.... 9.500 02/15/09 502,500
500,000 Loomis Fargo (f)............... 10.000 01/15/04 500,000
250,000 Norcal Waste Systems*.......... 13.500 11/15/05 292,500
-----------
2,119,000
-----------
TRANSPORTATION -- 1.6%
250,000 Coach USA...................... 9.375 07/01/07 260,000
250,000 Enterprises Shipholding........ 8.875 05/01/08 248,125
250,000 Holt Group..................... 9.750 01/15/06 251,250
200,000 Ryder TRS...................... 10.000 12/01/06 232,000
400,000 TFM (Zero Coupon until
06/15/02, 11.750% thereafter)
(b)........................... 11.398 06/15/09 251,000
482,145 Varig.......................... 9.600 02/10/05 452,011
-----------
1,694,386
-----------
UTILITIES -- 0.7%
250,000 AES............................ 8.500 11/01/07 253,750
500,000 GTE............................ 6.940 04/15/28 503,900
-----------
757,650
-----------
TOTAL CORPORATE BONDS
(cost -- $46,412,200)......... 46,804,338
-----------
SOVEREIGN BONDS -- 20.5%
ARGENTINA -- 1.2%
1,250,000 Republic of Argentina, Global
Bond.......................... 11.375 01/30/17 1,332,500
-----------
AUSTRALIA -- 0.1%
AUD 110,000 New South Wales Treasury....... 7.375 02/21/07 74,308
-----------
BRAZIL -- 3.1%
3,567,655 Federal Republic of Brazil,
Capitalization Bond (c)....... 8.000 04/15/14 2,626,686
875,000 Federal Republic of Brazil,
Global Bond................... 9.375 04/07/08 786,625
-----------
3,413,311
-----------
BULGARIA -- 1.2%
2,000,000 Republic of Bulgaria, FLIRB,
Series A*..................... 2.250 07/28/12 1,243,750
-----------
CANADA -- 0.9%
CAD 1,220,000 Government of Canada........... 6.500 09/01/98 832,001
CAD 130,000 Government of Canada........... 7.000 12/01/06 98,224
-----------
930,225
-----------
DENMARK -- 3.0%
DKK 13,440,000 Kingdom of Denmark (f)......... 6.000 02/15/99 1,976,712
DKK 7,440,000 Kingdom of Denmark............. 8.000 05/15/03 1,236,538
-----------
3,213,250
-----------
ECUADOR -- 0.3%
556,334 Republic of Ecuador, PDI
Bond*......................... 6.625 02/28/15 320,588
-----------
</TABLE>
See accompanying notes to financial statements
55
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
GERMANY -- 1.7%
DEM 1,120,000 Government of Germany..... 6.875% 02/24/99 $ 632,652
DEM 230,000 Government of Germany..... 6.000 01/05/06 137,717
DEM 1,040,000 Government of Germany..... 6.500 07/04/27 672,612
DEM 630,000 Government of Germany..... 5.625 01/04/28 362,428
-----------
1,805,409
-----------
GREECE -- 0.3%
GRD 102,000,000 Hellenic Republic......... 11.000 02/25/00 333,451
-----------
ITALY -- 0.7%
ITL 1,290,000,000 Government of Italy (b)... 5.523 11/16/98 712,402
-----------
JAPAN -- 0.4%
JPY 60,000,000 European Investment Bank.. 4.250 07/16/98 434,919
-----------
MEXICO -- 1.3%
United Mexico States,
1,100,000 Global Bond............... 11.500 05/15/26 1,249,875
United Mexico States,
175,000 Global Bond............... 11.375 09/15/16 195,169
-----------
1,445,044
-----------
NETHERLANDS -- 0.9%
NLG 1,780,000 Netherlands Government.... 9.000 01/15/01 973,684
-----------
NEW ZEALAND -- 0.3%
Government of New
NZD 700,000 Zealand................... 6.500 02/15/00 360,269
-----------
PANAMA -- 0.9%
1,250,000 Republic of Panama IRB*... 3.750 07/17/14 934,375
-----------
RUSSIA -- 0.4%
242,027 Russian Government, IAN*.. 6.625 12/15/15 134,477
Russian Government,
385,000 Ministry of Finance....... 11.750 06/10/03 342,169
Russian Government,
17,543 Ministry of Finance....... 6.625 12/15/15 9,747
-----------
486,393
-----------
SOUTH KOREA -- 2.2%
Export-Import Bank of
150,000 Korea, Global Bond........ 6.500 02/10/02 127,050
Korea Development Bank,
250,000 Global Bond............... 7.900 02/01/02 223,250
Korea Development Bank,
325,000 Global Bond............... 7.375 09/17/04 264,193
Korea Development Bank,
400,000 Global Bond............... 9.600 12/01/00 383,800
Republic of Korea, Global
1,500,000 Bond...................... 8.875 04/15/08 1,375,575
-----------
2,373,868
-----------
SWEDEN -- 0.8%
SEK 6,700,000 Kingdom of Sweden......... 11.000 01/21/99 868,915
-----------
VENEZUELA -- 0.8%
Republic of Venezuela
857,140 FLIRB, Series A*.......... 6.625 03/31/07 719,462
Republic of Venezuela
214,285 FLIRB, Series B*.......... 6.625 03/31/07 179,866
-----------
899,328
-----------
TOTAL SOVEREIGN BONDS
(cost -- $23,150,144).... 22,155,989
-----------
</TABLE>
See accompanying notes to financial statements
56
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
LOAN PARTICIPATIONS -- 2.7%
MOROCCO -- 1.2%
1,500,000 Kingdom of Morocco, Tranche A*
(d)
(Chase Manhattan Bank and
Morgan Guaranty Trust
Company)...................... 6.563% 01/01/09 $ 1,283,438
-----------
RUSSIA -- 1.5%
3,500,000 Russian Government, Principal
Loan* (d)(g)
(Chase Manhattan Bank, Goldman
Sachs, ING Bank,
J.P. Morgan and Morgan
Guaranty Trust Company)....... 6.625 12/15/20 1,653,109
-----------
TOTAL LOAN PARTICIPATIONS
(cost -- $3,358,996).......... 2,936,547
-----------
U.S. GOVERNMENT & AGENCY --
29.1%
Federal Home Loan Mortgage
435,593 Corporation.................... 7.000 07/01/11 445,136
Federal Home Loan Mortgage
185,731 Corporation.................... 10.000 05/15/20 201,690
Federal Home Loan Mortgage
3,536,471 Corporation - Interest only.... 1.157 06/15/21 104,326
Federal Home Loan Mortgage
16,236 Corporation Gold............... 6.000 10/01/10 16,213
Federal National Mortgage
22,900,000 Association (e)................ 6.500 ** 22,806,969
Federal National Mortgage
2,200,000 Association (e)................ 7.500 ** 2,257,063
Federal National Mortgage
400,000 Association.................... 7.000 ** 405,750
Federal National Mortgage
3,747,026 Association - Interest only.... 0.609 10/01/08 105,479
Federal National Mortgage
19,982 Association.................... 13.000 11/15/15 24,022
Federal National Mortgage
544,000 Association.................... 7.000 11/18/15 551,649
Federal National Mortgage
79,624 Association.................... 10.400 04/25/19 88,208
Federal National Mortgage
87,638 Association.................... 6.500 02/01/26 87,487
Federal National Mortgage
947,544 Association.................... 6.500 03/01/26 945,904
Federal National Mortgage
5,946,227 Association - Interest only.... 1.637 02/25/35 506,024
Federal National Mortgage
8,512,681 Association - Interest only.... 0.532 10/17/36 257,934
Government National Mortgage
705,536 Association.................... 7.500 09/15/26 725,454
Government National Mortgage
100,871 Association.................... 7.500 10/15/27 103,719
Government National Mortgage
99,743 Association.................... 7.500 02/15/28 102,559
200,000 U.S. Treasury Note............. 3.461 01/15/07 198,644
400,000 U.S. Treasury Note (f)......... 6.125 08/15/07 416,188
1,000,000 U.S. Treasury Note............. 5.500 02/15/08 999,370
120,000 U.S. Treasury Note............. 6.375 08/15/27 131,774
-----------
TOTAL U.S. GOVERNMENT & AGENCY
(cost -- $31,298,284)........ 31,481,562
-----------
MORTGAGED-BACKED SECURITIES --
1.6%
First Union Residential
299,386 Securitization Trust........... 7.000 08/25/28 293,866
PNC Mortgage Securities
574,684 Corporation.................... 6.838 05/25/28 558,521
PNC Mortgage Securities
525,000 Corporation.................... 6.734 02/25/28 508,430
PNC Mortgage Securities
399,699 Corporation.................... 6.750 05/25/28 386,709
-----------
TOTAL MORTGAGED-BACKED
SECURITIES
(cost -- $1,752,107).......... 1,747,526
-----------
</TABLE>
See accompanying notes to financial statements
57
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT (A) DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 0.5%
11,900,000 DLJ Commercial Mortgage
Corporation -- Interest only
(cost -- $590,407)............... 0.709% 05/10/23 $ 583,844
------------
<CAPTION>
WARRANTS WARRANTS+ -- 0.0%
<C> <S> <C> <C> <C>
400 In Flight Phone Warrants, expires
03/31/02 (cost -- $22,396)....... 0
<CAPTION>
RIGHTS RIGHTS+ -- 0.0%
<C> <S> <C> <C> <C>
1,000 Terex Stock Appreciation Rights,
expires 05/15/02 (cost -- $0).... 23,125
------------
TOTAL INVESTMENTS -- 97.8%
(cost -- $106,584,534)......... 105,732,931
------------
<CAPTION>
PRINCIPAL
AMOUNT (A) REPURCHASE AGREEMENT -- 24.4%
<C> <S> <C> <C> <C>
$26,419,000 Repurchase Agreement dated
06/30/98, with J.P. Morgan
Securities,
collateralized by $27,152,000
U.S. Treasury Bonds, 5.375%, due
06/30/03
valued at $26,948,360; proceeds:
$26,423,021 (cost --
$26,419,000)(f)................. 5.480 07/01/98 26,419,000
------------
Liabilities in excess of other
assets -- (22.2%)................ (24,029,833)
------------
NET ASSETS -- 100.0%............. $108,122,098
============
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
- ----------------------------------------------------------------------------
<CAPTION>
UNREALIZED
MATURITY CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
DATES RECEIVE/DELIVER FOR VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES 08/12/98 CAD 202,530 $ 140,159 $ 137,940 $ (2,219)
08/12/98 DEM 5,727,286 3,233,962 3,180,197 (53,765)
08/12/98 GRD 110,080,000 360,942 358,662 (2,280)
08/12/98 NLG 2,152,666 1,082,748 1,060,488 (22,260)
SALES 08/12/98 CAD 1,518,203 1,059,458 1,034,023 25,435
08/12/98 DEM 6,345,695 3,588,238 3,523,582 64,656
08/12/98 DKK 8,606,940 1,276,994 1,253,025 23,969
08/12/98 GRD 106,680,000 337,363 347,584 (10,221)
08/12/98 JPY 64,690,003 494,572 471,128 23,444
08/12/98 NLG 2,035,341 1,024,844 1,002,690 22,154
08/12/98 NZD 618,723 331,636 320,471 11,165
------------
$ 80,078
============
</TABLE>
See accompanying notes to financial statements
58
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS STRATEGIC BOND FUND (concluded)
- --------------------------------------------------------------------------------
* Interest rate shown reflects current rate on instrument with variable rate
or step coupon rate.
** To be announced.
+ Non-income producing security.
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Zero or step coupon bond. Interest rate shown reflects yield to maturity on
date of purchase.
(c) Payment-in-kind security for which all or part of the interest earned is
paid by the issuance of additional bonds.
(d) Participation interest was acquired through the financial institutions in-
dicated parenthetically.
(e) Mortgage dollar roll. See Note 1.
(f) All or part of the security is segregated as collateral for mortgage dollar
rolls, to be announced securities, and loan participations.
(g) Portion of income earned is capitalized as Russian Government Interest in
Arrears Notes.
Abbreviations used in this statement:
FLIRB Front-Loaded Interest Reduction Bonds.
IAN Inerest Arrears Notes.
IRB Interest Reduction Bonds.
PDI Past Due Interest.
AUD Australian Dollar.
CAD Canadian Dollar.
DEM German Deutschemark.
DKK Danish Krone.
GRD Greek Drachma.
ITL Italian Lira.
JPY Japanese Yen.
NLG Netherlands Guilder.
NZD New Zealand Dollar.
SEK Swedish Krone.
See accompanying notes to financial statements
59
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES -- 98.5%
CALIFORNIA -- 3.5%
$285,000 Los Angeles, California AMBAC.... 6.000% 08/01/03 $ 308,128
250,000 Oakland, California Port
Authority MBIA.................. 6.000 11/01/05 274,830
------------
582,958
------------
COLORADO -- 0.6%
100,000 Moffat County, Colorado Pollution
Control VR...................... 3.800 07/01/98 100,000
------------
DISTRICT OF COLUMBIA -- 3.1%
500,000 District of Columbia GO MBIA..... 5.000 06/01/06 511,465
------------
FLORIDA -- 1.1%
175,000 Florida Housing Finance Agency... 6.150 07/01/06 183,379
------------
HAWAII -- 1.6%
250,000 Hawaii State Department of Budget
& Finance....................... 5.600 07/01/06 266,235
------------
ILLINOIS -- 9.5%
300,000 Chicago, Illinois Metropolitan
Water GO........................ 5.900 12/01/06 331,582
250,000 Chicago, Illinois O'Hare
International Airport AMBAC..... 5.000 01/01/02 256,205
400,000 Illinois Student Assistance
Commission...................... 6.400 03/01/04 430,796
500,000 Springfield, Illinois Electric
MBIA............................ 6.000 03/01/06 550,540
------------
1,569,123
------------
INDIANA -- 9.5%
500,000 Indiana Health Facilities Finance
Authority....................... 5.800 08/15/06 533,280
300,000 Indiana Secondary Market for
Education AMBAC................. 5.550 12/01/05 317,538
650,000 Indiana Transportation Finance
Authority....................... 6.250 11/01/03 707,233
------------
1,558,051
------------
LOUISIANA -- 2.2%
350,000 Louisiana Public Facilities
Authority....................... 6.750 09/01/06 369,583
------------
MASSACHUSETTS -- 2.7%
400,000 Commonwealth of Massachusetts
Health & Educational Facilities
Authority....................... 6.500 12/01/05 449,436
------------
MICHIGAN -- 1.7%
250,000 Detroit, Michigan Water Supply
MBIA............................ 6.000 07/01/07 277,705
------------
MISSISSIPPI -- 3.9%
200,000 Mississippi Business Finance VR.. 3.900 07/01/98 200,000
420,000 Mississippi Higher Education..... 6.050 09/01/07 441,538
------------
641,538
------------
NEW JERSEY -- 3.0%
450,000 Passaic Valley, New Jersey Sewer
Commission AMBAC................ 5.750 12/01/07 484,961
------------
NEW YORK -- 23.2%
250,000 Municipal Assistance Corporation,
New York City, New York......... 5.500 07/01/02 262,613
450,000 New York City, New York GO....... 6.500 02/01/02 482,711
100,000 New York City, New York
Transportation Finance Authority
VR.............................. 3.650 11/02/98 100,000
500,000 New York State Dormitory
Authority....................... 6.000 07/01/06 543,635
700,000 New York State Dormitory
Authority MBIA.................. 5.600 07/01/06 742,574
</TABLE>
See accompanying notes to financial statements
60
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
NEW YORK -- (CONTINUED)
$400,000 New York State Dormitory
Authority (State University of
New York)....................... 6.625% 07/01/04 $ 451,676
500,000 New York State Mortgage Agency... 5.900 10/01/06 517,700
250,000 New York State Urban
Development..................... 5.000 01/01/06 254,855
400,000 New York State, Thruway Authority
MBIA............................ 6.000 01/01/04 432,600
------------
3,788,364
------------
OHIO -- 3.2%
250,000 Cleveland, Ohio Airport Systems
FSA............................. 5.500 01/01/08 265,188
250,000 Miami County, Ohio Hospital
Facilities...................... 5.600 05/15/02 257,783
------------
522,971
------------
PENNSYLVANIA -- 12.2%
500,000 Allegheny County, Pennsylvania
Airport MBIA.................... 5.500 01/01/03 524,325
400,000 Geisinger Authority, Pennsylvania
Health System................... 6.000 07/01/01 420,920
500,000 Monroeville, Pennsylvania
Hospital Authority.............. 5.750 10/01/05 534,445
250,000 Pennsylvania Housing Finance
Authority....................... 4.850 10/01/07 250,353
265,000 Philadelphia, Pennsylvania
Hospital Authority.............. 5.400 07/01/04 274,744
------------
2,004,787
------------
SOUTH CAROLINA -- 6.8%
250,000 Piedmont Municipal Power Agency
FGIC............................ 6.000 01/01/07 274,955
750,000 South Carolina State Public
Service Authority FGIC.......... 6.500 01/01/05 839,130
------------
1,114,085
------------
TEXAS -- 4.6%
500,000 Austin, Texas Airport Systems
MBIA............................ 6.500 11/15/05 563,140
200,000 Sabine River, Texas Pollution
Control Authority VR............ 3.900 07/01/98 200,000
------------
763,140
------------
VIRGINIA -- 5.5%
500,000 Pocahontas Parkway Association,
Virginia........................ 5.000 08/15/06 504,290
400,000 Roanoke, Virginia Industrial
Development Authority VR........ 4.000 07/01/98 400,000
------------
904,290
------------
WYOMING -- 0.6%
100,000 Platte County, Wyoming Pollution
Control VR...................... 3.800 07/01/98 100,000
------------
TOTAL INVESTMENTS -- 98.5%
(cost -- $15,500,974)........... 16,192,071
------------
Other assets in excess of
liabilities -- 1.5%............. 241,620
------------
NET ASSETS -- 100.0%............. $ 16,433,691
============
</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
Corporation.
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 MBIA Insurance Corporation.
VR Variable Rate Demand Note. Maturity date shown is the date of next
interest rate change.
