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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5018
Smith Barney Investment Series
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(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
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(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
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(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, 2004
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ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
SB GROWTH AND INCOME FUND
CLASSIC SERIES | SEMI-ANNUAL REPORT | APRIL 30, 2004
[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]
Michael Kagan
MICHAEL KAGAN
PORTFOLIO MANAGER
[PHOTO]
Kevin Caliendo
KEVIN CALIENDO
PORTFOLIO MANAGER
[LOGO]
Classic Series
Semi-Annual Report . April 30, 2004
SB GROWTH AND INCOME FUND
MICHAEL KAGAN
Michael Kagan has more than 20 years of securities business experience
and has been managing the fund since August 14, 2000.
Education: BA in Economics, Harvard University. Attended the
Massachusetts Institute of Technology's Sloan School of Management.
KEVIN CALIENDO
Kevin Caliendo has 10 years of securities business experience.
Education: BA in Journalism from Boston University.
FUND OBJECTIVE
The fund seeks reasonable growth and income. It invests in a portfolio
consisting principally of equity securities, including convertible
securities, that provide dividend or interest income. However, it may
also invest in non-income producing investments for potential
appreciation in value.
FUND FACTS
FUND INCEPTION
-----------------
April 14, 1987
MANAGERS' INVESTMENT INDUSTRY EXPERIENCE
-----------------
20 Years (Michael Kagan)
10 Years (Kevin Caliendo)
What's Inside
Letter from the Chairman.............................................. 1
Schedule of Investments............................................... 3
Statement of Assets and Liabilities................................... 8
Statement of Operations............................................... 9
Statements of Changes in Net Assets................................... 10
Notes to Financial Statements......................................... 11
Financial Highlights.................................................. 18
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
For the six months ended April 30, 2004, the key factors driving the stock
market were the strength of the global economy and fears that steps would be
taken by the U.S. and Chinese governments to slow the growth of their
economies. The closing months of 2003 saw a powerful cyclical stock market
rally. However, since the beginning of 2004, many investors saw a far bumpier
market, as signs of increasing inflation appeared in the U.S.
U.S. economic data during April showed a strong economy, with the greatest
strength in the industrial segments. While oil prices hit new highs, other
commodity prices fell sharply due, in our opinion, to comments from the Chinese
government indicating it was taking steps to slow the very rapid growth of the
economy. A significant portion of the companies included in the S&P 500 Index
beat their consensus earnings expectations.
Performance Review
Within this environment, the fund performed as follows: For the six months
ended April 30, 2004, Smith Barney Class A shares of the SB Growth and Income
Fund, excluding sales charges, returned 4.63%. In comparison, the fund's
unmanaged benchmark, the S&P 500 Index,/i/ returned 6.27%. The fund
outperformed it's Lipper large-cap core funds category average, which returned
4.52%./1/
PERFORMANCE SNAPSHOT
AS OF APRIL 30, 2004
(excluding sales charges)
6 Months
Smith Barney Class A Shares 4.63%
S&P 500 Index 6.27%
Lipper Large-Cap Core Funds Category Average 4.52%
The performance shown represents past performance. Past performance is no
guarantee of future results and current performance may be higher or lower
than the performance shown above. Principal value and investment returns will
fluctuate and investors' shares, when redeemed, may be worth more or less
than their original cost. To obtain performance data current to the most
recent month-end, please visit our website at www.smithbarneymutualfunds.com.
Smith Barney Class A 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. Excluding sales
charges, Smith Barney Class 1 shares returned 4.73%, Smith Barney Class B
shares returned 4.11%, Smith Barney Class C shares returned 4.43%, Smith
Barney Class O shares returned 4.55%, Smith Barney Class P shares returned
4.46% and Smith Barney Class Y shares returned 4.97% over the six months
ended April 30, 2004. Salomon Brothers Class A shares returned 4.68% over the
six month period ended April 30, 2004. Salomon Brothers Class B shares
returned 4.50% and Salomon Brothers Class C shares returned 4.43% since
inception on 11/05/03.
