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.
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SMITH BARNEY
INVESTMENT SERIES
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SEMI-ANNUAL REPORT | APRIL 30, 2003
Smith Barney Premier Selections
All Cap Growth Portfolio
Smith Barney Large Cap Core Portfolio
Smith Barney Growth and Income Portfolio
Smith Barney Government Portfolio
[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.
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NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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WHAT'S INSIDE
Letter From the Chairman............ 1
Schedules of Investments............ 2
Statements of Assets and Liabilities 15
Statements of Operations............ 16
Statements of Changes in Net Assets. 17
Notes to Financial Statements....... 19
Financial Highlights................ 24
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.
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 28, 2003
1 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) APRIL 30, 2003
Smith Barney Premier Selections All Cap Growth Portfolio
SHARES SECURITY VALUE
- -----------------------------------------------------------------
COMMON STOCK -- 97.5%
Aerospace and Defense -- 0.5%
2,385 Alliant Techsystems Inc.* $ 128,122
- -----------------------------------------------------------------
Auto Parts and Equipment -- 1.1%
8,000 Lear Corp.* 317,920
- -----------------------------------------------------------------
Banks -- 3.0%
10,000 Flagstar Bancorp, Inc. 331,000
2,300 M&T Bank Corp. 194,281
8,600 The South Financial Group, Inc. 210,700
2,200 Westamerica Bancorp. 94,820
- -----------------------------------------------------------------
830,801
- -----------------------------------------------------------------
Casino/Hotels -- 1.3%
16,600 Station Casinos, Inc.* 358,726
- -----------------------------------------------------------------
Chemicals -- 0.5%
3,900 International Flavors & Fragrances Inc. 123,942
- -----------------------------------------------------------------
Computers -- 2.1%
9,402 The BISYS Group, Inc.* 158,706
8,000 CACI International Inc., Class A Shares* 279,440
5,000 Dell Computer Corp.* 145,524
- -----------------------------------------------------------------
583,670
- -----------------------------------------------------------------
Consumer Durables -- 0.9%
1,360 Electronic Arts Inc.* 80,607
6,600 Leapfrog Enterprises, Inc.* 176,220
- -----------------------------------------------------------------
256,827
- -----------------------------------------------------------------
Consumer Non-Durables -- 3.6%
22,300 The Coca-Cola Co. 900,920
5,200 The Pepsi Bottling Group, Inc. 106,808
- -----------------------------------------------------------------
1,007,728
- -----------------------------------------------------------------
Consumer Services -- 3.9%
17,000 AOL Time Warner, Inc.* 232,560
7,101 ARAMARK Corp., Class B Shares* 163,039
1,700 Lennar Corp., Class A Shares 92,208
2,840 Manpower Inc. 93,379
4,700 Univision Communications Inc., Class A Shares* 142,316
20,300 The Walt Disney Co. 378,798
- -----------------------------------------------------------------
1,102,300
- -----------------------------------------------------------------
Cosmetics -- 0.6%
3,550 Alberto-Culver Co. 169,264
- -----------------------------------------------------------------
Education -- 1.6%
7,500 Career Education Corp.* 450,975
- -----------------------------------------------------------------
Electronic Components -- 4.3%
3,300 Benchmark Electronics, Inc.* 85,635
21,400 Intel Corp. 393,760
12,700 Lam Research Corp.* 184,531
8,900 Micrel Inc.* 104,219
See Notes to Financial Statements.
2 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Premier Selections All Cap Growth Portfolio
SHARES SECURITY VALUE
----------------------------------------------------------------------
Electronic Components -- 4.3% (continued)
22,900 Texas Instruments, Inc. $ 423,421
----------------------------------------------------------------------
1,191,566
----------------------------------------------------------------------
Electronics -- 1.1%
6,900 Cymer, Inc.* 196,995
6,400 Pepco Holdings, Inc.* 109,952
----------------------------------------------------------------------
306,947
----------------------------------------------------------------------
Energy -- 1.2%
6,000 Stone Energy Corp.* 210,780
5,000 Wisconsin Energy Corp. 131,650
----------------------------------------------------------------------
342,430
----------------------------------------------------------------------
Engineering and Construction -- 0.4%
3,000 Jacobs Engineering Group Inc.* 123,450
----------------------------------------------------------------------
Finance -- 9.5%
3,500 Affiliated Managers Group, Inc.* 162,085
4,017 Ambac Financial Group, Inc. 234,392
11,400 American International Group, Inc. 660,630
6,650 Banknorth Group, Inc. 158,802
5,000 Compass Bancshares, Inc. 168,600
9,500 Eaton Vance Corp. 283,100
10,600 Merrill Lynch & Co., Inc. 435,130
3,000 Nationwide Financial Services, Inc., Class A Shares 84,450
3,200 Southwest Bancorp. of Texas, Inc.* 108,736
3,100 StanCorp Financial Group, Inc. 166,470
9,300 Waddell & Reed Financial, Inc., Class A Shares 186,000
----------------------------------------------------------------------
2,648,395
----------------------------------------------------------------------
Food -- 1.5%
4,000 Dean Foods Co.* 174,120
7,400 Hormel Foods Corp. 170,274
2,375 Performance Food Group Co.* 83,315
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427,709
----------------------------------------------------------------------
Healthcare - Drugs -- 8.1%
12,900 Amgen, Inc.* 790,899
17,000 Merck & Co. Inc. 989,060
16,300 Pfizer Inc. 501,225
----------------------------------------------------------------------
2,281,184
----------------------------------------------------------------------
Healthcare - Services -- 7.1%
10,500 Coventry Health Care, Inc.* 428,610
7,500 Henry Schein, Inc.* 323,625
12,100 Johnson & Johnson 681,956
25,000 Quest Diagnostics, Inc.* 267,500
1,600 St. Jude Medical, Inc.* 83,936
5,150 Universal Health Services, Inc., Class B Shares* 199,151
----------------------------------------------------------------------
1,984,778
----------------------------------------------------------------------
Industrial Services -- 2.6%
3,720 IDEX Corp. 118,482
2,300 Smith International, Inc.* 81,788
See Notes to Financial Statements.
3 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Premier Selections All Cap Growth Portfolio
SHARES SECURITY VALUE
---------------------------------------------------------------------
Industrial Services -- 2.6% (continued)
8,500 Smurfit-Stone Container Corp.* $ 119,595
3,500 W.W. Grainger, Inc. 161,525
6,250 Weatherford International, Inc.* 251,438
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732,828
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Insurance -- 1.4%
90 Berkshire Hathaway Inc., Class B Shares* 209,734
2,100 PartnerRe Ltd. 112,350
2,500 Willis Group Holdings Ltd. 77,975
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400,059
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Leisure Time -- 0.4%
6,500 Royal Caribbean Cruises Ltd. 120,705
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Media -- 2.3%
1,500 The E.W. Scripps Co., Class A Shares 118,875
4,100 Entercom Communications Corp.* 199,219
5,900 Lin TV Corp., Class A Shares* 141,069
10,000 Regal Entertainment Group, Class A Shares 196,000
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655,163
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Medical Products -- 1.4%
4,400 Advanced Neuromodulation Systems, Inc.* 184,228
5,600 ResMed Inc.* 205,408
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389,636
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Oil and Gas -- 3.5%
6,250 KeySpan Corp. 211,687
4,100 Murphy Oil Corp. 170,765
3,950 Nabors Industries, Ltd.* 154,840
13,400 Pioneer Natural Resources Co.* 320,528
2,200 Praxair, Inc. 127,776
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985,596
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Pharmaceuticals -- 1.3%
3,500 Gilead Sciences, Inc.* 161,490
3,100 Mylan Laboratories Inc. 87,637
2,400 Teva Pharmaceutical Industries Ltd., Sponsored ADR 112,080
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361,207
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Process Industries -- 0.6%
3,400 Ecolab Inc. 173,706
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Producer Manufacturing -- 7.3%
2,000 American Standard Cos., Inc.* 142,380
2,700 Carlisle Cos., Inc. 122,472
3,650 DENTSPLY International Inc. 136,692
11,600 General Electric Co. 341,620
42,900 The Gillette Co. 1,306,305
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2,049,469
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Real Estate -- 0.6%
5,800 The St. Joe Co. 169,940
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See Notes to Financial Statements.