See accompanying notes to financial statements
61
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS U.S. GOVERNMENT INCOME FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES -- 26.8%
$ 100,000 U.S. Treasury Note (a)............. 5.875% 09/30/02 $ 101,250
150,000 U.S. Treasury Note (a)............. 5.625 12/31/02 150,656
700,000 U.S. Treasury Note................. 5.750 04/30/03 706,888
450,000 U.S. Treasury Note (a)............. 6.625 05/15/07 483,327
1,500,000 U.S. Treasury Note (a)............. 6.125 08/15/07 1,560,705
500,000 U.S. Treasury Note................. 5.500 02/15/08 499,685
500,000 U.S. Treasury Note................. 5.625 05/15/08 506,795
-----------
TOTAL U.S. TREASURY NOTES
(cost -- $3,954,602).............. 4,009,306
-----------
U.S. GOVERNMENT AGENCY -- 71.4%
100,000 Federal Home Loan Bank............. 5.940 06/13/00 100,562
308,555 Federal Home Loan Mortgage
Corporation....................... 7.500 05/01/07 318,157
26,781 Federal Home Loan Mortgage
Corporation....................... 6.000 07/01/10 26,742
16,043 Federal Home Loan Mortgage
Corporation....................... 11.750 01/01/11 17,800
156,855 Federal Home Loan Mortgage
Corporation....................... 7.000 05/01/11 160,291
393,367 Federal Home Loan Mortgage
Corporation....................... 7.000 07/01/11 401,986
620,395 Federal Home Loan Mortgage
Corporation....................... 7.000 07/01/11 633,988
303,494 Federal Home Loan Mortgage
Corporation....................... 7.000 08/01/11 310,143
863 Federal Home Loan Mortgage
Corporation....................... 11.750 06/01/14 970
13,761 Federal Home Loan Mortgage
Corporation....................... 11.750 12/01/14 15,555
27,708 Federal Home Loan Mortgage
Corporation....................... 11.750 07/01/15 31,469
226,747 Federal Home Loan Mortgage
Corporation....................... 8.250 04/01/17 237,402
263,507 Federal Home Loan Mortgage
Corporation....................... 8.000 12/01/19 274,585
578,261 Federal Home Loan Mortgage
Corporation....................... 8.000 07/01/20 606,136
189,601 Federal Home Loan Mortgage
Corporation....................... 7.000 04/15/21 192,563
750,000 Federal Home Loan Mortgage
Corporation....................... 8.500 03/15/24 807,904
800,797 Federal National Mortgage
Association....................... 6.783 01/17/03 812,058
202,512 Federal National Mortgage
Association....................... 6.500 12/01/03 203,506
1,500,000 Federal National Mortgage
Association (b)................... 7.000 * 1,521,563
800,000 Federal National Mortgage
Association....................... 6.527 03/25/10 816,000
29,888 Federal National Mortgage
Association....................... 14.500 11/01/14 36,753
17,222 Federal National Mortgage
Association....................... 12.500 08/01/15 20,193
71,689 Federal National Mortgage
Association....................... 12.500 09/01/15 85,108
79,926 Federal National Mortgage
Association....................... 13.000 11/15/15 96,087
426,563 Federal National Mortgage
Association....................... 12.000 01/01/16 494,097
30,283 Federal National Mortgage
Association....................... 12.000 01/01/16 35,724
261,801 Federal National Mortgage
Association....................... 12.500 01/01/16 308,189
23,364 Federal National Mortgage
Association....................... 11.500 04/01/19 26,609
167,041 Federal National Mortgage
Association....................... 10.500 08/01/20 186,563
372,410 Federal National Mortgage
Association....................... 8.500 11/01/23 390,717
211,260 Federal National Mortgage
Association....................... 9.000 08/01/26 223,438
1,100,000 Federal National Mortgage
Association (b)................... 6.500 * 1,095,531
177,660 Government National Mortgage
Association....................... 8.500 01/15/18 188,523
-----------
TOTAL U.S. GOVERNMENT AGENCY
(cost -- $10,541,678)............. 10,676,912
-----------
</TABLE>
See accompanying notes to financial statements
62
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS U.S. GOVERNMENT INCOME FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT DESCRIPTION RATE DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MORTGAGED-BACKED SECURITIES --
3.5%
$ 331,175 Merrill Lynch Trust............... 6.000% 03/20/18 $ 328,794
200,233 Vendee Mortgage Trust............. 7.250 10/15/10 200,796
-----------
TOTAL MORTGAGED-BACKED SECURITIES
(cost -- $529,590)............... 529,590
-----------
TOTAL INVESTMENTS -- 101.7%
(cost -- $15,025,870)............ 15,215,808
-----------
REPURCHASE AGREEMENT -- 14.6%
2,181,000 Repurchase Agreement dated
06/30/98, with J.P. Morgan
Securities, collateralized by
$2,072,000 U.S. Treasury Bonds,
8.50%, due 11/15/00, valued at
$2,224,810; proceeds: $2,181,332
(cost -- $2,181,000)............. 5.480 07/01/98 2,181,000
-----------
Liabilities in excess of other
assets -- (16.3%)................ (2,441,269)
-----------
NET ASSETS -- 100.0%.............. $14,955,539
===========
</TABLE>
*To be announced.
(a) All or part of the security is segregated as collateral for mortgage dollar
rolls.
(b) Mortgage dollar roll. See Note 1.
See accompanying notes to financial statements
63
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
MUNICIPAL SECURITIES --
99.3%
NEW YORK -- 97.3%
$ 655,000 Albany County, New York
Industrial Development
Agency VR............... 3.600% 07/02/98 $ 655,000
1,355,000 Amherst, New York
Industrial Development
Agency VR............... 3.750 07/02/98 1,355,000
1,550,000 Auburn, New York
Industrial Development
Agency VR............... 3.750 07/01/98 1,550,000
3,900,000 Babylon, New York
Industrial Development
Agency VR............... 4.000 07/01/98 3,900,000
575,000 Babylon, New York
Industrial Development
Agency VR............... 3.750 07/02/98 575,000
1,375,000 Broome County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 1,375,000
1,600,000 Chautauqua County, New
York
Industrial Development
Agency VR............... 3.750 07/01/98 1,600,000
1,740,000 Chemung County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 1,740,000
4,300,000 Chenango, New York
Industrial Development
Agency VR............... 3.750 07/02/98 4,300,000
670,000 Colonie, New York
Housing Development
Corporation VR.......... 4.200 07/01/98 670,000
495,000 Colonie, New York
Industrial Development
Agency VR............... 3.600 07/02/98 495,000
1,025,000 Dutchess County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 1,025,000
1,140,000 Erie County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 1,140,000
410,000 Erie County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 410,000
263,600 Erie County, New York
Industrial Development
Agency VR............... 3.750 07/02/98 263,600
100,000 Erie County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 100,000
2,550,000 Islip, New York
Industrial Development
Authority VR............ 3.600 07/02/98 2,550,000
7,000,000 Long Island, New York
Power Authority VR...... 3.800 07/01/98 7,000,000
1,560,000 Monroe County, New York
Industrial Development
Agency PUT.............. 3.800 12/01/98 1,560,000
700,000 Monroe County, New York
Industrial Development
Agency PUT.............. 4.500 06/15/99 700,000
6,500,000 Monroe County, New York
Industrial Development
Agency VR............... 3.750 07/01/98 6,500,000
3,325,000 Monroe County, New York
Industrial Development
Agency VR............... 3.700 07/02/98 3,325,000
3,075,000 Monroe County, New York
Industrial Development
Agency VR............... 3.700 07/02/98 3,075,000
3,000,000 Monroe County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 3,000,000
2,490,000 Monroe County, New York
Industrial Development
Agency VR............... 3.550 07/02/98 2,490,000
</TABLE>
See accompanying notes to financial statements
64
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------
$ 1,810,000 Monroe County, New York
Industrial Development
Agency VR................. 3.750% 07/02/98 $ 1,810,000
1,430,000 Monroe County, New York
Industrial Development
Agency VR................. 3.750 07/02/98 1,430,000
825,000 Monroe County, New York
Industrial Development
Agency VR................. 3.700 07/02/98 825,000
780,000 Monroe County, New York
Industrial Development
Agency VR................. 3.750 07/02/98 780,000
2,500,000 Monroe County, New York
Industrial Development
Agency VR................. 3.600 07/02/98 2,500,000
1,000,000 Municipal Assistance
Corporation
New York City, New York... 3.700 07/01/98 1,000,000
100,000 Municipal Assistance
Corporation
New York City, New York... 4.000 07/01/98 100,000
6,760,000 Nassau County, New York GO
BAN....................... 3.575-3.630 08/17/98 6,765,720
900,000 Nassau County, New York
Industrial Development
Agency VR................. 3.600 07/02/98 900,000
2,000,000 New York City, New York
Health & Hospital
Corporation VR............ 3.300 07/01/98 2,000,000
1,900,000 New York City, New York
Health & Hospital
Corporation VR............ 3.300 07/01/98 1,900,000
5,300,000 New York City, New York
Housing Development
Corporation VR............ 3.250 07/02/98 5,300,000
3,100,000 New York City, New York
Housing Development
Corporation VR............ 3.200 07/01/98 3,100,000
2,500,000 New York City, New York
Housing Development
Corporation VR............ 3.600 07/01/98 2,500,000
1,700,000 New York City, New York
Housing Development
Corporation VR............ 3.600 07/01/98 1,700,000
100,000 New York City, New York
Housing Development
Corporation VR............ 3.500 07/01/98 100,000
4,000,000 New York City, New York
Industrial Development
Agency VR................. 3.450 07/01/98 4,000,000
1,690,000 New York City, New York
Industrial Development
Agency VR................. 3.250 07/01/98 1,690,000
1,650,000 New York City, New York
Industrial Development
Agency VR................. 3.250 07/01/98 1,650,000
1,050,000 New York City, New York
Industrial Development
Agency VR................. 3.250 07/01/98 1,050,000
725,000 New York City, New York
Industrial Development
Agency VR................. 3.600 07/02/98 725,000
400,000 New York City, New York
Industrial Development
Agency VR................. 3.750 07/02/98 400,000
250,000 New York City, New York
Industrial Development
Agency VR................. 3.900 07/02/98 250,000
1,100,000 New York City, New York
Municipal Water Finance
Authority VR.............. 3.800 07/01/98 1,100,000
4,000,000 New York City, New York
Transportation Finance
Authority VR.............. 3.650 07/01/98 4,000,000
5,310,000 New York State,
Power Authority PUT....... 3.600 09/01/98 5,310,000
</TABLE>
See accompanying notes to financial statements
65
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (continued)
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------
$ 5,000,000 New York State,
Power Authority PUT...... 3.600% 09/01/98 $ 5,000,000
1,500,000 New York State,
Power Authority PUT...... 3.600 09/01/98 1,500,000
750,000 New York State,
Dormitory Authority FSA.. 3.850 07/01/98 749,999
1,370,000 New York State,
Dormitory Authority VR... 4.050 07/01/98 1,370,000
2,500,000 New York State,
Energy, Research &
Development Authority
VR....................... 3.800 07/01/98 2,500,000
1,300,000 New York State,
Energy, Research &
Development Authority
VR....................... 3.800 07/01/98 1,300,000
5,000,000 New York State,
Housing Finance Agency
VR....................... 3.250 07/01/98 5,000,000
4,500,000 New York State,
Housing Finance Agency
VR....................... 3.500 07/01/98 4,500,000
1,700,000 New York State,
Housing Finance Agency
VR....................... 3.200 07/01/98 1,700,000
1,655,000 New York State,
Job Development Authority
VR....................... 3.850 07/01/98 1,655,000
1,615,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 1,615,000
790,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 790,000
535,000 New York State,
Job Development Authority
VR....................... 3.850 07/01/98 535,000
350,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 350,000
215,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 215,000
150,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 150,000
135,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 135,000
60,000 New York State,
Job Development Authority
VR....................... 3.750 07/01/98 60,000
3,800,000 New York State,
Thruway Authority VR..... 3.800 07/01/98 3,800,000
20,495,000 Niagara County, New York
Industrial Development
Agency VR................ 3.600 07/01/98 20,495,000
4,400,000 Niagara County, New York
Industrial Development
Agency VR................ 3.500 07/01/98 4,400,000
765,000 Niagara County, New York
Industrial Development
Agency VR................ 3.750 07/02/98 765,000
5,000,000 Oneida County, New York
Industrial Development
Agency VR................ 3.750 07/02/98 5,000,000
270,000 Oneida County, New York
Industrial Development
Agency VR................ 3.750 07/02/98 270,000
20,000,000 Onondaga County, New York
Industrial Development
Agency PUT............... 4.100 11/01/98 20,000,000
3,800,000 Onondaga County, New York
Industrial Development
Agency VR................ 3.700 07/01/98 3,800,000
</TABLE>
See accompanying notes to financial statements
66
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS NEW YORK MUNICIPAL MONEY MARKET FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
$ 1,300,000 Onondaga County, New York
Industrial Development
Agency VR............... 3.700% 07/01/98 $ 1,300,000
100,000 Onondaga County, New York
Industrial Development
Agency VR............... 3.700 07/01/98 100,000
100,000 Onondaga County, New York
Industrial Development
Agency VR............... 3.700 07/01/98 100,000
4,400,000 Ontario County, New York
Industrial Development
Agency VR............... 4.000 07/01/98 4,400,000
405,000 Port Authority of New
York & New Jersey....... 3.580 10/15/98 407,194
7,300,000 Port Authority of New
York & New Jersey VR.... 3.750 07/01/98 7,300,000
6,410,000 Port Authority of New
York & New Jersey VR.... 3.750 07/01/98 6,410,000
1,300,000 Rockland County, New York
Industrial Development
Agency VR............... 3.750 07/02/98 1,300,000
175,000 Schoharie County, New
York
Industrial Development
Agency VR............... 3.750 07/02/98 175,000
10,000,000 Suffolk County, New York
GO TAN.................. 3.850 09/10/98 10,007,478
3,650,000 Syracuse, New York
Industrial Development
Agency VR............... 3.750 07/01/98 3,650,000
2,510,000 Triborough Bridge &
Tunnel Authority, New
York.................... 3.550 01/01/99 2,548,863
1,000,000 Triborough Bridge &
Tunnel Authority, New
York.................... 3.600 01/01/99 1,003,148
2,460,000 Warren & Washington
Counties, New York
Industrial Development
Agency VR............... 3.550 07/02/98 2,460,000
5,900,000 Wyoming County, New York
Industrial Development
Agency VR............... 3.750 07/02/98 5,900,000
305,000 Wyoming County, New York
Industrial Development
Agency VR............... 3.600 07/02/98 305,000
1,035,000 Yates County, New York
Industrial Development
Agency VR............... 3.550 07/02/98 1,035,000
------------
240,296,002
------------
PUERTO RICO -- 2.0%
1,500,000 Commonwealth of Puerto
Rico, Highway Authority
P/R..................... 3.650 07/01/98 1,530,000
500,000 Commonwealth of Puerto
Rico, Telephone
Authority MBIA.......... 3.520 01/01/99 502,138
3,000,000 Commonwealth of Puerto
Rico GDB TECP........... 3.400 07/01/98 3,000,000
------------
5,032,138
------------
TOTAL INVESTMENTS --
99.3%
(cost -- $245,328,140).. 245,328,140
------------
Other assets in excess of
liabilities -- 0.7%..... 1,756,843
------------
NET ASSETS -- 100.0%..... $247,084,983
============
</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, ma-
turity date shown is the date of next interest rate change.
Abbreviations used in this statement:
BANBond Anticipation Note.
FSAInsured as to principal and interest by the Financial Security Assurance
Corporation.
GOGeneral Obligation.
MBIAInsured as to principal and interest by the MBIA Insurance Corporation.
P/RPre-Refunded in U.S. Government Securities.
PUTOptional or mandatory put. Maturity date shown is the put date as well as
the date of the next interest rate change.
TANTax Anticipation Note.
TECPTax Exempt Commercial Paper.
See accompanying notes to financial statements
67
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS CASH MANAGEMENT FUND
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
ASSET-BACKED SECURITIES --
6.5%
FINANCIAL SERVICES -- 6.5%
$ 500,000 Contimortgage Home Equity
Loan Trust................ 5.649% 06/15/99 $ 500,000
52,176 Ford Credit Auto Owner
Trust..................... 5.748 10/15/98 52,176
848,068 Ford Credit Auto Owner
Trust..................... 5.615 05/15/99 848,068
296,236 Union Acceptance
Corporation............... 5.611 03/10/99 296,236
-----------
TOTAL ASSET-BACKED
SECURITIES
(cost -- $1,696,480)...... 1,696,480
-----------
CERTIFICATES OF DEPOSIT --
34.4%
BANKS -- 34.4%
1,000,000 Bankers Trust.............. 5.950 09/09/98 999,938
1,000,000 Barclays Bank.............. 5.820 10/05/98 1,000,125
1,000,000 Branch Banking & Trust..... 5.900 08/24/98 1,000,000
1,000,000 Commerzbank................ 5.670 03/05/99 999,445
1,000,000 Credit Agricole Indosuez... 5.870 08/10/98 1,000,182
1,000,000 Creditanstalt.............. 5.830 09/25/98 999,942
1,000,000 Deutsche Bank AG........... 5.570 07/06/98 999,994
1,000,000 First Tennessee Bank....... 5.560 08/06/98 999,996
1,000,000 Svenska Handelsbanken...... 5.580 09/14/98 999,954
-----------
TOTAL CERTIFICATES OF
DEPOSIT
(cost -- $8,999,576)...... 8,999,576
-----------
COMMERCIAL PAPER -- 5.3%
PAPER -- 1.5%
389,000 Bemis...................... 5.550 07/08/98 388,580
-----------
TOY MANUFACTURING -- 3.8%
1,000,000 Hasbro..................... 5.630 07/06/98 999,218
-----------
TOTAL COMMERCIAL PAPER
(cost -- $1,387,798)...... 1,387,798
-----------
CORPORATE BONDS -- 3.8%
FINANCIAL SERVICES -- 1.9%
500,000 Associates Corporation of
North America............. 5.940 07/15/98 500,207
-----------
TELEPHONE SYSTEMS -- 1.9%
500,000 Bell Atlantic.............. 5.640 09/01/98 499,547
-----------
TOTAL CORPORATE BONDS
(cost -- $999,754)........ 999,754
-----------
</TABLE>
See accompanying notes to financial statements
68
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (continued)
SALOMON BROTHERS CASH MANAGEMENT FUND (continued)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
FLOATING RATE NOTES --
49.1%
CALIFORNIA -- 3.8%
$ 1,000,000 Pasadena, California
Certificates of
Participation VR......... 5.660% 07/07/98 $ 1,000,000
-----------
FLORIDA -- 9.6%
1,000,000 Baptist Health Systems VR
MBIA..................... 5.600 07/01/98 1,000,000
1,000,000 Dade County, Florida
Expressway Authority VR
FGIC..................... 5.600 07/02/98 1,000,000
500,000 Florida Housing Finance
Agency VR................ 5.610 07/01/98 500,000
-----------
2,500,000
-----------
GEORGIA -- 2.3%
600,000 De Kalb Development
Authority VR............. 5.600 07/01/98 600,000
-----------
ILLINOIS -- 2.7%
500,000 Edwards Hospital Group
VR....................... 5.650 07/01/98 500,000
200,000 Isac, Illinois VR......... 5.650 07/01/98 200,000
-----------
700,000
-----------
KENTUCKY -- 1.9%
500,000 Lexington-Fayette,
Kentucky
Urban County Airport VR.. 5.700 07/01/98 500,000
-----------
LOUISIANA -- 3.8%
1,000,000 Calcasieu Parish,
Louisiana
Industrial Development
Agency VR................ 5.700 07/01/98 1,000,000
-----------
MICHIGAN -- 2.7%
700,000 Genesys Health Systems
VR....................... 5.680 07/01/98 700,000
-----------
MINNESOTA -- 3.8%
1,000,000 Catholic Health
Initiatives VR........... 5.600 07/01/98 1,000,000
-----------
NEW JERSEY -- 1.0%
255,000 New Jersey Economic
Development Authority
VR....................... 5.910 07/06/98 255,000
-----------
NEW YORK -- 6.0%
280,000 New York City, New York
Industrial Development
Agency VR................ 5.650 07/01/98 280,000
100,000 New York City, New York
Industrial Development
Agency VR................ 5.650 07/01/98 100,000
900,000 New York State, Housing
Finance Agency VR........ 5.600 07/01/98 900,000
300,000 Syracuse, New York GO VR.. 5.850 07/01/98 300,000
-----------
1,580,000
-----------
NORTH CAROLINA -- 2.9%
400,000 Community Health Systems
VR....................... 5.850 07/01/98 400,000
365,000 Greensboro, North Carolina
GO VR.................... 5.700 07/01/98 365,000
-----------
765,000
-----------
PENNSYLVANIA -- 5.3%
400,000 Moon, Pennsylvania
Industrial Development
Authority VR............. 5.700 07/02/98 400,000
1,000,000 Pennsylvania Economic
Development Authority
VR....................... 5.700 07/01/98 1,000,000
-----------
1,400,000
-----------
</TABLE>
See accompanying notes to financial statements
69
<PAGE>
PORTFOLIO OF INVESTMENTS
(unaudited) (concluded)
SALOMON BROTHERS CASH MANAGEMENT FUND (concluded)
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
YIELD TO
PRINCIPAL MATURITY ON DATE MATURITY
AMOUNT DESCRIPTION OF PURCHASE* DATE VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
TEXAS -- 3.3%
$ 875,000 Texas State GO VR.......... 5.610% 07/01/98 $ 875,000
-----------
TOTAL FLOATING RATE NOTES
(cost -- $12,875,000)..... 12,875,000
-----------
TOTAL INVESTMENTS -- 99.1%
(cost -- $25,958,608)..... 25,958,608
-----------
REPURCHASE AGREEMENT --
0.7%
175,000 Repurchase Agreement dated
06/30/98 with State Street
Bank, collateralized by
$155,000 U.S. Treasury
Bonds, 8.375%, due
05/15/08, valued at
$178,831; proceeds:
$175,028 (cost --
$175,000)................ 5.700 07/01/98 175,000
-----------
Other assets in excess of
liabilities -- 0.2%....... 51,761
-----------
NET ASSETS -- 100.0%....... $26,185,369
===========
</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.