Effective April 29, 2004, Smith Barney Class L shares were renamed Smith
Barney Class C shares. On April 29, 2004 Salomon Brothers Class 2 shares were
renamed Salomon Brothers Class C shares. On February 2, 2004, initial sales
charges on Smith Barney Class C shares and Salomon Brothers Class C shares
were eliminated. On April 29, 2004, initial sales charges on Smith
Barney Class O shares were eliminated.
All index performance reflects no deduction for fees, expenses or taxes. 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.
/1/Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended April 30, 2004, calculated
among the 1,052 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any, and excluding sales
charges.
1 SB Growth and Income Fund | 2004 Semi-Annual Report
Explanation of Performance
The fund's underperformance relative to the S&P 500 Index can be attributed to
poor stock selection in the information technology and consumer discretionary
sectors. Performance was hampered by holdings in global telecommunications
equipment maker Nortel Networks Corp., semiconductor manufacturer Infineon
Technologies AG, and consumer electronics retailer Best Buy Co. Inc. However,
the fund's performance was helped by select positions in the telecommunication
services, health care and industrial sectors. In particular, performance
benefited from holdings in mobile service provider AT&T Wireless Services Inc.,
biotechnology company Elan Corp. PLC and manufacturing conglomerate Tyco
International Ltd.
Special Shareholder Notice
Effective April 29, 2004, Smith Barney Class L shares were renamed Smith Barney
Class C shares. On April 29, 2004 Salomon Brothers Class 2 shares were renamed
Salomon Brothers Class C shares. On February 2, 2004, initial sales charges on
Smith Barney Class C shares and Salomon Brothers Class C shares were
eliminated. On April 29, 2004, initial sales charges on Smith Barney Class O
shares were eliminated.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. 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 regulators appear to be
examining, among other things, the fund's response to market timing and
shareholder exchange activity, including compliance with prospectus disclosure
related to these subjects. The fund has been informed that 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.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
May 14, 2004
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 April 30, 2004, are subject to
change, and may not be representative of the portfolio manager's current or
future investments.
The fund's top ten holdings as of this date were: Pfizer Inc. (3.91%), General
Electric Co. (3.81%), Exxon Mobil Corp. (2.93%), Microsoft Corp. (2.81%), Bank
of America Corp. (2.74%), American International Group Inc. (2.41%), PepsiCo
Inc. (2.39%), Teva Pharmaceutical Industries Ltd. (2.35%), The Proctor & Gamble
Co. (2.17%), Wells Fargo & Co. (2.03%). Please refer to pages 3 through 7 for a
list and percentage breakdown of the fund's holdings.
The mention of sector breakdowns is for informational purposes only and should
not be construed as a recommendation to purchase or sell any securities. The
information provided regarding such sectors is not a sufficient basis upon
which to make an investment decision. Investors seeking financial advice
regarding the appropriateness of investing in any securities or investment
strategies discussed should consult their financial professional. Portfolio
holdings are subject to change at any time and may not be representative of the
portfolio manager's current or future investments. The fund's top five sector
holdings as of April 30, 2004 were: Financials (19.4%); Industrials (15.3%);
Health Care (14.9%); Information Technology (14.0%) and Consumer Discretionary
(12.0%). The fund's portfolio composition is subject to change at any time.
RISKS: The fund is subject to certain risks of foreign investing not typically
associated with investing in U.S. securities, including currency fluctuations
and changes in political and economic conditions. Lower-rated, higher yielding
bonds known as "junk bonds" are subject to greater credit risk, including the
risk of default, than higher-rated obligations. The fund may engage in short
sales. Losses from short sales may be unlimited. The fund may use derivatives,
such as options and futures, which can be illiquid, may disproportionately
increase losses, and have a potentially large impact on fund performance.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
/i/The S&P 500 Index is a market capitalization-weighted index of 500 widely
held common stocks.
