UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5018
Smith Barney Investment Series
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Christina T. Sydor, Esq.
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code:
(800) 451-2010
Date of fiscal year end: October 31
Date of reporting period: April 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
SMITH BARNEY
LARGE CAP CORE FUND
STYLE PURE SERIES | SEMI-ANNUAL REPORT | APRIL 30, 2003
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered service mark of
Citigroup Global Markets Inc.
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
[PHOTO]
LARRY WEISSMAN
PORTFOLIO MANAGER
Style Pure Series
[GRAPHIC]
Semi-Annual Report . April 30, 2003
SMITH BARNEY
LARGE CAP CORE FUND
LARRY WEISSMAN, CFA
Larry Weissman, CFA, has more than 18 years of securities
business experience.
Education: BS in Economics from Cornell University, MBA in Finance from
Columbia University.
FUND OBJECTIVE
The Fund seeks capital appreciation. It aims to achieve this objective by
investing at least 80% of its net assets in the equity securities of U.S.
large cap issuers and related investments.
FUND FACTS
FUND INCEPTION
-----------------
April 14, 1987
MANAGER'S INVESTMENT
INDUSTRY EXPERIENCE
-----------------
18 Years
What's Inside
Letter From the Chairman.............................................. 1
Schedule of Investments............................................... 2
Statement of Assets and Liabilities................................... 5
Statement of Operations............................................... 6
Statements of Changes in Net Assets................................... 7
Notes to Financial Statements......................................... 8
Financial Highlights.................................................. 13
[LOGO] Smith Barney
Mutual Funds
Your Serious Money. Professionally Managed.(R)
Your Serious Money. Professionally Managed.(R) is a registered
service mark of Citigroup Global Markets Inc.
Investment Products: Not FDIC Insured . Not Bank Guaranteed . May Lose Value
LETTER FROM THE CHAIRMAN
[PHOTO]
R. JAY GERKEN
Chairman, President and Chief Executive officer
Dear Shareholder,
The philosopher Bertrand Russell famously remarked that, "Change is one thing,
progress is another." You will notice in the following pages that we have begun
to implement some changes to your shareholder report and we will be reflecting
other changes in future reports. Our aim is to make meaningful improvements in
reporting on the management of your Fund and its performance, not just to enact
change for change's sake. Please bear with us during this transition period.
We know that you have questions about fund managers' decisions and plans, and
we want to be sure that you have easy access to the information you need.
Keeping investors informed is, and always will be, one of my top priorities as
Chairman of your Fund. To that end, we encourage you to go to our website:
www.smithbarneymutualfunds.com/1/ where you can find additional insight on your
Fund.
I invite you to read this report in full. Please take the opportunity to talk
to your financial adviser about this report or any other questions or concerns
you have about your Fund and your financial future. As always, thank you for
entrusting your assets to us. We look forward to helping you continue to meet
your financial goals.
Sincerely,
/s/ R Jay Gerken
R. Jay Gerken
Chairman, President and Chief Executive Officer
May 15, 2003
- --------
/1/Matters referenced are not incorporated by reference unless otherwise stated.
1 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2003
SHARES SECURITY VALUE
- -------------------------------------------------------------------
COMMON STOCK -- 99.7%
Consumer Discretionary -- 10.8%
1,141,150 AOL Time Warner, Inc.* $ 15,610,932
1,187,990 Comcast Corp., Class A Shares* 37,908,761
1,018,185 Cox Communications, Inc.* 33,701,924
100,150 Gannett Co., Inc. 7,583,358
446,150 Harley-Davidson, Inc. 19,826,906
1,142,224 The Home Depot, Inc. 32,130,761
166,850 Lowe's Cos., Inc. 7,323,047
835,000 Target Corp. 27,922,400
2,175,550 TJX Cos., Inc. 41,879,338
160,700 Tribune Corp. 7,871,085
242,450 Univision Communications, Inc.* 7,341,385
311,450 USA Interactive* 9,327,927
1,098,776 Viacom Inc., Class B Shares* 47,697,865
831,850 The Walt Disney Co. 15,522,321
- -------------------------------------------------------------------
311,648,010