Abbreviations used in this statement:
FGIC Insured as to principal and interest by the Financial Guaranty Insurance
Corporation.
GO General Obligation.
MBIA Insured as to principal and interest by the MBIA Insurance Corporation.
See accompanying notes to financial statements
70
<PAGE>
[This page intentionally left blank]
71
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
ASIA
GROWTH CAPITAL INVESTORS
FUND FUND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note A).......... $13,914,566 $216,196,504 $766,461,748
Repurchase agreements, at value and
cost................................... -- 5,301,000 44,696,000
Cash (including foreign currency)....... 1,540,063 599 762
Receivable for securities sold.......... 1,022,739 4,425,468 15,043,901
Receivable for Fund shares sold......... 103,879 847,859 1,190,083
Interest and dividends receivable....... 36,688 361,039 949,639
Receivable from investment advisor...... 97,825 -- --
Deferred organization expense........... 64,095 -- --
Net unrealized appreciation of forward
foreign currency contracts............. -- -- --
Other assets............................ 23,088 23,692 41,121
----------- ------------ ------------
Total assets............................ 16,802,943 227,156,161 828,383,254
----------- ------------ ------------
LIABILITIES:
Payable for:
Securities purchased................... 1,166,859 4,019,703 8,219,393
Sale of security to be received........ -- -- 1,040,362
Reverse repurchase agreements.......... -- -- --
Fund shares redeemed................... 174,167 1,069,983 318,288
Dividends and distributions declared... -- -- --
Affiliate transactions:
Management fees........................ -- 150,818 1,023,959
Service and distribution fees.......... 27,674 36,973 242,747
Net unrealized depreciation of forward
foreign currency contracts............. 22,897 2,484 --
Accrued expenses and other liabilities.. 30,295 100,070 218,969
----------- ------------ ------------
Total liabilities....................... 1,421,892 5,380,031 11,063,718
----------- ------------ ------------
NET ASSETS.............................. $15,381,051 $221,776,130 $817,319,536
=========== ============ ============
NET ASSETS CONSIST OF:
Paid-in capital......................... $26,196,408 $166,896,518 $503,658,181
Undistributed net investment income or
(distributions in excess of net
investment income)..................... 70,197 529,899 1,727,908
Accumulated net realized gain (loss) on
investments, options and foreign
currency transactions.................. (7,734,402) 23,407,659 64,183,025
Net unrealized appreciation
(depreciation) on investments, foreign
currency transactions and other
assets................................. (3,151,152) 30,942,054 247,750,422
----------- ------------ ------------
NET ASSETS:............................. $15,381,051 $221,776,130 $817,319,536
=========== ============ ============
Class A................................. $ 5,881,696 $ 7,910,855 $ 64,354,746
=========== ============ ============
Class B................................. $ 5,876,319 $ 10,957,341 $ 70,294,000
=========== ============ ============
Class C................................. $ 2,313,513 $ 4,330,175 $ 16,619,460
=========== ============ ============
Class O................................. $ 1,309,523 $198,577,759 $666,051,330
=========== ============ ============
SHARES OUTSTANDING:
Class A................................. 1,033,934 337,624 2,785,439
=========== ============ ============
Class B................................. 1,042,681 472,344 3,065,304
=========== ============ ============
Class C................................. 410,623 186,523 724,500
=========== ============ ============
Class O................................. 229,240 8,439,551 28,769,364
=========== ============ ============
NET ASSET VALUE:
CLASS A SHARES
Net asset value and redemption price per
share.................................. $ 5.69 $ 23.43 $ 23.10
=========== ============ ============
Maximum offering price per share (based
on maximum sales charge of 4.75%,
except Cash Management Fund and New
York Municipal Money Fund)............. $ 5.97 $ 24.60 $ 24.25
=========== ============ ============
CLASS B SHARES
Net asset value and offering price per
share *................................ $ 5.64 $ 23.20 $ 22.93
=========== ============ ============
CLASS C SHARES
Net asset value and offering price per
share *................................ $ 5.63 $ 23.22 $ 22.94
=========== ============ ============
CLASS O SHARES
Net asset value, offering price and
redemption price per share............. $ 5.71 $ 23.53 $ 23.15
=========== ============ ============
Note A: Cost of investments............. $17,045,768 $185,254,623 $518,786,158
=========== ============ ============
</TABLE>
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
72 See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
NATIONAL U.S. NEW YORK CASH
TOTAL HIGH YIELD STRATEGIC INTERMEDIATE GOVERNMENT MUNICIPAL MANAGEMENT
RETURN FUND BOND FUND BOND FUND MUNICIPAL FUND INCOME FUND MONEY FUND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$197,586,073 $649,028,652 $105,732,931 $16,192,071 $15,215,808 $245,328,140 $25,958,608
32,973,000 16,190,000 26,419,000 -- 2,181,000 -- 175,000
471 779 3,188 99,321 667 747,712 286
51,610 1,047,969 11,316 -- 27,977 -- --
982,859 2,902,465 927,983 348,471 43,343 193,069 --
1,567,158 12,999,199 1,633,650 279,501 124,402 1,947,288 366,910
-- -- -- 32,582 31,492 -- --
42,075 48,564 48,740 38,510 39,868 -- --
-- -- 80,078 -- -- -- --
37,290 169,139 29,676 15,388 15,541 12,636 15,757
------------ ------------ ------------ ----------- ----------- ------------ -----------
233,240,536 682,386,767 134,886,562 17,005,844 17,680,098 248,228,845 26,516,561
------------ ------------ ------------ ----------- ----------- ------------ -----------
18,921,800 4,559,323 25,948,401 505,506 2,619,358 -- --
-- -- -- -- -- -- --
3,167,194 -- -- -- -- -- --
458,371 3,376,013 201,167 1,475 29,532 801,210 219,979
91,106 2,729,937 306,723 45,997 50,444 19,214 87,375
41,267 398,447 51,233 -- -- 41,648 1,896
394,573 1,299,227 217,893 7,060 11,170 -- --
-- -- -- -- -- -- --
88,860 291,740 39,047 12,115 14,055 281,790 21,942
------------ ------------ ------------ ----------- ----------- ------------ -----------
23,163,171 12,654,687 26,764,464 572,153 2,724,559 1,143,862 331,192
------------ ------------ ------------ ----------- ----------- ------------ -----------
$210,077,365 $669,732,080 $108,122,098 $16,433,691 $14,955,539 $247,084,983 $26,185,369
============ ============ ============ =========== =========== ============ ===========
$188,764,308 $680,542,247 $108,444,399 $15,756,847 $14,659,103 $247,324,167 $26,187,840
459,891 (754,357) (427,996) (11,724) (16,581) -- --
4,891,353 1,862,214 896,117 (2,529) 123,079 (239,184) (2,471)
15,961,813 (11,918,024) (790,422) 691,097 189,938 -- --
------------ ------------ ------------ ----------- ----------- ------------ -----------
$210,077,365 $669,732,080 $108,122,098 $16,433,691 $14,955,539 $247,084,983 $26,185,369
============ ============ ============ =========== =========== ============ ===========
$ 58,864,178 $187,754,386 $ 21,808,291 $ 1,985,269 $ 2,366,217 $ 5,337,724 $11,364,146
============ ============ ============ =========== =========== ============ ===========
$117,640,313 $378,926,598 $ 60,892,091 $ 1,836,481 $ 3,216,087 $ 25,000 $ 3,717,814
============ ============ ============ =========== =========== ============ ===========
$ 31,824,659 $100,631,152 $ 25,014,534 $ 1,723,024 $ 1,258,724 $ 25,000 $ 906,431
============ ============ ============ =========== =========== ============ ===========
$ 1,748,215 $ 2,419,944 $ 407,182 $10,888,917 $ 8,114,511 $241,697,259 $10,196,978
============ ============ ============ =========== =========== ============ ===========
4,293,877 16,438,237 2,024,562 187,517 230,971 5,337,871 11,364,292
============ ============ ============ =========== =========== ============ ===========
8,598,574 33,271,498 5,658,500 174,037 313,954 25,000 3,717,862
============ ============ ============ =========== =========== ============ ===========
2,320,337 8,839,822 2,323,396 163,263 122,953 25,000 906,448
============ ============ ============ =========== =========== ============ ===========
126,804 211,749 37,826 1,029,245 792,462 241,937,153 10,199,238
============ ============ ============ =========== =========== ============ ===========
$ 13.71 $ 11.42 $ 10.77 $ 10.59 $ 10.24 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 14.39 $ 11.99 $ 11.31 $ 11.12 $ 10.75 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 13.68 $ 11.39 $ 10.76 $ 10.55 $ 10.24 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 13.72 $ 11.38 $ 10.77 $ 10.55 $ 10.24 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$ 13.79 $ 11.43 $ 10.76 $ 10.58 $ 10.24 $ 1.00 $ 1.00
============ ============ ============ =========== =========== ============ ===========
$181,624,260 $660,790,266 $106,584,534 $15,500,974 $15,025,870 $245,328,140 $25,958,608
============ ============ ============ =========== =========== ============ ===========
</TABLE>
See accompanying notes to financial statements
73
<PAGE>
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
ASIA
GROWTH CAPITAL INVESTORS
FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME:
Interest............................... $ 24,985 $ 655,950 $ 1,108,797
Dividends (Note A)..................... 180,966 1,046,599 4,816,891
----------- ----------- -----------
205,951 1,702,549 5,925,688
EXPENSES:
Management fee......................... 67,638 889,274 1,958,214
Custody and administration fees........ 108,600 35,784 35,689
Shareholder services................... 29,322 43,078 258,106
Registration and filing fees........... 19,418 21,901 26,064
Amortization of organization expenses.. 11,155 -- --
Legal.................................. 5,068 23,530 27,512
Directors' fees and expenses........... 1,448 33,666 38,734
Printing............................... 905 14,299 52,128
Audit and tax return preparation fees.. 905 31,313 27,693
Other.................................. 4,707 17,374 30,769
----------- ----------- -----------
249,166 1,110,219 2,454,909
Management fee waived and expenses
absorbed by investment advisor........ (165,463) -- --
Credits earned from custodian on cash
balances.............................. -- (8) (183)
----------- ----------- -----------
83,703 1,110,211 2,454,726
Distribution and service fees:
Class A Shares......................... 8,654 7,342 72,620
Class B Shares......................... 32,560 36,296 300,454
Class C Shares......................... 11,028 16,335 70,878
----------- ----------- -----------
Net expenses........................... 135,945 1,170,184 2,898,678
----------- ----------- -----------
NET INVESTMENT INCOME.................. 70,006 532,365 3,027,010
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (Note B)................... (3,770,777) 23,620,126 64,269,823
Options written........................ -- 8,175 --
Foreign currency transactions.......... (203,083) (47) (3,229)
----------- ----------- -----------
(3,973,860) 23,628,254 64,266,594
----------- ----------- -----------
Net change in unrealized appreciation
(depreciation) on:
Investments............................ (1,064,552) 5,121,954 20,927,678
Foreign currency transactions and other
assets................................ 21,068 173 74,662
----------- ----------- -----------
(1,043,484) 5,122,127 21,002,340
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS)................................ (5,017,344) 28,750,381 85,268,934
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSET
FROM OPERATIONS....................... $(4,947,338) $29,282,746 $88,295,944
=========== =========== ===========
Note A: Net of foreign withholding tax
of:................................... $ 9,763 $ 4,320 $ 106,218
=========== =========== ===========
Note B: Net of foreign withholding tax
of:................................... $ 58,883 $ -- $ --
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
74
<PAGE>
<TABLE>
<CAPTION>
NATIONAL U.S. NEW YORK CASH
TOTAL HIGH YIELD STRATEGIC INTERMEDIATE GOVERNMENT MUNICIPAL MANAGEMENT
RETURN FUND BOND FUND BOND FUND MUNICIPAL FUND INCOME FUND MONEY FUND FUND
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,341,197 $ 31,925,327 $ 4,031,759 $380,205 $448,688 $5,219,865 $988,047
1,381,461 91,248 -- -- -- -- --
- ----------- ------------ ----------- -------- -------- ---------- --------
4,722,658 32,016,575 4,031,759 380,205 448,688 5,219,865 988,047
519,941 2,371,987 366,074 36,971 42,271 284,098 34,653
124,971 358,657 74,898 11,715 15,020 282,914 29,621
109,324 277,111 55,748 24,616 24,978 67,648 30,589
32,352 94,683 25,888 16,227 15,807 9,405 22,677
9,483 14,603 14,654 11,579 11,986 -- --
7,602 8,507 1,267 181 181 3,077 543
1,991 1,448 1,448 1,448 1,448 1,448 1,448
14,480 45,793 7,421 1,086 905 25,385 1,991
15,747 57,377 11,403 1,629 1,448 47,512 3,801
6,515 13,213 5,430 1,990 1,991 4,525 2,897
- ----------- ------------ ----------- -------- -------- ---------- --------
842,406 3,243,379 564,231 107,442 116,035 726,012 128,220
(282,353) (112,183) (80,989) (69,553) (73,763) -- (32,757)
(28) (173) (24) (882) (11) (712) (168)
- ----------- ------------ ----------- -------- -------- ---------- --------
560,025 3,131,023 483,218 37,007 42,261 725,300 95,295
71,344 226,715 24,987 1,839 2,171 -- --
520,467 1,801,125 272,283 7,676 13,426 -- --
131,776 442,972 112,967 2,876 5,050 -- --
- ----------- ------------ ----------- -------- -------- ---------- --------
1,283,612 5,601,835 893,455 49,398 62,908 725,300 95,295
- ----------- ------------ ----------- -------- -------- ---------- --------
3,439,046 26,414,740 3,138,304 330,807 385,780 4,494,565 892,752
- ----------- ------------ ----------- -------- -------- ---------- --------
4,234,209 1,983,511 705,218 -- 127,545 (856) (271)
-- -- -- -- -- -- --
66,330 -- 54,074 -- -- -- --
- ----------- ------------ ----------- -------- -------- ---------- --------
4,300,539 1,983,511 759,292 -- 127,545 (856) (271)
- ----------- ------------ ----------- -------- -------- ---------- --------
2,623,835 (20,132,875) (2,134,425) (26,688) (39,628) -- --
(19) -- 6,821 -- -- -- --
- ----------- ------------ ----------- -------- -------- ---------- --------
2,623,816 (20,132,875) (2,127,604) (26,688) (39,628) -- --
- ----------- ------------ ----------- -------- -------- ---------- --------
6,924,355 (18,149,364) (1,368,312) (26,688) 87,917 (856) (271)
- ----------- ------------ ----------- -------- -------- ---------- --------
$10,363,401 $ 8,265,376 $ 1,769,992 $304,119 $473,697 $4,493,709 $892,481
=========== ============ =========== ======== ======== ========== ========
$ 15,111 $ -- $ -- $ -- $ -- $ -- $ --
=========== ============ =========== ======== ======== ========== ========
$ -- $ -- $ -- $ -- $ -- $ -- $ --
=========== ============ =========== ======== ======== ========== ========
</TABLE>
See accompanying notes to financial statements
75
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
ASIA
GROWTH CAPITAL INVESTORS
FUND FUND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 70,006 $ 532,365 $ 3,027,010
Net realized gain (loss) on
investments, options, and foreign
currency transactions................ (3,973,860) 23,628,254 64,266,594
Net change in unrealized appreciation
(depreciation) on investments,
options, foreign currency
transactions and other assets........ (1,043,484) 5,122,127 21,002,340
----------- ------------ ------------
Net increase (decrease) in net assets
from operations...................... (4,947,338) 29,282,746 88,295,944
----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment income:
Class A.............................. -- (5,320) (91,602)
Class B.............................. -- (1,750) --
Class C.............................. -- -- --
Class O.............................. -- (380,954) (1,371,792)
----------- ------------ ------------
-- (388,024) (1,463,394)
----------- ------------ ------------
Distributions from net realized gains:
Class A.............................. -- (272,758) (1,362,082)
Class B.............................. -- (345,158) (1,448,387)
Class C.............................. -- (141,699) (338,856)
Class O.............................. -- (7,515,562) (14,569,969)
----------- ------------ ------------
-- (8,275,177) (17,719,294)
----------- ------------ ------------
NET FUND CAPITAL SHARE TRANSACTIONS:
Class A.............................. 1,269,136 1,790,623 2,159,923
Class B.............................. 2,076,632 6,619,251 15,717,360
Class C.............................. 1,332,873 1,671,277 3,776,577
Class O.............................. 1,366,863 3,811,637 (440,431)
----------- ------------ ------------
Net increase (decrease) in net assets
from share transactions............. 6,045,504 13,892,788 21,213,429
----------- ------------ ------------
NET INCREASE (DECREASE) IN NET
ASSETS............................... 1,098,166 34,512,333 90,326,685
NET ASSETS:
Beginning of period.................. 14,282,885 187,263,797 726,992,851
----------- ------------ ------------
End of period (a).................... $15,381,051 $221,776,130 $817,319,536
=========== ============ ============
(a) Including undistributed net
investment income or (distributions
in
excess of net investment income)
of:................................. $ 70,197 $ 529,899 $ 1,727,908
=========== ============ ============
</TABLE>
See accompanying notes to financial statements
76
<PAGE>
<TABLE>
<CAPTION>
NATIONAL U.S. NEW YORK CASH
TOTAL HIGH YIELD STRATEGIC INTERMEDIATE GOVERNMENT MUNICIPAL MANAGEMENT
RETURN FUND BOND FUND BOND FUND MUNICIPAL FUND INCOME FUND MONEY FUND FUND
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 3,439,046 $ 26,414,740 $ 3,138,304 $ 330,807 $ 385,780 $ 4,494,565 $ 892,752
4,300,539 1,983,511 759,292 -- 127,545 (856) (271)
2,623,816 (20,132,875) (2,127,604) (26,688) (39,628) -- --
------------ ------------ ------------ ----------- ----------- ------------ ------------
10,363,401 8,265,376 1,769,992 304,119 473,697 4,493,709 892,481
------------ ------------ ------------ ----------- ----------- ------------ ------------
(1,060,870) (8,281,154) (775,050) (33,142) (49,684) (71,659) (391,878)
(1,610,271) (15,073,593) (1,915,246) (29,692) (66,819) (394) (102,686)
(405,752) (3,704,776) (794,836) (10,979) (25,137) (394) (33,974)
(30,209) (109,574) (23,308) (268,718) (260,721) (4,422,118) (364,214)
------------ ------------ ------------ ----------- ----------- ------------ ------------
(3,107,102) (27,169,097) (3,508,440) (342,531) (402,361) (4,494,565) (892,752)
------------ ------------ ------------ ----------- ----------- ------------ ------------
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
------------ ------------ ------------ ----------- ----------- ------------ ------------
-- -- -- -- -- -- --
------------ ------------ ------------ ----------- ----------- ------------ ------------
3,381,300 23,366,719 5,018,953 926,325 1,038,830 1,529,837 (6,882,086)
26,243,694 59,915,304 13,948,397 543,987 671,150 -- (433,475)
9,843,222 27,434,914 5,190,463 1,211,539 503,613 -- (899,729)
467,147 98,473 (237,293) (368,035) (1,484,255) (63,720,851) (9,674,758)
------------ ------------ ------------ ----------- ----------- ------------ ------------
39,935,363 110,815,410 23,920,520 2,313,816 729,338 (62,191,014) (17,890,048)
------------ ------------ ------------ ----------- ----------- ------------ ------------
47,191,662 91,911,689 22,182,072 2,275,404 800,674 (62,191,870) (17,890,319)
162,885,703 577,820,391 85,940,026 14,158,287 14,154,865 309,276,853 44,075,688
------------ ------------ ------------ ----------- ----------- ------------ ------------
$210,077,365 $669,732,080 $108,122,098 $16,433,691 $14,955,539 $247,084,983 $ 26,185,369
============ ============ ============ =========== =========== ============ ============
$ 459,891 $ (754,357) $ (427,996) $ (11,724) $ (16,581) $ -- $ --
============ ============ ============ =========== =========== ============ ============
</TABLE>
See accompanying notes to financial statements
77
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
ASIA
GROWTH CAPITAL INVESTORS
FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss)......... $ (12,780) $ 387,192 $ 6,928,901
Net realized gain (loss) on
investments, options, and foreign
currency transactions............... (3,746,816) 34,136,203 86,488,758
Net change in unrealized appreciation
(depreciation) on investments,
foreign currency transactions and
other assets........................ (2,160,805) 4,077,726 55,513,413
----------- ------------ ------------
Net increase (decrease) in net assets
from operations..................... (5,920,401) 38,601,121 148,931,072
----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment income:
Class A............................. (11,004) -- (394,641)
Class B............................. (924) -- (127,662)
Class C............................. (213) -- (31,038)
Class O............................. (478) -- (6,411,465)
----------- ------------ ------------
(12,619) -- (6,964,806)
----------- ------------ ------------
Dividends in excess of net investment
income:
Class A............................. -- -- --
Class B............................. -- -- --
Class C............................. -- -- --
Class O............................. -- -- --
----------- ------------ ------------
-- -- --
----------- ------------ ------------
Distributions from net realized
gains:
Class A............................. (104,353) (718,602) (5,343,337)
Class B............................. (89,299) (465,526) (4,567,031)