2 SB Growth and Income Fund | 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------
COMMON STOCK -- 99.7%
CONSUMER DISCRETIONARY -- 12.0%
Hotels, Restaurants & Leisure -- 0.8%
338,400 McDonald's Corp. $ 9,214,632
- --------------------------------------------------------------------
Household Durables -- 1.1%
528,100 Newell Rubbermaid Inc. 12,484,284
- --------------------------------------------------------------------
Internet & Catalog Retail -- 1.3%
451,300 InterActiveCorp* 14,382,931
- --------------------------------------------------------------------
Leisure Equipment & Products -- 0.7%
461,200 Mattel, Inc. 7,821,952
- --------------------------------------------------------------------
Media -- 4.5%
402,200 Comcast Corp., Class A Shares* 12,106,220
136,300 Comcast Corp., Special Class A Shares* 3,951,337
988,802 Liberty Media Corp., Class A Shares* 10,817,494
286,300 The News Corp. Ltd., Preferred Shares, ADR 9,662,625
398,400 Viacom Inc., Class B Shares 15,398,160
- --------------------------------------------------------------------
51,935,836
- --------------------------------------------------------------------
Multiline Retail -- 1.2%
364,100 Costco Wholesale Corp.* 13,635,545
- --------------------------------------------------------------------
Specialty Retail -- 2.4%
348,700 Best Buy Co., Inc. 18,916,975
253,900 The Home Depot, Inc. 8,934,741
- --------------------------------------------------------------------
27,851,716
- --------------------------------------------------------------------
TOTAL CONSUMER DISCRETIONARY 137,326,896
- --------------------------------------------------------------------
CONSUMER STAPLES -- 8.8%
Beverages -- 2.4%
502,500 PepsiCo, Inc. 27,381,225
- --------------------------------------------------------------------
Food Products -- 1.2%
313,600 Kellogg Co. 13,453,440
- --------------------------------------------------------------------
Household Products -- 4.1%
346,200 Kimberly-Clark Corp. 22,658,790
235,400 The Procter & Gamble Co. 24,893,550
- --------------------------------------------------------------------
47,552,340
- --------------------------------------------------------------------
Personal Products -- 1.1%
280,700 The Estee Lauder Cos. Inc., Class A Shares 12,830,797
- --------------------------------------------------------------------
TOTAL CONSUMER STAPLES 101,217,802
- --------------------------------------------------------------------
ENERGY -- 7.4%
Energy Equipment & Services -- 1.8%
434,400 ENSCO International Inc. 11,889,528
328,000 GlobalSantaFe Corp. 8,649,360
- --------------------------------------------------------------------
20,538,888
- --------------------------------------------------------------------
See Notes to Financial Statements.
3 SB Growth and Income Fund | 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2004
SHARES SECURITY VALUE
- --------------------------------------------------------------------
Oil & Gas -- 5.6%
114,600 ChevronTexaco Corp. $ 10,485,900
789,500 Exxon Mobil Corp. 33,593,225
214,100 Total SA, Sponsored ADR+ 19,722,892
- --------------------------------------------------------------------
63,802,017
- --------------------------------------------------------------------
TOTAL ENERGY 84,340,905
- --------------------------------------------------------------------
FINANCIALS -- 19.4%
Banks -- 9.7%
390,627 Bank of America Corp. 31,441,567
297,800 The Bank of New York Co., Inc. 8,677,892
326,300 Bank One Corp. 16,109,431
159,900 Comerica Inc. 8,255,637
181,100 Fifth Third Bancorp 9,717,826
322,900 U.S. Bancorp 8,279,156
127,300 Wachovia Corp. 5,823,975
412,100 Wells Fargo & Co. 23,267,166
- --------------------------------------------------------------------
111,572,650
- --------------------------------------------------------------------
Diversified Financials -- 5.6%
294,000 American Express Co. 14,391,300
104,300 Freddie Mac 6,091,120
171,600 The Goldman Sachs Group, Inc. 16,602,300
212,000 J.P. Morgan Chase & Co. 7,971,200
335,900 MBNA Corp. 8,189,242
193,600 Merrill Lynch & Co., Inc. 10,498,928
- --------------------------------------------------------------------
63,744,090
- --------------------------------------------------------------------
Insurance -- 4.1%
384,900 American International Group, Inc. 27,578,085
108 Berkshire Hathaway Inc., Class A Shares* 10,086,120
134,100 The Chubb Corp. 9,252,900
- --------------------------------------------------------------------
46,917,105
- --------------------------------------------------------------------
TOTAL FINANCIALS 222,233,845
- --------------------------------------------------------------------
HEALTH CARE -- 14.9%
Biotechnology -- 2.0%
249,004 Amgen Inc.* 14,011,455
113,700 OSI Pharmaceuticals, Inc.*+ 8,389,923
- --------------------------------------------------------------------
22,401,378
- --------------------------------------------------------------------
Health Care Equipment & Supplies -- 2.2%
150,700 Fisher Scientific International* 8,823,485
269,400 Guidant Corp. 16,974,894
- --------------------------------------------------------------------
25,798,379
- --------------------------------------------------------------------
Health Care Providers & Services -- 1.0%
133,700 Anthem, Inc.*+ 11,843,146
- --------------------------------------------------------------------
See Notes to Financial Statements.