- -------------------------------------------------------------------
Consumer Staples -- 11.7%
300,500 Avon Products, Inc. 17,480,085
1,070,300 The Coca-Cola Co. 43,240,120
344,850 Costco Wholesale Corp.* 11,942,155
446,750 General Mills, Inc. 20,152,893
414,600 Kimberly-Clark Corp. 20,634,642
945,925 Kraft Foods Inc. 29,229,083
986,750 PepsiCo, Inc. 42,706,540
582,750 The Procter & Gamble Co. 52,360,088
231,850 Unilever N.V., NY Shares 14,599,595
1,522,100 Wal-Mart Stores, Inc. 85,724,672
- -------------------------------------------------------------------
338,069,873
- -------------------------------------------------------------------
Energy -- 6.3%
454,145 Encana Corp. 14,941,370
2,963,610 Exxon Mobil Corp. 104,319,072
498,150 Noble Corp.* 15,417,743
400,500 Total Fina Elf SA, Sponsored ADR 26,312,850
554,610 Weatherford International, Inc.* 22,311,960
- -------------------------------------------------------------------
183,302,995
- -------------------------------------------------------------------
Financials -- 20.3%
1,269,300 Ambac Financial Group, Inc. 74,063,655
1,597,925 American International Group Inc. 92,599,754
854,700 Bank of America Corp. 63,290,535
1,123,750 The Bank of New York Co., Inc. 29,723,188
262 Berkshire Hathaway Inc., Class A Shares* 18,291,530
942,450 Fannie Mae 68,223,956
1,191,500 J.P. Morgan Chase & Co. 34,970,524
597,550 Lehman Brothers Holdings Inc. 37,627,724
1,435,450 Morgan Stanley 64,236,388
952,150 The St. Paul Cos. 32,696,831
1,189,900 Wells Fargo & Co. 57,424,574
171,500 XL Capital Ltd., Class A Shares 14,114,450
- -------------------------------------------------------------------
587,263,109
- -------------------------------------------------------------------
See Notes to Financial Statements.
2 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------
Healthcare --14.3%
798,705 Alcon, Inc.* $ 35,182,955
508,540 Amgen Inc.* 31,178,587
196,500 Anthem, Inc.* 13,487,760
311,950 Bristol-Myers Squibb Co. 7,967,203
245,000 Eli Lilly & Co. 15,635,900
185,500 Forest Laboratories, Inc.* 9,594,060
264,550 iShares Nasdaq Biotechnology Index* 15,158,715
933,350 Johnson & Johnson 52,603,606
443,300 Medtronic, Inc. 21,163,142
4,089,250 Pfizer Inc. 125,744,438
923,250 Schering-Plough Corp. 16,710,825
510,900 Teva Pharmaceutical Industries Ltd., Sponsored ADR 23,859,030
1,089,550 Wyeth 47,428,112
- -----------------------------------------------------------------------------
415,714,333
- -----------------------------------------------------------------------------
Industrials -- 9.7%
305,750 3M Co. 38,536,730
509,900 Canadian National Railway Co. 24,796,437
556,100 Delta Air Lines, Inc. 7,112,519
3,556,970 General Electric Co. 104,752,766
457,650 Lockheed Martin Corp. 22,905,383
1,890,300 Tyco International Ltd. 29,488,680
291,400 United Parcel Service Inc., Class B Shares 18,101,768
352,750 United Technologies Corp. 21,803,478
290,650 W.W. Grainger, Inc. 13,413,498
- -----------------------------------------------------------------------------
280,911,259
- -----------------------------------------------------------------------------
Information Technology -- 18.9%
982,500 BEA Systems, Inc.* 10,522,574
2,356,150 Cisco Systems, Inc.* 35,436,496
1,689,800 Dell Computer Corp.* 48,852,118
347,060 Electronic Arts, Inc.* 20,570,246
1,146,650 EMC Corp.* 10,423,048
1,127,900 Hewlett-Packard Co. 18,384,770
2,891,932 Intel Corp. 53,211,549
575,250 International Business Machines Corp. 48,838,725
419,600 Intuit Inc.* 16,272,088
447,504 Maxim Integrated Products, Inc. 17,582,432
4,841,540 Microsoft Corp. 123,798,178
836,300 Nokia Oyj, Sponsored ADR 13,857,491
3,629,975 Oracle Corp.* 43,124,103
1,041,600 Paychex, Inc. 32,435,424
767,000 SAP AG, Sponsored ADR 19,566,170
823,500 Texas Instruments Inc. 15,226,515
904,848 VERITAS Software Corp.* 19,915,704
- -----------------------------------------------------------------------------
548,017,631
- -----------------------------------------------------------------------------
Materials -- 2.7%
516,650 Alcan Inc. 15,158,510
645,500 Alcoa Inc. 14,801,315
330,900 E.I. du Pont de Nemours & Co. 14,073,177
375,350 International Paper Co. 13,418,763
362,350 Praxair, Inc. 21,045,288
- -----------------------------------------------------------------------------
78,497,053
- -----------------------------------------------------------------------------
See Notes to Financial Statements.
