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)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
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: October 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
SMITH BARNEY
LARGE CAP CORE FUND
STYLE PURE SERIES | ANNUAL REPORT | OCTOBER 31, 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]
Annual Report . October 31, 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
Manager Overview...................................................... 2
Fund Performance...................................................... 4
Historical Performance................................................ 5
Schedule of Investments............................................... 6
Statement of Assets and Liabilities................................... 10
Statement of Operations............................................... 11
Statements of Changes in Net Assets................................... 12
Notes to Financial Statements......................................... 13
Financial Highlights.................................................. 19
Independent Auditors' Report.......................................... 23
Additional Information................................................ 24
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
We are pleased to present the annual report for the Smith Barney Large Cap Core
Fund. After a torturous three-year bear market, the U.S. stock market has
rallied strongly so far in 2003 as geopolitical uncertainties eased and
investors began to look forward to better economic times. The recent
performance of the U.S. economy has supported an improvement in investor
sentiment and corporate earnings.
If you have any questions about recent economic events or investing in a
recovering economy, we urge you to talk with your financial adviser. As always,
we thank you for entrusting your assets to us, and we look forward to helping
you continue to meet your financial goals. Please read on to learn more about
your fund's performance and the Manager's strategy.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
November 12, 2003
1 Smith Barney Large Cap Core Fund | 2003 Annual Report
MANAGER OVERVIEW
Performance Review
For the 12 months ended October 31, 2003, Class 1 shares of the Smith Barney
Large Cap Core Fund, excluding sales charges, returned 16.03%. These shares
underperformed the fund's unmanaged benchmark, the S&P 500 Index,/i/ which
returned 20.79% for the same period. They also underperformed the average of
the fund's Lipper peer group of large-cap core funds, which returned 17.75% for
the same period./1/
The fund's underperformance is due primarily to the marked differences in the
performance of small- and large- cap stocks in the past year's stock market
rally. This past year has been an unusual one in that low-priced, high
volatility stocks of smaller, lesser-known companies significantly outperformed
stocks of many larger, well-known companies with good balance sheets, sound
business plans, and favorable long term outlooks. Because the fund does not
invest in small- or micro-cap companies, which benefited the most in the market
rally, its performance could not match that of funds that invest in the broad
market, or those funds that do invest in stocks of smaller companies.
Overview
Early in the fund's fiscal year, the economy was not showing any clear signs of
improvement and the stock market was testing multiyear lows. The Federal
government's aggressive monetary and fiscal policies finally manifested
themselves in the third calendar quarter of 2003, with the highest rate of
gross domestic product (GDP)/ii/ growth in a single quarter that the U.S. had
seen in almost two decades. Corporate expenses were cautiously controlled
during the economic downturn in place at the start of the period, which allowed
for dramatic operating leverage as modest revenue increases started to
translate into positive earnings surprises in the second and third calendar
quarters. This was the backdrop for the dramatic rebound in the equity markets
that began after the end of the first calendar quarter. Many of the biggest
gainers in the ensuing market rally were low-priced, single-digit stocks that
had been oversold and were among the worst performers over the previous three
years.
What Affected Performance
As of the end of the period, the fund's largest sector concentrations were in
Financials, Information Technology and Healthcare. While we continued to
emphasize these sectors, during the period we reduced the fund's weightings in
the Financials and Healthcare sectors and increased exposure to the Information
Technology sector.
Not surprisingly, the largest contributors to the fund's performance during the
period came from the Information Technology sector, which outperformed all
other sectors handily. The biggest single contributor to the fund's performance
for the period was its position in
PERFORMANCE SNAPSHOT
AS OF OCTOBER 31, 2003
(excluding sales charges)
6 Months 12 Months
Class 1 Shares 12.36% 16.03%
S&P 500 Index 15.62% 20.79%
Average of Lipper
large-cap core funds 14.42% 17.75%
Class 1 share returns assume the reinvestment of income dividends and capital
gains distributions at net asset value and the deduction of all fund
expenses. Returns have not been adjusted to include sales charges that may
apply when shares are purchased or the deduction of taxes that a shareholder
would pay on fund distributions. Only eligible Class 1 shareholders may
purchase additional Class 1 shares. Results for other share classes may vary.
The S&P 500 Index is a market capitalization-weighted index of 500 widely
held common stocks. Please note that an investor cannot invest directly in an
index.
Lipper Inc. is a major independent mutual-fund tracking organization. Returns
are based on the 12 month period ended October 31, 2003, calculated among
1,098 funds for the six-month period and among 1,064 funds for the 12-month
period, in the fund's Lipper peer group including the reinvestment of
dividends and capital gains and excluding sales charges.
All figures represent past performance and are not a guarantee of future
results. Principal value and investment returns will fluctuate and investors'
shares, when redeemed may be worth more or less than their original cost.
/1/Lipper Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended October 31, 2003, calculated
among 1,064 funds in the large-cap core funds category with reinvestment of
dividends and capital gains and excluding sales charges.
2 Smith Barney Large Cap Core Fund | 2003 Annual Report
Intel Corp. Intel is one of the largest semiconductor manufacturers in the
world and was a big beneficiary in the recovery in demand for semiconductors
used in PCs, laptops and corporate network servers. Intel has been reaping the
benefits of significant investments it made in research and development and in
manufacturing over the last several years.
The other two top contributors were also fund holdings in the Information
Technology sector, Cisco Systems Inc. and VERITAS Software Corp. Cisco
manufactures and sells computer networking and communications products
worldwide. Cisco benefited from market share gains in the network router and
switch segments, growth of emerging technologies such as Voice Over Internet
Protocol ("VOIP") telephony and a general improvement in the business
environment. VERITAS Software provides data availability software that enables
customers to protect, manage, and access their critical information and data.
During the last twelve months, VERITAS has benefited from market share gains in
the data back-up and recovery segments, new foundation products designed for
the IBM/AIX platform and a general pickup in business spending as well.
While the fund's overall performance was positive, some stocks in the portfolio
lost value during the period, detracting from performance. The largest single
detractor from fund performance during the period was hospital operator HCA,
Inc. in the Healthcare sector. HCA suffered a considerable drop in share price
during the period, falling from a 5-year high of $52.05 per share in June of
2002 (before the start of the period) to a low of $27.30 per share on April 16,
2003. The company has been the focus of a number of government investigations,
as well as civil and criminal suits brought against it, alleging fraud and
accounting irregularities, and was no longer held by the fund as of the end of
October.