4 SB Growth and Income Fund | 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2004
SHARES SECURITY VALUE
- -------------------------------------------------------------------------------
Pharmaceuticals -- 9.7%
386,500 GlaxoSmithKline PLC, Sponsored ADR+ $ 16,233,000
176,400 Johnson & Johnson 9,530,892
1,255,100 Pfizer Inc. 44,882,376
802,200 Schering-Plough Corp. 13,420,806
438,200 Teva Pharmaceutical Industries Ltd., Sponsored ADR+ 26,975,592
- -------------------------------------------------------------------------------
111,042,666
- -------------------------------------------------------------------------------
TOTAL HEALTH CARE 171,085,569
- -------------------------------------------------------------------------------
INDUSTRIALS -- 15.3%
Aerospace & Defense -- 2.8%
539,500 The Boeing Co. 23,031,255
199,900 Lockheed Martin Corp. 9,535,230
- -------------------------------------------------------------------------------
32,566,485
- -------------------------------------------------------------------------------
Building Products -- 1.1%
114,100 American Standard Cos. Inc.* 12,002,179
- -------------------------------------------------------------------------------
Commercial Services & Supplies -- 2.7%
178,700 Avery Dennison Corp. 11,477,901
373,600 Paychex, Inc. 13,927,808
190,400 Waste Management, Inc. 5,407,360
- -------------------------------------------------------------------------------
30,813,069
- -------------------------------------------------------------------------------
Industrial Conglomerates -- 6.2%
1,460,100 General Electric Co. 43,729,995
384,300 Honeywell International Inc. 13,289,094
518,200 Tyco International Ltd. 14,224,590
- -------------------------------------------------------------------------------
71,243,679
- -------------------------------------------------------------------------------
Machinery -- 1.6%
153,900 Eaton Corp. 9,138,582
213,500 Navistar International Corp.* 9,639,525
- -------------------------------------------------------------------------------
18,778,107
- -------------------------------------------------------------------------------
Road & Rail -- 0.9%
255,250 Canadian National Railway Co. 9,640,793
- -------------------------------------------------------------------------------
TOTAL INDUSTRIALS 175,044,312
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 14.0%
Communications Equipment -- 2.7%
4,097,500 ADC Telecommunications, Inc.*+ 10,243,750
394,300 Cisco Systems, Inc.* 8,229,041
60,600 Motorola, Inc. 1,105,950
2,907,300 Nortel Networks Corp.* 10,873,302
- -------------------------------------------------------------------------------
30,452,043
- -------------------------------------------------------------------------------
Computers & Peripherals -- 3.3%
498,400 Dell Inc.* 17,299,464
654,100 Hewlett-Packard Co. 12,885,770
93,600 International Business Machines Corp. 8,252,712
- -------------------------------------------------------------------------------
38,437,946
- -------------------------------------------------------------------------------
See Notes to Financial Statements.