4 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Premier Selections All Cap Growth Portfolio
SHARES SECURITY VALUE
--------------------------------------------------------
Retail -- 12.5%
32,500 Amazon.com, Inc.* $ 931,775
5,000 American Eagle Outfitters, Inc.* 87,500
6,300 Barnes & Noble, Inc.* 124,110
6,300 Brinker International, Inc.* 200,025
15,800 Chico's FAS, Inc.* 384,572
9,400 Coach, Inc.* 408,994
11,700 Hollywood Entertainment Corp.* 207,675
20,000 The Home Depot, Inc. 562,600
7,900 Hot Topic, Inc.* 193,155
4,600 Outback Steakhouse, Inc. 164,404
3,200 Panera Bread Co., Class A Shares* 108,896
4,700 Williams-Sonoma, Inc.* 121,636
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3,495,342
--------------------------------------------------------
Semiconductors -- 2.1%
9,050 ATMI, Inc.* 190,946
15,700 Cypress Semiconductor Corp.* 136,904
2,600 Microchip Technology Inc.* 54,054
7,350 Semtech Corp.* 116,865
5,100 Zoran Corp.* 90,729
--------------------------------------------------------
589,498
--------------------------------------------------------
Software -- 1.9%
16,700 Borland Software Corp.* 151,469
4,900 Cognos, Inc.* 132,986
5,900 Hyperion Solutions Corp.* 166,852
7,200 J.D. Edwards & Co.* 86,256
--------------------------------------------------------
537,563
--------------------------------------------------------
Technology -- 6.0%
13,800 Cisco Systems, Inc.* 207,552
11,800 Emulex Corp.* 241,782
2,750 Intuit Inc.* 106,645
3,400 Jabil Circuit, Inc.* 63,580
3,275 Mercury Interactive Corp.* 111,154
31,600 Microsoft Corp. 808,012
3,700 Network Associates, Inc.* 42,291
8,100 Teradyne, Inc.* 93,960
--------------------------------------------------------
1,674,976
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Telecommunications -- 0.8%
29,300 Motorola, Inc. 231,763
--------------------------------------------------------
Transportation -- 0.5%
4,300 JetBlue Airways Corp.* 135,149
--------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $29,753,796) 27,339,334
--------------------------------------------------------
See Notes to Financial Statements.
5 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Premier Selections All Cap Growth Portfolio
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.5%
$688,000 Merrill Lynch & Co., Inc., 1.250% due 5/1/03; Proceeds at maturity -- $688,024; (Fully collateralized
by various U.S. government agency obligations, 0.000% to 4.875% due 5/9/03 to 11/15/07;
Market value -- $701,760) (Cost -- $688,000) $ 688,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $30,441,796**) $28,027,334
- --------------------------------------------------------------------------------------------------------------------------
*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.
6 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Large Cap Core Portfolio
SHARES SECURITY VALUE
- ---------------------------------------------------------
COMMON STOCK -- 99.2%
Consumer Durables -- 0.7%
7,590 Electronic Arts, Inc.* $ 449,859
- ---------------------------------------------------------
Consumer Non-Durables -- 9.0%
6,450 Avon Products, Inc. 375,197
23,050 The Coca-Cola Co. 931,220
9,650 General Mills, Inc. 435,312
8,950 Kimberly-Clark Corp. 445,442
20,425 Kraft Foods Inc., Class A Shares 631,132
9,550 Medtronic, Inc. 455,917
21,305 PepsiCo, Inc. 922,080
12,600 The Procter & Gamble Co. 1,132,110
5,000 Unilever N.V., NY Shares 314,850
- ---------------------------------------------------------
5,643,260
- ---------------------------------------------------------
Consumer Services -- 6.0%
24,150 AOL Time Warner, Inc.* 330,372
22,000 Cox Communications, Inc.* 728,200
9,650 Harley-Davidson, Inc. 428,846
22,500 Paychex, Inc. 700,650
6,700 USA Interactive* 200,665
23,731 Viacom Inc., Class A Shares* 1,030,163
17,600 The Walt Disney Co. 328,416
- ---------------------------------------------------------
3,747,312
- ---------------------------------------------------------
Energy -- 5.6%
7,050 Exelon Corp. 373,932
64,006 Exxon Mobil Corp. 2,253,011
10,750 Noble Corp.* 332,713
8,600 Total Fina Elf SA, Sponsored ADR 565,020
- ---------------------------------------------------------
3,524,676
- ---------------------------------------------------------
Finance -- 17.9%
27,350 AMBAC Financial Group, Inc. 1,595,872
34,500 American International Group, Inc. 1,999,275
18,450 Bank of America Co., Inc. 1,366,222
24,250 The Bank of New York Co., Inc. 641,412
20,350 Fannie Mae 1,473,136
25,650 J.P. Morgan Chase & Co. 752,827
12,900 Lehman Brothers Holdings Inc. 812,313
31,000 Morgan Stanley 1,387,250
25,650 Wells Fargo & Co. 1,237,869
- ---------------------------------------------------------
11,266,176
- ---------------------------------------------------------
Healthcare -- 12.6%
17,240 Alcon, Inc. 759,422
10,960 Amgen Inc.* 671,958
6,700 Bristol-Myers Squibb Co. 171,118
5,275 Eli Lilly & Co. 336,651
4,000 Forest Laboratories, Inc.* 206,880
20,000 Johnson & Johnson 1,127,200
See Notes to Financial Statements.