American International Group Inc. ("AIG") in the Financials sector was the
second largest detractor from fund performance during the period. AIG is one of
the world's largest insurance firms, an industry that was hit hard by losses
related to terrorism in 2001 and by the stock market's difficulties in much of
2002. The third biggest detractor from fund performance for the period was
Kraft Foods Inc. in the Consumer Staples sector. The company's stock suffered
during the period in part because of investor concerns over ties to its parent
company, Altria Group (formerly Phillip Morris), and its exposure to ongoing
tobacco litigation issues and a decline in the long-term growth expectations
for the company. Kraft was no longer held by the fund as of the end of October.
Additional Information About Your Fund
The Fund's Adviser and some of its affiliates have received requests for
information from various government regulators regarding market timing, late
trading, fees and other mutual fund issues in connection with various
investigations. The Adviser and its affiliates are responding to those
information requests, but are not in a position to predict the outcome of these
requests and investigations.
Thank you for your investment in the Smith Barney Large Cap Core Fund. We
appreciate that you have entrusted us to manage your money and value our
relationship with you.
Sincerely,
/s/ Lawrence Weissman
Lawrence B. Weissman, CFA
Vice President and Investment Officer
November 12, 2003
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of October 31, 2003 and are subject to
change. Please refer to pages 6 through 9 for a list and percentage breakdown
of the fund's holdings.
/i/ The S&P 500 Index is a market capitalization-weighted index of 500 widely
held common stocks. Please note that an investor cannot invest directly in
an index.
/ii/Gross domestic product is a market value of goods and services produced by
labor and property in a given country.
Portfolio holdings and breakdowns are as of October 31, 2003 and are subject to
change. The fund's top ten holdings as of October 31, 2003 were: Exxon Mobil
Corp. (3.43%); Pfizer Inc. (3.28%); Intel Corp. (3.07%); General Electric Co.
(3.06%); Microsoft Corp. (2.99%); Wal Mart Stores Inc. (2.24%); Merrill Lynch &
Co. Inc. (2.18%); American Express Co. (2.15%); Teva Pharmaceutical Industries
Ltd. (1.98%); Veritas Software Corp. (1.96%).
3 Smith Barney Large Cap Core Fund | 2003 Annual Report
AVERAGE ANNUAL TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
------------------------------
Class 1 Class A Class B Class L
- -------------------------------------------------------------------
Twelve Months Ended 10/31/03 16.03% 15.08% 14.05% 15.21%
- ------------------------------------------------------------------
Five Years Ended 10/31/03 1.60 0.99 0.21 N/A
- ------------------------------------------------------------------
Ten Years Ended 10/31/03 8.91 N/A N/A N/A
- ------------------------------------------------------------------
Inception* through 10/31/03 9.38 6.99 6.16 (13.05)
- ------------------------------------------------------------------
With Sales Charges/(2)/
------------------------------
Class 1 Class A Class B Class L
- -------------------------------------------------------------------
Twelve Months Ended 10/31/03 6.16% 9.35% 9.05% 13.07%
- ------------------------------------------------------------------
Five Years Ended 10/31/03 (0.19) (0.04) 0.06 N/A
- ------------------------------------------------------------------
Ten Years Ended 10/31/03 7.95 N/A N/A N/A
- ------------------------------------------------------------------
Inception* through 10/31/03 8.80 6.22 6.16 (13.33)
- ------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS+ (UNAUDITED)
Without Sales Charges/(1)/
- -----------------------------------------------------------------------
Class 1 (10/31/93 through 10/31/03) 134.81%
- ---------------------------------------------------------------------
Class A (Inception* through 10/31/03) 62.65
- ---------------------------------------------------------------------
Class B (Inception* through 10/31/03) 53.85
- ---------------------------------------------------------------------
Class L (Inception* through 10/31/03) (35.31)
- ---------------------------------------------------------------------
(1) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value and does not reflect the deduction of the
applicable sales charges with respect to Class 1, A and L shares or the
applicable contingent deferred sales charges ("CDSC") with respect to Class
B and L shares.
(2) Assumes reinvestment of all dividends and capital gain distributions, if
any, at net asset value. In addition, Class 1, A and L shares reflect the
deduction of the maximum initial sales charges of 8.50%, 5.00% and 1.00%,
respectively; Class B shares reflect the deduction of a 5.00% CDSC if
shares are redeemed within one year from purchase payment. Thereafter, this
CDSC declines by 1.00% per year until no CDSC is incurred. Class L shares
also reflect the deduction of a 1.00% CDSC, which applies if shares are
redeemed within one year from purchase payment.
+ The returns shown do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
* Inception date for Class 1 shares is April 14, 1987. Inception date for
Class A and B shares is August 18, 1996. Inception date for Class L shares
is September 19, 2000.
4 Smith Barney Large Cap Core Fund | 2003 Annual Report
HISTORICAL PERFORMANCE (UNAUDITED)
Value of $10,000 Invested in Class 1 Shares of the
Smith Barney Large Cap Core Fund vs. S&P 500 Index+
- --------------------------------------------------------------------------------
October 1993 -- October 2003
[CHART]
Smith Barney Large S&P
Cap Core Fund-Class 1 Shares 500 Index
---------------------------- ---------
Oct-1993 $ 9,150 $10,000
Oct-1994 9,343 10,386
Oct-1995 11,585 13,129
Oct-1996 13,895 16,292
Oct-1997 17,637 21,522
Oct-1998 19,849 26,259
Oct-1999 26,916 32,998
Oct-2000 31,254 35,003
Oct-2001 22,919 26,290
Oct-2002 18,518 22,322
Oct-2003 21,486 26,963
+Hypothetical illustration of $10,000 invested in Class 1 shares on October 31,
1993, assuming deduction of the maximum initial 8.50% sales charge at the time
of investment for Class 1 shares. It also assumes reinvestment of dividends
and capital gains, if any, at net asset value through October 31, 2003. The
S&P 500 Index is an index of widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and over-the-counter markets. Figures
for the Index include reinvestment of dividends. The Index is unmanaged and is
not subject to the same management and trading expenses of a mutual fund.
Please note that an investor cannot invest directly in an index. The
performance of the Fund's other classes may be greater or less than the Class
1 shares' performance indicated on this chart, depending on whether greater or
lesser sales charges and fees were incurred by shareholders investing in other
classes. The returns shown do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or the redemption of fund shares.
All figures represent past performance and are not a guarantee of future
results. The performance data represents past performance, including the
investment return and principal value of an investment, which will fluctuate
so that an investor's shares, when redeemed, may be worth more or less than
their original cost.