Class C............................. (11,184) (273,465) (1,068,601)
Class O............................. (4,097) (27,201,307) (63,545,388)
----------- ------------ ------------
(208,933) (28,658,900) (74,524,357)
----------- ------------ ------------
NET FUND CAPITAL SHARE TRANSACTIONS:
Class A............................. 5,542,052 5,435,106 44,549,064
Class B............................. 5,069,723 3,847,103 38,690,707
Class C............................. 2,131,854 2,353,927 9,264,215
Class O............................. 455,841 29,050,070 26,389,130
----------- ------------ ------------
Net increase in net assets from
share transactions................. 13,199,470 40,686,206 118,893,116
----------- ------------ ------------
NET INCREASE IN NET ASSETS........... 7,057,517 50,628,427 186,335,025
NET ASSETS:
Beginning of year................... 7,225,368 136,635,370 540,657,826
----------- ------------ ------------
End of year (a)..................... $14,282,885 $187,263,797 $726,992,851
=========== ============ ============
(a) Including undistributed net
investment income or (distributions
in
excess of net investment income
of):............................... $ 191 $ 385,558 $ 164,292
=========== ============ ============
</TABLE>
See accompanying notes to financial statements
78
<PAGE>
<TABLE>
<CAPTION>
NATIONAL U.S. NEW YORK CASH
TOTAL HIGH YIELD STRATEGIC INTERMEDIATE GOVERNMENT MUNICIPAL MANAGEMENT
RETURN FUND BOND FUND BOND FUND MUNICIPAL FUND INCOME FUND MONEY FUND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 4,062,152 $ 31,253,132 $ 3,650,788 $ 601,238 $ 748,817 $ 8,313,827 $ 1,548,291
4,262,532 8,465,196 1,712,925 (2,529) 63,896 (13,552) (76)
8,999,845 969,040 373,007 371,912 181,947 -- --
------------ ------------ ----------- ----------- ----------- ------------ -----------
17,324,529 40,687,368 5,736,720 970,621 994,660 8,300,275 1,548,215
------------ ------------ ----------- ----------- ----------- ------------ -----------
(1,558,218) (10,420,856) (1,143,614) (37,285) (71,481) (79,283) (569,373)
(1,977,475) (17,332,825) (2,042,725) (38,708) (75,368) (1,701) (189,375)
(392,855) (3,341,225) (771,855) (19,762) (20,511) (849) (66,693)
(40,279) (158,226) (42,923) (507,057) (522,724) (8,231,994) (722,850)
------------ ------------ ----------- ----------- ----------- ------------ -----------
(3,968,827) (31,253,132) (4,001,117) (602,812) (690,084) (8,313,827) (1,548,291)
------------ ------------ ----------- ----------- ----------- ------------ -----------
-- (48,331) -- (417) -- -- --
-- (80,388) -- (432) -- -- --
-- (15,496) -- (221) -- -- --
-- (734) -- (5,664) -- -- --
------------ ------------ ----------- ----------- ----------- ------------ -----------
-- (144,949) -- (6,734) -- -- --
------------ ------------ ----------- ----------- ----------- ------------ -----------
(1,198,304) (2,590,594) (271,871) (526) (13,129) -- --
(2,114,495) (4,997,854) (720,497) (603) (22,138) -- --
(465,720) (1,121,874) (300,522) (380) (6,321) -- --
(31,374) (35,848) (9,827) (7,141) (91,288) -- --
------------ ------------ ----------- ----------- ----------- ------------ -----------
(3,809,893) (8,746,170) (1,302,717) (8,650) (132,876) -- --
------------ ------------ ----------- ----------- ----------- ------------ -----------
28,181,302 103,283,278 8,671,695 340,899 115,262 3,448,121 10,071,260
54,654,942 222,507,647 33,410,343 567,070 1,240,773 -- 231,259
16,777,707 62,616,274 15,575,013 33,963 324,948 -- 1,371,294
917,192 1,971,786 (3,177,357) 1,211,479 51,765 31,698,249 5,646,570
------------ ------------ ----------- ----------- ----------- ------------ -----------
100,531,143 390,378,985 54,479,694 2,153,411 1,732,748 35,146,370 17,320,383
------------ ------------ ----------- ----------- ----------- ------------ -----------
110,076,952 390,922,102 54,912,580 2,505,836 1,904,448 35,132,818 17,320,307
52,808,751 186,898,289 31,027,446 11,652,451 12,250,417 274,144,035 26,755,381
------------ ------------ ----------- ----------- ----------- ------------ -----------
$162,885,703 $577,820,391 $85,940,026 $14,158,287 $14,154,865 $309,276,853 $44,075,688
============ ============ =========== =========== =========== ============ ===========
$ 127,947 $ -- $ (57,860) $ -- $ -- $ -- $ --
============ ============ =========== =========== =========== ============ ===========
</TABLE>
See accompanying notes to financial statements
79
<PAGE>
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
U.S.
STRATEGIC GOVERNMENT
BOND FUND INCOME FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from (Purchases of) short-term portfolio
investments, net.................................. $ (5,968,000) $ 920,000
Purchases of long-term portfolio investments....... (75,887,527) (9,197,898)
Proceeds from disposition of long-term portfolio
investments and principal paydowns................ 58,936,103 7,605,602
------------ -----------
(22,919,424) (672,296)
Net investment income.............................. 3,138,304 385,780
Net amortization of premium/discount on
investments....................................... (328,998) 2,395
Amortization of organization expenses.............. 14,654 11,986
Net change is receivables/payables related to
operations........................................ (385,665) 30,649
------------ -----------
Net cash flows used by operating activities........ (20,481,129) (241,486)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares sold.......................... 34,933,825 4,007,459
Payments on shares redeemed........................ (12,668,903) (3,399,643)
Cash dividends paid................................ (1,784,021) (366,509)
------------ -----------
Net cash flows provided by financing activities.... 20,480,901 241,307
------------ -----------
Net decrease in cash................................ (228) (179)
------------ -----------
Cash at beginning of period......................... 319 846
------------ -----------
Cash at end of period............................... $ 91 $ 667
============ ===========
</TABLE>
Note: Other non-cash activity includes mortgage dollar roll transactions. See
Note 1.
See accompanying notes to financial statements
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited)
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, the Salomon Brothers Investors Fund Inc (the
"Investors Fund") and the Salomon Brothers Capital Fund Inc (the "Capital
Fund"). The Series Funds were incorporated in Maryland on April 17, 1990 as an
open-end management investment company, and currently operate as a series
company comprised of ten portfolios: Salomon Brothers Asia Growth Fund (the
"Asia Growth Fund"), Salomon Brothers Small Cap Growth Fund (the "Small Cap
Fund"), Salomon Brothers Total Return Fund (the "Total Return Fund"), Salomon
Brothers High Yield Bond Fund (the "High Yield Bond Fund"), Salomon Brothers
Strategic Bond Fund (the "Strategic 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 New York Municipal Money Market Fund (the "New York
Municipal Money Fund"), Salomon Brothers Cash Management Fund (the "Cash
Management Fund"), and Salomon Brothers Institutional Money Market Fund (the
"Institutional Money Market Fund"). As of the date of this report the Small Cap
Fund had not yet commenced operations. Separate financial statements are
prepared for the Institutional Money Market Fund which is 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 and the Capital Fund, a non-diversified open-end management investment
company incorporated in Maryland on August 23, 1976. 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 Asia Growth Fund's objective is to seek
long-term capital appreciation; the Capital Fund's objective is to seek capital
appreciation through investments primarily in common stock, or securities
convertible into common stocks, which are believed to have above average price
appreciation potential; the Investors Fund's primary objective is to seek long-
term growth of capital; the Total Return Fund's primary objective is to obtain
above-average income (compared to a portfolio entirely invested in equity
securities); the High Yield Bond Fund's primary objective is to maximize
current income; the Strategic Bond Fund's primary objective is to seek a high
level of current income; the National Intermediate Municipal Fund's objective
is to seek a high level of current income which is exempt from regular federal
income taxes; the U.S. Government Income Fund's objective is to seek a high
level of current income; the New York Municipal Money Fund's objective is to
seek as high a level of current income exempt from federal income taxes, New
York State and New York City personal income taxes consistent with liquidity
and the stability of principal; 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.
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 investment operations. A summary of those expenditures that
remain as of June 30, 1998 for each Fund is as follows:
<TABLE>
<CAPTION>
FUND EXPIRATION OF AMORTIZATION AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
Asia Growth Fund............................ May 2001 $64,095
Total Return Fund........................... September 2000 $42,075
High Yield Bond Fund........................ February 2000 $48,564
Strategic Bond Fund......................... February 2000 $48,740
National Intermediate Municipal Fund........ February 2000 $38,510
U.S. Government Income Fund................. February 2000 $39,868
</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.
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
(A) INVESTMENT VALUATION. Portfolio securities listed or traded on national
securities exchanges, or reported on the NASDAQ national market system, are
valued at the last sale price, or if there have been no sales on that day, at
the mean of the current bid and asked price which represents the current value
of the security. Over-the-counter securities are valued at the mean of the
current bid and asked price. Debt securities are valued by using either market
quotations or independent pricing services which use prices provided by market-
makers or estimates of market values obtained from yield data relating to
instruments or securities with similar characteristics. Publicly traded
sovereign bonds are typically traded internationally on the over-the-counter
market and are valued at the mean of the last current bid and asked price as of
the close of business of that market. Short-term securities with less than 60
days remaining to maturity when acquired by a Fund are valued at amortized cost
which approximates market value. If a Fund, other than the New York Municipal
Money Fund and Cash Management Fund, acquires such securities with more than 60
days remaining to maturity, they are valued at current market value, until the
60th day prior to maturity, and are then valued on an amortized cost basis.
Portfolio securities for the New York Municipal Money Fund and 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.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging market countries, and the extent of
foreign investment in domestic companies may be subject to limitation in other
emerging market countries. Foreign ownership limitations also may be imposed by
the charters of individual companies in emerging market countries to prevent,
among other things, violation of foreign investment limitations. As a result,
an additional class of shares (identified as "Foreign Shares" in the Portfolio
of Investments) may be created and offered for investment by such companies.
The "local" and "foreign" shares' market values may differ.
Foreign securities quoted in a foreign currency are translated into U.S.
dollars using exchange rates at 2:30 p.m. Eastern time (12:30 p.m. for the Asia
Growth Fund), or at such other rates as SBAM may determine to be appropriate in
computing net asset value.
Securities for which reliable quotations or prices from pricing services are
not readily available (as may be the case for securities of limited
marketability) and all other assets are valued at their respective fair value
as determined in good faith by, or under procedures established by, the Board
of Directors.
(B) FUTURES CONTRACTS. The Asia Growth Fund, Capital Fund, Investors Fund,
Total Return Fund, High Yield Bond Fund, Strategic Bond Fund, and National
Intermediate Municipal Fund may enter into futures contracts, 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 is recognized. Outstanding contracts may 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 Total Return Fund, Strategic Bond Fund, and U.S.
Government Income 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
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
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 six months ended
June 30, 1998 was approximately $11,510,000, $23,695,000, and $2,786,000 for
the Total Return Fund, Strategic Bond Fund, and U.S. Government Income 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) REVERSE REPURCHASE AGREEMENTS. Certain Funds may enter into reverse
repurchase agreements in which a Fund sells portfolio securities and agrees to
repurchase them from the buyer at a particular date and price. Whenever a Fund
enters into a reverse repurchase agreement, it establishes a segregated account
consisting of liquid assets in an amount at least equal to the repurchase price
marked to market daily (including accrued interest), and subsequently monitors
the account to ensure that such equivalent value is maintained. A Fund pays
interest on amounts obtained pursuant to reverse repurchase agreements. Reverse
repurchase agreements are considered to be borrowings by a Fund. Transactions
in reverse repurchase agreements for the Funds during the six months ended June
30, 1998 were as follows:
<TABLE>
<CAPTION>
AVERAGE WEIGHTED MAXIMUM
DAILY AVERAGE AMOUNT
FUND BALANCE INTEREST RATE OUTSTANDING
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Return Fund.......................... $4,464,835 4.47% $6,281,063
Strategic Bond Fund........................ $5,302,500 3.46% $5,302,500
U.S. Government Income Fund................ $1,858,931 4.13% $2,466,750
</TABLE>
(G) FOREIGN CURRENCY TRANSLATION. The accounting records of each Fund are
maintained in U.S. dollars. Investment securities and other assets and
liabilities of the Asia Growth Fund, Capital Fund, Investors Fund, Total Return
Fund, High Yield Bond Fund, and Strategic Bond 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.
(H) FORWARD FOREIGN CURRENCY CONTRACTS. The Asia Growth Fund, Capital Fund,
Investors Fund, Total Return Fund, High Yield Bond Fund, and Strategic Bond
Fund may enter into forward foreign currency contracts. 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.
(I) LOAN PARTICIPATIONS. The Total Return Fund, High Yield Bond Fund, and
Strategic Bond 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 June 30, 1998 were
$40,151,002 and $2,936,547, respectively.
83
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
(J) FEDERAL INCOME TAXES. Each Fund has complied with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
distributed all of its income, including any net realized gains, to
shareholders. Therefore, no Federal income tax or excise tax provision is
required for such Funds.
(K) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment
income on the shares of each of the Funds (except the Asia Growth Fund,
Investors Fund, and Capital Fund) are declared each business day to
shareholders of record that day, and are paid on the last business day of the
month. Dividends from net investment income for the Asia Growth Fund and the
Capital Fund will be declared on an annual basis. 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,
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.
(L) 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.
(M) 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.
(N) OTHER. Investment transactions are recorded as of the trade date. Dividend
income is recorded on the ex-dividend date (except for the Asia Growth Fund,
where certain dividends may be recorded as soon as the Fund is informed of such
dividends). 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. Net investment income (other than
distribution fees), unrealized and realized gains or losses are allocated daily
to each class of shares based upon the relative proportion of each class's net
assets to the Fund's total net assets.
(O) 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 Total Return Fund, Strategic Bond Fund, and U.S. Government Income 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 Travelers Group
Inc. ("Travelers") to act as investment manager of each Fund, subject to the
supervision by the Board of Directors of each Fund. Each management agreement
with SBAM was most recently approved by shareholders at a special meeting held
on January 14, 1998. Approval of the agreements were necessary due to the
merger of Salomon Inc, which had been the ultimate parent company of the
investment manager, with and into Smith Barney Holdings Inc., a subsidiary of
Travelers, which occurred on November 28, 1997. On such date, Travelers became
the ultimate parent of SBAM.
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
SBAM furnishes the Investment Series with office space and certain 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 Capital Fund and Investors Fund) is payable monthly
and is based on the following annual percentages of each Fund's average daily
net assets: .80% for the Asia Growth Fund, .55% for the Total Return Fund, .75%
for the High Yield Bond Fund and Strategic Bond Fund, .50% for the National
Intermediate Municipal Fund, .60% for the U.S. Government Income Fund, .20% for
the New York Municipal Money Fund and Cash Management Fund. The management fee
for the Capital Fund is payable monthly and is based on the following annual
percentages of the Fund's average daily net assets: first $100 million--1%;
next $100 million--.75% ; next $200 million--.625%; excess over $400 million--
.50%. SBAM Limited, an affiliate of SBAM, provides certain advisory services to
SBAM for the benefit of the Strategic Bond Fund, as well as, certain
administrative services for the Asia Growth Fund. SBAM Limited is compensated
by SBAM at no additional expense to the Strategic Bond Fund and Asia Growth
Fund. SBAM has retained SBAM AP, an affiliate of SBAM, to act as sub-advisor to
the Asia Growth Fund. SBAM AP is compensated by SBAM at no additional expense
to the Asia Growth Fund.
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"). For the period
January 1, 1997 through April 28, 1997 the base fee was paid quarterly based on
the following annual percentages of the Fund's average daily net assets: first
$350 million--.50%; next $150 million--.40%; next $250 million--.375%; next
$250 million--.35%; excess over $1 billion--.30%. At its Annual Meeting on
April 29, 1997, the Fund's shareholders approved an amendment to the Fund's
Management Agreement between the Fund and SBAM to increase the base fee
component of the management fee. Accordingly, as of April 29, 1997, the base
fee is paid quarterly based on the following annual rates:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL FEE RATE
- -------------------------------------------------------------------------------
<S> <C>
First $350 million............................................. .650%
Next $150 million.............................................. .550%
Next $250 million.............................................. .525%
Next $250 million.............................................. .500%
Over $1 billion................................................ .450%
</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.
For the rolling one-year period ended March 31, 1998, the investment record of
the S&P 500 Index exceeded the Investors Fund's performance by approximately
nine percent. For the rolling one-year period ended June 30, 1998, the
investment record of the S&P 500 Index exceeded the Investors Fund's
performance by approximately eight percent. As a result, base management fees
were decreased, in aggregate, by $307,143 for the six months ended June 30,
1998.
For the six months ended June 30, 1998, SBAM waived management fees of $67,638,
$282,353, $112,183, $80,989, $36,971, $42,271 and $32,757 for the Asia Growth
Fund, Total Return Fund, High Yield Bond Fund, Strategic Bond Fund, National
Intermediate Municipal Fund, U.S. Government Income Fund, and Cash Management
Fund, respectively, and voluntarily absorbed expenses of $97,825, $32,582, and
$31,492 for the Asia Growth Fund, National Intermediate Municipal Fund, and
U.S. Government Income Fund, respectively.
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 six months ended June 30, 1998,
credits earned on outstanding cash balances were used to reduce custodian fees.
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
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 New York Municipal Money Fund and 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 New York
Municipal Money Fund and 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 $21,900, $14,952, and $3,600 were paid by the Capital
Fund, Investors Fund, and Total Return Fund, respectively, to Smith Barney Inc.
Salomon Brothers received $223,926 as its portion of the front-end sales charge
on sales of Class A shares of the Funds during the six months ended June 30,
1998. In addition, contingent deferred sales charges of $1,040,681 were paid to
Salomon Brothers in connection with redemptions of certain Class B and Class C
shares of the Funds during the six months ended June 30, 1998.