7 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Large Cap Core Portfolio
SHARES SECURITY VALUE
- ----------------------------------------------------------------------
Healthcare -- 12.6% (continued)
88,315 Pfizer Inc. $ 2,715,686
19,900 Schering-Plough Corp. 360,190
11,050 Teva Pharmaceutical Industries Ltd., Sponsored ADR 516,035
23,500 Wyeth 1,022,955
- ----------------------------------------------------------------------
7,888,095
- ----------------------------------------------------------------------
Indices -- 0.9%
5,600 iShares Nasdaq Biotechnology Index Fund* 320,880
8,500 Nasdaq-100 Index Tracking Stock* 233,325
- ----------------------------------------------------------------------
554,205
- ----------------------------------------------------------------------
Industrial Services -- 3.5%
9,900 Lockheed Martin Corp. 495,495
7,800 Praxair, Inc. 453,024
7,600 United Technologies Corp. 469,756
6,300 W.W. Grainger, Inc. 290,745
11,990 Weatherford International, Inc.* 482,358
- ----------------------------------------------------------------------
2,191,378
- ----------------------------------------------------------------------
Insurance -- 2.7%
4,150 Anthem, Inc.* 284,856
6 Berkshire Hathaway Inc., Class A Shares* 418,890
20,500 The St. Paul Cos., Inc. 703,970
3,700 XL Capital Ltd., Class A Shares 304,510
- ----------------------------------------------------------------------
1,712,226
- ----------------------------------------------------------------------
Media -- 0.5%
2,150 Gannett Co., Inc. 162,798
3,450 Tribune Co. 168,981
- ----------------------------------------------------------------------
331,779
- ----------------------------------------------------------------------
Producer Manufacturing -- 9.0%
6,600 3M Co. 831,864
10,950 Alcan, Inc.* 321,273
13,900 Alcoa, Inc.* 318,727
7,000 E.I. du Pont de Nemours & Co. 297,710
9,805 EnCana Corp. 322,585
76,780 General Electric Co. 2,261,171
8,050 International Paper Co. 287,788
9,620 Maxim Integrated Products, Inc. 377,970
40,800 Tyco International Ltd. 636,480
- ----------------------------------------------------------------------
5,655,568
- ----------------------------------------------------------------------
Retail -- 7.1%
7,450 Costco Wholesale Corp.* 257,994
24,576 The Home Depot, Inc. 691,323
3,600 Lowe's Cos., Inc. 158,004
18,050 Target Corp. 603,592
46,950 The TJX Cos., Inc. 903,787
32,750 Wal-Mart Stores, Inc. 1,844,480
- ----------------------------------------------------------------------
4,459,180
- ----------------------------------------------------------------------
See Notes to Financial Statements.
8 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Large Cap Core Portfolio
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------
Software -- 7.4%
20,800 BEA Systems, Inc.* $ 222,768
104,210 Microsoft Corp. 2,664,650
78,375 Oracle Corp.* 931,095
16,500 SAP AG, Sponsored ADR 420,915
19,520 VERITAS Software Corp.* 429,635
- --------------------------------------------------------------------------------------------------------------------------
4,669,063
- --------------------------------------------------------------------------------------------------------------------------
Technology -- 8.5%
50,750 Cisco Systems, Inc.* 763,280
36,500 Dell Computer Corp.* 1,055,215
24,100 EMC Corp.* 219,069
24,350 Hewlett-Packard Co. 396,905
62,368 Intel Corp. 1,147,571
12,400 International Business Machines Corp. 1,052,760
9,050 Intuit Inc.* 350,959
17,800 Texas Instruments Inc. 329,122
- --------------------------------------------------------------------------------------------------------------------------
5,314,881
- --------------------------------------------------------------------------------------------------------------------------
Telecommunications and Equipment -- 2.4%
34,179 AT&T Wireless Services Inc.* 220,796
25,632 Comcast Corp.* 817,917
17,700 Nokia Oyj, Sponsored ADR 293,289
5,250 Univision Communications Inc., Class A Shares* 158,970
- --------------------------------------------------------------------------------------------------------------------------
1,490,972
- --------------------------------------------------------------------------------------------------------------------------
Transportation -- 1.7%
11,000 Canadian National Railway Co. 534,930
11,750 Delta Air Lines, Inc. 150,283
6,300 United Parcel Service, Inc., Class B Shares 391,356
- --------------------------------------------------------------------------------------------------------------------------
1,076,569
- --------------------------------------------------------------------------------------------------------------------------
Utilities -- 3.7%
17,850 The Southern Co. 519,256
47,715 Verizon Communications Inc. 1,783,587
- --------------------------------------------------------------------------------------------------------------------------
2,302,843
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $66,159,767) 62,278,042
- --------------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.8%
$511,000 Merrill Lynch & Co., Inc., 1.250% due 5/1/03; Proceeds at maturity -- $511,018; (Fully collateralized
by various U.S. government agency obligations, 0.000% to 4.875% due 5/9/03 to 11/15/07;
Market value -- $521,221) (Cost -- $511,000) 511,000
- --------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $66,670,767) $62,789,042
- --------------------------------------------------------------------------------------------------------------------------
*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.
9 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Growth and Income Portfolio
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
COMMON STOCK -- 96.7%
Consumer Discretionary -- 11.6%
22,500 Best Buy Co., Inc.* $ 778,050
12,861 Comcast Corp. 410,395
8,320 Comcast Corp., Special Class A Shares* 250,099
14,850 Federated Department Stores, Inc.* 454,707
21,990 The Home Depot, Inc. 618,579
36,764 Liberty Media Corp., Class A Shares* 404,404
11,700 McDonald's Corp. 200,070
13,130 MGM Mirage* 373,155
33,900 The News Corp. Ltd. 795,294
6,800 UnitedGlobalCom Inc., Class A Shares* 26,180
15,870 USA Interactive* 475,307
- -------------------------------------------------------------------------------------------------------
4,786,240
- -------------------------------------------------------------------------------------------------------
Consumer Staples -- 9.3%
4,160 Avon Products, Inc. 241,987
22,300 Costco Wholesale Corp.* 772,249
10,650 The Estee Lauder Cos., Inc., Class A Shares+ 346,125
8,350 General Mills, Inc. 376,668
6,290 Kimberly-Clark Corp. 313,053
12,740 Kraft Foods Inc., Class A Shares 393,666
17,950 PepsiCo, Inc. 776,876
3,600 Procter & Gamble Co. 323,460
16,940 Safeway, Inc.* 281,543
- -------------------------------------------------------------------------------------------------------
3,825,627
- -------------------------------------------------------------------------------------------------------
Energy -- 6.3%
38,040 Exxon Mobil Corp. 1,339,008
4,500 Occidental Petroleum Corp. 134,325
2,940 Royal Dutch Petroleum Co., Sponsored ADR 120,187
11,560 Total Fina Elf SA, Sponsored ADR+ 759,492
12,580 Transocean, Inc.* 239,649
- -------------------------------------------------------------------------------------------------------
2,592,661
- -------------------------------------------------------------------------------------------------------
Financials -- 19.4%
6,090 American Express Co. 230,567
23,018 American International Group, Inc.+ 1,333,893
10,140 Bank of America Corp. 750,867
30,530 The Bank of New York Co., Inc. 807,518
9,740 Bank One Corp. 351,127
3 Berkshire Hathaway Inc., Class A Shares* 209,445
15,190 Fleet Boston Financial Corp. 402,839
9,030 Freddie Mac 522,837
5,380 The Goldman Sachs Group, Inc. 408,342
3,750 iStar Financial, Inc. 112,237
12,070 J.P. Morgan Chase & Co. 354,255
7,370 Marsh & McLennan Cos., Inc. 351,402
11,900 MBNA Corp. 224,910
11,460 Merrill Lynch & Co., Inc. 470,433
4,260 Morgan Stanley 190,635
See Notes to Financial Statements.