5 Smith Barney Large Cap Core Fund | 2003 Annual Report
SCHEDULE OF INVESTMENTS OCTOBER 31, 2003
SHARES SECURITY VALUE
- ----------------------------------------------------------------------
COMMON STOCK -- 98.4%
Aerospace and Defense -- 1.8%
595,150 Lockheed Martin Corp. $ 27,591,154
352,750 United Technologies Corp. 29,874,398
- ----------------------------------------------------------------------
57,465,552
- ----------------------------------------------------------------------
Air Freight and Couriers -- 0.5%
235,300 United Parcel Service, Inc., Class B Shares 17,063,956
- ----------------------------------------------------------------------
Automobiles -- 0.6%
419,100 Harley-Davidson, Inc. 19,869,531
- ----------------------------------------------------------------------
Banks -- 6.0%
487,800 Bank of America Corp. 36,941,094
1,345,950 The Bank of New York Co., Inc. 41,980,180
171,000 Comerica Inc. 8,803,080
742,850 Fifth Third Bancorp 43,055,586
1,047,700 Wells Fargo & Co. 59,006,464
- ----------------------------------------------------------------------
189,786,404
- ----------------------------------------------------------------------
Beverages -- 2.0%
351,200 The Coca-Cola Co. 16,295,680
986,750 PepsiCo, Inc. 47,186,385
- ----------------------------------------------------------------------
63,482,065
- ----------------------------------------------------------------------
Biotechnology -- 2.4%
434,490 Amgen, Inc.* 26,834,102
1,240,500 Biogen, Inc.*+ 50,203,035
- ----------------------------------------------------------------------
77,037,137
- ----------------------------------------------------------------------
Chemicals -- 1.4%
675,000 E.I. du Pont de Nemours & Co. 27,270,000
249,750 Praxair, Inc. 17,377,605
- ----------------------------------------------------------------------
44,647,605
- ----------------------------------------------------------------------
Commercial Services & Supplies -- 1.3%
1,041,600 Paychex, Inc. 40,539,072
- ----------------------------------------------------------------------
Communications Equipment -- 3.3%
1,012,000 Alcatel SA, Sponsored ADR 13,338,160
2,314,050 Cisco Systems, Inc.* 48,548,769
1,320,600 Motorola, Inc. 17,867,718
1,483,000 Nokia Oyj, Sponsored ADR 25,196,170
- ----------------------------------------------------------------------
104,950,817
- ----------------------------------------------------------------------
Computers and Peripherals -- 4.5%
604,650 Dell Inc.* 21,839,958
1,909,950 EMC Corp.* 26,433,708
2,167,150 Hewlett-Packard Co. 48,349,116
485,200 International Business Machines Corp. 43,415,696
- ----------------------------------------------------------------------
140,038,478
- ----------------------------------------------------------------------
Diversified Financials -- 9.1%
1,449,650 American Express Co. 68,032,074
361,000 The Goldman Sachs Group, Inc. 33,897,900
678,600 J.P. Morgan Chase & Co. 24,361,740
1,766,000 MBNA Corp. 43,708,500
See Notes to Financial Statements.
6 Smith Barney Large Cap Core Fund | 2003 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
SHARES SECURITY VALUE
- --------------------------------------------------------------------
Diversified Financials -- 9.1% (continued)
1,163,350 Merrill Lynch & Co., Inc. $ 68,870,320
1,204,700 SLM Corp. 47,176,052
- --------------------------------------------------------------------
286,046,586
- --------------------------------------------------------------------
Diversified Telecommunication Services -- 0.9%
838,410 Verizon Communications Inc. 28,170,576
- --------------------------------------------------------------------
Electric Utilities -- 0.7%
325,500 Exelon Corp. 20,652,975
- --------------------------------------------------------------------
Electronic Equipment and Instruments -- 2.9%
1,219,000 Agilent Technologies, Inc.* 30,377,480
4,307,350 Flextronics International Ltd.* 60,302,900
- --------------------------------------------------------------------
90,680,380
- --------------------------------------------------------------------
Energy Equipment and Services -- 1.6%
1,328,200 Halliburton Co. 31,717,416
498,150 Noble Corp.* 17,101,490
- --------------------------------------------------------------------
48,818,906
- --------------------------------------------------------------------
Food Products -- 0.6%
594,300 Kellogg Co. 19,689,159
- --------------------------------------------------------------------
Healthcare Equipment and Supplies -- 0.7%
220,300 Medtronic, Inc. 10,039,071
189,100 St. Jude Medical, Inc.* 10,998,056
- --------------------------------------------------------------------
21,037,127
- --------------------------------------------------------------------
Healthcare Providers and Services -- 0.4%
196,500 Anthem, Inc.* 13,446,495
- --------------------------------------------------------------------
Hotels, Restaurants and Leisure -- 1.1%
795,700 Outback Steakhouse, Inc. 33,419,400
- --------------------------------------------------------------------
Household Products -- 1.8%
582,750 The Procter & Gamble Co. 57,278,498
- --------------------------------------------------------------------
Industrial Conglomerates -- 5.9%
611,500 3M Co. 48,229,005
3,333,970 General Electric Co. 96,718,470
1,890,300 Tyco International Ltd. 39,469,464
- --------------------------------------------------------------------
184,416,939
- --------------------------------------------------------------------
Insurance -- 3.3%
697,550 Ambac Financial Group, Inc. 49,344,687
881,225 American International Group, Inc. 53,604,917
- --------------------------------------------------------------------
102,949,604
- --------------------------------------------------------------------
Internet and Catalog Retail -- 1.1%
963,800 InterActiveCorp* 35,381,098
- --------------------------------------------------------------------
Machinery -- 1.4%
520,300 Danaher Corp. 43,106,855
- --------------------------------------------------------------------
Media -- 3.9%
1,451,890 Comcast Corp., Class A Shares* 49,248,109
552,900 The News Corp. Ltd., Preferred Shares ADR 16,310,550
2,466,550 Time Warner Inc.* 37,713,550
491,476 Viacom Inc., Class B Shares 19,595,148
- --------------------------------------------------------------------
122,867,357
- --------------------------------------------------------------------
See Notes to Financial Statements.