5 SB Growth and Income Fund | 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2004
SHARES SECURITY VALUE
- ------------------------------------------------------------
Semiconductor Equipment & Products -- 3.7%
993,100 Infineon Technologies AG+ $ 12,532,922
847,000 Intel Corp. 21,793,310
305,100 Microchip Technology Inc. 8,548,902
- ------------------------------------------------------------
42,875,134
- ------------------------------------------------------------
Software -- 4.3%
554,200 BMC Software, Inc.* 9,587,660
1,239,300 Microsoft Corp. 32,184,621
652,700 Oracle Corp.* 7,323,294
- ------------------------------------------------------------
49,095,575
- ------------------------------------------------------------
TOTAL INFORMATION TECHNOLOGY 160,860,698
- ------------------------------------------------------------
MATERIALS -- 3.8%
Containers & Packaging -- 0.5%
347,200 Smurfit-Stone Container Corp.* 5,968,368
- ------------------------------------------------------------
Metals & Mining -- 2.1%
509,900 Alcoa Inc. 15,679,425
410,900 Barrick Gold Corp. 7,901,607
- ------------------------------------------------------------
23,581,032
- ------------------------------------------------------------
Paper & Forest Products -- 1.2%
353,900 International Paper Co. 14,269,248
- ------------------------------------------------------------
TOTAL MATERIALS 43,818,648
- ------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.4%
Wireless Telecommunication Services -- 1.4%
1,168,200 AT&T Wireless Services Inc.* 16,132,842
- ------------------------------------------------------------
UTILITIES -- 2.7%
Electric Utilities -- 0.9%
262,300 FirstEnergy Corp. 10,255,930
- ------------------------------------------------------------
Gas Utilities -- 0.9%
1,472,400 El Paso Corp.+ 10,321,524
- ------------------------------------------------------------
Multi-Utilities -- 0.9%
516,500 NiSource Inc. 10,412,640
- ------------------------------------------------------------
TOTAL UTILITIES 30,990,094
- ------------------------------------------------------------
TOTAL COMMON STOCK
(Cost -- $975,680,133) 1,143,051,611
- ------------------------------------------------------------
See Notes to Financial Statements.
6 SB Growth and Income Fund | 2004 Semi-Annual Report
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) APRIL 30, 2004
FACE
AMOUNT SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.3%
$ 3,753,000 State Street Bank and Trust Co. dated 4/30/04, 0.870% due 5/3/04; Proceeds at maturity -- $3,753,272;
(Fully collateralized by U.S. Treasury Notes, 7.875% due 11/15/04; Market value -- $3,829,290)
(Cost -- $3,753,000) $ 3,753,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $979,433,133**) $1,146,804,611
- --------------------------------------------------------------------------------------------------------------------------------
LOANED SECURITIES COLLATERAL
86,019,691 State Street Navigator Securities Lending Trust Prime Portfolio (Cost -- $86,019,691) $ 86,019,691
- --------------------------------------------------------------------------------------------------------------------------------
* 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
See Notes to Financial Statements.
7 SB Growth and Income Fund | 2004 Semi-Annual Report
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2004
ASSETS:
Investments, at value (Cost -- $979,433,133) $1,146,804,611
Loaned securities collateral, at value (Cost --
$86,019,691) (Note 6) 86,019,691
Cash 246
Receivable for securities sold 6,732,935
Dividends and interest receivable 598,735
Receivable for Fund shares sold 328,876
Prepaid assets 92,073
- ----------------------------------------------------------------------------
Total Assets 1,240,577,167
- ----------------------------------------------------------------------------
LIABILITIES:
Payable for loaned securities collateral (Note 6) 86,019,691
Payable for securities purchased 5,893,703
Management fee payable 603,839
Payable for Fund shares reacquired 472,934
Trustees' retirement plan 286,876
Service plan fees payable 87,341
Accrued expenses 624,269
- ----------------------------------------------------------------------------
Total Liabilities 93,988,653
- ----------------------------------------------------------------------------
Total Net Assets $1,146,588,514
- ----------------------------------------------------------------------------
NET ASSETS:
Par value of shares of beneficial interest $ 815
Capital paid in excess of par value 1,183,598,477
Undistributed net investment income 730,703
Accumulated net realized loss from investment transactions (205,112,959)
Net unrealized appreciation of investments 167,371,478
- ----------------------------------------------------------------------------
Total Net Assets $1,146,588,514
- ----------------------------------------------------------------------------
Shares Outstanding:
Smith Barney Class 1 37,718,224
- ----------------------------------------------------------------------------