3. CAPITAL STOCK
At June 30, 1998, the Series Funds had 10,000,000,000 shares of authorized
capital stock, par value $.001 per share, of which the High Yield Bond Fund,
Strategic Bond Fund, National Intermediate Municipal Fund, U.S. Government
Income Fund, New York Municipal Money Fund, and Cash Management Fund, each had
1,000,000,000 shares authorized. The Asia Growth Fund and Total Return Fund had
1,000,000,008 and 999,999,992 shares authorized, respectively. The Investors
Fund had 50,000,000 shares of authorized capital stock, par value $1.00 per
share. The Capital Fund had 25,000,000 shares of authorized capital stock, par
value $.001 per share. Transactions in Fund shares for the periods indicated
were as follows:
86
<PAGE>
[This page intentionally left blank]
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997 JUNE 30, 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASIA GROWTH FUND
Sold............ 538,592 $ 3,979,873 784,262 $ 8,043,748 413,821 $ 3,010,563 587,102 $ 6,015,329
Issued as
reinvestment... -- -- 4,663 47,952 -- -- 2,762 28,865
Redeemed........ (372,191) (2,710,737) (279,337) (2,549,648) (142,370) (933,931) (125,319) (974,471)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase.... 166,401 $ 1,269,136 509,588 $ 5,542,052 271,451 $ 2,076,632 464,545 $ 5,069,723
=========== ============ =========== ============ ========== ============ ========== ============
CAPITAL FUND
Sold............ 574,534 $ 13,334,158 244,014 $ 5,395,246 289,019 $ 6,585,624 170,314 $ 3,845,395
Issued as
reinvestment... 11,333 260,661 32,960 686,354 13,493 308,988 20,010 414,792
Redeemed........ (512,515) (11,804,196) (29,990) (646,494) (11,986) (275,361) (19,507) (413,084)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase.... 73,352 $ 1,790,623 246,984 $ 5,435,106 290,526 $ 6,619,251 170,817 $ 3,847,103
=========== ============ =========== ============ ========== ============ ========== ============
INVESTORS FUND
Sold 1,712,958 $ 39,225,758 2,135,627 $ 44,955,334 792,592 $ 17,865,742 1,807,337 $ 37,583,157
Issued as
reinvestment... 61,121 1,392,847 270,764 5,490,289 56,653 1,282,392 210,840 4,248,456
Redeemed........ (1,694,037) (38,458,682) (278,167) (5,896,559) (154,873) (3,430,774) (147,459) (3,140,906)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 80,042 $ 2,159,923 2,128,224 $ 44,549,064 694,372 $ 15,717,360 1,870,718 $ 38,690,707
=========== ============ =========== ============ ========== ============ ========== ============
TOTAL RETURN FUND
Sold............ 981,132 $ 13,347,746 2,997,984 $ 37,786,536 2,204,372 $ 30,069,177 4,353,173 $ 55,268,487
Issued as
reinvestment... 63,808 874,281 186,260 2,398,523 98,622 1,349,577 278,060 3,583,557
Redeemed........ (788,460) (10,840,727) (932,424) (12,003,757) (379,174) (5,175,060) (329,620) (4,197,102)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase.... 256,480 $ 3,381,300 2,251,820 $ 28,181,302 1,923,820 $ 26,243,694 4,301,613 $ 54,654,942
=========== ============ =========== ============ ========== ============ ========== ============
HIGH YIELD BOND
FUND
Sold............ 3,527,145 $ 41,404,970 10,472,612 $123,618,211 6,317,494 $ 73,978,821 19,202,042 $226,221,650
Issued as
reinvestment... 360,463 4,219,932 649,010 7,635,569 503,487 5,879,766 858,730 10,077,323
Redeemed........ (1,901,775) (22,258,183) (2,381,823) (27,970,502) (1,705,322) (19,943,283) (1,171,254) (13,791,326)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase.... 1,985,833 $ 23,366,719 8,739,799 $103,283,278 5,115,659 $ 59,915,304 18,889,518 $222,507,647
=========== ============ =========== ============ ========== ============ ========== ============
STRATEGIC BOND
FUND
Sold............ 1,102,004 $ 12,103,852 1,926,700 $ 21,016,666 1,481,909 $ 16,217,590 3,148,600 $ 34,351,577
Issued as
reinvestment... 43,077 470,708 96,880 1,053,971 74,529 813,467 121,076 1,318,901
Redeemed........ (687,535) (7,555,607) (1,227,233) (13,398,942) (281,747) (3,082,660) (206,869) (2,260,135)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 457,546 $ 5,018,953 796,347 $ 8,671,695 1,274,691 $ 13,948,397 3,062,807 $ 33,410,343
=========== ============ =========== ============ ========== ============ ========== ============
NATIONAL
INTERMEDIATE
MUNICIPAL FUND
Sold............ 123,744 $ 1,309,642 38,594 $ 401,849 78,570 $ 826,918 58,555 $ 610,666
Issued as
reinvestment... 1,462 15,464 1,526 15,575 1,012 10,676 1,136 11,852
Redeemed........ (37,782) (398,781) (7,300) (76,525) (27,922) (293,607) (5,312) (55,448)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 87,424 $ 926,325 32,820 $ 340,899 51,660 $ 543,987 54,379 $ 567,070
=========== ============ =========== ============ ========== ============ ========== ============
U.S. GOVERNMENT
INCOME FUND
Sold............ 129,347 $ 1,323,399 103,116 $ 1,042,851 150,246 $ 1,536,334 186,691 $ 1,894,446
Issued as
reinvestment... 3,963 40,561 4,667 46,772 2,620 26,869 3,100 31,486
Redeemed........ (31,781) (325,130) (96,345) (974,361) (87,115) (892,053) (67,468) (685,159)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 101,529 $ 1,038,830 11,438 $ 115,262 65,751 $ 671,150 122,323 $ 1,240,773
=========== ============ =========== ============ ========== ============ ========== ============
NEW YORK
MUNICIPAL MONEY
FUND
Sold............ 2,046,964 $ 2,046,964 4,315,593 $ 4,315,593 -- -- 171,196 $ 171,196
Issued as
reinvestment... 71,259 71,259 78,317 78,317 -- -- 823 823
Redeemed........ (588,386) (588,386) (945,789) (945,789) -- -- (172,019) (172,019)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... 1,529,837 $ 1,529,837 3,448,121 $ 3,448,121 -- -- -- --
=========== ============ =========== ============ ========== ============ ========== ============
CASH MANAGEMENT
FUND
Sold............ 89,902,244 $ 89,902,244 49,364,779 $ 49,364,779 3,546,557 $ 3,546,557 7,072,814 $ 7,072,814
Issued as
reinvestment... 71,274 71,274 107,866 107,866 11,943 11,943 3,490 3,490
Redeemed........ (96,855,604) (96,855,604) (39,401,385) (39,401,385) (3,991,975) (3,991,975) (6,845,045) (6,845,045)
----------- ------------ ----------- ------------ ---------- ------------ ---------- ------------
Net increase
(decrease)..... (6,882,086) $ (6,882,086) 10,071,260 $ 10,071,260 (433,475) $ (433,475) 231,259 $ 231,259
=========== ============ =========== ============ ========== ============ ========== ============
</TABLE>
88
<PAGE>
<TABLE>
<CAPTION>
CLASS C CLASS O
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997 JUNE 30, 1998 DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
302,205 $ 2,106,824 217,343 $ 2,305,240 176,638 $ 1,383,189 52,094 $ 522,908
-- -- 922 9,436 -- -- 126 1,288
(112,482) (773,951) (21,244) (182,822) (2,270) (16,326) (9,331) (68,355)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
189,723 $ 1,332,873 197,021 $ 2,131,854 174,368 $ 1,366,863 42,889 $ 455,841
=========== ============ =========== ============ ============ ============= ============ =============
78,552 $ 1,795,189 109,650 $ 2,436,155 703,003 $ 15,788,163 1,515,840 $ 32,432,466
5,551 126,677 11,358 235,649 329,569 7,588,437 1,233,042 25,695,916
(11,050) (250,589) (14,069) (317,877) (857,272) (19,564,963) (1,324,112) (29,078,312)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
73,053 $ 1,671,277 106,939 $ 2,353,927 175,300 $ 3,811,637 1,424,770 $ 29,050,070
=========== ============ =========== ============ ============ ============= ============ =============
204,353 $ 4,612,358 439,633 $ 9,018,876 128,368 $ 2,839,506 327,714 $ 6,684,983
14,097 318,922 52,227 1,051,559 551,649 12,632,209 2,676,551 54,132,073
(51,006) (1,154,703) (38,639) (806,220) (697,455) (15,912,146) (1,648,238) (34,427,926)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
167,444 $ 3,776,577 453,221 $ 9,264,215 (17,438) $ (440,431) 1,356,027 $ 26,389,130
=========== ============ =========== ============ ============ ============= ============ =============
802,222 $ 11,014,909 1,375,162 $ 17,585,566 34,849 $ 480,096 71,228 $ 868,205
24,926 342,080 57,799 748,828 2,185 30,149 5,513 71,451
(110,427) (1,513,767) (120,112) (1,556,687) (3,137) (43,098) (1,766) (22,464)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
716,721 $ 9,843,222 1,312,849 $ 16,777,707 33,897 $ 467,147 74,975 $ 917,192
=========== ============ =========== ============ ============ ============= ============ =============
2,792,598 $ 32,681,648 5,448,642 $ 64,363,903 33,724 $ 395,591 154,852 $ 1,805,306
166,619 1,944,767 239,406 2,811,246 8,490 99,452 16,452 193,506
(616,195) (7,191,501) (386,476) (4,558,875) (33,561) (396,570) (2,315) (27,026)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
2,343,022 $ 27,434,914 5,301,572 $ 62,616,274 8,653 $ 98,473 168,989 $ 1,971,786
=========== ============ =========== ============ ============ ============= ============ =============
579,715 $ 6,343,220 1,482,086 $ 16,180,280 3,757 $ 41,217 28,853 $ 314,650
47,731 521,388 70,686 770,915 1,422 15,530 807 9,043
(152,877) (1,674,145) (126,672) (1,376,182) (26,730) (294,040) (323,232) (3,501,050)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
474,569 $ 5,190,463 1,426,100 $ 15,575,013 (21,551) $ (237,293) (293,572) $ (3,177,357)
=========== ============ =========== ============ ============ ============= ============ =============
117,482 $ 1,241,240 7,578 $ 79,000 13,673 $ 144,840 116,992 $ 1,204,429
504 5,326 948 9,844 3,036 32,135 3,593 37,613
(3,304) (35,027) (5,227) (54,881) (51,339) (545,010) (2,962) (30,563)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
114,682 $ 1,211,539 3,299 $ 33,963 (34,630) $ (368,035) 117,623 $ 1,211,479
=========== ============ =========== ============ ============ ============= ============ =============
108,956 $ 1,114,962 54,593 $ 553,880 3,864 $ 39,510 4,476 $ 45,019
1,528 15,631 815 8,233 332 3,403 674 6,756
(61,264) (626,980) (23,641) (237,165) (148,987) (1,527,168) (1) (10)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
49,220 $ 503,613 31,767 $ 324,948 (144,791) $ (1,484,255) 5,149 $ 51,765
=========== ============ =========== ============ ============ ============= ============ =============
-- -- -- -- 112,470,003 $ 112,470,003 305,993,355 $ 305,993,355
-- -- -- -- 4,298,842 4,298,842 8,071,455 8,071,455
-- -- -- -- (180,489,696) (180,489,696) (282,366,561) (282,366,561)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
-- -- -- -- (63,720,851) $ (63,720,851) 31,698,249 $ 31,698,249
=========== ============ =========== ============ ============ ============= ============ =============
15,445,471 $ 15,445,471 18,049,799 $ 18,049,799 19,922,287 $ 19,922,287 84,489,946 $ 84,489,946
8,281 8,281 9,406 9,406 217,910 217,910 471,121 471,121
(16,353,481) (16,353,481) (16,687,911) (16,687,911) (29,814,955) (29,814,955) (79,314,497) (79,314,497)
- ----------- ------------ ----------- ------------ ------------ ------------- ------------ -------------
(899,729) $ (899,729) 1,371,294 $ 1,371,294 (9,674,758) $ (9,674,758) 5,646,570 $ 5,646,570
=========== ============ =========== ============ ============ ============= ============ =============
</TABLE>
89
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
At June 30, 1998, Salomon Brothers owned approximately the following
percentages of total shares outstanding of the following Funds:
<TABLE>
<S> <C>
Asia Growth Fund............................................................ 18%
National Intermediate Municipal Fund........................................ 59%
</TABLE>
4. PORTFOLIO ACTIVITY
Cost of purchases and proceeds from sales of securities, excluding short-term
obligations, for the six months ended June 30, 1998, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Asia Growth Fund..................................... $ 35,949,358 $ 30,994,853
============ ============
Capital Fund......................................... $170,819,635 $154,612,085
============ ============
Investors Fund....................................... $252,398,007 $260,236,186
============ ============
Total Return Fund
U.S. Government Securities.......................... $ 26,260,820 $ 20,426,416
Other Investments................................... 83,952,753 48,208,124
------------ ------------
$110,213,573 $ 68,634,540
============ ============
High Yield Bond Fund................................. $329,200,534 $185,821,679
============ ============
Strategic Bond Fund
U.S. Government Securities.......................... $ 26,344,131 $ 22,257,906
Other Investments................................... 49,301,032 28,004,378
------------ ------------
$ 75,645,163 $ 50,262,284
============ ============
National Intermediate Municipal Fund................. $ 1,521,483 $ --
============ ============
U.S. Government Income Fund
U.S. Government Securities.......................... $ 8,332,693 $ 7,549,868
Other Investments................................... 612,604 83,251
------------ ------------
$ 8,945,297 $ 7,633,119
============ ============
</TABLE>
Transactions in options written for the Funds during the six months ended June
30, 1998 were as follows:
<TABLE>
<CAPTION>
CAPITAL FUND
------------------
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Options outstanding at December 31, 1997................... -- --
Options written............................................ (300) $(14,399)
Options terminated in closing purchase transactions........ 300 14,399
Options expired............................................ -- --
Options exercised.......................................... -- --
---- --------
Options outstanding at June 30, 1998....................... -- --
==== ========
</TABLE>
90
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
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 New York Municipal Money Fund and Cash Management Fund invest in money
market instruments maturing in thirteen months or less whose short-term credit
ratings are within the highest ratings categories of two nationally recognized
statistical rating organizations ("NRSROs") or if rated by only one NRSRO, that
NRSRO, or, if not rated, are believed by the investment manager to be of
comparable quality. The New York Municipal Money Fund pursues its investment
objective by investing at least 80% of its net assets in obligations that are
exempt from Federal income taxes and at least 65% of its net assets in
obligations that are exempt 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.
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.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
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 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. The risk in writing a put option is that the Fund may incur a
loss if the market price of the underlying security decreases and the option is
exercised. In addition, there is the risk that the Fund may not be able to
enter into a closing transaction because of an illiquid secondary market.
In connection with purchasing participations, the Fund generally will have no
right to enforce compliance by the borrower, and the Fund may not benefit
directly from any collateral supporting the loan in which it has purchased the
participation. As
91
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(unaudited) (concluded)
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.
6. TAX INFORMATION
At December 31, 1997, the Asia Growth Fund, National Intermediate Municipal
Fund, New York Municipal Money Fund, and Cash Management Fund had net capital
loss carry-forwards available to offset future capital gains as follows:
<TABLE>
<CAPTION>
NATIONAL NEW YORK
ASIA INTERMEDIATE MUNICIPAL CASH
YEAR OF GROWTH MUNICIPAL MONEY MANAGEMENT
EXPIRATION FUND FUND FUND FUND
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999........................... -- -- $ 64,677 $ 894
2000........................... -- -- 94,778 396
2001........................... -- -- -- 409
2002........................... -- -- 65,321 415
2003........................... -- -- -- --
2004........................... -- -- -- 10
2005........................... $2,724,760 $ 2,529 13,552 42
---------- ---------- ---------- ----------
$2,724,760 $ 2,529 $ 238,328 $ 2,166
========== ========== ========== ==========
</TABLE>
At June 30, 1998, the cost for Federal income tax purposes and gross unrealized
appreciation and depreciation in value of investments held in each Fund were as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asia Growth Fund........ $ 17,045,768 $ 96,604 $(3,227,806) $ (3,131,202)
Capital Fund............ 185,254,623 42,266,514 (11,324,633) 30,941,881
Investors Fund.......... 518,786,158 263,116,097 (15,440,507) 247,675,590
Total Return Fund....... 181,624,260 18,748,732 (2,786,919) 15,961,813
High Yield Bond Fund.... 660,790,266 13,595,174 (25,356,788) (11,761,614)
Strategic Bond Fund..... 106,584,534 1,479,897 (2,331,500) (851,603)
National Intermediate
Municipal Fund......... 15,500,974 691,757 (660) 691,097
U.S. Government Income
Fund................... 15,025,870 197,138 (7,200) 189,938
</TABLE>
92
<PAGE>
[This page intentionally left blank]
93
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
ASIA GROWTH FUND
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED YEAR PERIOD
JUNE 30, ENDED ENDED JUNE 30, ENDED ENDED
1998 DECEMBER 31, DECEMBER 31, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996(A) (UNAUDITED) 1997 1996(A)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 7.48 $10.32 $10.00 $ 7.44 $10.31 $10.00
------ ------ ------ ------ ------ ------
Net investment income
(loss)................. 0.04 0.03(S) 0.05(S) 0.01 (0.05)(S) 0.01(S)
Net gain (loss) on
investments (both
realized and
unrealized)............ (1.83) (2.59) 0.47 (1.81) (2.57) 0.46
------ ------ ------ ------ ------ ------
Total from investment
operations............ (1.79) (2.56) 0.52 (1.80) (2.62) 0.47
------ ------ ------ ------ ------ ------
Dividends from net
investment income...... -- (0.03) (0.05) -- 0.00 (0.01)
Distributions from net
realized gain on
investments............ -- (0.25) (0.15) -- (0.25) (0.15)
------ ------ ------ ------ ------ ------
Total dividends and
distributions......... -- (0.28) (0.20) -- (0.25) (0.16)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $ 5.69 $ 7.48 $10.32 $ 5.64 $ 7.44 $10.31
====== ====== ====== ====== ====== ======
Net assets, end of
period (thousands)..... $5,882 $6,491 $3,693 $5,876 $5,738 $3,163
Total return *.......... -23.9% -25.6% +5.2% -24.2% -26.1% +4.7%
Ratios to average net
assets:
Expenses............... 1.24%** 1.24% 1.24%** 1.99%** 1.99% 1.99%**
Net investment income.. 1.14%** 0.27% 0.90%** 0.44%** -0.48% 0.20%**
Portfolio turnover
rate................... 199% 294% 119% 199% 294% 119%
Before applicable 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............. $(0.03) $(0.23) $(0.18) $(0.05) $(0.30) $(0.23)
Expense ratio.......... 3.20%** 3.81% 5.50%** 3.95%** 4.56% 6.25%**
</TABLE>
CAPITAL FUND
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED YEAR PERIOD
JUNE 30, ENDED ENDED JUNE 30, ENDED ENDED
1998 DECEMBER 31, DECEMBER 31, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996(B) (UNAUDITED) 1997 1996(B)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $21.15 $19.88 $21.98 $ 21.01 $19.90 $21.98
------ ------ ------ ------- ------ ------
Net investment income
(loss)................. 0.03(S) 0.00 0.01(S) (0.04)(S) (0.07) (0.02)(S)
Net gain (loss) on
investments (both
realized and
unrealized)............ 3.18 5.10 1.54 3.14 5.01 1.56
------ ------ ------ ------- ------ ------
Total from investment
operations............ 3.21 5.10 1.55 3.10 4.94 1.54
------ ------ ------ ------- ------ ------
Dividends from net
investment income...... (0.02) -- (0.15) 0.00 -- (0.12)
Distributions from net
realized gain on
investments............ (0.91) (3.83) (3.50) (0.91) (3.83) (3.50)
Distributions in excess
of net realized gains.. -- -- -- -- -- --
------ ------ ------ ------- ------ ------
Total dividends and
distributions......... (0.93) (3.83) (3.65) (0.91) (3.83) (3.62)
------ ------ ------ ------- ------ ------
Net asset value, end of
period................. $23.43 $21.15 $19.88 $ 23.20 $21.01 $19.90
====== ====== ====== ======= ====== ======
Net assets, end of
period (thousands)..... $7,911 $5,589 $ 344 $10,957 $3,820 $ 219
Total return *.......... +15.2% +26.4% +7.7% +14.8% +25.6% +7.6%
Ratios to average net
assets:
Expenses............... 1.33%** 1.46% 1.88%** 2.08%** 2.20% 2.73%**
Net investment income.. 0.30%** -0.10% 0.18%** -0.35%** -0.94% -0.66%**
Portfolio turnover
rate................... 80% 159% 191% 80% 159% 191%
</TABLE>
(a) May 6, 1996, commencement of investment operations, through December 31,
1996.