7 Smith Barney Large Cap Core Fund | 2003 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------
Metals and Mining -- 1.2%
1,185,150 Alcoa Inc. $ 37,415,185
- -----------------------------------------------------------------------------
Multiline Retail -- 3.8%
421,400 J.C. Penney Co., Inc. 9,966,110
949,900 Target Corp. 37,749,026
1,198,500 Wal-Mart Stores, Inc. 70,651,575
- -----------------------------------------------------------------------------
118,366,711
- -----------------------------------------------------------------------------
Oil and Gas -- 4.4%
2,963,610 Exxon Mobil Corp. 108,408,854
400,500 Total SA, Sponsored ADR 31,267,035
- -----------------------------------------------------------------------------
139,675,889
- -----------------------------------------------------------------------------
Paper and Forest Products -- 1.5%
1,159,800 Bowater Inc. 47,354,634
- -----------------------------------------------------------------------------
Personal Products -- 1.4%
192,900 Avon Products, Inc. 13,109,484
837,950 The Estee Lauder Cos., Inc. 31,330,950
- -----------------------------------------------------------------------------
44,440,434
- -----------------------------------------------------------------------------
Pharmaceuticals -- 9.1%
706,800 Johnson & Johnson 35,573,244
749,600 Merck & Co. Inc. 33,169,800
3,281,650 Pfizer Inc. (a) 103,700,140
1,102,227 Teva Pharmaceutical Industries Ltd., Sponsored ADR 62,705,694
1,142,050 Wyeth 50,410,087
- -----------------------------------------------------------------------------
285,558,965
- -----------------------------------------------------------------------------
Road and Rail -- 1.0%
509,900 Canadian National Railway Co. 30,695,980
- -----------------------------------------------------------------------------
Semiconductor Equipment and Products -- 3.9%
2,935,032 Intel Corp. 97,002,808
603,800 Linear Technology Corp. 25,727,918
- -----------------------------------------------------------------------------
122,730,726
- -----------------------------------------------------------------------------
Software -- 9.4%
508,800 Adobe Systems Inc. 22,305,792
2,352,100 BEA Systems, Inc.* 32,694,190
179,510 Electronic Arts Inc.* 17,778,670
3,614,540 Microsoft Corp. (a) 94,520,221
766,500 SAP AG, Sponsored ADR 28,007,910
3,138,350 Siebel Systems, Inc.* 39,511,826
1,716,148 VERITAS Software Corp.* 62,038,750
- -----------------------------------------------------------------------------
296,857,359
- -----------------------------------------------------------------------------
Specialty Retail -- 2.7%
395,100 Bed Bath and Beyond Inc.* 16,689,024
1,142,224 The Home Depot, Inc. 42,342,244
1,229,850 The TJX Cos., Inc. 25,814,552
- -----------------------------------------------------------------------------
84,845,820
- -----------------------------------------------------------------------------
Trading Companies and Distributors -- 0.4%
290,650 W.W. Grainger, Inc. 13,305,957
- -----------------------------------------------------------------------------
See Notes to Financial Statements.
8 Smith Barney Large Cap Core Fund | 2003 Annual Report
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2003
SHARES SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services -- 0.4%
1,612,934 AT&T Wireless Services Inc.* $ 11,693,771
- --------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $2,494,739,598) 3,095,784,003
- --------------------------------------------------------------------------------------------------------------------
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
$50,273,000 J.P. Morgan Chase & Co., 0.980% due 11/3/03; Proceeds at maturity -- $50,277,106; (Fully
collateralized by U.S. Treasury Notes, 3.000% due 2/15/08; Market value -- $51,279,913)
(Cost -- $50,273,000) 50,273,000
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $2,545,012,598**) $3,146,057,003
- --------------------------------------------------------------------------------------------------------------------
(a) All or a portion of this security is held as collateral for futures
contracts commitments.
* Non-income producing security.
+ Subsequent to the reporting period, the company changed its name to Biogen
Idec Inc. due to a merger.
** Aggregate cost for Federal income tax purposes is $2,547,617,456.
Abbreviation used in this schedule:
ADR -- American Depositary Receipt
See Notes to Financial Statements.
9 Smith Barney Large Cap Core Fund | 2003 Annual Report
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2003
ASSETS:
Investments, at value (Cost -- $2,545,012,598) $3,146,057,003
Cash 473
Receivable for securities sold 49,192,247
Dividends and interest receivable 2,361,017
Receivable for Fund shares sold 250,542
- ---------------------------------------------------------------------------
Total Assets 3,197,861,282
- ---------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 31,252,292
Payable for Fund shares reacquired 1,899,676
Management fee payable 1,589,368
Trustees' retirement plan 409,037
Service plan fees payable 169,777
Accrued expenses 2,639,129
- ---------------------------------------------------------------------------
Total Liabilities 37,959,279
- ---------------------------------------------------------------------------
Total Net Assets $3,159,902,003
- ---------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 1,951
Capital paid in excess of par value 2,858,820,211
Undistributed net investment income 3,458,927
Accumulated net realized loss from investment
transactions and futures contracts (303,423,491)
Net unrealized appreciation of investments 601,044,405
- ---------------------------------------------------------------------------
Total Net Assets $3,159,902,003
- ---------------------------------------------------------------------------
Shares Outstanding:
Class 1 148,880,296
- ----------------------------------------------------------------------------
Class A 25,812,281
- ----------------------------------------------------------------------------
Class B 19,964,237
- ----------------------------------------------------------------------------
Class L 394,122
- ----------------------------------------------------------------------------
Net Asset Value:
Class 1 (and redemption price) $16.36
- ----------------------------------------------------------------------------
Class A (and redemption price) $16.03
- ----------------------------------------------------------------------------
Class B * $15.26
- ----------------------------------------------------------------------------
Class L * $15.98
- ----------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Class 1 (net asset value plus 9.29% of net asset value
per share) $17.88
- ----------------------------------------------------------------------------
Class A (net asset value plus 5.26% of net asset value
per share) $16.87
- ----------------------------------------------------------------------------
Class L (net asset value plus 1.01% of net asset value
per share) $16.14
- ---------------------------------------------------------------------------
* Redemption price is NAV of Class B and L shares reduced by a 5.00% and 1.00%
CDSC, respectively, if shares are redeemed within one year from purchase
payment (See Note 2).
See Notes to Financial Statements.
10 Smith Barney Large Cap Core Fund | 2003 Annual Report
STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2003
INVESTMENT INCOME:
Dividends $ 40,801,066
Interest 410,381
Less: Foreign withholding tax (411,534)
----------------------------------------------------------------------
Total Investment Income 40,799,913
----------------------------------------------------------------------
EXPENSES:
Management fee (Note 2) 17,667,289
Shareholder servicing fees (Note 6) 14,967,900
Service plan fees (Note 6) 3,847,899
Shareholder communications (Note 6) 327,693
Trustees' fees 101,378
Custody 93,038
Audit and legal 76,030
Registration fees 49,224
Other 36,138
----------------------------------------------------------------------
Total Expenses 37,166,589
----------------------------------------------------------------------
Net Investment Income 3,633,324
----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 3 AND 5):
Realized Gain (Loss) From:
Investment transactions (22,695,179)
Futures contracts 285,540
----------------------------------------------------------------------
Net Realized Loss (22,409,639)
----------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of year 150,815,314
End of year 601,044,405
----------------------------------------------------------------------
Increase in Net Unrealized Appreciation 450,229,091
----------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 427,819,452
----------------------------------------------------------------------
Increase in Net Assets From Operations $431,452,776
----------------------------------------------------------------------
See Notes to Financial Statements.