Smith Barney Class A 20,424,676
- ----------------------------------------------------------------------------
Smith Barney Class B 8,690,588
- ----------------------------------------------------------------------------
Smith Barney Class C 426,291
- ----------------------------------------------------------------------------
Smith Barney Class O 108,748
- ----------------------------------------------------------------------------
Smith Barney Class P 1,274,754
- ----------------------------------------------------------------------------
Smith Barney Class Y 12,842,670
- ----------------------------------------------------------------------------
Salomon Brothers Class A 1,798
- ----------------------------------------------------------------------------
Salomon Brothers Class B 1,114
- ----------------------------------------------------------------------------
Salomon Brothers Class C 174
- ----------------------------------------------------------------------------
Net Asset Value:
Smith Barney Class 1 (and redemption price) $14.14
- ----------------------------------------------------------------------------
Smith Barney Class A (and redemption price) $14.14
- ----------------------------------------------------------------------------
Smith Barney Class B * $13.44
- ----------------------------------------------------------------------------
Smith Barney Class C * $13.92
- ----------------------------------------------------------------------------
Smith Barney Class O * $14.01
- ----------------------------------------------------------------------------
Smith Barney Class P * $14.04
- ----------------------------------------------------------------------------
Smith Barney Class Y (and redemption price) $14.17
- ----------------------------------------------------------------------------
Salomon Brothers Class A (and redemption price) $14.14
- ----------------------------------------------------------------------------
Salomon Brothers Class B * $13.48
- ----------------------------------------------------------------------------
Salomon Brothers Class C * $13.91
- ----------------------------------------------------------------------------
Maximum Public Offering Price Per Share:
Smith Barney Class 1 (net asset value plus 9.29% of net
asset value per share) $15.45
- ----------------------------------------------------------------------------
Smith Barney Class A (net asset value plus 5.26% of net
asset value per share) $14.88
- ----------------------------------------------------------------------------
Salomon Brothers Class A (net asset value plus 6.10% of
net asset value per share) $15.00
- ----------------------------------------------------------------------------
* Redemption price is NAV of Smith Barney Class B, Smith Barney Class C, Smith
Barney Class O, Smith Barney Class P, Salomon Brothers Class B and Salomon
Brothers Class C shares reduced by a 5.00%, 1.00%, 1.00%, 5.00%, 5.00% and
1.00% contingent deferred sales charge ("CDSC"), respectively, if shares are
redeemed within one year from purchase payment (See Note 2).
See Notes to Financial Statements.
8 SB Growth and Income Fund | 2004 Semi-Annual Report
STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2004
INVESTMENT INCOME:
Dividends $ 8,735,396
Interest (Note 6) 211,819
Less: Foreign withholding tax (38,865)
- -------------------------------------------------------------------------
Total Investment Income 8,908,350
- -------------------------------------------------------------------------
EXPENSES:
Management fee (Note 2) 3,776,809
Transfer agency services (Note 7) 1,517,449
Service plan fees (Note 7) 1,079,659
Registration fees 69,060
Audit and legal 63,340
Shareholder communications (Note 7) 54,345
Custody 40,871
Trustees' fees 20,301
Other 30,630
- -------------------------------------------------------------------------
Total Expenses 6,652,464
Less: Expense reimbursement (Note 2) (9,300)
- -------------------------------------------------------------------------
Net Expenses 6,643,164
- -------------------------------------------------------------------------
Net Investment Income 2,265,186
- -------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN
CURRENCIES (NOTE 3):
Realized Gain From:
Investment transactions 24,820,970
Foreign currency transactions 8
- -------------------------------------------------------------------------
Net Realized Gain 24,820,978
- -------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 140,364,662
End of period 167,371,478
- -------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 27,006,816
- -------------------------------------------------------------------------
Net Gain on Investments and Foreign Currencies 51,827,794
- -------------------------------------------------------------------------
Increase in Net Assets From Operations $ 54,092,980
- -------------------------------------------------------------------------
See Notes to Financial Statements.