3 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
Miscellaneous -- 1.8%
325,500 Exelon Corp. $ 17,264,520
404,300 Nasdaq-100 Index Tracking Stock* 11,098,035
826,000 Southern Co. 24,028,340
- ---------------------------------------------------------------------------------------------------------------------------------
52,390,895
- ---------------------------------------------------------------------------------------------------------------------------------
Telecommunication Services -- 3.2%
1,612,934 AT&T Wireless Services Inc.* 10,419,554
2,210,010 Verizon Communications Inc. 82,610,174
- ---------------------------------------------------------------------------------------------------------------------------------
93,029,728
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $2,585,778,243) 2,888,844,886
- ---------------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.3%
$8,715,000 Merrill Lynch & Co., Inc., 1.250% due 5/1/03; Proceeds at maturity -- $8,715,303; (Fully collateralized
by various U.S. government agency obligations, 0.000% to 4.875% due 5/9/03 to 11/15/07;
Market value -- $8,889,325) (Cost -- $8,715,000) 8,715,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $2,594,493,243**) $2,897,559,886
- ---------------------------------------------------------------------------------------------------------------------------------
*Non-income producing security.
**Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depositary Receipt
See Notes to Financial Statements.
4 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2003
ASSETS:
Investments, at value (Cost -- $2,594,493,243) $2,897,559,886
Cash 228
Receivable for securities sold 5,807,826
Dividends and interest receivable 2,301,636
Receivable for Fund shares sold 397,718
- ---------------------------------------------------------------------------
Total Assets 2,906,067,294
- ---------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares purchased 3,457,804
Management fee payable 1,454,134
Trustees' retirement plan 346,575
Service plan fees payable 131,900
Accrued expenses 2,670,238
- ---------------------------------------------------------------------------
Total Liabilities 8,060,651
- ---------------------------------------------------------------------------
Total Net Assets $2,898,006,643
- ---------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 2,006
Capital paid in excess of par value 2,945,202,511
Undistributed net investment income 1,587,625
Accumulated net realized loss from security transactions
and futures contracts (351,852,142)
Net unrealized appreciation of investments 303,066,643
- ---------------------------------------------------------------------------
Total Net Assets $2,898,006,643
- ---------------------------------------------------------------------------
Shares Outstanding:
Class 1 154,270,370
- ---------------------------------------------------------------------------
Class A 25,329,473
- ---------------------------------------------------------------------------
Class B 20,668,670
- ---------------------------------------------------------------------------
Class L 364,653
- ---------------------------------------------------------------------------
Net Asset Value:
Class 1 (and redemption price) $14.56
- ---------------------------------------------------------------------------
Class A (and redemption price) $14.33
- ---------------------------------------------------------------------------
Class B * $13.70
- ---------------------------------------------------------------------------
Class L ** $14.27
- ---------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class 1 (net asset value plus 9.29% of net asset value
per share) $15.91
- ---------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value
per share) $15.08
- ---------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value
per share) $14.41
- ---------------------------------------------------------------------------
*Redemption price is NAV of Class B shares reduced by a 5.00% CDSC if shares
are redeemed within one year from purchase (See Note 2).
**Redemption price is NAV of Class L shares reduced by a 1.00% CDSC if shares
are redeemed within one year from initial purchase (See Note 2).
See Notes to Financial Statements.
5 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2003
INVESTMENT INCOME:
Dividends $ 19,893,156
Interest 490,885
Less: Foreign withholding tax (139,615)
--------------------------------------------------------------------------
Total Investment Income 20,244,426
--------------------------------------------------------------------------
EXPENSES:
Management fee (Note 2) 8,465,320
Shareholder servicing fees (Note 6) 7,953,805
Service plan fees (Note 6) 1,831,409
Shareholder communications (Note 6) 131,559
Trustees' fees 53,226
Custody 45,920
Audit and legal 38,400
Registration fees 30,768
Other 13,075
--------------------------------------------------------------------------
Total Expenses 18,563,482
--------------------------------------------------------------------------
Net Investment Income 1,680,944
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Loss From:
Security transactions (excluding short-term securities) (69,795,856)
Futures contracts (961,356)
--------------------------------------------------------------------------
Net Realized Loss (70,757,212)
--------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 150,815,314
End of period 303,066,643
--------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 152,251,329
--------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 81,494,117
--------------------------------------------------------------------------
Increase in Net Assets From Operations $ 83,175,061
--------------------------------------------------------------------------
See Notes to Financial Statements.