(b) November 1, 1996, commencement of investment operations, through December
31, 1996.
(SPer)share information calculated using the average shares outstanding
method, which more accurately represents 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.
94 See accompanying notes to financial statements
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED YEAR PERIOD
JUNE 30, ENDED ENDED JUNE 30, ENDED ENDED
1998 DECEMBER 31, DECEMBER 31, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996(A) (UNAUDITED) 1997 1996(A)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 7.44 $10.30 $10.00 $ 7.50 $10.32 $10.00
------ ------ ------ ------ ------ ------
0.01 (0.05)(S) 0.01(S) 0.05 0.05(S) 0.07(S)
(1.82) (2.56) 0.45 (1.84) (2.59) 0.46
------ ------ ------ ------ ------ ------
(1.81) (2.61) 0.46 (1.79) (2.54) 0.53
------ ------ ------ ------ ------ ------
-- 0.00 (0.01) -- (0.03) (0.06)
-- (0.25) (0.15) -- (0.25) (0.15)
------ ------ ------ ------ ------ ------
-- (0.25) (0.16) -- (0.28) (0.21)
------ ------ ------ ------ ------ ------
$ 5.63 $ 7.44 $10.30 $ 5.71 $ 7.50 $10.32
====== ====== ====== ====== ====== ======
$2,314 $1,643 $ 246 $1,310 $ 412 $ 124
-24.2% -26.0% +4.6% -23.9% -25.3% +5.3%
1.99%** 1.99% 2.00%** 0.99%** 0.99% 0.99%**
0.50%** -0.47% 0.08%** 1.69%** 0.51% 1.21%**
199% 294% 119% 199% 294% 119%
$(0.04) $(0.30) $(0.20) $(0.01) $(0.20) $(0.18)
3.95%** 4.56% 6.26%** 2.95%** 3.56% 5.25%**
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED
JUNE 30, ENDED ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1998 DECEMBER 31, DECEMBER 31, 1998 -------------------------------------------------
(UNAUDITED) 1997 1996(B) (UNAUDITED) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$21.02 $19.91 $21.98 $ 21.23 $ 19.88 $ 18.67 $ 15.62 $ 20.80 $19.64
------ ------ ------ -------- -------- -------- -------- ------- --------
(0.04)(S) (0.06) (0.02)(S) 0.06(S) 0.05 0.13(S) 0.14 0.03 0.028
3.15 5.00 1.57 3.20 5.13 5.70 5.27 (2.87) 3.242
------ ------ ------ -------- -------- -------- -------- ------- --------
3.11 4.94 1.55 3.26 5.18 5.83 5.41 (2.84) 3.27
------ ------ ------ -------- -------- -------- -------- ------- --------
0.00 -- (0.12) (0.05) -- (0.15) (0.14) (0.03) (0.035)
(0.91) (3.83) (3.50) (0.91) (3.83) (4.47) (2.22) (1.51) (2.075)
-- -- -- -- -- -- -- (0.80) --
------ ------ ------ -------- -------- -------- -------- ------- --------
(0.91) (3.83) (3.62) (0.96) (3.83) (4.62) (2.36) (2.34) (2.11)
------ ------ ------ -------- -------- -------- -------- ------- --------
$23.22 $21.02 $19.91 $ 23.53 $ 21.23 $ 19.88 $ 18.67 $ 15.62 $20.80
====== ====== ====== ======== ======== ======== ======== ======= ========
$4,330 $2,385 $ 130 $198,578 $175,470 $135,943 $102,429 $86,704 $113,905
+14.9% +25.6% +7.7% +15.4% +26.8% +33.3% +34.9% -14.2% +17.2%
2.08%** 2.21% 2.45%** 1.08%** 1.22% 1.38% 1.36% 1.30% 1.31%
-0.38%** -0.91% -0.50%** 0.57%** 0.26% 0.67% 0.74% 0.12% 0.13%
80% 159% 191% 80% 159% 191% 217% 152% 104%
</TABLE>
See accompanying notes to financial statements
95
<PAGE>
FINANCIAL HIGHLIGHTS
(continued)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
INVESTORS FUND
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
----------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED DECEMBER 31,
1998 --------------------------- 1998 --------------------------
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 21.11 $ 18.89 $ 16.62 $ 13.61 $ 21.00 $ 18.86 $ 16.61 $ 13.61
------- -------- -------- ------- ------- -------- ------- -------
Net investment income
(loss)................. 0.07 0.16 0.19 0.19 (0.01) 0.04 0.08 0.10
Net gain (loss) on
investments (both
realized and
unrealized)............ 2.46 4.64 4.63 4.55 2.45 4.58 4.60 4.54
------- -------- -------- ------- ------- -------- ------- -------
Total from investment
operations............ 2.53 4.80 4.82 4.74 2.44 4.62 4.68 4.64
------- -------- -------- ------- ------- -------- ------- -------
Dividends from net
investment income...... (0.03) (0.21) (0.22) (0.23) 0.00 (0.11) (0.10) (0.14)
Distributions from net
realized gain on
investments............ (0.51) (2.37) (2.33) (1.50) (0.51) (2.37) (2.33) (1.50)
------- -------- -------- ------- ------- -------- ------- -------
Total dividends and
distributions......... (0.54) (2.58) (2.55) (1.73) (0.51) (2.48) (2.43) (1.64)
------- -------- -------- ------- ------- -------- ------- -------
Net asset value, end of
period................. $ 23.10 $ 21.11 $ 18.89 $ 16.62 $ 22.93 $ 21.00 $ 18.86 $ 16.61
======= ======== ======== ======= ======= ======== ======= =======
Net assets, end of
period (thousands)..... $64,355 $ 57,105 $ 10,905 $ 441 $70,294 $ 49,786 $ 9,433 $ 716
Total return*........... +12.1% +26.2% +30.3% +35.3% +11.7% +25.3% +29.2% +34.5%
Ratios to average net
assets:
Expenses............... 0.88%** 0.95% 1.06% 0.94% 1.63%** 1.70% 1.82% 1.71%
Net investment income.. 0.65%** 0.86% 0.94% 1.41% -0.09%** 0.12% 0.21% 0.63%
Portfolio turnover
rate................... 34% 62% 58% 86% 34% 62% 58% 86%
</TABLE>
TOTAL RETURN FUND
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
-----------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 ---------------- DECEMBER 31, 1998 ---------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 13.13 $ 11.82 $ 10.55 $10.00 $ 13.12 $ 11.82 $ 10.54 $10.00
------- ------- ------- ------ -------- ------- ------- ------
Net investment
income(S).............. 0.28 0.55 0.54 0.15 0.23 0.45 0.45 0.13
Net gain on investments
(both realized and
unrealized)............ 0.55 1.65 1.35 0.52 0.54 1.65 1.35 0.51
------- ------- ------- ------ -------- ------- ------- ------
Total from investment
operations............ 0.83 2.20 1.89 0.67 0.77 2.10 1.80 0.64
------- ------- ------- ------ -------- ------- ------- ------
Dividends from net
investment income...... (0.25) (0.53) (0.52) (0.11) (0.21) (0.44) (0.42) (0.09)
Distributions from net
realized gain on
investments............ -- (0.36) (0.10) (0.01) -- (0.36) (0.10) (0.01)
------- ------- ------- ------ -------- ------- ------- ------
Total dividends and
distributions......... (0.25) (0.89) (0.62) (0.12) (0.21) (0.80) (0.52) (0.10)
------- ------- ------- ------ -------- ------- ------- ------
Net asset value, end of
period................. $ 13.71 $ 13.13 $ 11.82 $10.55 $ 13.68 $ 13.12 $ 11.82 $10.54
======= ======= ======= ====== ======== ======= ======= ======
Net assets, end of
period (thousands)..... $58,864 $53,024 $21,109 $3,658 $117,640 $87,549 $28,043 $5,378
Total return*........... +6.4% +19.1% +18.3% +6.7% +5.9% +18.2% +17.4% +6.4%
Ratios to average net
assets:
Expenses............... 0.84%** 0.77% 0.75% 0.74%** 1.59%** 1.52% 1.50% 1.49%**
Net investment income.. 4.16%** 4.29% 4.81% 4.82%** 3.40%** 3.54% 4.06% 4.06%**
Portfolio turnover
rate................... 39% 70% 76% 16% 39% 70% 76% 16%
Before applicable 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............. $ 0.26 $ 0.49 $ 0.44 $ 0.13 $ 0.21 $ 0.39 $ 0.36 $ 0.11
Expense ratio.......... 1.14%** 1.24% 1.61% 1.45%** 1.89%** 1.99% 2.36% 2.19%**
</TABLE>
(a) September 11, 1995, commencement of investment operations, through December
31, 1995.
(SPer)share information calculated using the average shares outstanding meth-
od, which more accurately represents 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 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.
96 See accompanying notes to financial statements
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED DECEMBER 31,
1998 -------------------------- 1998 ------------------------------------------------
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 21.01 $ 18.86 $ 16.61 $ 13.61 $ 21.13 $ 18.90 $ 16.61 $ 13.63 $ 15.60 $ 16.10
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
(0.01) 0.04 0.07 0.09 0.10 0.24 0.25 0.27 0.27 0.32
2.45 4.59 4.60 4.55 2.48 4.60 4.62 4.48 (0.48) 2.03
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
2.44 4.63 4.67 4.64 2.58 4.84 4.87 4.75 (0.21) 2.35
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
0.00 (0.11) (0.09) (0.14) (0.05) (0.24) (0.25) (0.27) (0.27) (0.33)
(0.51) (2.37) (2.33) (1.50) (0.51) (2.37) (2.33) (1.50) (1.49) (2.52)
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
(0.51) (2.48) (2.42) (1.64) (0.56) (2.61) (2.58) (1.77) (1.76) (2.85)
------- -------- ------- ------- -------- -------- -------- -------- -------- --------
$ 22.94 $ 21.01 $ 18.86 $ 16.61 $ 23.15 $ 21.13 $ 18.90 $ 16.61 $ 13.63 $ 15.60
======= ======== ======= ======= ======== ======== ======== ======== ======== ========
$16,619 $ 11,701 $ 1,959 $ 306 $666,051 $608,401 $518,361 $428,950 $348,214 $386,147
+11.7% +25.2% +29.3% +34.5% +12.3% +26.5% +30.6% +35.4% -1.3% +15.1%
1.63%** 1.70% 1.80% 1.68% 0.63%** 0.69% 0.76% 0.69% 0.69% 0.68%
-0.09%** 0.13% 0.23% 0.66% 0.89%** 1.15% 1.36% 1.67% 1.75% 1.90%
34% 62% 58% 86% 34% 62% 58% 86% 66% 79%
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 --------------- DECEMBER 31, 1998 -------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13.15 $ 11.85 $10.56 $10.00 $13.20 $11.88 $10.57 $10.00
------- ------- ------ ------ ------ ------ ------ ------
0.23 0.45 0.46 0.14 0.30 0.59 0.57 0.17
0.55 1.65 1.35 0.51 0.56 1.65 1.39 0.52
------- ------- ------ ------ ------ ------ ------ ------
0.78 2.10 1.81 0.65 0.86 2.24 1.96 0.69
------- ------- ------ ------ ------ ------ ------ ------
(0.21) (0.44) (0.42) (0.08) (0.27) (0.56) (0.55) (0.11)
-- (0.36) (0.10) (0.01) -- (0.36) (0.10) (0.01)
------- ------- ------ ------ ------ ------ ------ ------
(0.21) (0.80) (0.52) (0.09) (0.27) (0.92) (0.65) (0.12)
------- ------- ------ ------ ------ ------ ------ ------
$ 13.72 $ 13.15 $11.85 $10.56 $13.79 $13.20 $11.88 $10.57
======= ======= ====== ====== ====== ====== ====== ======
$31,825 $21,085 $3,445 $ 445 $1,748 $1,227 $ 213 $4,494
+5.9% +18.1% +17.5% +6.5% +6.5% +19.3% +19.0% +6.9%
1.59%** 1.52% 1.50% 1.51%** 0.60%** 0.52% 0.50% 0.51%**
3.39%** 3.52% 4.07% 4.26%** 4.42%** 4.60% 5.13% 5.30%**
39% 70% 76% 16% 39% 70% 76% 16%
$ 0.21 $ 0.39 $ 0.36 $ 0.11 $ 0.28 $ 0.53 $ 0.47 $ 0.15
1.89%** 1.99% 2.36% 2.22%** 0.90%** 1.00% 1.36% 1.22%**
</TABLE>
See accompanying notes to financial statements
97
<PAGE>
FINANCIAL HIGHLIGHTS
(continued)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
HIGH YIELD BOND FUND
<TABLE>
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1998 ----------------- DECEMBER 31, 1998 ------------------
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.74 $ 11.54 $ 10.53 $ 10.00 $ 11.71 $ 11.53 $ 10.53
-------- -------- ------- ------- -------- -------- --------
Net investment income... 0.52 1.06 1.10 0.92 0.47 0.98 1.02
Net gain (loss) on
investments (both
realized and
unrealized)............ (0.31) 0.38 1.11 0.67 (0.30) 0.37 1.11
-------- -------- ------- ------- -------- -------- --------
Total from investment
operations............ 0.21 1.44 2.21 1.59 0.17 1.35 2.13
-------- -------- ------- ------- -------- -------- --------
Dividends from net
investment income...... (0.53) (1.05) (1.10) (0.91) (0.49) (0.98) (1.03)
Distributions from net
realized gain on
investments............ -- (0.19) (0.10) (0.15) -- (0.19) (0.10)
-------- -------- ------- ------- -------- -------- --------
Total dividends and
distributions......... (0.53) (1.24) (1.20) (1.06) (0.49) (1.17) (1.13)
-------- -------- ------- ------- -------- -------- --------
Net asset value, end of
period................. $ 11.42 $ 11.74 $ 11.54 $ 10.53 $ 11.39 $ 11.71 $ 11.53
======== ======== ======= ======= ======== ======== ========
Net assets, end of
period (thousands)..... $187,754 $169,721 $65,935 $10,789 $378,927 $329,672 $106,797
Total return*........... +1.8% +13.0% +21.9% +16.6% +1.4% +12.2% +21.2%
Ratios to average net
assets:
Expenses............... 1.24%** 1.24% 1.24% 1.24%** 1.99%** 1.99% 1.99%
Net investment income.. 8.89%** 8.66% 9.38% 10.58%** 8.13%** 7.90% 8.49%
Portfolio turnover
rate................... 31% 79% 85% 109% 31% 79% 85%
Before applicable 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............. $ 0.52 $ 1.04 $ 1.09 $ 0.87 $ 0.47 $ 0.97 $ 1.01
Expense ratio.......... 1.28%** 1.34% 1.50% 1.80%** 2.03%** 2.09% 2.24%
</TABLE>
STRATEGIC BOND FUND
<TABLE>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31,
1998 ----------------- DECEMBER 31, 1998 ------------------
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period..... $ 10.94 $ 10.83 $10.53 $10.00 $ 10.93 $ 10.82 $ 10.53
------- ------- ------ ------ ------- ------- -------
Net investment income.... 0.39 0.76(S) 0.87(S) 0.84 0.35 0.67(S) 0.79(S)
Net gain (loss) on
investments (both
realized and
unrealized)............. (0.14) 0.41 0.55 0.78 (0.14) 0.41 0.53
------- ------- ------ ------ ------- ------- -------
Total from investment
operations............. 0.25 1.17 1.42 1.62 0.21 1.08 1.32
------- ------- ------ ------ ------- ------- -------
Dividends from net
investment income....... (0.42) (0.89) (0.94) (0.85) (0.38) (0.80) (0.85)
Dividends in excess of
net investment income... -- -- (0.01) -- -- -- (0.01)
Distributions from net
realized gain on
investments............. -- (0.17) (0.17) (0.24) -- (0.17) (0.17)
------- ------- ------ ------ ------- ------- -------
Total dividends and
distributions.......... (0.42) (1.06) (1.12) (1.09) (0.38) (0.97) (1.03)
------- ------- ------ ------ ------- ------- -------
Net asset value, end of
period.................. $ 10.77 $ 10.94 $10.83 $10.53 $ 10.76 $ 10.93 $ 10.82
======= ======= ====== ====== ======= ======= =======
Net assets, end of period
(thousands)............. $21,808 $17,150 $8,345 $ 513 $60,892 $47,921 $14,291
Total return*............ +2.3% +11.2% +14.1% +16.8% +2.0% +10.4% +13.0%
Ratios to average net
assets:
Expenses................ 1.24%** 1.24% 1.24% 1.23%** 1.99%** 1.99% 1.98%
Net investment income... 6.99%** 6.99% 8.09% 9.51%** 6.28%** 6.12% 7.34%
Portfolio turnover rate.. 52% 184% 122% 161% 52% 184% 122%
Before applicable 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.............. $ 0.38 $ 0.73 $ 0.79 $ 0.76 $ 0.34 $ 0.64 $ 0.71
Expense ratio........... 1.40%** 1.53% 1.98% 2.11%** 2.16%** 2.28% 2.73%
</TABLE>
(a) February 22, 1995, commencement of investment operations, through December
31, 1995.
(SPer)share information calculated using the average shares outstanding meth-
od, which more accurately represents 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 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.