9 SB Growth and Income Fund | 2004 Semi-Annual Report
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 2004 (unaudited)
and the Year Ended October 31, 2003
2004 2003
- ----------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,265,186 $ 3,684,397
Net realized gain (loss) 24,820,978 (109,929,583)
Increase in net unrealized appreciation 27,006,816 318,152,765
- ----------------------------------------------------------------------------------
Increase in Net Assets From Operations 54,092,980 211,907,579
- ----------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 8):
Net investment income (1,993,576) (3,166,671)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Distributions to
Shareholders (1,993,576) (3,166,671)
- ----------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 9):
Net proceeds from sale of shares 42,476,048 83,291,446
Net asset value of shares issued for
reinvestment of dividends 1,297,089 2,102,528
Cost of shares reacquired (84,750,831) (165,271,692)
- ----------------------------------------------------------------------------------
Decrease in Net Assets From Fund Share
Transactions (40,977,694) (79,877,718)
- ----------------------------------------------------------------------------------
Increase in Net Assets 11,121,710 128,863,190
NET ASSETS:
Beginning of period 1,135,466,804 1,006,603,614
- ----------------------------------------------------------------------------------
End of period* $1,146,588,514 $1,135,466,804
- ----------------------------------------------------------------------------------
* Includes undistributed net investment income of: $730,703 $459,085
- ----------------------------------------------------------------------------------
See Notes to Financial Statements.
10 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Significant Accounting Policies
The SB Growth and Income Fund ("Fund") is a separate investment fund of the
Smith Barney Investment Series ("Trust"). The 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. The
Trust consists of this Fund and six other separate investment funds: Smith
Barney International Fund, Smith Barney Large Cap Core 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. The
financial statements and financial highlights for the other funds are presented
in separate shareholder reports.
The following are significant accounting policies consistently followed by the
Fund and are in conformity with generally accepted accounting principles
("GAAP"): (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 at the mean between the bid and asked prices; U.S.
government and agency obligations are valued at the average between bid and
asked prices in the 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 determines 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) class specific expenses are charged to each class; management fees
and general fund expenses are allocated on the basis of relative net assets of
each class or on another reasonable basis; (i) dividends and distributions to
shareholders are recorded by the Fund on the ex-dividend date; the Fund
distributes dividends quarterly and capital gains, if any, at least annually;
(j) 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; (k) 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; (l) the character of
income and gains to be distributed is determined in accordance with income tax
regulations which may differ from U.S. generally accepted accounting
principles; (m) the Fund intends to comply with the applicable provisions 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 (n)
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.
11 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
In addition, 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.
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
- ------------------------------------------------------------------------------
During the six months ended April 30, 2004, SBFM voluntarily reimbursed
expenses amounting to $9,300 related to certain class specific expenses for
Salomon Brothers Class A, Salomon Brothers Class B and Salomon Brothers Class C
shares. This voluntary reimbursement can be terminated at any time by SBFM.
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 six months ended April 30, 2004, the Fund paid transfer
agent fees of $1,250,739 to CTB.
Citigroup Global Markets Inc. ("CGM") and PFS Distributors, Inc. ("PFS"), both
of which are subsidiaries of Citigroup, act as the Fund's distributors.
On April 29, 2004, Smith Barney Class L and Salomon Brothers Class 2 shares
were renamed as Smith Barney Class C and Salomon Brothers Class C shares,
respectively. On February 2, 2004, initial sales charges on Smith Barney Class
C and Salomon Brothers Class C shares were eliminated. On April 29, 2004,
initial sales charges on Smith Barney Class O shares were eliminated.