6 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 2003 (unaudited) and the Year Ended October
31, 2002
2003 2002
- -----------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,680,944 $ 1,260,197
Net realized loss (70,757,212) (247,616,504)
Increase (decrease) in net unrealized
appreciation 152,251,329 (497,956,718)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Operations 83,175,061 (744,313,025)
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 7):
Net investment income -- (15,313,890)
Net realized gains -- (1,906,977)
Capital -- (1,694,562)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders -- (18,915,429)
- ----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 8):
Net proceeds from sale of shares 99,876,790 258,182,747
Net asset value of shares issued for
reinvestment of dividends -- 18,912,891
Cost of shares reacquired (235,388,671) (563,945,773)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share
Transactions (135,511,881) (286,850,135)
- ----------------------------------------------------------------------------------
Decrease in Net Assets (52,336,820) (1,050,078,589)
NET ASSETS:
Beginning of period 2,950,343,463 4,000,422,052
- ----------------------------------------------------------------------------------
End of period* $2,898,006,643 $ 2,950,343,463
- ----------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net
investment income of: $1,587,625 $(93,319)
- ----------------------------------------------------------------------------------
See Notes to Financial Statements.
7 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The Smith Barney Large Cap Core Fund ("Fund"), a separate investment fund of
the Smith Barney Investment Series ("Trust"), a Massachusetts business trust,
is registered under the Investment Company Act of 1940 ("1940 Act"), as
amended, as a diversified open-end management investment company. This Trust
consists of this Fund and six other separate investment funds: Smith Barney
International Fund, formerly known as Smith Barney International Aggressive
Growth Fund, Smith Barney Growth and Income Fund, Smith Barney Large Cap Core
Portfolio, Smith Barney Premier Selections All Cap Growth Portfolio, Smith
Barney Growth and Income Portfolio and Smith Barney Government Portfolio. The
financial statements and financial highlights for the other portfolios are
presented in separate shareholder reports.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities traded on
national securities markets are valued at the closing prices on such markets
or, if there were no sales during the day, at the current quoted bid price;
securities primarily traded on foreign exchanges are generally valued at the
preceding closing values of such securities on their respective exchanges,
except that when a significant occurrence, subsequent to the time a value was
so established, is likely to have significantly changed the value, then the
fair value of those securities will be determined by consideration of other
factors by or under the direction of the Board of Trustees or its delegates;
over-the-counter securities are valued on the basis of the bid price at the
close of business on each day; U.S. government and agency obligations are
valued at the average between bid and ask prices in the over-the-counter
market; securities listed on the NASDAQ National Market System for which market
quotations are available are valued at the official closing price or, if there
is no official closing price on that day, at the last sale price; (c)
securities maturing within 60 days are valued at cost plus accreted discount or
minus amortized premium, which approximates value; (d) securities for which
market quotations are not available will be valued in good faith at fair value
by or under the direction of the Board of Trustees; (e) interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
an accrual basis; ( f ) dividend income is recorded on the ex-dividend date;
foreign dividend income is recorded on the ex-dividend date or as soon as
practical after the Fund determine the existence of a dividend declaration
after exercising reasonable due diligence; (g) gains or losses on the sale of
securities are calculated by using the specific identification method; (h)
dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date; the Fund distributes dividends and capital gains, if any,
annually; (i) the accounting records of the Fund are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies are
translated into U.S. dollars based on the rate of exchange of such currencies
against U.S. dollars on the date of valuation. Purchases and sales of
securities, and income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are adjusted
when reported by the custodian bank; ( j) realized gain and loss on foreign
currency includes the net realized amount from the sale of currency and the
amount realized between trade date and settlement date on security
transactions; (k) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America; (l)
the Fund intends to comply with the requirements of the Internal Revenue Code
of 1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
federal income and excise tax; and (m) estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
8 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Also, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk. These contracts are marked-to-market
daily, by recognizing the difference between the contract exchange rate and the
current market rate as an unrealized gain or loss. Realized gains or losses are
recognized when contracts are settled.
2. Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as the investment manager to the Fund.
The Fund pays SBFM a management fee, which is calculated daily and paid monthly
at an annual rate of the Fund's average daily net assets as follows:
Average Daily Net Assets Annual Rate
- -----------------------------------------------------------------------------
First $1 billion 0.65%
- -----------------------------------------------------------------------------
Next $1 billion 0.60
- -----------------------------------------------------------------------------
Next $1 billion 0.55
- -----------------------------------------------------------------------------
Next $1 billion 0.50
- -----------------------------------------------------------------------------
Over $4 billion 0.45
- -----------------------------------------------------------------------------
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Fund's transfer agent. PFPC Global Fund Services ("PFPC") and Primerica
Shareholder Services ("PSS"), another subsidiary of Citigroup, act as the
Fund's sub-transfer agents. CTB receives account fees and asset-based fees that
vary according to the size and type of account. PFPC and PSS are responsible
for shareholder recordkeeping and financial processing for all shareholder
accounts and are paid by CTB. For the six months ended April 30, 2003, the Fund
paid transfer agent fees of $6,068,172 to CTB.
Citigroup Global Markets Inc. ("CGM"), formerly known as Salomon Smith Barney
Inc., and PFS Distributors, Inc., both of which are subsidiaries of Citigroup,
act as the Fund's distributors. In addition, CGM and certain other
broker-dealers continue to sell Fund shares to the public as members of the
selling group. For the six months ended April 30, 2003, CGM and its affiliates
received brokerage commissions of $47,731.
There are maximum initial sales charges of 8.50%, 5.00% and 1.00% for Class 1,
A and L shares, respectively. There is a contingent deferred sales charge
("CDSC") of 5.00% on Class B shares, which applies if redemption occurs within
one year from purchase. This CDSC declines thereafter by 1.00% per year until
no CDSC is incurred. Class L shares also have a 1.00% CDSC, which applies if
redemption occurs within the first year of purchase. In certain cases, Class A
shares have a 1.00% CDSC, which applies if redemption occurs within the first
year of purchase. This CDSC only applies to those purchases of Class A shares,
which, when combined with current holdings of Class A shares, equal or exceed
$1,000,000 in the aggregate. These purchases do not incur an initial sales
charge.
For the six months ended April 30, 2003, CGM and its affiliates received sales
charges of approximately $2,810,000, $1,125,000 and $5,000 on sales of the
Fund's Class 1, A and L shares, respectively. In addition, CDSCs paid to CGM
and its affiliates for the six months ended April 30, 2003 were approximately
$457,000 for Class B shares.
All officers and one Trustee of the Trust are employees of Citigroup or its
affiliates.
The Trustees of the Funds have adopted a Retirement Plan ("Plan") for all
Trustees who are not "interested persons" of the Fund, within the meaning of
the 1940 Act. Under the Plan, all Trustees are required to retire from the
Board as of the last day of the calendar year in which the applicable Trustee
attains age 75 (certain Trustees who had already attained age 75 when the Plan
was adopted are required to retire effective December 31, 2003). Trustees may
retire under the Plan before attaining the mandatory retirement age. Trustees
who have served as Trustee of the Trust or any of the investment compa-
9 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
nies associated with Citigroup for at least ten years when they retire are
eligible to receive the maximum retirement benefit under the Plan. The maximum
retirement benefit is an amount equal to five times the amount of retainer and
regular meeting fees payable to a Trustee during the calendar year ending on or
immediately prior to the applicable Trustee's retirement. Amounts under the
Plan may be paid in installments or in a lump sum (discounted to present
value). Benefits under the Plan are unfunded. Two former Trustees are currently
receiving payments under the Plan. The amount of benefits to be paid under the
Plan cannot currently be determined for current Trustees.
Messrs. Carlton, Cocanougher, Gross, Merten and Pettit also are covered by a
prior retirement plan. Under the prior plan, retirement benefits are payable
for a ten-year period following retirement, with the annual payment to be based
upon the Trustee's compensation from the Trust during calendar year 2000.
Trustees with more than five but less than ten years of service at retirement
will receive a prorated benefit. In order to receive benefits under the current
Plan, a Trustee must waive all rights under the prior plan prior to receiving
payment under either plan. Total aggregate retirement benefits accrued under
the prior plan for the six months ended April 30, 2003 were $42,285. The amount
of benefits to be paid under the prior plan cannot currently be determined for
these Trustees.