98 See accompanying notes to financial statements
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
DECEMBER 31, 1998 ------------------ DECEMBER 31, 1998 ---------------- DECEMBER 31,
1995(A) (UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 11.70 $ 11.52 $ 10.53 $10.00 $11.75 $11.53 $10.54 $10.00
------- -------- ------- ------- ------ ------ ------ ------ ------
0.85 0.47 0.99 1.02 0.85 0.53 1.08 1.16(S) 0.95
0.68 (0.30) 0.36 1.10 0.68 (0.30) 0.40 1.05 0.67
------- -------- ------- ------- ------ ------ ------ ------ ------
1.53 0.17 1.35 2.12 1.53 0.23 1.48 2.21 1.62
------- -------- ------- ------- ------ ------ ------ ------ ------
(0.85) (0.49) (0.98) (1.03) (0.85) (0.55) (1.07) (1.12) (0.93)
(0.15) -- (0.19) (0.10) (0.15) -- (0.19) (0.10) (0.15)
------- -------- ------- ------- ------ ------ ------ ------ ------
(1.00) (0.49) (1.17) (1.13) (1.00) (0.55) (1.26) (1.22) (1.08)
------- -------- ------- ------- ------ ------ ------ ------ ------
$ 10.53 $ 11.38 $ 11.70 $ 11.52 $10.53 $11.43 $11.75 $11.53 $10.54
======= ======== ======= ======= ====== ====== ====== ====== ======
$10,108 $100,631 $76,042 $13,773 $1,274 $2,420 $2,386 $ 393 $7,854
+15.7% +1.4% +12.2% +21.1% +15.8% +1.9% +13.4% +22.0% +16.8%
1.96%** 1.99%** 1.99% 1.99% 1.98%** 0.99%** 0.99% 0.99% 1.00%**
9.53%** 8.12%** 7.87% 8.43% 9.61%** 9.15%** 8.93% 10.64% 10.59%**
109% 31% 79% 85% 109% 31% 79% 85% 109%
$ 0.80 $ 0.47 $ 0.98 $ 1.01 $ 0.80 $ 0.53 $ 1.07 $ 1.13 $ 0.90
2.51%** 2.02%** 2.08% 2.24% 2.54%** 1.03%** 1.09% 1.24% 1.55%**
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
ENDED JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
DECEMBER 31, 1998 ------------------ DECEMBER 31, 1998 ---------------- DECEMBER 31,
1995(A) (UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 10.94 $ 10.82 $ 10.53 $10.00 $10.93 $10.82 $10.53 $10.00
------- -------- ------- ------- ------ ------ ------ ------ ------
0.76 0.35 0.66(S) 0.78(S) 0.77 0.37 0.78(S) 0.92(S) 0.87
0.79 (0.14) 0.43 0.54 0.78 (0.10) 0.41 0.51 0.77
------- -------- ------- ------- ------ ------ ------ ------ ------
1.55 0.21 1.09 1.32 1.55 0.27 1.19 1.43 1.64
------- -------- ------- ------- ------ ------ ------ ------ ------
(0.78) (0.38) (0.80) (0.85) (0.78) (0.44) (0.91) (0.96) (0.87)
-- -- -- (0.01) -- -- -- (0.01) --
(0.24) -- (0.17) (0.17) (0.24) -- (0.17) (0.17) (0.24)
------- -------- ------- ------- ------ ------ ------ ------ ------
(1.02) (0.38) (0.97) (1.03) (1.02) (0.44) (1.08) (1.14) (1.11)
------- -------- ------- ------- ------ ------ ------ ------ ------
$ 10.53 $ 10.77 $ 10.94 $ 10.82 $10.53 $10.76 $10.93 $10.82 $10.53
======= ======== ======= ======= ====== ====== ====== ====== ======
$ 1,879 $ 25,015 $20,220 $ 4,575 $ 411 $ 407 $ 649 $3,817 $9,763
+16.1% +2.0% +10.5% +13.1% +16.1% +2.5% +11.5% +14.2% +17.0%
1.97%** 1.99%** 1.99% 1.98% 1.99%** 0.99%** 0.96% 1.00% 0.99%**
8.75%** 6.28%** 6.09% 7.26% 8.77%** 7.27%** 7.22% 8.65% 9.74%**
161% 52% 184% 122% 161% 52% 184% 122% 161%
$ 0.69 $ 0.34 $ 0.63 $ 0.70 $ 0.70 $ 0.36 $ 0.75 $ 0.84 $ 0.79
2.85%** 2.16%** 2.28% 2.72% 2.87%** 1.16%** 1.25% 1.74% 1.87%**
</TABLE>
See accompanying notes to financial statements
99
<PAGE>
FINANCIAL HIGHLIGHTS
(continued)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
NATIONAL INTERMEDIATE MUNICIPAL FUND
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 -------------- DECEMBER 31, 1998 -------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $10.62 $10.35 $10.43 $10.00 $10.59 $10.33 $10.42 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Net investment income... 0.23 0.48 0.48 0.40 0.19 0.40 0.40 0.34
Net gain (loss) on
investments (both
realized and
unrealized)............ (0.02) 0.28 (0.06) 0.46 (0.03) 0.28 (0.06) 0.45
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............ 0.21 0.76 0.42 0.86 0.16 0.68 0.34 0.79
------ ------ ------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.24) (0.48) (0.48) (0.40) (0.20) (0.40) (0.41) (0.34)
Distributions in excess
of net investment
income................. -- -- -- -- -- (0.01) -- --
Distributions from net
realized gain on
investments............ -- (0.01) (0.02) (0.03) -- (0.01) (0.02) (0.03)
------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions......... (0.24) (0.49) (0.50) (0.43) (0.20) (0.42) (0.43) (0.37)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $10.59 $10.62 $10.35 $10.43 $10.55 $10.59 $10.33 $10.42
====== ====== ====== ====== ====== ====== ====== ======
Net assets, end of
period (thousands)..... $1,985 $1,063 $ 696 $ 569 $1,836 $1,295 $ 702 $ 432
Total return*........... +2.0% +7.5% +4.2% +8.7% +1.6% +6.7% +3.4% +8.0%
Ratios to average net
assets:
Expenses............... 0.75%** 0.75% 0.75% 0.75%** 1.50%** 1.50% 1.50% 1.50%**
Net investment income.. 4.35%** 4.53% 4.62% 4.63%** 3.62%** 3.75% 3.88% 3.85%**
Portfolio turnover
rate................... 0% 1% 19% 29% 0% 1% 19% 29%
Before applicable 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............. $ 0.18 $ 0.36 $ 0.35 $ 0.32 $ 0.14 $ 0.28 $ 0.27 $ 0.25
Expense ratio.......... 1.69%** 1.82% 2.02% 1.71%** 2.44%** 2.57% 2.77% 2.45%**
</TABLE>
U.S. GOVERNMENT INCOME FUND
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 -------------- DECEMBER 31, 1998 -------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $10.20 $10.07 $10.32 $10.00 $10.20 $10.06 $10.32 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Net investment income... 0.28 0.58 0.54 0.49 0.24 0.51 0.46 0.43
Net gain (loss) on
investments (both
realized and
unrealized)............ 0.05 0.19 (0.19) 0.43 0.06 0.19 (0.20) 0.43
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations............ 0.33 0.77 0.35 0.92 0.30 0.70 0.26 0.86
------ ------ ------ ------ ------ ------ ------ ------
Dividends from net
investment income...... (0.29) (0.54) (0.54) (0.49) (0.26) (0.46) (0.46) (0.43)
Distributions from net
realized gain on
investments............ -- (0.10) (0.06) (0.10) -- (0.10) (0.06) (0.10)
Distributions in excess
of net realized gain on
investments............ -- -- -- (0.01) -- -- -- (0.01)
------ ------ ------ ------ ------ ------ ------ ------
Total dividends and
distributions......... (0.29) (0.64) (0.60) (0.60) (0.26) (0.56) (0.52) (0.54)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $10.24 $10.20 $10.07 $10.32 $10.24 $10.20 $10.06 $10.32
====== ====== ====== ====== ====== ====== ====== ======
Net assets, end of
period (thousands)..... $2,366 $1,320 $1,188 $ 278 $3,216 $2,531 $1,266 $ 572
Total return*........... +3.3% +7.9% +3.6% +9.5% +2.9% +7.2% +2.7% +8.8%
Ratios to average net
assets:
Expenses............... 0.85%** 0.85% 0.84% 0.85%** 1.60%** 1.60% 1.59% 1.60%**
Net investment income.. 5.44%** 5.77% 5.22% 5.67%** 4.73%** 4.96% 4.51% 4.85%**
Portfolio turnover
rate................... 55% 261% 365% 230% 55% 261% 365% 230%
Before applicable 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............. $ 0.23 $ 0.47 $ 0.38 $ 0.40 $ 0.19 $ 0.39 $ 0.30 $ 0.34
Expense ratio.......... 1.89%** 2.02% 2.21% 1.90%** 2.64%** 2.77% 2.96% 2.64%**
</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.
100 See accompanying notes to financial statements
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 -------------- DECEMBER 31, 1998 --------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.59 $10.33 $10.42 $10.00 $ 10.61 $ 10.34 $10.43 $10.00
------ ------ ------ ------ ------- ------- ------ ------
0.20 0.40 0.40 0.34 0.24 0.50 0.50 0.42
(0.04) 0.28 (0.06) 0.45 (0.02) 0.28 (0.07) 0.46
------ ------ ------ ------ ------- ------- ------ ------
0.16 0.68 0.34 0.79 0.22 0.78 0.43 0.88
------ ------ ------ ------ ------- ------- ------ ------
(0.20) (0.40) (0.41) (0.34) (0.25) (0.50) (0.50) (0.42)
-- (0.01) -- -- -- -- -- --
-- (0.01) (0.02) (0.03) -- (0.01) (0.02) (0.03)
------ ------ ------ ------ ------- ------- ------ ------
(0.20) (0.42) (0.43) (0.37) (0.25) (0.51) (0.52) (0.45)
------ ------ ------ ------ ------- ------- ------ ------
$10.55 $10.59 $10.33 $10.42 $ 10.58 $ 10.61 $10.34 $10.43
====== ====== ====== ====== ======= ======= ====== ======
$1,723 $ 514 $ 468 $ 271 $10,889 $11,286 $9,786 $9,675
+1.6% +6.7% +3.4% +8.0% +2.1% +7.8% +4.3% +9.0%
1.49%** 1.50% 1.50% 1.50%** 0.50%** 0.50% 0.50% 0.50%**
3.53%** 3.81% 3.88% 3.85%** 4.66%** 4.79% 4.88% 4.86%**
0% 1% 19% 29% 0% 1% 19% 29%
$ 0.15 $ 0.28 $ 0.27 $ 0.25 $ 0.20 $ 0.39 $ 0.37 $ 0.34
2.43%** 2.57% 2.77% 2.46%** 1.44%** 1.57% 1.77% 1.46%**
- -----------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD
JUNE 30, DECEMBER 31, ENDED JUNE 30, DECEMBER 31, ENDED
1998 -------------- DECEMBER 31, 1998 --------------- DECEMBER 31,
(UNAUDITED) 1997 1996 1995(A) (UNAUDITED) 1997 1996 1995(A)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.19 $10.05 $10.32 $10.00 $ 10.19 $ 10.06 $10.32 $10.00
------ ------ ------ ------ ------- ------- ------ ------
0.24 0.51 0.46 0.43 0.29 0.61 0.56 0.52
0.07 0.19 (0.21) 0.43 0.07 0.18 (0.20) 0.42
------ ------ ------ ------ ------- ------- ------ ------
0.31 0.70 0.25 0.86 0.36 0.79 0.36 0.94
------ ------ ------ ------ ------- ------- ------ ------
(0.26) (0.46) (0.46) (0.43) (0.31) (0.56) (0.56) (0.52)
-- (0.10) (0.06) (0.10) -- (0.10) (0.06) (0.10)
-- -- -- (0.01) -- -- -- --
------ ------ ------ ------ ------- ------- ------ ------
(0.26) (0.56) (0.52) (0.54) (0.31) (0.66) (0.62) (0.62)
------ ------ ------ ------ ------- ------- ------ ------
$10.24 $10.19 $10.05 $10.32 $ 10.24 $ 10.19 $10.06 $10.32
====== ====== ====== ====== ======= ======= ====== ======
$1,259 $ 751 $ 422 $ 273 $ 8,115 $ 9,553 $9,375 $9,552
+3.0% +7.0% +2.7% +8.8% +3.5% +8.1% +3.7% +9.7%
1.59%** 1.59% 1.60% 1.60%** 0.60%** 0.60% 0.60% 0.60%**
4.70%** 4.94% 4.51% 4.92%** 5.80%** 6.01% 5.53% 5.92%**
55% 261% 365% 230% 55% 261% 365% 230%
$ 0.19 $ 0.39 $ 0.31 $ 0.34 $ 0.24 $ 0.49 $ 0.41 $ 0.42
2.64%** 2.76% 2.97% 2.64%** 1.65%** 1.77% 1.97% 1.64%**
</TABLE>
See accompanying notes to financial statements
101
<PAGE>
FINANCIAL HIGHLIGHTS
(concluded)
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
NEW YORK MUNICIPAL MONEY FUND
<TABLE>
- -------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED YEAR PERIOD
JUNE 30, ENDED ENDED JUNE 30, ENDED ENDED
1998 DECEMBER 31, DECEMBER 31, 1998 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1997 1996 (A) (UNAUDITED) 1997 1996 (A)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------
Net investment income... 0.016 0.034 0.006 0.016 0.034 0.006
Dividends from net
investment income...... (0.016) (0.034) (0.006) (0.016) (0.034) (0.006)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ======
Net assets, end of
period (thousands)..... $5,338 $3,808 $ 360 $ 25 $ 25 $ 25
Total return*........... +1.6% +3.5% +0.6% +1.6% +3.5% +0.6%
Ratios to average net
assets:
Expenses............... 0.51%** 0.50% 0.38%** 0.51%** 0.43% 0.40%**
Net investment income.. 3.19%** 3.39% 3.56%** 3.18%** 3.32% 3.40%**
Before applicable 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............. -- -- $0.006 -- -- $0.006
Expense ratio.......... -- -- 0.39%** -- -- 0.41%**
</TABLE>
CASH MANAGEMENT FUND
<TABLE>
- ----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED DECEMBER ENDED YEAR ENDED DECEMBER
JUNE 30, 31, JUNE 30, 31,
1998 ----------------------- 1998 ----------------------
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 1.000 $ 1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------- ------- ------ ------ ------ ------ ------ ------
Net investment income... 0.026 0.051 0.050 0.044 0.026 0.051 0.050 0.043
Dividends from net
investment income...... (0.026) (0.051) (0.050) (0.044) (0.026) (0.051) (0.050) (0.043)
------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $ 1.000 $ 1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
======= ======= ====== ====== ====== ====== ====== ======
Net assets, end of
period (thousands)..... $11,364 $18,246 $8,175 $1,756 $3,718 $4,151 $3,920 $2,238
Total return*........... +2.6% +5.2% +5.1% +4.5% +2.6% +5.2% +5.1% +4.4%
Ratios to average net
assets:
Expenses............... 0.55%** 0.55% 0.55% 0.55% 0.55%** 0.55% 0.55% 0.55%
Net investment income.. 5.15%** 5.11% 4.95% 5.42% 5.15%** 5.10% 4.95% 5.38%
Before applicable 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............. $ 0.025 $ 0.049 $0.047 $0.037 $0.025 $0.049 $0.047 $0.037
Expense ratio.......... 0.74%** 0.70% 0.82% 1.35% 0.74%** 0.70% 0.82% 1.34%
</TABLE>
(a) November 1, 1996, commencement of investment operations, through December
31, 1996.
* Total return is calculated assuming a $1,000 investment on the first day of
each period reported, reinvestment of all dividends at the net asset value
on the payable date, and a sale at net asset value on the last day of each
period reported. Total return calculated for a period of less than one year
is not annualized.
** Annualized.
See accompanying notes to financial statements
102
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- -----------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR PERIOD ENDED
JUNE 30, ENDED ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1998 DECEMBER 31, DECEMBER 31, 1998 ------------------------------------------------
(UNAUDITED) 1997 1996 (A) (UNAUDITED) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------ ------ ------ -------- -------- -------- -------- -------- --------
0.016 0.034 0.006 0.016 0.034 0.032 0.037 0.027 0.023
(0.016) (0.034) (0.006) (0.016) (0.034) (0.032) (0.037) (0.027) (0.023)
------ ------ ------ -------- -------- -------- -------- -------- --------
$1.000 $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====== ====== ====== ======== ======== ======== ======== ======== ========
$25 $ 25 $ 25 $241,697 $305,419 $273,734 $226,549 $269,788 $262,413
+1.6% +3.5% +0.6% +1.6% +3.5% +3.3% +3.7% +2.7% +2.3%
0.51%** 0.47% 0.40%** 0.51%** 0.47% 0.53% 0.43% 0.41% 0.41%
3.18%** 3.40% 3.40%** 3.16%** 3.39% 3.25% 3.67% 2.63% 2.31%
-- -- $0.006 -- -- $ 0.032 $ 0.037 -- --
-- -- 0.41%** -- -- 0.53% 0.45% -- --
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C CLASS O
- --------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED DECEMBER ENDED
JUNE 30, 31, JUNE 30, YEAR ENDED DECEMBER 31,
1998 ---------------------- 1998 ------------------------------------------
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
------ ------ ------ ------ ------- ------- ------- ------ ------- -------
0.026 0.051 0.050 0.043 0.026 0.051 0.050 0.055 0.038 0.027
(0.026) (0.051) (0.050) (0.043) (0.026) (0.051) (0.050) (0.055) (0.038) (0.027)
------ ------ ------ ------ ------- ------- ------- ------ ------- -------
$1.000 $1.000 $1.000 $1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 $ 1.000 $ 1.000
====== ====== ====== ====== ======= ======= ======= ====== ======= =======
$906 $1,806 $ 435 $ 183 $10,197 $19,872 $14,225 $6,684 $19,127 $15,049
+2.6% +5.2% +5.1% +4.4% +2.6% +5.2% +5.1% +5.6% +3.9% +2.7%
0.55%** 0.55% 0.55% 0.55% 0.55%** 0.55% 0.55% 0.55% 0.61% 0.65%
5.15%** 5.16% 4.95% 5.40% 5.16%** 5.10% 4.95% 5.46% 3.79% 2.68%
$0.025 $0.049 $0.047 $0.036 $ 0.025 $ 0.049 $ 0.047 $0.047 $ 0.036 $ 0.025
0.74%** 0.70% 0.82% 1.34% 0.74%** 0.70% 0.82% 1.34% 0.81% 0.85%
</TABLE>
See accompanying notes to financial statements
103
<PAGE>
[This page intentionally left blank]
104
<PAGE>
SALOMON BROTHERS INVESTMENT SERIES
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
200 Clarendon Street
Boston, Massachusetts 02116
DIVIDEND DISBURSING AND TRANSFER AGENT
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109-2873
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman; ASARCO Incorporated
ANDREW L. BREECH(*),(***)
President, Dealer Operating Control Service Inc.
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN(**)
Vice President-General Counsel,
Pfizer International Inc.
WILLIAM R. DILL(*),(***)
Consultant; formerly President, Boston Architectural
Center; formerly President, Anna Maria College
HEATH B. MCLENDON
Chairman and President, Managing Director,
Smith Barney Inc.; President and Director,
Mutual Management Corp. and Travelers
Investment Adviser, Inc.; Chairman of
Smith Barney Strategy Advisers Inc.
CLIFFORD M. KIRTLAND, JR.(*),(***)
Member of the Advisory Committee, Nero-Moseley
Partners; formerly Director, Oxford Industries, Inc., Shaw
Industries Inc., Graphic Industries, Inc. and CSX Corp.;
formerly Chairman, Cox Communications, Inc.
ROBERT W.LAWLESS(*),(***)
President and Chief Executive Officer, University of
Tulsa; formerly President and Chief Executive Officer,
Texas Tech University and Tech University Health
Sciences Center
LOUIS P. MATTIS(*),(***)
Consultant; formerly Chairman and President, Sterling
Winthrop Inc.
THOMAS F. SCHLAFLY(*),(***)
Of counsel to Blackwell Sanders Peper Martin LLP (law firm), President, The
Saint Louis Brewery, Inc.
OFFICERS
HEATH B. MCLENDON
Chairman and President
LEWIS E. DAIDONE
Executive Vice President
and Treasurer
JAMES E. CRAIGE(**)
Executive Vice President
RICHARD E. DAHLBERG
Executive Vice President
THOMAS K. FLANAGAN(**)
Executive Vice President
GIAMPAOLO G. GUARNIERI(**)
Executive Vice President
ROSS S. MARGOLIES(***)
Executive Vice President
MAUREEN O'CALLAGHAN(**)
Executive Vice President
BETH A. SEMMEL(**)
Executive Vice President
ALLAN R. WHITE, III(*),(**)
Executive Vice President
MARYBETH WHYTE(**)
Executive Vice President
PETER J. WILBY(**)
Executive Vice President
PAMELA P. MILUNOVICH(*),(**)
Vice President(*)
Executive Vice President(**)
NANCY A. NOYES(**)
Vice President
NOEL B. DAUGHERTY
Secretary
ANTHONY PACE
Assistant Controller
JANET S. TOLCHIN
Assistant Controller(*),(***)
- --------------------------------------------------
(*) Salomon Brothers Investors Fund Inc only
(**) Salomon Brothers Series Funds Inc only
(***) Salomon Brothers Capital Fund Inc only
<PAGE>
============================
SALOMON BROTHERS
============================
ASSET MANAGEMENT
SEVEN WORLD TRADE CENTER o NEW YORK, NEW YORK 10048
<PAGE>
SALOMON BROTHERS
INSTITUTIONAL
MONEY MARKET FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
- --------------------------------------
SALOMON BROTHERS ASSET MANAGEMENT
---------------------------------------
Salomon Brothers Asset Management Inc
P.O. Box 5127
Westborough, MA 01581-5127
- ------------------
FIRST-CLASS
U.S. POSTAGE
PAID
NORTH READING, MA
PERMIT NO.