11 Smith Barney Large Cap Core Fund | 2003 Annual Report
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED OCTOBER 31,
2003 2002
- -----------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 3,633,324 $ 1,260,197
Net realized loss (22,409,639) (247,616,504)
Increase (decrease) in net unrealized
appreciation 450,229,091 (497,956,718)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets From
Operations 431,452,776 (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 10):
Net proceeds from sale of shares 187,397,917 258,182,747
Net asset value of shares issued for
reinvestment of dividends -- 18,912,891
Cost of shares reacquired (409,292,153) (563,945,773)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share
Transactions (221,894,236) (286,850,135)
- ----------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 209,558,540 (1,050,078,589)
NET ASSETS:
Beginning of year 2,950,343,463 4,000,422,052
- ----------------------------------------------------------------------------------
End of year* $3,159,902,003 $ 2,950,343,463
- ----------------------------------------------------------------------------------
* Includes undistributed (overdistributed) net
investment income of: $3,458,927 $(93,319)
- ----------------------------------------------------------------------------------
See Notes to Financial Statements.
12 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS
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, as amended ("1940 Act")
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), SB
Growth and Income Fund (formerly known as 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 SB Government
Portfolio (formerly known as 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 fair value determined by or under
the direction of the Board of Trustees; 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 event,
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, at least 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
is determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America. At
October 31, 2003, reclassifications were made to the Fund's capital accounts to
reflect permanent book/tax differences and income and gains available for
distributions under income tax regulations. Net investment income, net realized
gains and net assets were not affected by this adjustment; (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 taxes; 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.
13 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (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 or offset by entering into another
forward exchange contract. The Fund from time to time may also enter into
options and/or futures contracts typically to hedge market or currency risk.
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 Inc. ("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 year ended October 31, 2003, the Fund paid transfer agent
fees of $10,945,285 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. For the year ended October 31, 2003, CGM and
its affiliates received brokerage commissions of $156,111.
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 payment. 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 one year from purchase payment. In certain cases,
Class A shares have a 1.00% CDSC, which applies if redemption occurs within one
year from purchase payment. 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 year ended October 31, 2003, CGM and its affiliates received sales
charges of approximately $5,150,000, $2,102,000 and $11,000 on sales of the
Fund's Class 1, A and L shares, respectively. In addition, CDSCs paid to CGM
and its affiliates for the year ended October 31, 2003 were approximately
$813,000 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
14 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. Two
additional Trustees have announced their intention to retire, effective
December 31, 2003. 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 year ended October 31, 2003 were $85,271. The amount of
benefits to be paid under the prior plan cannot currently be determined for
these Trustees.
3. Investments
During the year ended October 31, 2003, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
- --------------------------------------------------------------------------------
Purchases $1,996,562,567
- --------------------------------------------------------------------------------
Sales 2,231,203,015
- --------------------------------------------------------------------------------
At October 31, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were as follows:
- ------------------------------------------------------------------------------
Gross unrealized appreciation $644,189,458
Gross unrealized depreciation (45,749,911)
- ------------------------------------------------------------------------------
Net unrealized appreciation $598,439,547
- ------------------------------------------------------------------------------
4. Repurchase Agreements
The Fund purchases (and the 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
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the current market
value of the futures contracts. 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
15 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
basis in the contract. The Fund enters into such contracts typically 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.
At October 31, 2003, the Fund did not hold any futures contracts.
6. Class Specific Expenses
Pursuant to a Service Plan, 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
year ended October 31, 2003, total Service Plan fees, which are accrued daily
and paid monthly, were as follows:
Class A Class B Class L
- ----------------------------------------------------------------------------
Service Plan Fees $920,241 $2,874,541 $53,117
- ----------------------------------------------------------------------------
For the year ended October 31, 2003, total Shareholder Servicing fees were
as follows:
Class 1 Class A Class B Class L
- ----------------------------------------------------------------------------
Shareholder Servicing Fees $8,647,745 $3,375,675 $2,942,250 $2,230
- ----------------------------------------------------------------------------
For the year ended October 31, 2003, total Shareholder Communication
expenses were as follows:
Class 1 Class A Class B Class L
- ----------------------------------------------------------------------------
Shareholder Communication Expenses $182,756 $79,656 $64,619 $662
- ----------------------------------------------------------------------------
7. Distributions Paid to Shareholders by Class
Year Ended Year Ended
October 31, 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 realized gains -- $ 226,265
- -----------------------------------------------------------------------------
Total -- $ 226,265
- -----------------------------------------------------------------------------
Class B
Net realized gains -- $ 195,425
- -----------------------------------------------------------------------------
Total -- $ 195,425
- -----------------------------------------------------------------------------
Class L
Net realized gains -- $ 3,012
- -----------------------------------------------------------------------------
Total -- $ 3,012
- -----------------------------------------------------------------------------
16 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. Capital Loss Carryforward
At October 31, 2003, the Fund had, for Federal income tax purposes,
approximately $300,819,000 of unused capital loss carryforwards available to
offset future capital gains. To the extent that these capital carryforward
losses are used to offset capital gains, it is probable that the gains so
offset will not be distributed.
The amount and year of expiration for each carryforward loss is indicated
below. Expiration occurs on October 31 of the year indicated:
2010 2011
- ---------------------------------------------------------------------------
Carryforward Amounts $244,521,000 $56,298,000
- ---------------------------------------------------------------------------
9. Income Tax Information and Distributions to Shareholders
At October 31, 2003, the tax basis components of distributable earnings were:
- ----------------------------------------------------------------
Undistributed ordinary income $ 3,458,927
- ----------------------------------------------------------------
Accumulated capital losses (300,818,633)
- ----------------------------------------------------------------
Unrealized appreciation 598,439,547
- ----------------------------------------------------------------
The difference between book basis and tax basis unrealized appreciation is
attributable primarily to wash sale loss deferrals.
For the year ended October 31, 2003, the Fund did not make any distributions.