3. Investments
During the six months ended April 30, 2003, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
securities, but excluding short-term securities) were as follows:
- ------------------------------------------------
Purchases $606,622,275
- ------------------------------------------------
Sales 703,337,291
- ------------------------------------------------
At April 30, 2003, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
- -------------------------------------------------
Gross unrealized appreciation $ 457,728,416
Gross unrealized depreciation (154,661,773)
- -------------------------------------------------
Net unrealized appreciation $ 303,066,643
- -------------------------------------------------
4. Repurchase Agreements
The Fund purchases (and its custodian takes possession of ) U.S. government
securities from securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day),
at an agreed-upon higher repurchase price. The Fund requires continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are made or received and recognized as
assets due from or liabilities due to broker, depending upon whether unrealized
gains or losses are incurred. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (and
cost of ) the closing transaction and the Fund's basis in the contract. The
Fund enters into such contracts to hedge a portion of its portfolio. The Fund
bears the market risk that arises from changes in the value of the financial
instruments and securities indices (futures contracts) and the credit risk
should a counterparty fail to perform under such contracts.
At April 30, 2003, the Fund did not hold any futures contracts.
10 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. Class Specific Expenses
Pursuant to Service Plans, the Fund pays a service fee with respect to its
Class A, B and L shares calculated at the annual rate of 0.25% of the average
daily net assets with respect to Class A shares and calculated at the annual
rate of 1.00% of the average daily net assets of Class B and L shares. For the
six months ended April 30, 2003, total Service Plan fees incurred, which are
accrued daily and paid monthly, were as follows:
Class A Class B Class L
- ----------------------------------------------------------------------------
Service Plan Fees $427,872 $1,379,990 $23,547
- ----------------------------------------------------------------------------
For the six months ended April 30, 2003, total Shareholder Servicing fees
were as follows:
Class 1 Class A Class B Class L
- ----------------------------------------------------------------------------
Shareholder Servicing Fees $4,502,700 $1,793,310 $1,655,740 $2,055
- ----------------------------------------------------------------------------
For the six months ended April 30, 2003, total Shareholder Communication
expenses were as follows:
Class 1 Class A Class B Class L
- ----------------------------------------------------------------------------
Shareholder Communication Expenses $86,101 $25,101 $19,207 $1,150
- ----------------------------------------------------------------------------
7. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
April 30, 2003 October 31, 2002
- ------------------------------------------------------
Class 1
Net investment
income -- $15,313,890
Net realized gains -- 1,482,275
Capital -- 1,694,562
- ------------------------------------------------------
Total -- $18,490,727
- ------------------------------------------------------
Class A
Net investment
income -- --
Net realized gains -- $ 226,265
Capital -- --
- ------------------------------------------------------
Total -- $ 226,265
- ------------------------------------------------------
Class B
Net investment
income -- --
Net realized gains -- $ 195,425
Capital -- --
- ------------------------------------------------------
Total -- $ 195,425
- ------------------------------------------------------
Class L
Net investment
income -- --
Net realized gains -- $ 3,012
Capital -- --
- ------------------------------------------------------
Total -- $ 3,012
- ------------------------------------------------------
11 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. Shares of Beneficial Interest
The Fund has five classes of beneficial interest, 1, A, B, L and Y, of which
four classes are outstanding, each with a par value of $0.00001 per share.
There are an unlimited number of shares authorized.