10 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Growth and Income Portfolio
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------------------------------------
Financials -- 19.4% (continued)
5,580 Wachovia Corp. $ 213,212
1,120 Washington Mutual, Inc. 44,240
18,460 Wells Fargo & Co. 890,880
2,030 XL Capital Ltd., Class A Shares 167,069
- --------------------------------------------------------------------------------------------------------
8,036,708
- --------------------------------------------------------------------------------------------------------
Healthcare -- 14.3%
16,410 Amgen, Inc.* 1,006,097
9,200 Cephalon, Inc.*+ 375,728
4,670 Eli Lilly & Co. 298,039
3,250 Johnson & Johnson 183,170
4,260 Medtronic, Inc. 203,372
9,160 Mylan Laboratories, Inc. 258,953
58,770 Pfizer Inc. 1,807,177
29,540 Schering-Plough Corp. 534,674
27,080 Teva Pharmaceutical Industries Ltd., Sponsored ADR 1,264,636
- --------------------------------------------------------------------------------------------------------
5,931,846
- --------------------------------------------------------------------------------------------------------
Industrials -- 9.5%
2,700 American Standard Cos., Inc.* 192,213
4,200 Avery Dennison Corp. 222,642
6,090 The Boeing Co. 166,135
9,230 Canadian National Railway Co. 448,855
4,160 Cummins, Inc.+ 112,778
3,550 Danaher Corp.+ 244,879
40,420 General Electric Co. 1,190,369
8,530 Lockheed Martin Corp. 426,926
7,610 Navistar International Corp., Inc.* 212,319
3,720 PACCAR, Inc. 217,285
31,090 Tyco International Ltd.+ 485,004
- --------------------------------------------------------------------------------------------------------
3,919,405
- --------------------------------------------------------------------------------------------------------
Information Technology -- 16.8%
21,600 ASML Holding N.V.* 190,296
32,560 BMC Software, Inc.* 485,795
34,590 Cisco Systems, Inc.* 520,234
17,030 Comverse Technology, Inc.* 222,582
27,080 Dell Computer Corp.* 782,883
5,900 Electronic Data Systems Corp. 107,085
29,340 EMC Corp. 266,701
2,100 Expedia, Inc.* 121,359
18,080 Infineon Technologies AG 137,589
26,900 Intel Corp. 494,960
1,220 International Business Machines Corp. 103,578
9,000 LSI Logic Corp.* 48,240
54,980 Microsoft Corp. 1,405,839
23,820 Nokia Corp., Sponsored ADR 394,697
26,980 Oracle Corp.* 320,522
15,720 Paychex, Inc.+ 489,521
9,170 STMicroelectronics N.V. 188,810
75,490 Sun Microsystems, Inc.* 249,117
See Notes to Financial Statements.
11 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Growth and Income Portfolio
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
Information Technology -- 16.8% (continued)
19,501 VERITAS Software Corp.* $ 429,217
- -----------------------------------------------------------------------------------------------------------
6,959,025
- -----------------------------------------------------------------------------------------------------------
Materials -- 3.2%
28,810 Alcoa, Inc. 660,613
10,350 Barrick Gold Corp. 154,732
7,200 Ecolab Inc. 367,848
4,980 PolyOne Corp. 23,008
8,720 Smurfit-Stone Container Corp.* 122,690
- -----------------------------------------------------------------------------------------------------------
1,328,891
- -----------------------------------------------------------------------------------------------------------
Telecommunication Services -- 3.1%
86,486 AT&T Wireless Services Inc.* 558,700
19,250 Verizon Communications, Inc. 719,565
- -----------------------------------------------------------------------------------------------------------
1,278,265
- -----------------------------------------------------------------------------------------------------------
Utilities -- 3.2%
9,840 Consolidated Edison, Inc.+ 382,481
4,870 Exelon Corp. 258,305
12,000 NiSource, Inc. 226,800
8,370 Progress Energy, Inc. 349,699
6,100 Xcel Energy, Inc. 82,472
- -----------------------------------------------------------------------------------------------------------
1,299,757
- -----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost -- $41,716,078) 39,958,425
- -----------------------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
$1,356,000 Merrill Lynch & Co., Inc., 1.250% due 5/1/03; Proceeds at maturity -- $1,356,047;
(Fully collateralized by various U.S. government agency obligations, 0.000% to
4.875% due 5/9/03 to 11/15/07; Market value -- $1,383,120) (Cost -- $1,356,000) 1,356,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100% (Cost -- $43,072,078**) $41,314,425
- -----------------------------------------------------------------------------------------------------------
*Non-income producing security.
+ All or a portion of this security is on loan (See Note 6).
**Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviation used in this schedule:
ADR -- American Depositary Receipt
LOANED SECURITIES COLLATERAL (UNAUDITED) APRIL 30, 2003
FACE
AMOUNT SECURITY VALUE
- -------------------------------------------------------------------------------------
$1,768,104 State Street Navigator Securities Lending Trust Prime Portfolio
(Cost -- $1,768,104) $1,768,104
- -------------------------------------------------------------------------------------
See Notes to Financial Statements.
12 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Government Portfolio
FACE
AMOUNT SECURITY VALUE
- ------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 45.8%
U.S. Treasury Notes:
$11,500,000 3.250% due 8/15/07 (a) $ 11,817,159
15,000,000 3.000% due 2/15/08 (a) 15,159,390
1,500,000 4.875% due 2/15/12 (a) 1,626,681
25,000,000 4.375% due 8/15/12 (a) 26,110,375
15,000,000 4.000% due 11/15/12 (a) 15,196,290
U.S. Treasury Bonds:
300,000 7.250% due 5/15/16 (a) 386,965
200,000 9.000% due 11/15/18 (a)(b) 299,742
700,000 7.625% due 2/15/25 (a) 963,895
5,000,000 6.250% due 5/15/30 (a) 6,026,370
1,350,000 U.S. Treasury Strip (Principal) due 5/15/05 (a) 1,308,162
- ------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost -- $77,900,763) 78,895,029
- ------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES -- 4.3%
Fannie Mae:
1,200,000 4.750% due 11/14/03 (a) 1,223,116
1,700,000 5.250% due 1/15/09 (a) 1,872,169
Federal Home Loan Bank (FHLB):
1,500,000 3.375% due 5/14/04 (a) 1,533,445
700,000 6.500% due 11/15/05 (a) 779,957
2,000,000 Freddie Mac, 4.500% due 4/15/32 (a) 2,030,413
- ------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES
(Cost -- $7,095,663) 7,439,100
- ------------------------------------------------------------------------
MORTGAGED-BACKED SECURITIES -- 27.8%
Federal Home Loan Mortgage Corp. (FHLMC), Gold:
1,186,256 6.500% due 9/1/31 (a) 1,238,893
727,096 6.000% due 12/1/31 (a) 757,390
8,000,000 6.000% due 5/1/33 (c)(d) 8,322,496
Federal National Mortgage Association (FNMA):
241,615 6.000% due 8/1/16 (a) 253,367
1,000,000 6.000% due 5/1/18 (c)(d) 1,048,125
1,000,000 6.500% due 5/1/18 (c)(d) 1,059,688
184,101 6.500% due 4/1/29 (a) 192,592
554,864 7.000% due 11/1/31 (a) 586,426
626,322 6.500% due 5/1/32 (a) 654,596
725,940 7.500% due 5/1/32 (a)(e) 773,811
8,875,162 6.000% due 1/1/33 (a)(e) 9,251,324
5,000,000 5.500% due 5/1/33 (c)(d) 5,137,500
6,000,000 6.500% due 5/1/33 (c)(d) 6,270,000
1,000,000 7.000% due 5/1/33 (c)(d) 1,056,875
See Notes to Financial Statements.