10. Shares of Beneficial Interest
At October 31, 2003, the Fund had 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:
Year Ended Year Ended
October 31, 2003 October 31, 2002
-------------------------- --------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------
Class 1
Shares sold 5,191,779 $ 75,863,431 5,514,504 $ 90,519,719
Shares issued on reinvestment -- -- 1,001,831 18,490,718
Shares reacquired (19,635,110) (283,537,780) (24,219,440) (389,744,381)
- -------------------------------------------------------------------------------------
Net Decrease (14,443,331) $(207,674,349) (17,703,105) $(280,733,944)
- -------------------------------------------------------------------------------------
Class A
Shares sold 4,762,832 $ 68,607,615 5,825,048 $ 96,435,608
Shares issued on reinvestment -- -- 15,797 225,263
Shares reacquired (4,237,240) (60,363,852) (4,989,579) (79,284,641)
- -------------------------------------------------------------------------------------
Net Increase 525,592 $ 8,243,763 851,266 $ 17,376,230
- -------------------------------------------------------------------------------------
Class B
Shares sold 2,968,621 $ 40,777,367 4,315,346 $ 68,774,689
Shares issued on reinvestment -- -- 14,163 194,179
Shares reacquired (4,689,891) (64,100,603) (5,960,574) (93,075,362)
- -------------------------------------------------------------------------------------
Net Decrease (1,721,270) $ (23,323,236) (1,631,065) $ (24,106,494)
- -------------------------------------------------------------------------------------
Class L
Shares sold 151,984 $ 2,149,504 144,571 $ 2,452,731
Shares issued on reinvestment -- -- 192 2,731
Shares reacquired (93,791) (1,289,918) (115,607) (1,841,389)
- -------------------------------------------------------------------------------------
Net Increase 58,193 $ 859,586 29,156 $ 614,073
- -------------------------------------------------------------------------------------
17 Smith Barney Large Cap Core Fund | 2003 Annual Report
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. Subsequent Event
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
$16 million (plus interest) that CAM and its affiliates received from the
Revenue Guarantee Agreement and its amendment. CAM also plans an independent
review to verify that the transfer agency fees charged by CAM were fairly
priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
18 Smith Barney Large Cap Core Fund | 2003 Annual Report
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)/ 2002/(1)/ 2001/(1)/ 2000/(1)/ 1999/(1)/
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $14.10 $17.55 $26.52 $24.36 $19.59
- --------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.06 0.05 0.11 0.07 0.08
Net realized and unrealized gain (loss) 2.20 (3.39) (6.70) 3.74 6.62
- --------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.26 (3.34) (6.59) 3.81 6.70
- --------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.09) (0.06) (0.07) (0.11)
Net realized gains -- (0.01) (2.32) (1.58) (1.82)
Capital -- (0.01) -- -- --
- --------------------------------------------------------------------------------------------------
Total Distributions -- (0.11) (2.38) (1.65) (1.93)
- --------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.36 $14.10 $17.55 $26.52 $24.36
- --------------------------------------------------------------------------------------------------
Total Return 16.03% (19.20)% (26.67)% 16.12% 35.60%
- --------------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $2,435 $2,303 $3,177 $4,691 $4,475
- --------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.00% 0.90% 0.73% 0.70% 0.76%
Net investment income 0.39 0.31 0.55 0.26 0.34
- --------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 69% 38% 27% 34% 37%
- --------------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
19 Smith Barney Large Cap Core Fund | 2003 Annual Report
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)/ 2002/(1)/ 2001/(1)/ 2000/(1)/ 1999/(1)/
- -----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.93 $17.41 $26.41 $24.29 $19.54
- -----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.06) (0.10) (0.01) (0.02) 0.02
Net realized and unrealized gain (loss) 2.16 (3.37) (6.67) 3.73 6.60
- -----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.10 (3.47) (6.68) 3.71 6.62
- -----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- (0.01) (0.05)
Net realized gains -- (0.01) (2.32) (1.58) (1.82)
- -----------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) (1.59) (1.87)
- -----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $16.03 $13.93 $17.41 $26.41 $24.29
- -----------------------------------------------------------------------------------------------
Total Return 15.08% (19.94)% (27.12)% 15.69% 35.24%
- -----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $414 $352 $425 $510 $344
- -----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.80% 1.80% 1.34% 1.04% 1.01%
Net investment income (loss) (0.42) (0.59) (0.06) (0.07) 0.09
- -----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 69% 38% 27% 34% 37%
- -----------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
20 Smith Barney Large Cap Core Fund | 2003 Annual Report
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)/ 2002/(1)/ 2001/(1)/ 2000/(1)/ 1999/(1)/
- ----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.38 $16.86 $25.81 $23.95 $19.37
- ----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.18) (0.22) (0.15) (0.23) (0.14)
Net realized and unrealized gain (loss) 2.06 (3.25) (6.48) 3.67 6.54
- ----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 1.88 (3.47) (6.63) 3.44 6.40
- ----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- --
Net realized gains -- (0.01) (2.32) (1.58) (1.82)
- ----------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) (1.58) (1.82)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.26 $13.38 $16.86 $25.81 $23.95
- ----------------------------------------------------------------------------------------------
Total Return 14.05% (20.59)% (27.59)% 14.76% 34.31%
- ----------------------------------------------------------------------------------------------
Net Assets, End of Year (millions) $305 $290 $393 $524 $357
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.66% 2.59% 2.01% 1.83% 1.76%
Net investment loss (1.27) (1.39) (0.73) (0.86) (0.65)
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 69% 38% 27% 34% 37%
- ----------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
21 Smith Barney Large Cap Core Fund | 2003 Annual Report
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)/ 2002/(1)/ 2001/(1)/ 2000/(1)(2)/
- ----------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Year $13.87 $17.36 $26.41 $27.33
- ----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.04) (0.13) (0.07) (0.01)
Net realized and unrealized gain (loss) 2.15 (3.35) (6.66) (0.91)
- ----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 2.11 (3.48) (6.73) (0.92)
- ----------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- --
Net realized gains -- (0.01) (2.32) --
- ----------------------------------------------------------------------------------------------
Total Distributions -- (0.01) (2.32) --
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Year $15.98 $13.87 $17.36 $26.41
- ----------------------------------------------------------------------------------------------
Total Return 15.21% (20.05)% (27.32)% (3.37)%++
- ----------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $6,000 $4,659 $5,326 $180
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.67% 2.00% 1.65% 1.54%+
Net investment loss (0.29) (0.80) (0.37) (0.46)+
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 69% 38% 27 % 34%
- ----------------------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period 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.