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
April 30, 2003 October 31, 2002
-------------------------- --------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------
Class 1
Shares sold 2,942,484 $ 40,845,341 5,514,504 $ 90,519,719
Shares issued on
reinvestment -- -- 1,001,831 18,490,718
Shares reacquired (11,995,741) (164,605,957) (24,219,440) (389,744,381)
- ---------------------------------------------------------------------------
Net Decrease (9,053,257) $(123,760,616) (17,703,105) $(280,733,944)
- ---------------------------------------------------------------------------
Class A
Shares sold 2,594,551 $ 35,380,038 5,825,048 $ 96,435,608
Shares issued on
reinvestment -- -- 15,797 225,263
Shares reacquired (2,551,767) (34,570,767) (4,989,579) (79,284,641)
- ---------------------------------------------------------------------------
Net Increase 42,784 $ 809,271 851,266 $ 17,376,230
- ---------------------------------------------------------------------------
Class B
Shares sold 1,695,795 $ 22,224,260 4,315,346 $ 68,774,689
Shares issued on
reinvestment -- -- 14,163 194,179
Shares reacquired (2,712,632) (35,203,381) (5,960,574) (93,075,362)
- ---------------------------------------------------------------------------
Net Decrease (1,016,837) $ (12,979,121) (1,631,065) $ (24,106,494)
- ---------------------------------------------------------------------------
Class L
Shares sold 104,379 $ 1,427,151 144,571 $ 2,452,731
Shares issued on
reinvestment -- -- 192 2,731
Shares reacquired (75,655) (1,008,566) (115,607) (1,841,389)
- ---------------------------------------------------------------------------
Net Increase 28,724 $ 418,585 29,156 $ 614,073
- ---------------------------------------------------------------------------
12 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Class 1 Shares 2003/(1)(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/ 1998
- -------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $14.10 $17.55 $26.52 $24.36 $19.59 $20.94
- -------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.03 0.05 0.11 0.07 0.08 0.13
Net realized and unrealized gain (loss) 0.43 (3.39) (6.70) 3.74 6.62 2.10
- -------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.46 (3.34) (6.59) 3.81 6.70 2.23
- -------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.09) (0.06) (0.07) (0.11) (0.17)
Net realized gains -- (0.01) (2.32) (1.58) (1.82) (3.41)
Capital -- (0.01) -- -- -- --
- -------------------------------------------------------------------------------------------------------
Total Distributions -- (0.11) (2.38) (1.65) (1.93) (3.58)
- -------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.56 $14.10 $17.55 $26.52 $24.36 $19.59
- -------------------------------------------------------------------------------------------------------
Total Return 3.26%++ (19.20)% (26.67)% 16.12% 35.60% 12.54%
- -------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $2,247 $2,303 $3,177 $4,691 $4,475 $3,657
- -------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.04%+ 0.90% 0.73% 0.70% 0.76% 0.78%
Net investment income 0.41+ 0.31 0.55 0.26 0.34 0.63
- -------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 22% 38% 27% 34% 37% 113%
- -------------------------------------------------------------------------------------------------------
(1)For the six months ended April 30, 2003 (unaudited).
(2)Per share amounts have been calculated using the monthly average shares
method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
13 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Class A Shares 2003/(1)(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/ 1998
- ----------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.93 $17.41 $26.41 $24.29 $19.54 $20.89
- ----------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.03) (0.10) (0.01) (0.02) 0.02 0.05
Net realized and unrealized gain (loss) 0.43 (3.37) (6.67) 3.73 6.60 2.13
- ----------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.40 (3.47) (6.68) 3.71 6.62 2.18
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- (0.01) (0.05) (0.12)
Net realized gains -- (0.01) (2.32) (1.58) (1.82) (3.41)
Capital -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) (1.59) (1.87) (3.53)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.33 $13.93 $17.41 $26.41 $24.29 $19.54
- ----------------------------------------------------------------------------------------------------
Total Return 2.87%++ (19.94)% (27.12)% 15.69% 35.24% 12.27%
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $363 $352 $425 $510 $344 $180
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.93%+ 1.80% 1.34% 1.04% 1.01% 1.02%
Net investment income (loss) (0.49)+ (0.59) (0.06) (0.07) 0.09 0.38
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 22% 38% 27% 34% 37% 113%
- ----------------------------------------------------------------------------------------------------
(1)For the six months ended April 30, 2003 (unaudited).
(2)Per share amounts have been calculated using the monthly average shares
method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
14 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Class B Shares 2003/(1)(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)/ 1999/(2)/ 1998
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.38 $16.86 $25.81 $23.95 $19.37 $20.75
- ----------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.09) (0.22) (0.15) (0.23) (0.14) (0.11)
Net realized and unrealized gain (loss) 0.41 (3.25) (6.48) 3.67 6.54 2.14
- ----------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.32 (3.47) (6.63) 3.44 6.40 2.03
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- -- --
Net realized gains -- (0.01) (2.32) (1.58) (1.82) (3.41)
Capital -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) (1.58) (1.82) (3.41)
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.70 $13.38 $16.86 $25.81 $23.95 $19.37
- ----------------------------------------------------------------------------------------------------------
Total Return 2.39%++ (20.59)% (27.59)% 14.76% 34.31% 11.43%
- ----------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $283 $290 $393 $524 $357 $182
- ----------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.83%+ 2.59% 2.01% 1.83% 1.76% 1.75%
Net investment loss (1.39)+ (1.39) (0.73) (0.86) (0.65) (0.35)
- ----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 22% 38% 27% 34% 37% 113%
- ----------------------------------------------------------------------------------------------------------
(1)For the six months ended April 30, 2003 (unaudited).