13 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SCHEDULES OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2003
Smith Barney Government Portfolio
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 27.8% (continued)
Government National Mortgage Association (GNMA):
$ 315,249 6.500% due 6/15/31 (a) $ 331,639
441,374 7.000% due 9/15/31 (a)(e) 468,573
10,000,000 6.000% due 5/1/33 (c)(d) 10,456,250
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost -- $47,118,917) 47,859,545
- ---------------------------------------------------------------------------------------------------------------------------------
SUB-TOTAL INVESTMENTS
(Cost -- $132,115,343) 134,193,674
- ---------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 22.1%
13,976,000 Goldman, Sachs & Co., 1.250% due 5/1/03; Proceeds at maturity -- $13,976,485; (Fully collateralized
by various U.S. government agency obligations, 0.000% to 13.875% due 5/8/03 to 2/15/31;
Market value -- $14,255,561) 13,976,000
13,976,000 Merrill Lynch & Co., Inc., 1.250% due 5/1/03; Proceeds at maturity -- $13,976,485; (Fully collateralized
by various U.S. government agency obligations, 0.000% to 4.875% due 5/9/03 to 11/15/07;
Market value -- $14,255,793) 13,976,000
9,979,000 Morgan Stanley, 1.250% due 5/1/03; Proceeds at maturity -- $9,979,346; (Fully collateralized
by various U.S. government agency obligations, 7.875% to 9.000% due 8/15/17 to 2/15/21;
Market value -- $10,275,452) 9,979,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost -- $37,931,000) 37,931,000
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $170,046,343**) $172,124,674
- ---------------------------------------------------------------------------------------------------------------------------------
(a)All or a portion of this security is segregated for "to-be-announced"
securities and open futures contracts commitments.
(b)All or a portion of this security is held as collateral for open futures
contracts commitments.
(c)Mortgage dollar roll (See Note 8).
(d)All or a portion of this security is traded on a "to-be-announced" basis
(See Note 7).
(e)Maturity date shown represents the last in the range of maturity dates of
mortgage certificates owned.
**Aggregate cost of Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
14 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2003
Smith Barney
Premier Selections Smith Barney Smith Barney Smith Barney
All Cap Large Cap Growth and Government
Growth Portfolio Core Portfolio Income Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments, at cost $ 29,753,796 $ 66,159,767 $ 41,716,078 $132,115,343
Repurchase agreements, at cost 688,000 511,000 1,356,000 37,931,000
Loaned securities collateral, at cost (Note 6) -- -- 1,768,104 --
- --------------------------------------------------------------------------------------------------------------------------
Investments, at value $ 27,339,334 $ 62,278,042 $ 39,958,425 $134,193,674
Repurchase agreements, at value 688,000 511,000 1,356,000 37,931,000
Loaned securities collateral, at value (Note 6) -- -- 1,768,104 --
Cash 721 247 803 2,771
Receivable for securities sold 365,285 128,690 421,978 18,727,438
Receivable for Fund shares sold 16,194 77,241 110,086 202,142
Dividends and interest receivable 14,556 49,345 49,513 1,123,919
Receivable from broker -- variation margin -- -- -- 23,437
- --------------------------------------------------------------------------------------------------------------------------
Total Assets 28,424,090 63,044,565 43,664,909 192,204,381
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 661,344 -- 684,154 51,911,677
Management fees payable 18,878 37,868 24,346 81,804
Payable for Fund shares purchased 16,342 237 -- --
Payable for securities on loan (Note 6) -- -- 1,768,104 --
Accrued expenses 45,704 34,019 52,146 26,002
- --------------------------------------------------------------------------------------------------------------------------
Total Liabilities 742,268 72,124 2,528,750 52,019,483
- --------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 27,681,822 $ 62,972,441 $ 41,136,159 $140,184,898
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 30 $ 85 $ 57 $ 118
Capital paid in excess of par value 41,576,187 95,488,737 53,341,220 136,504,774
Undistributed net investment income 4,445 95,831 88,626 1,280,048
Accumulated net realized gain (loss) from security
transactions and futures contracts (11,484,378) (28,730,487) (10,536,091) 264,583
Net unrealized appreciation (depreciation) of investments
and futures contracts (2,414,462) (3,881,725) (1,757,653) 2,135,375
- --------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 27,681,822 $ 62,972,441 $ 41,136,159 $140,184,898
- --------------------------------------------------------------------------------------------------------------------------
Shares Outstanding 2,991,287 8,483,676 5,677,807 11,835,406
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value $9.25 $7.42 $7.25 $11.84
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
15 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2003
Smith Barney
Premier Selections Smith Barney Smith Barney Smith Barney
All Cap Large Cap Growth and Government
Growth Portfolio Core Portfolio Income Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 124,986 $ 418,512 $ 296,977 --
Interest 4,217 8,972 20,592 $2,107,538
Less: Foreign withholding tax (129) (2,910) (4,760) --
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 129,074 424,574 312,809 2,107,538
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 102,641 223,898 141,753 342,083
Custody 7,124 14,753 9,902 6,489
Audit and legal 4,885 22,505 12,483 16,258
Shareholder communications 4,071 16,021 7,543 10,038
Shareholder servicing fees 2,487 2,626 2,347 2,716
Trustees' fees 1,982 1,346 610 537
Other 1,439 4,668 2,833 3,397
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 124,629 285,817 177,471 381,518
Less: Management fee waiver (Note 2) -- (3,457) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Expenses 124,629 282,360 177,471 381,518
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income 4,445 142,214 135,338 1,726,020
- ---------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) (2,510,534) (3,303,587) (3,227,629) 281,797
Futures contracts -- (12,078) -- 31,793
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized Gain (Loss) (2,510,534) (3,315,665) (3,227,629) 313,590
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments and Futures Contracts:
Beginning of period (5,743,336) (8,712,461) (6,720,746) 1,483,895
End of period (2,414,462) (3,881,725) (1,757,653) 2,135,375
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) 3,328,874 4,830,736 4,963,093 651,480
- ---------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 818,340 1,515,071 1,735,464 965,070
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 822,785 $ 1,657,285 $ 1,870,802 $2,691,090
- ---------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
16 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL
30, 2003
Smith Barney
Premier Selections Smith Barney Smith Barney Smith Barney
All Cap Growth Large Cap Growth and Government
Portfolio Core Portfolio Income Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 4,445 $ 142,214 $ 135,338 $ 1,726,020
Net realized gain (loss) (2,510,534) (3,315,665) (3,227,629) 313,590
Change in net unrealized appreciation
(depreciation) 3,328,874 4,830,736 4,963,093 651,480
- -------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 822,785 1,657,285 1,870,802 2,691,090
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (214,782) (198,672) (1,371,678)
- -------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders -- (214,782) (198,672) (1,371,678)
- -------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 1,126,882 3,580,177 4,624,944 56,106,782
Net asset value of shares issued
for reinvestment of dividends -- 214,782 198,672 1,371,678
Cost of shares reacquired (2,895,656) (3,404,211) (2,089,700) (2,716,896)
- -------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From Fund
Share Transactions (1,768,774) 390,748 2,733,916 54,761,564
- -------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (945,989) 1,833,251 4,406,046 56,080,976
NET ASSETS:
Beginning of period 28,627,811 61,139,190 36,730,113 84,103,922
- -------------------------------------------------------------------------------------------------------------------
End of period* $27,681,822 $62,972,441 $41,136,159 $140,184,898
- -------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: $4,445 $95,831 $88,626 $1,280,048
- -------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
17 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) FOR THE YEAR ENDED OCTOBER 31,
2002
Smith Barney
Premier Selections Smith Barney Smith Barney Smith Barney
All Cap Growth Large Cap Growth and Government