22 Smith Barney Large Cap Core Fund | 2003 Annual Report
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
Smith Barney Investment Series
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Smith Barney Large Cap Core Fund of the Smith
Barney Investment Series ("Fund") as of October 31, 2003, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the four-year period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
financial highlights for each year ended October 31, 1999 were audited by other
auditors whose report thereon, dated December 15, 1999, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of October 31, 2003 by
correspondence with the custodian and broker. As to securities purchased or
sold but not received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of October 31, 2003, and the results of its operations for the year
then ended, the changes in its net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
four-year period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
December 10, 2003
23 Smith Barney Large Cap Core Fund | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED)
Information about Trustees and Officers
The business and affairs of the Smith Barney Large Cap Core Fund ("Fund") are
managed under the direction of the Fund's Board of Trustees. Information
pertaining to the Trustees and officers of the Fund is set forth below. Each
Trustee and Officer holds office for his or her lifetime, unless that
individual resigns, retires or is otherwise removed. The Statement of
Additional Information includes additional information about Fund Trustees and
is available, without charge, upon request by calling Citicorp Trust Bank, fsb.
at 1-800-451-2010 or Primerica Shareholder Services at 1-800-544-5445.
Number of
Terms of Portfolios
Office* and in Fund
Position(s) Length Principal Complex Other Board Memberships
Held with of Time Occupation(s) During Overseen by Held by Trustees During
Name, Address and Age Fund Served Past Five Years Trustee Past Five Years
- --------------------------------------------------------------------------------------------------------------------------------
Non-Interested Trustees:
Elliott J. Berv Trustee Since President and Chief 36 Board Member, American
c/o R. Jay Gerken 2001 Operations Officer, Identity Corp. (doing
Citigroup Asset Management ("CAM") Landmark City (Real Estate business a Morpheus
399 Park Avenue Development) (since 2002); Technologies) (biometric
New York, NY 10022 Executive Vice President information management)
Age 60 and Chief Operations (since 2001; Consultant
Officer, DigiGym Systems since 1999); Director,
(On-line Personal Training Lapoint Industries
Systems) (since 2001); (Industrial Filter Company)
Chief Executive Officer, (since 2002); Director,
Rocket City Enterprises Alzheimer's Association
(Internet Service Company) (New England Chapter)
(from 2000 to 2001); (since 1998)
President, Catalyst
(Consulting) (since 1984)
Donald M. Carlton Trustee Since Consultant, URS Corporation 31 Director, American Electric
c/o R. Jay Gerken 1997 (Engineering) (since 1999); Power (Electric Utility)
CAM former Chief Executive (since 1999); Director,
399 Park Avenue Officer, Radian Valero Energy (Petroleum
New York, NY 10022 International L.L.C. Refining) (since 1999);
Age 66 (Engineering) (from 1969 to Director, National
1998), Member of Management Instruments Corp.
Committee, Signature (Technology) (since 1994)
Science (Research and
Development) (since 2000)
A. Benton Cocanougher Trustee Since Dean Emeritus and Wiley 31 Former Director, Randall's
c/o R. Jay Gerken 1991 Professor, Texas A&M Food Markets, Inc. (from
CAM University (since 2001); 1990 to 1999); former
399 Park Avenue former Dean and Professor Director, First American
New York, NY 10022 of Marketing, College and Bank and First American
Age 65 Graduate School of Business Savings Bank (from 1994 to
of Texas A&M University 1999)
(from 1987 to 2001)
24 Smith Barney Large Cap Core Fund | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Terms of Portfolios
Office* and in Fund
Position(s) Length Principal Complex Other Board Memberships
Held with of Time Occupation(s) During Overseen by Held by Trustees During
Name, Address and Age Fund Served Past Five Years Trustee Past Five Years
- -----------------------------------------------------------------------------------------------------------------------------
Mark T. Finn Trustee Since Adjunct Professor, William & Mary 36 Former President and Director,
c/o R. Jay Gerken 2001 College (since September 2002); Delta Financial, Inc.
CAM Principal/Member, Belvan Partners/ (Investment Advisory Firm)
399 Park Avenue Balfour Vantage - Manager and (from 1983 to 1999)
New York, NY 10022 General Partner to the Vantage
Age 60 Hedge Fund, LP (since March
2002); Chairman and Owner,
Vantage Consulting Group, Inc.
(Investment Advisory and
Consulting Firm) (since 1988);
former Vice Chairman and Chief
Operating Officer, Lindner Asset
Management Company (Mutual
Fund Company) (from March 1999
to 2001); former General Partner
and Shareholder, Greenwich
Ventures, LLC (Investment
Partnership) (from 1996 to 2001);
former President, Secretary, and
Owner, Phoenix Trading Co.
(Commodity Trading Advisory Firm)
(from 1997 to 2000)
Stephen Randolph Gross Trustee Since Partner, Capital Investment 31 Director, United Telesis, Inc.
c/o R. Jay Gerken 1986 Advisory Partners (Consulting) (Telecommunications) (since
CAM (since January 2000); Managing 1997); Director, eBank.com,
399 Park Avenue Director, Fountainhead Ventures, Inc. (since 1997); Director,
New York, NY 10022 LLC (Consulting) (from 1998 to Andersen Calhoun, Inc.
Age 56 2002); Secretary, Carint N.A. (Assisted Living) (since 1987);
(Manufacturing) (since 1988); former Director, Charter Bank,
former Treasurer, Hank Aaron Inc, Inc. (from 1987 to 1997);
Enterprises (Fast Food Franchise) former Director, Yu Save, Inc.
(from 1985 to 2001); Chairman, (Internet Company) (from 1998
Gross, Collins & Cress, P.C. to 2000); former Director,
(Accounting Firm) (since 1980); Hotpalm.com, Inc. (Wireless
Treasurer, Coventry Limited, Inc. Applications) (from 1998 to
(since 1985) 2000); former Director, Ikon
Ventures, Inc. (from 1997 to
1998)
Diana R. Harrington Trustee Since Professor, Babson College 36 Former Trustee, The Highland
c/o R. Jay Gerken 2001 (since 1992) Family of Funds (Investment
CAM Company) (from 1997 to 1998)
399 Park Avenue
New York, NY 10022
Age 63
Susan B. Kerley Trustee Since Consultant, Strategic 36 Director, Eclipse Funds
c/o R. Jay Gerken 2001 Management Advisors, LLC (currently supervises 17
CAM Global Research Associates, Inc. investment companies in
399 Park Avenue (Investment Consulting) (since fund complex) (since 1990)
New York, NY 10022 1990)
Age 52
25 Smith Barney Large Cap Core Fund | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Terms of Portfolios
Office* and in Fund
Position(s) Length Principal Complex Other Board Memberships
Held with of Time Occupation(s) During Overseen by Held by Trustees During
Name, Address and Age Fund Served Past Five Years Trustee Past Five Years
- ----------------------------------------------------------------------------------------------------------------------------
Alan G. Merten Trustee Since President, George Mason 31 Director, DigitalNet
c/o R. Jay Gerken 1990 University (since 1996) Holdings, Inc. (since
CAM October 2003); Director,
399 Park Avenue Comshare, Inc. (Information
New York, NY 10022 Technology) (since 1985);
Age 62 former Director, Indus
(Information Technology)
(from 1995 to 1999)
C. Oscar Morong, Jr. Trustee Since Managing Director, Morong 36 Former Director, Indonesia
c/o R. Jay Gerken 2001 Capital Management (since Fund (Closed-End Fund)
CAM 1993) (from 1990 to 1999);
399 Park Avenue Trustee, Morgan Stanley
New York, NY 10022 Institutional Fund
Age 68 (currently supervises 75
investment companies)
(since 1993)
R. Richardson Pettit Trustee Since Professor of Finance, 31 None
c/o R. Jay Gerken 1990 University of Houston (from
CAM 1977 to 2002); Independent
399 Park Avenue Consultant (since 1984)
New York, NY 10022
Age 61
Walter E. Robb, III Trustee Since President, Benchmark 36 Director, John Boyle & Co.,
c/o R. Jay Gerken 1985 Consulting Group, Inc. Inc. (Textiles) (since
CAM (Service Company) (since 1999); Director, Harbor
399 Park Avenue 1991); Sole Proprietor, Sweets, Inc. (Candy) (since
New York, NY 10022 Robb Associates (Financial 1990); Director, W.A. Wilde
Age 77 Consulting) (since 1978); Co. (Direct Media
Co-Owner, Kedron Design Marketing) (since 1982);
(Gifts) (since 1978); Director, Alpha Grainger
former President and Manufacturing Inc.