(2)Per share amounts have been calculated using the monthly average shares
method.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
15 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Class L Shares 2003/(1)(2)/ 2002/(2)/ 2001/(2)/ 2000/(2)(3)/
- -------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.87 $17.36 $26.41 $27.33
- -------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.02) (0.13) (0.07) (0.01)
Net realized and unrealized gain (loss) 0.42 (3.35) (6.66) (0.91)
- -------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.40 (3.48) (6.73) (0.92)
- -------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
Net realized gains -- (0.01) (2.32) --
Capital -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) --
- -------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.27 $13.87 $17.36 $26.41
- -------------------------------------------------------------------------------------------------
Total Return 2.88%++ (20.05)% (27.32)% (3.37)%++
- -------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,205 $4,659 $5,326 $180
- -------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.75%+ 2.00% 1.65% 1.54%+
Net investment loss (0.31)+ (0.80) (0.37) (0.46)+
- -------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 22% 38% 27 % 34%
- -------------------------------------------------------------------------------------------------
(1) For the six months ended April 30, 2003 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) For the period from September 19, 2000 (inception date) to October 31, 2000.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
16 Smith Barney Large Cap Core Fund | 2003 Semi-Annual Report to Shareholders
SMITH BARNEY
LARGE CAP CORE FUND
TRUSTEES INVESTMENT MANAGER
Elliott J. Berv Smith Barney Fund
Donald M. Carlton Management LLC
A. Benton Cocanougher
Mark T. Finn DISTRIBUTORS
R. Jay Gerken, Chairman Citigroup Global Markets Inc.
Stephen Randolph Gross PFS Distributors, Inc.
Diana R. Harrington
Susan B. Kerley CUSTODIAN
Alan G. Merten State Street Bank and
C. Oscar Morong, Jr. Trust Company
R. Richardson Pettit
Walter E. Robb, III TRANSFER AGENT
Citicorp Trust Bank, fsb.
OFFICERS 125 Broad Street, 11th Floor
R. Jay Gerken New York, New York 10004
President and
Chief Executive Officer SUB-TRANSFER AGENTS
PFPC Global Fund Services
Lewis E. Daidone P.O. Box 9699
Senior Vice President and Providence, Rhode Island
Chief Administrative Officer 02940-9699
Richard L. Peteka Primerica Shareholder Services
Chief Financial Officer P.O. Box 9662
and Treasurer Providence, Rhode Island
02940-9662
Lawrence B. Weissman, CFA
Vice President and
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary
Smith Barney Large Cap Core Fund
This report is submitted for the general information of shareholders of the
Smith Barney Investment Series -- Smith Barney Large Cap Core Fund, but it may
also be used as sales literature when preceded or accompanied by the current
Prospectus, which gives details about charges, expenses, investment objectives
and operating policies of the Fund. If used as sales material after July 31,
2003, this report must be accompanied by performance information for the most
recently completed calendar quarter.
SMITH BARNEY LARGE CAP CORE FUND
Smith Barney Mutual Funds
3120 Breckinridge Boulevard
Duluth, Georgia 30099-0001
For complete information on any Smith Barney Mutual Funds, including
management fees and expenses, call or write your financial professional for a
free prospec-tus. Read it carefully before you invest or send money.
www.smithbarneymutualfunds.com
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02328 6/03 03-4964
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and
principal financial officer have concluded that the
registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended) are effective based on their
evaluation of the disclosure controls and procedures
as of a date within 90 days of the filing date of
this document.
(b) In the last 90 days, there have been no significant
changes in the Registrant's internal controls or in
other factors that could significantly affect these
controls.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Smith Barney Investment Series
By: /s/ R. Jay Gerken
-------------------------------
R. Jay Gerken
Chief Executive Officer of
Smith Barney Investment Series
Date: June 27, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
-----------------
(R. Jay Gerken)
Chief Executive Officer of
Smith Barney Investment Series
Date: June 27, 2003
By: /s/ Richard Peteka
------------------
Chief Financial Officer of
Smith Barney Investment Series
Date: June 27, 2003