Portfolio Core Portfolio Income Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (87,395) $ 169,137 $ 154,000 $ 902,915
Net realized loss (6,532,841) (15,801,301) (3,914,987) (22,345)
Change in net unrealized appreciation
(depreciation) 528,777 497,788 (3,064,839) 1,016,483
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Operations (6,091,459) (15,134,376) (6,825,826) 1,897,053
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (18,768) (197,647) (113,186) (471,166)
Net realized gains -- -- -- (323,201)
- ------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders (18,768) (197,647) (113,186) (794,367)
- ------------------------------------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 5,995,549 16,910,865 15,695,927 70,965,054
Net asset value of shares issued
for reinvestment of dividends 18,768 197,647 113,186 794,367
Cost of shares reacquired (5,659,901) (7,730,105) (3,716,053) (2,167,846)
- ------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Fund Share
Transactions 354,416 9,378,407 12,093,060 69,591,575
- ------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (5,755,811) (5,953,616) 5,154,048 70,694,261
NET ASSETS:
Beginning of year 34,383,622 67,092,806 31,576,065 13,409,661
- ------------------------------------------------------------------------------------------------------------------
End of year* $28,627,811 $ 61,139,190 $36,730,113 $84,103,922
- ------------------------------------------------------------------------------------------------------------------
* Includes undistributed net investment income of: -- $168,399 $151,960 $925,706
- ------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
18 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The Smith Barney Premier Selections All Cap Growth, Smith Barney Large Cap
Core, Smith Barney Growth and Income, and Smith Barney Government Portfolios
("Funds") are separate investment funds of the Smith Barney Investment Series
("Trust"). The Trust, a Massachusetts business trust, is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end
management investment company and consists of these Funds and three other
separate retail investment funds: Smith Barney Large Cap Core Fund, Smith
Barney Growth and Income Fund and Smith Barney International Fund, formerly
known as Smith Barney International Aggressive Growth Fund. The financial
statements and financial highlights for the other funds are presented in
separate shareholder reports.
The significant accounting policies consistently followed by the Funds 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 asked 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
the 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 Funds 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 Funds on the
ex-dividend date; the Funds distribute dividends and capital gains, if any,
annually; (i) the accounting records of the Funds 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)
each 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.
In addition, the Smith Barney Premier Selections All Cap Growth Portfolio may
enter into forward 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.
19 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. Investment Management Agreement and Other Transactions
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary
of Citigroup Inc. ("Citigroup"), acts as the manager to the Funds. The Smith
Barney Premier Selections All Cap Growth, Smith Barney Large Cap Core and Smith
Barney Growth and Income Portfolios pay SBFM a management fee calculated at an
annual rate of 0.75% of their average daily net assets and the Smith Barney
Government Portfolio pays SBFM a management fee calculated at an annual rate of
0.60% of its average daily net assets. These fees are calculated daily and paid
monthly. For the six months ended April 30, 2003, SBFM waived a portion of its
management fee for the Smith Barney Large Cap Core Portfolio amounting to
$3,457.
Citicorp Trust Bank, fsb. ("CTB"), another subsidiary of Citigroup, acts as the
Funds' transfer agent. PFPC Global Fund Services ("PFPC") acts as the Funds'
sub-transfer agent. CTB receives account fees and asset-based fees that vary
according to the size and type of account. PFPC is responsible for shareholder
recordkeeping and financial processing for all shareholder accounts and is paid
by CTB. For the six months ended April 30, 2003, each Fund paid transfer agent
fees of $2,500 to CTB.
Citigroup Global Markets Inc. ("CGM"), formerly known as Salomon Smith Barney
Inc., another indirect wholly-owned subsidiary of Citigroup, acts as the Funds'
distributor. 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 $890 in brokerage
commissions for the Funds' agency transactions.
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 Funds, 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 companies
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 $1,666. The amount
of benefits to be paid under the prior plan cannot currently be determined for
these Trustees.
20 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 Sales
- -------------------------------------------------------------
Smith Barney Premier Selections
All Cap Growth Portfolio $ 6,398,810 $ 7,247,731
- ------------------------------------------------------------
Smith Barney Large Cap Core
Portfolio 16,192,268 15,144,797
- ------------------------------------------------------------
Smith Barney Growth and Income
Portfolio 13,586,083 11,073,424
- ------------------------------------------------------------
Smith Barney Government Portfolio 206,696,875 153,163,477
- ------------------------------------------------------------
At April 30, 2003, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Net Unrealized
Appreciation
Appreciation Depreciation (Depreciation)
- ----------------------------------------------------------------------------
Smith Barney Premier Selections
All Cap Growth Portfolio $2,436,370 $(4,850,832) $(2,414,462)
- ---------------------------------------------------------------------------
Smith Barney Large Cap Core
Portfolio 3,217,897 (7,099,622) (3,881,725)
- ---------------------------------------------------------------------------
Smith Barney Growth and Income
Portfolio 2,440,188 (4,197,841) (1,757,653)
- ---------------------------------------------------------------------------
Smith Barney Government Portfolio 2,180,860 (102,529) 2,078,331
- ---------------------------------------------------------------------------
4. Repurchase Agreements
The Funds purchase (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 Funds require continual
maintenance of the market value (plus accrued interest) of the collateral in
amounts at least equal to the repurchase price.
5. Futures Contracts
The Funds may from time to time enter into 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).
At April 30, 2003, the Smith Barney Government Portfolio had the following open
futures contracts:
Expiration
Month/ # of Basis Market Unrealized
Year Contracts Value Value Gain
- -----------------------------------------------------------------------------------------
To Buy:
U.S. Treasury Notes 6/03 50 $5,630,456 $5,687,500 $57,044
- ----------------------------------------------------------------------------------------
At April 30, 2003, the Smith Barney Premier Selections All Cap Growth, Smith
Barney Large Cap Core and Smith Barney Growth and Income Portfolios did not
hold any futures contracts.
21 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. Lending of Portfolio Securities
The Funds have an agreement with their custodian whereby the custodian may lend
securities owned by the Funds to brokers, dealers and other financial
organizations. Fees earned by the Funds on securities lending are recorded as
interest income. Loans of securities by the Funds are collateralized by cash,
U.S. government securities, high quality money market instruments or other
securities that are maintained at all times in an amount at least equal to the
current market value of the loaned securities, plus a margin which may vary
depending on the type of securities loaned. The custodian establishes and
maintains the collateral in segregated accounts.
The Funds maintain exposure for the risk of any loss in the investment of
amounts received as collateral.
At April 30, 2003, Smith Barney Growth and Income Portfolio had loaned common
stocks having a market value of $1,737,777 which were collateralized by cash.
The cash collateral received for the Smith Barney Growth and Income Portfolio
amounting to $1,768,104 was invested in the State Street Navigator Securities
Lending Trust Prime Portfolio.
For the six months ended April 30, 2003, the Smith Barney Growth and Income
Portfolio earned $5,822 in interest income from securities loaned.