105
- ------------------
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY
AMOUNT DESCRIPTION PURCHASE* DATE VALUE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 11.4%
FINANCIAL SERVICES -- 11.4%
$4,500,000 Contimortgage Home Equity Loan Trust..................... 5.649% 06/15/99 $ 4,500,000
260,882 Ford Credit Auto Owner Trust............................. 5.748 10/15/98 260,882
4,240,341 Ford Credit Auto Owner Trust............................. 5.615 05/15/99 4,240,341
5,000,000 SMM Trust................................................ 5.656 12/14/98 5,000,000
5,000,000 Triangle Funding......................................... 5.656 11/15/98 5,000,000
888,707 Union Acceptance Corporation............................. 5.611 03/10/99 888,707
------------
TOTAL ASSET-BACKED SECURITIES (cost -- $19,889,930)...... 19,889,930
------------
CERTIFICATES OF DEPOSIT -- 18.3%
BANKS -- 18.3%
1,000,000 Bankers Trust............................................ 6.000 07/07/98 1,000,014
5,000,000 Bankers Trust............................................ 5.950 09/09/98 4,999,689
4,000,000 Barclays Bank............................................ 5.820 10/05/98 4,000,499
3,000,000 Bayerische Landesbank.................................... 5.775 07/27/98 2,999,703
1,000,000 Credit Agricole Indosuez................................. 5.870 08/10/98 1,000,182
2,000,000 Deutsche Bank............................................ 5.950 10/26/98 2,000,627
5,000,000 First Tennessee Bank..................................... 5.560 08/06/98 4,999,979
2,500,000 National Westminster Bank................................ 5.860 08/10/98 2,500,127
4,000,000 Swiss Bank............................................... 5.690 07/02/98 3,999,985
4,500,000 Westpac Banking.......................................... 5.920 08/28/98 4,499,450
------------
TOTAL CERTIFICATES OF DEPOSIT (cost -- $32,000,255)...... 32,000,255
------------
COMMERCIAL PAPER -- 24.6%
AEROSPACE & DEFENSE -- 0.6%
1,000,000 Raytheon................................................. 5.950 07/07/98 999,008
------------
AUTOMOBILE MANUFACTURING -- 2.9%
5,000,000 Volkswagen of America.................................... 5.520 07/10/98 4,993,100
------------
BANKS -- 2.7%
4,789,000 BIL North America........................................ 5.520 07/01/98 4,789,000
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 1
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY
AMOUNT DESCRIPTION PURCHASE* DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER -- 24.6% (CONTINUED)
BEVERAGES, FOOD & TOBACCO -- 3.4%
$5,000,000 Brown Forman............................................. 5.520% 07/07/98 $ 4,995,400
1,000,000 Conagra.................................................. 5.850 07/15/98 997,726
------------
5,993,126
------------
FINANCIAL SERVICES -- 1.3%
1,000,000 Gatx Capital............................................. 5.850 07/14/98 997,887
1,230,000 KFW International Finance................................ 5.550 07/23/98 1,225,828
------------
2,223,715
------------
PAPER -- 2.6%
4,490,000 Bemis.................................................... 6.200 07/01/98 4,490,000
------------
HEAVY MACHINERY -- 0.6%
1,000,000 York International....................................... 5.700 07/07/98 999,050
------------
MUNICIPAL -- 2.4%
3,450,000 Tennessee State School Board............................. 5.520 07/02/98 3,450,000
800,000 Tennessee State School Board............................. 5.600 07/02/98 800,000
------------
4,250,000
------------
OIL & GAS -- 5.4%
1,400,000 Amoco.................................................... 5.850 07/07/98 1,398,636
2,000,000 Oklahoma Gas & Electric Energy........................... 6.100 07/07/98 1,997,967
6,056,000 Shell Oil................................................ 6.150 07/01/98 6,056,000
------------
9,452,603
------------
RETAIL-DRUG STORES -- 0.6%
1,000,000 Rite Aid................................................. 6.050 07/09/98 998,656
------------
TOY MANUFACTURING -- 1.0%
1,661,000 Hasbro................................................... 5.630 07/06/98 1,659,701
------------
TRANSPORTATION -- 1.1%
1,000,000 General American Transportation.......................... 6.000 07/09/98 998,667
1,000,000 J.B. Hunt................................................ 5.950 07/10/98 998,513
------------
1,997,180
------------
TOTAL COMMERCIAL PAPER (cost -- $42,845,139)............. 42,845,139
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 2
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY
AMOUNT DESCRIPTION PURCHASE* DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLOATING RATE NOTES -- 44.9%
CALIFORNIA -- 3.2%
$5,500,000 Pasadena, California Certificates of Participation VR.... 5.660% 07/07/98 $ 5,500,000
------------
FLORIDA -- 4.6%
2,000,000 Baptist Health Systems VR MBIA........................... 5.600 07/01/98 2,000,000
6,000,000 Dade County, Florida Expressway Authority VR FGIC........ 5.600 07/02/98 6,000,000
------------
8,000,000
------------
HEALTH CARE -- 1.9%
3,400,000 Barton Healthcare VR..................................... 5.700 07/01/98 3,400,000
------------
ILLINOIS -- 5.4%
5,100,000 Edwards Hospital Group VR................................ 5.650 07/01/98 5,100,000
1,800,000 Illinois Student Assistance Commission VR................ 5.580 07/01/98 1,800,000
2,500,000 Oakwood, Illinois Medical Center VR...................... 5.680 07/01/98 2,500,000
------------
9,400,000
------------
INDIANA -- 1.4%
2,500,000 Indiana State Finance Authority VR....................... 5.610 07/01/98 2,500,000
------------
KENTUCKY -- 2.8%
2,200,000 Lexington - Fayette, Kentucky Urban County Airport VR.... 5.700 07/01/98 2,200,000
2,600,000 Lexington - Fayette, Kentucky Urban County Airport VR.... 5.700 07/01/98 2,600,000
------------
4,800,000
------------
LOUISIANA -- 2.9%
5,000,000 Calcasieu Parish, Louisiana Industrial Development Agency
VR..................................................... 5.700 07/01/98 5,000,000
------------
MICHIGAN -- 1.4%
2,500,000 Genesys Health Systems VR................................ 5.680 07/01/98 2,500,000
------------
MINNESOTA -- 1.7%
3,000,000 Catholic Health Initiatives VR........................... 5.600 07/01/98 3,000,000
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 3
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
<TABLE>
<CAPTION>
YIELD TO
MATURITY ON
PRINCIPAL DATE OF MATURITY
AMOUNT DESCRIPTION PURCHASE* DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FLOATING RATE NOTES -- 44.9% (CONTINUED)
NEW YORK -- 7.6%
$3,740,000 Clinton County, New York Industrial Development Agency
VR..................................................... 5.688% 07/02/98 $ 3,740,000
2,000,000 Clinton County, New York Industrial Development Agency
VR..................................................... 5.688 07/02/98 2,000,000
3,200,000 Health Insurance Plan, Greater New York VR............... 5.550 07/01/98 3,200,000
350,000 New York City, New York Industrial Development Agency
VR..................................................... 5.650 07/01/98 350,000
470,000 New York City, New York Industrial Development Agency
VR..................................................... 5.650 07/01/98 470,000
600,000 New York State, Housing Finance Agency VR................ 5.600 07/01/98 600,000
2,800,000 New York State, Housing Finance Agency VR................ 5.650 07/01/98 2,800,000
------------
13,160,000
------------
NORTH CAROLINA -- 4.0%
3,100,000 Community Health Systems VR.............................. 5.850 07/01/98 3,100,000
2,830,000 Greensboro, North Carolina GO VR......................... 5.700 07/01/98 2,830,000
1,120,000 North Carolina Assisted Living VR........................ 5.700 07/01/98 1,120,000
------------
7,050,000
------------
PENNSYLVANIA -- 2.2%
1,095,000 Moon, Pennsylvania Industrial Development Authority VR... 5.700 07/02/98 1,095,000
2,775,000 Union County, Pennsylvania Hospital Authority VR......... 5.700 07/01/98 2,775,000
------------
3,870,000
------------
TENNESSEE -- 2.9%
5,000,000 Memphis - Shelby County, Tennessee Airport Authority
VR..................................................... 5.610 07/02/98 5,000,000
------------
TEXAS -- 2.9%
5,065,000 Texas State GO VR........................................ 5.610 07/01/98 5,065,000
------------
TOTAL FLOATING RATE NOTES (cost -- $78,245,000).......... 78,245,000
------------
TOTAL INVESTMENTS -- 99.2% (cost -- $172,980,324)........ 172,980,324
------------
Other assets in excess of liabilities -- 0.8%............ 1,420,639
------------
NET ASSETS -- 100.0%..................................... $174,400,963
------------
------------
</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.
Abbreviations used in this statement:
FGIC -- Insured as to principal and interest by the Financial Guaranty Insurance
Corporation.
GO -- General Obligation.
MBIA -- Insured as to principal and interest by the MBIA Insurance Corporation.
See accompanying notes to financial statements.
PAGE 4
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $172,980,324)..................................................... $172,980,324
Cash.......................................................................................... 122
Interest receivable........................................................................... 1,732,057
------------
Total assets.......................................................................... 174,712,503
------------
LIABILITIES
Dividend payable.............................................................................. 146,198
Payable for Fund shares repurchased........................................................... 80,603
Management fee payable........................................................................ 7,941
Accrued expenses.............................................................................. 76,798
------------
Total liabilities..................................................................... 311,540
------------
NET ASSETS (equivalent to $1.00 per share on 174,402,791 shares of $.001 par value capital
stock outstanding).......................................................................... $174,400,963
------------
------------
</TABLE>
- ------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest................................................................................... $ 4,617,608
EXPENSES
Management fee.................................................................. $160,735
Custody and administration...................................................... 89,247
Audit and tax return preparation fees........................................... 17,195
Printing........................................................................ 15,023
Registration and filing fees.................................................... 8,507
Legal........................................................................... 3,077
Directors' fees and expenses.................................................... 1,448
Shareholder services............................................................ 905
Other........................................................................... 2,534
--------
298,671
Management fee waived........................................................... (152,794) 145,877
-------- ------------
Net investment income...................................................................... 4,471,731
NET REALIZED LOSS ON SECURITIES SOLD........................................................... (117)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS..................................................... $ 4,471,614
------------
------------
</TABLE>
See accompanying notes to financial statements.
PAGE 5
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- -----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
1998 DECEMBER 31,
(UNAUDITED) 1997
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income............................................... $ 4,471,731 $ 9,612,644
Net realized loss on securities sold................................ (117) (1,975)
---------------- ------------
Net increase in net assets from operations.......................... 4,471,614 9,610,669
---------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income................................ (4,471,731) (9,612,644)
Distributions from net realized gains............................... -- (378)
---------------- ------------
(4,471,731) (9,613,022)
---------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sales of shares....................................... 409,434,852 446,027,534
Net asset value of shares issued in reinvestment of dividends....... 3,544,578 7,267,767
Payment for redemption of shares.................................... (371,590,280) (479,931,796)
---------------- ------------
Net increase (decrease) in net assets derived from share
transactions...................................................... 41,389,150 (26,636,495)
---------------- ------------
Net increase (decrease) in net assets............................... 41,389,033 (26,638,848)
NET ASSETS
Beginning of period................................................. 133,011,930 159,650,778
---------------- ------------
End of period....................................................... $174,400,963 $133,011,930
---------------- ------------
---------------- ------------
</TABLE>
- -------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED DATA PER SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 ------------------------------------------------------
(UNAUDITED) 1997 1996(A) 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period........ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- -------- -------- -------- ------- -------
Net investment income....................... 0.027 0.055 0.050 0.049 0.036 0.028
Dividends from net investment income........ (0.027) (0.055) (0.050) (0.049) (0.036) (0.028)
----------- -------- -------- -------- ------- -------
Net asset value, end of period.............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------- -------- -------- -------- ------- -------
----------- -------- -------- -------- ------- -------
Net assets, end of period (thousands)....... $ 174,401 $133,012 $159,651 $ 11,425 $27,667 $34,120
Total investment return..................... +2.8% +5.6% +5.1% +5.0% +3.6% +2.9%
Ratios to average net assets:
Expense................................. 0.18% 0.18% 0.20% 0.65% 0.45% 0.35%
Net investment income................... 5.52% 5.48% 5.29% 4.89% 3.53% 2.83%
Before applicable waiver of management fee
and expenses absorbed by SBAM, net
investment income per share and expense
ratios would have been:
Net investment income per share......... $ 0.026 $ 0.052 $ 0.048 $ 0.049 -- --
Expense ratios.......................... 0.37% 0.41% 0.46% 0.70% -- --
</TABLE>
(a) The Fund changed its name and objective on April 29, 1996. See Note 1.
See accompanying notes to financial statements.
PAGE 6
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Series Funds Inc (the "Company") was incorporated in Maryland
on April 17, 1990 as an open-end management investment company, and currently
operates as a series company comprised of nine portfolios. Only information with
respect to Salomon Brothers Institutional Money Market Fund (the "Fund") is
included in this report. The other portfolios of the Company are reported in a
separate report and are not included herein. The Fund changed its name from
Salomon Brothers U.S. Treasury Securities Money Market Fund to its current name
on April 29, 1996. Prior to April 29, 1996, the Fund's objective was to seek a
high level of current income by investing only in short-term United States
government and government agency securities. The Fund's current objective is to
seek as high a level of current income as is consistent with liquidity and the
stability of principal.
Following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles ("GAAP"). The preparation of
financial statements in accordance with GAAP requires management to make
estimates of certain reported amounts in the financial statements. Actual
amounts could differ from those estimates.
(A) SECURITIES VALUATION. Portfolio securities are valued using the
amortized cost method, which involves initially valuing an investment at
its cost and thereafter assuming a constant amortization to maturity of any
premium or discount. This method results in a value approximating market
value and does not include unrealized gains or losses.
(B) FEDERAL INCOME TAXES. The Fund has complied and intends to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies, including the distribution
requirements of the Tax Reform Act of 1986, and to distribute all of its
income, including any net realized gains, to shareholders. Therefore, no
Federal income tax or excise tax provision is required.
(C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends on the
shares of the Fund are declared each business day to shareholders of record
at twelve noon (New York time) on that day, and paid on the last business
day of the month. Distributions of net realized gains to shareholders, if
any, are declared annually and recorded on the ex-dividend date. Dividends
and distributions are determined in accordance with income tax regulations,
which may differ from GAAP.
PAGE 7
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
(D) EXPENSES. Direct expenses are charged to the Fund, and general
expenses of the Company are allocated to the Fund based on relative average
net assets for the period in which 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 Travelers Group Inc. ("Travelers"), to act as
investment manager of the Fund, subject to the supervision by the Board of
Directors of the Company. SBAM furnishes the Company with office space and
certain services and facilities required for conducting the business of the
Company and pays the compensation of its officers. The management agreement with
SBAM was most recently approved by shareholders at a special meeting held on
January 14, 1998. Approval of the agreement was necessary due to the merger of
Salomon Inc, which had been the ultimate parent company of the investment
manager, with and into Smith Barney Holdings Inc., a subsidiary of Travelers,
which occurred on November 28, 1997. The management fee to SBAM is payable
monthly and is based on an annual rate of .20% of the Fund's average daily net
assets.
Under a voluntary agreement between SBAM and the Fund, SBAM has agreed to reduce
or otherwise limit the expenses of the Fund (exclusive of taxes, interest, and
extraordinary expenses such as litigation and indemnification expenses), on an
annualized basis to .18% of the Fund's average daily net assets. For the six
months ended June 30, 1998, SBAM voluntarily waived management fees of $152,794.
Investors Bank & Trust Company ("IBT") serves as custodian and administrator for
the Fund, which includes performing custodial and certain administrative
services in connection with the operation of the Fund.
The Fund has an agreement with Salomon Brothers Inc, an affiliate of SBAM, to
distribute its shares.
3. CAPITAL STOCK
At June 30, 1998, the Company had 10,000,000,000 shares of authorized capital
stock, par value $.001 per share, of which the Fund had 1,000,000,000 shares
authorized.
PAGE 8
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
Because the Fund has maintained a $1.00 net asset value per share from
inception, the number of shares sold, shares issued in reinvestment of dividends
declared, and shares repurchased, are equal to the dollar amount shown in the
Statement of Changes in Net Assets for the corresponding capital share
transactions.
Net assets consist of:
<TABLE>
<S> <C>
Par value..................................................................................... $ 174,403
Paid-in capital in excess of par.............................................................. 174,228,387
Undistributed net investment income........................................................... 881
Accumulated net realized loss on investments.................................................. (2,708)
------------
Net assets.................................................................................... $174,400,963
------------
------------
</TABLE>
4. PORTFOLIO ACTIVITY
The Fund invests in money market instruments maturing in thirteen months or less
whose credit ratings are within the two highest ratings categories of two
nationally recognized statistical rating organizations ("NRSROs") or, if rated
by only one NRSRO, that NRSRO, or, if not rated, are believed by the investment
manager to be of comparable quality.
At December 31, 1997, the Fund had net capital loss carry-forwards available to
offset future capital gains of $949, of which $616 expire on December 31, 2004
and $333 expire on December 31, 2005.
PAGE 9
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
CAROL L. COLMAN
President, Colman Consulting Co., Inc.
DANIEL P. CRONIN
Vice President -- General Counsel,
Pfizer International Inc.
HEATH B. MCLENDON
Chairman and President,
Managing Director, Smith Barney, Inc.;
President and Director, Mutual
Management Corp. and Travelers
Investment Adviser, Inc.;
Chairman of Smith Barney
Strategy Advisers Inc.
- --------
OFFICERS
HEATH B. MCLENDON
Chairman and President
JAMES E. CRAIGE
Executive Vice President
RICHARD E. DAHLBERG
Executive Vice President
THOMAS K. FLANAGAN
Executive Vice President
GIAMPAOLO G. GUARNIERI
Executive Vice President
PAMELA P. MILUNOVICH
Executive Vice President
MAUREEN O'CALLAGHAN
Executive Vice President
BETH SEMMEL
Executive Vice President
MARYBETH WHYTE
Executive Vice President
PETER J. WILBY
Executive Vice President
LEWIS E. DAIDONE
Executive Vice President and Treasurer
NANCY A. NOYES
Vice President
NOEL B. DAUGHERTY
Secretary
ANTHONY PACE
Assistant Controller
<PAGE>
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
- ---------------------------------------------------
SALOMON BROTHERS INSTITUTIONAL MONEY MARKET FUND
7 World Trade Center
New York, New York 10048
1-800-347-6028
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
200 Clarendon Street
Boston, Massachusetts 02116
DIVIDEND DISBURSING AND TRANSFER AGENT
First Data Investor Services Group, Inc.
53 State Street
Boston, Massachusetts 02109-2873
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
- ---------------------------------------------------
SALOMON BROTHERS INSTITUTIONAL INVESTMENT SERIES*
SALOMON BROTHERS INSTITUTIONAL HIGH YIELD BOND
FUND
The High Yield Bond Fund's investment objective is to maximize total returns.
The Fund seeks to achieve its objective by investing primarily in a portfolio of
high yield fixed-income securities that offer a yield above that generally
available on debt securities in the four highest rating categories of the
recognized rating services and which generally entail increased credit and
market risks.
SALOMON BROTHERS INSTITUTIONAL
EMERGING MARKETS DEBT FUND
The Emerging Market Debt Fund's objective is to maximize total return. The Fund
seeks to achieve its objective by investing at least 65% of its total assets in
debt securities of government, government-related and corporate issuers in
emerging market countries and of entities organized to restructure outstanding
debt of such issuers.
- ------------------------------------------------------------------------------
* For more complete information about Salomon Brothers Institutional Investment
Series, you may obtain a Prospectus by calling 1-800-347-6028.
This report is submitted for the general information of the shareholders of
Salomon Brothers Institutional Investment Series. It is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus, which contains information concerning the Fund's
investment policies and expenses as well as other pertinent information.