Treasurer, Benchmark (Electronics) (since 1983);
Advisors, Inc. (Financial former Trustee, MFS Family
Consulting) (from 1989 to of Funds (Investment
2000) Company) (from 1985 to
2001); Harvard Club of
Boston (Audit Committee)
(since 2001)
Interested Trustee:
R. Jay Gerken, CFA** Chairman, Since Managing Director of 220 N/A
CAM President 2002 Citigroup Global Markets
399 Park Avenue, 4th Floor and Inc. ("CGM"); Chairman,
New York, NY 10022 Chief President and Chief
Age 52 Executive Executive Officer of Smith
Officer Barney Fund Management LLC
("SBFM"), Travelers
Investment Adviser, Inc
("TIA") and Citi Fund
Management Inc. ("CFM");
President and Chief
Executive Officer of
certain mutual funds
associated with Citigroup
Inc. ("Citigroup");
Formerly, Portfolio Manager
of Smith Barney Allocation
Series Inc. (from 1996 to
2001) and Smith Barney
Growth and Income Fund
(from 1996 to 2000)
26 Smith Barney Large Cap Core Fund | 2003 Annual Report
ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
Number of
Terms of Portfolios
Office* and in Fund
Position(s) Length Principal Complex Other Board Memberships
Held with of Time Occupation(s) During Overseen by Held by Trustees During
Name, Address and Age Fund Served Past Five Years Trustee Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------
Officers:
Andrew B. Shoup*** Senior Vice Since Director of CAM; Senior Vice N/A N/A
CAM President and 2003 President and Chief Administrative
125 Broad Street, 10th Floor Chief Officer of mutual funds associated
New York, NY 10004 Administrative with Citigroup; Head of
Age 47 Officer International Funds Administration
of CAM from 2001 to 2003;
Director of Global Funds
Administration of CAM from 2000
to 2001; Head of U.S. Citibank
Funds Administration of CAM from
1998 to 2000
Richard L. Peteka Treasurer Since Director of CGM; Chief Financial N/A N/A
CAM 2002 Officer and Treasurer of certain
125 Broad Street, 11th Floor mutual funds associated with
New York, NY 10004 Citigroup; Director and Head of
Age 42 Internal Control for CAM U.S.
Mutual Fund Administration from
1999 to 2002; Vice President,
Head of Mutual Fund
Administration and Treasurer at
Oppenheimer Capital from 1996 to
1999
Lawrence B. Weissman, CFA Vice President Since Managing Director of CAM N/A N/A
CAM and Investment 1999
300 First Stamford Place Officer
Stamford, CT 06902
Age 42
Kaprel Ozsolak Controller Since Vice President of CGM; Controller N/A N/A
CAM 2002 of certain funds associated with
125 Broad Street, 11th Floor Citigroup
New York, NY 10004
Age 38
Robert I. Frenkel Secretary Since Managing Director and General N/A N/A
CAM 2000 Counsel of Global Mutual Funds
300 First Stamford Place for CAM and its predecessor (since
4th Floor Chief Legal Since 1994); Secretary of CFM; Secretary
Stamford, CT 06902 Officer 2003 and Chief Legal Officer of mutual
Age 48 funds associated with Citigroup
- --------
* Trustees are elected until the Trust's next annual meeting and until their
successors are elected and qualified.
** Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
*** As of November 25, 2003.
27 Smith Barney Large Cap Core Fund | 2003 Annual Report
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, CFA Citigroup Global Markets Inc.
Chairman PFS Distributors, Inc.
Stephen Randolph Gross
Diana R. Harrington CUSTODIAN
Susan B. Kerley State Street Bank and
Alan G. Merten Trust Company
C. Oscar Morong, Jr.
R. Richardson Pettit
Walter E. Robb, III TRANSFER AGENT
Citicorp Trust Bank, fsb.
125 Broad Street, 11th Floor
OFFICERS New York, New York 10004
R. Jay Gerken, CFA
President and
Chief Executive Officer SUB-TRANSFER AGENTS
PFPC Inc.
P.O. Box 9699
Andrew B. Shoup* Providence, Rhode Island
Senior Vice President and 02940-9699
Chief Administrative Officer
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 and
Chief Legal Officer
* As of November 25, 2003.
Smith Barney Investment Series
Smith Barney Large Cap Core Fund
The Fund is a separate investment fund of the Smith
Barney Investment Series, a Massachusetts business trust.
This report is submitted for the general information of the 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
January 31, 2004, 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 prospectus. Read it carefully before you invest or send money.
www.smithbarneymutualfunds.com
(C)2003 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02102 12/03 03-5795
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that Stephen
Randolph Gross, the Chairman of the Board's Audit Committee, possesses
the technical attributes identified in Instruction 2(b) of Item 3 to
Form N-CSR to qualify as an "audit committee financial expert," and has
designated Mr. Gross as the Audit Committee's financial expert. Mr.
Gross is an "independent" Director pursuant to paragraph (a)(2) of Item
3 to Form N-CSR.
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- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and procedures
required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under
the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(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: January 2, 2004
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: January 2, 2004
By: /s/ Richard L. Peteka
(Richard L. Peteka)
Chief Financial Officer of
Smith Barney Investment Series
Date: January 2, 2004