At April 30, 2003, Smith Barney Premier Selections All Cap Growth, Smith Barney
Large Cap Core and Smith Barney Government Portfolios did not have any
securities on loan.
7. Securities Traded on a To-Be-Announced Basis
The Funds may trade securities on a "to-be-announced" ("TBA") basis. In a TBA
transaction, the Funds commit to purchasing or selling securities for which
specific information is not yet known at the time of the trade, particularly
the face amount and maturity date in GNMA transactions. Securities purchased on
a TBA basis are not settled until they are delivered to the Funds normally 15
to 45 days later. These transactions are subject to market fluctuations and
their current value is determined in the same manner as for other securities.
At April 30, 2003, the Smith Barney Government Portfolio held TBA securities
with a total cost of $32,934,922.
8. Mortgage Dollar Rolls
The Smith Barney Government Portfolio enters into dollar rolls in which the
Fund sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities to settle on a specified future date. During the roll
period, the Fund forgoes interest paid on the securities. The Fund is
compensated by a fee paid by the counterparty. Dollar rolls are accounted for
as financing arrangements; the fee is recorded as interest income at the time
of the transaction and any gain or loss on the roll is deferred and realized
upon disposition of the rolled security.
At April 30, 2003, the Fund had outstanding net contracts to repurchase
mortgage-backed securities of $23,736,313 and $2,108,359 for scheduled
settlements on May 14, 2003 and May 19, 2003, respectively. There were no
counterparties with dollar rolls outstanding in excess of 10% of net assets at
April 30, 2003.
22 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
9. Sharesof Beneficial Interest
At April 30, 2003, the Trust had an unlimited number of shares authorized with
a par value of $0.00001 per share.
Transactions in shares of each Fund were as follows:
Six Months Ended Year Ended
April 30, 2003 October 31, 2002
- ------------------------------------------------------------------------------
Smith Barney Premier Selections All Cap
Growth Portfolio
Shares sold 126,429 560,604
Shares issued on reinvestment -- 2,076
Shares reacquired (331,255) (570,559)
- ------------------------------------------------------------------------------
Net Decrease (204,826) (7,879)
- ------------------------------------------------------------------------------
Smith Barney Large Cap Core Portfolio
Shares sold 498,767 1,930,789
Shares issued on reinvestment 30,596 26,709
Shares reacquired (486,082) (1,008,749)
- ------------------------------------------------------------------------------
Net Increase 43,281 948,749
- ------------------------------------------------------------------------------
Smith Barney Growth and Income Portfolio
Shares sold 664,342 1,905,118
Shares issued on reinvestment 29,088 15,764
Shares reacquired (303,305) (509,688)
- ------------------------------------------------------------------------------
Net Increase 390,125 1,411,194
- ------------------------------------------------------------------------------
Smith Barney Government Portfolio
Shares sold 4,784,277 6,115,834
Shares issued on reinvestment 117,037 68,717
Shares reacquired (232,405) (190,552)
- ------------------------------------------------------------------------------
Net Increase 4,668,909 5,993,999
- ------------------------------------------------------------------------------
10. SubsequentEvent
Effective May 12, 2003, Smith Barney Government Portfolio changed its name to
SB Government Portfolio, and all of the Fund's outstanding shares have been
designated Class A shares.
23 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout the
year ended October 31, unless otherwise noted:
Smith Barney Premier Selections
All Cap Growth Portfolio 2003/(1)/ 2002 2001 2000/(2)/ 1999/(3)/
- ------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 8.96 $ 10.73 $ 14.48 $ 10.11 $ 10.00
- ------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(4)/ 0.00* (0.03) 0.02 0.09 0.01
Net realized and unrealized gain (loss) 0.29 (1.73) (3.69) 4.30 0.10
- ------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.29 (1.76) (3.67) 4.39 0.11
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.01) (0.04) (0.02) --
Net realized gains -- -- (0.04) -- --
- ------------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (0.08) (0.02) --
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.25 $ 8.96 $ 10.73 $ 14.48 $ 10.11
- ------------------------------------------------------------------------------------------------
Total Return 3.24%++ (16.44)% (25.45)% 43.43% 1.10%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $27,682 $28,628 $34,384 $21,419 $3,032
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)(5)/ 0.91%+ 0.95% 0.95% 0.95% 0.95%+
Net investment income (loss) 0.03+ (0.25) 0.16 0.72 1.00+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 24% 58% 116% 58% 8%
- ------------------------------------------------------------------------------------------------
(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 15, 1999 (commencement of operations) to
October 31, 1999.
(4) The Manager agreed to waive all or a portion of its fees for the years
ended October 31, 2002, 2001 and 2000 and the period ended October 31,
1999. In addition, the Manager also reimbursed expenses of $45,159, $30,419
and $13,182 for the years ended October 31, 2001 and 2000, and the period
ended October 31, 1999, respectively. If such fees were not waived and
expenses not reimbursed, the per share effect on net investment income
(loss) and the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income (Loss) Without Fee Waivers and/or
Per Share (Increases) Decreases Expense Reimbursements
------------------------------- ----------------------
2002 2001 2000 1999 2002 2001 2000 1999
------ ----- ----- ----- ---- ---- ---- ----
Smith Barney Premier Selections All Cap Growth Portfolio $(0.02) $0.02 $0.15 $0.05 1.11% 1.08% 2.14% 5.35%+
(5) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
24 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout the
year ended October 31, unless otherwise noted:
Smith Barney Large Cap Core Portfolio 2003/(1)/ 2002 2001 2000/(2)/ 1999/(3)/
- ------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 7.24 $ 8.96 $ 12.14 $ 10.51 $ 10.00
- ------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)/ 0.02 0.02 0.04 0.05 0.01
Net realized and unrealized gain (loss) 0.19 (1.72) (3.19) 1.59 0.50
- ------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.21 (1.70) (3.15) 1.64 0.51
- ------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.02) (0.03) (0.01) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.02) (0.03) (0.01) --
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 7.42 $ 7.24 $ 8.96 $ 12.14 $ 10.51
- ------------------------------------------------------------------------------------------------
Total Return 2.85%++ (18.94)% (26.03)% 15.61% 5.10%++
- ------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $62,972 $61,139 $67,093 $49,630 $5,274
- ------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)(5)/ 0.95%+ 0.93% 0.93% 0.95% 0.95%+
Net investment income 0.48+ 0.24 0.42 0.42 0.67+
- ------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 26% 45% 26% 30% 6%
- ------------------------------------------------------------------------------------------------
(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 15, 1999 (commencement of operations) to
October 31, 1999.
(4) The Manager agreed to waive all or a portion of its fees for the six months
ended April 30, 2003, the year ended October 31, 2000 and the period ended
October 31, 1999. In addition, the Manager also reimbursed expenses of
$20,272 for the period ended October 31, 1999. If such fees were not waived
and expenses not reimbursed, the per share effect on net investment income
and the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
----------------------- -----------------------
2003 2000 1999 2003 2000 1999
----- -------- ------- ---- ---- ----
Smith Barney Large Cap Core Portfolio $0.00* $0.07 $0.05 0.96%+ 1.55% 5.00%+
(5) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
*Amount represents less than 0.01%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
25 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout the
year ended October 31, unless otherwise noted:
Smith Barney Growth and Income Portfolio 2003/(1)/ 2002 2001 2000/(2)/ 1999/(3)/
- --------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 6.95 $ 8.15 $ 10.77 $ 10.10 $ 10.00
- --------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(4)(5)/ 0.02 0.02 0.05 0.16 0.01
Net realized and unrealized gain (loss)/(5)/ 0.32 (1.20) (2.58) 0.53 0.09
- --------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.34 (1.18) (2.53) 0.69 0.10
- --------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.04) (0.02) (0.05) (0.02) --
Net realized gains -- -- (0.04) -- --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.04) (0.02) (0.09) (0.02) --
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 7.25 $ 6.95 $ 8.15 $ 10.77 $ 10.10
- --------------------------------------------------------------------------------------------------------
Total Return 4.88%++ (14.47)% (23.63)% 6.86% 1.00%++
- --------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $41,136 $36,730 $31,576 $18,089 $3,045
- --------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)(6)/ 0.94%+ 0.95% 0.95% 0.95% 0.95%+
Net investment income/(5)/ 0.72+ 0.40 0.53 1.54 0.69+
- --------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 30% 48% 68% 72% 1%
- --------------------------------------------------------------------------------------------------------
(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 15, 1999 (commencement of operations) to
October 31, 1999.
(4)The Manager agreed to waive all or a portion of its fees for the years ended
October 31, 2002, 2001 and 2000 and the period ended October 31, 1999. In
addition, the Manager also reimbursed expenses of $61,498, $21,016 and
$12,636 for the years ended October 31, 2001 and 2000, and the period ended
October 31, 1999, respectively. If such fees were not waived and expenses
not reimbursed, the per share effect on net investment income and the
expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
----------------------- ----------------------
2002 2001 2000 1999 2002 2001 2000 1999
----- ----- ----- ----- ---- ---- ---- ----
Smith Barney Growth and Income Portfolio $0.01 $0.02 $0.12 $0.05 1.09% 1.18% 2.05% 5.22%+
(5)Effective November 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended October
31, 2002, the change to net investment income, net realized and unrealized
loss and the ratio of net investment income to average net assets was less
than $0.01, $0.01 and 0.01%, respectively. Per share, ratios and
supplemental data for the periods prior to November 1, 2001 have not been
restated to reflect this change in presentation.
(6) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.95%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
26 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout the
year ended October 31, unless otherwise noted:
Smith Barney Government Portfolio 2003/(1)(2)/ 2002/(2)/ 2001 2000/(2)/ 1999/(3)/
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $11.74 $11.44 $10.62 $10.13 $10.00
- ----------------------------------------------------------------------------------------------
Income From Operations:
Net investment income/(4)(5)/ 0.20 0.35 0.52 0.53 0.05
Net realized and unrealized gain/(5)/ 0.06 0.13 0.87 0.12 0.08
- ----------------------------------------------------------------------------------------------
Total Income From Operations 0.26 0.48 1.39 0.65 0.13
- ----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.16) (0.11) (0.57) (0.16) --
Net realized gains -- (0.07) -- -- --
- ----------------------------------------------------------------------------------------------
Total Distributions (0.16) (0.18) (0.57) (0.16) --
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.84 $11.74 $11.44 $10.62 $10.13
- ----------------------------------------------------------------------------------------------
Total Return 2.25%++ 4.20% 13.56% 6.55% 1.30++
- ----------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $140,185 $84,104 $13,410 $4,996 $5,066
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)(6)/ 0.69%+ 0.80% 0.80% 0.80% 0.80%+
Net investment income/(5)/ 3.10+ 3.17 4.47 5.19 4.36+
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 170% 145% 90% 0% 0%
- ----------------------------------------------------------------------------------------------
(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 15, 1999 (commencement of operations) to
October 31, 1999.
(4) The Manager agreed to waive all or a portion of its fees for the years
ended October 31, 2002, 2001 and 2000 and the period ended October 31,
1999. In addition, the Manager also reimbursed expenses of $57,022, $33,010
and $14,291 for the years ended October 31, 2001 and 2000, and the period
ended October 31, 1999, respectively. If such fees were not waived and
expenses not reimbursed, the per share effect on net investment income and
the actual expense ratios would have been as follows:
Expense Ratios
Net Investment Income Without Fee Waivers and/or
Per Share Decreases Expense Reimbursements
----------------------- ----------------------
2002 2001 2000 1999 2002 2001 2000 1999
----- ----- ----- ----- ---- ---- ---- ----
Smith Barney
Government
Portfolio $0.02 $0.06 $0.13 $0.04 1.00% 1.30% 2.06% 3.73%+
(5) Effective November 1, 2001, the Fund adopted a change in the accounting
method that requires the Fund to amortize premiums and accrete all
discounts. Without the adoption of this change, for the year ended October
31, 2002, net investment income, net realized and unrealized gain and the
ratio of net investment income to average net assets would have been $0.36,
$0.12 and 3.32%, respectively. Per share, ratios and supplemental data for
the periods prior to November 1, 2001 have not been restated to reflect
this change in presentation.
(6) As a result of a voluntary expense limitation, the expense ratio will not
exceed 0.80%.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
27 Smith Barney Investment Series | 2003 Semi-Annual Report to Shareholders
SMITH BARNEY
INVESTMENT SERIES
TRUSTEES OFFICERS (Cont'd.)
Elliott J. Berv Francis L. Mustaro
Donald M. Carlton Vice President and
A. Benton Cocanougher Investment Officer
Mark T. Finn
R. Jay Gerken, Chairman Lawrence B. Weissman, CFA
Stephen Randolph Gross Vice President and
Diana R. Harrington Investment Officer
Susan B. Kerley
Alan G. Merten Timothy Woods, CFA
C. Oscar Morong, Jr. Vice President and
R. Richardson Pettit Investment Officer
Walter E. Robb, III
Kaprel Ozsolak
OFFICERS Controller
R. Jay Gerken
President and Robert I. Frenkel
Chief Executive Officer Secretary
Lewis E. Daidone INVESTMENT MANAGER
Senior Vice President and Smith Barney Fund
Chief Administrative Officer Management LLC
Richard L. Peteka CUSTODIAN
Chief Financial Officer State Street Bank and
and Treasurer Trust Company
Alan J. Blake TRANSFER AGENT
Vice President and Citicorp Trust Bank, fsb.
Investment Officer 125 Broad Street, 11th Floor
New York, New York 10004
Michael Kagan
Vice President and SUB-TRANSFER AGENT
Investment Officer PFPC Global Fund Services
P.O. Box 9699
Roger M. Lavan Providence, Rhode Island
Vice President and 02940-9699
Investment Officer
Smith Barney Investment Series
This report is submitted for general information of the shareholders of the
Smith Barney Investment Series -- Smith Barney Premier Selections All Cap
Growth, Smith Barney Large Cap Core, Smith Barney Growth and Income and Smith
Barney Government Portfolios. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current Prospectus,
which contains information concerning the investment policies and expenses as
well as other pertinent information.
SMITH BARNEY INVESTMENT SERIES
Smith Barney Mutual Funds
125 Broad Street
10th Floor, MF-2
New York, New York 10004
For complete information on any Smith Barney Mutual Funds, including
management fees and expenses, call or write your financial professional for a
free prospectus. Read it carefully before you invest or send money.
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02334 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: July 2, 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: July 2, 2003
By: /s/ Richard Peteka
Chief Financial Officer of
Smith Barney Investment Series
Date: July 2, 2003