There are maximum initial sales charges of 8.50%, 5.00% and 5.75% for Smith
Barney Class 1, Smith Barney Class A and Salomon Brothers Class A shares,
respectively. There is a contingent deferred sales charge ("CDSC") of 5.00% on
Smith Barney Class B, Smith Barney Class P and Salomon Brothers Class B shares,
which applies if redemption occurs within one year from purchase payment and
declines thereafter by 1.00% per year until no CDSC is incurred. Smith Barney
Class C, Smith Barney Class O and Salomon Brothers Class C shares also have a
1.00% CDSC, which applies if redemption occurs within one year from purchase
payment. In certain cases, Smith Barney Class A and Salomon Brothers 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 Smith
Barney Class A and Salomon Brothers Class A shares which, when combined with
current holdings of Smith Barney Class A and Salomon Brothers Class A shares,
respectively, equal or exceed $1,000,000 in the aggregate. These purchases do
not incur an initial sales charge.
For the six months ended April 30, 2004, CGM and its affiliates received sales
charges of approximately $482,000, $542,000, $5,000 and $26 on sales on the
Fund's Smith Barney Class 1, Smith Barney Class A, Smith Barney Class C and
12 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Salomon Brothers Class C shares, respectively. In addition, CDSCs paid to CGM
and its affiliates for the six months ended April 30, 2004 were approximately:
Smith Barney Smith Barney
Class B Class P
- ------------------------------------------------------------------
CDSCs $126,000 $7,000
- -----------------------------------------------------------------
For the six months ended April 30, 2004, CGM and its affiliates did not receive
any brokerage commissions for the Fund's portfolio 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 Fund, within the meaning of
the 1940 Act. Under the Plan, all Trustees are required to retire from the
Board as of the last day of the calendar year in which the applicable Trustee
attains age 75 (certain Trustees who had already attained age 75 when the Plan
was adopted are required to retire effective December 31, 2003). Trustees may
retire under the Plan before attaining the mandatory retirement age. Trustees
who have served as Trustee of the Trust or any of the investment 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. In addition, two other Trustees elected to
receive a lump sum payment from this plan during the period. 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 six months ended April 30, 2004 were $16,125. The amount of
benefits to be paid under the prior plan cannot currently be determined for
these Trustees.
3. Investments
During the six months ended April 30, 2004, 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 $287,959,260
- ------------------------------------------------------
Sales 324,604,536
- ------------------------------------------------------
At April 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
- ------------------------------------------------------
Gross unrealized
appreciation $191,968,667
Gross unrealized depreciation (24,597,189)
- ------------------------------------------------------
Net unrealized appreciation $167,371,478
- ------------------------------------------------------
13 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. Repurchase Agreements
When entering into repurchase agreements, it is the Fund's policy that a
custodian takes possession of the underlying collateral securities, the value
of which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market to
ensure the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
5. Foreign Securities
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
U.S. companies and the U.S. government. These risks include revaluation of
currencies and future adverse political and economic developments. Moreover,
securities of many foreign companies and foreign governments and their markets
may be less liquid and their prices more volatile than those of securities of
comparable U.S. companies and the U.S. government.
6. Lending of Portfolio Securities
The Fund has an agreement with its custodian whereby the custodian may lend
securities owned by the Fund to brokers, dealers and other financial
organizations. Fees earned by the Fund on securities lending are recorded in
interest income. Loans of securities by the Fund are collateralized by cash,
U.S. government securities or high-quality money market instruments 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 Fund maintains exposure for the risk of any losses in
the investment of amounts received as collateral.
At April 30, 2004, the Fund loaned securities having a market value of
$82,031,690. The Fund received cash collateral amounting to $86,019,691 which
was invested in the State Street Navigator Securities Lending Trust Prime
Portfolio.
Income earned by the Fund from securities lending for the six months ended
April 30, 2004 was $49,302.
7. Class Specific Expenses
Pursuant to Rule 12b-1 Service Plans, the Fund pays a distribution/service fee
with respect to its Smith Barney Class A, Smith Barney Class B, Smith Barney
Class C, Smith Barney Class O, Smith Barney Class P, Salomon Brothers Class A,
Salomon Brothers Class B and Salomon Brothers Class C shares calculated at an
annual rate not to exceed 0.25%, 1.00%, 1.00%, 0.70%, 0.75%, 0.25%, 1.00% and
1.00% of the average daily net assets of each class, respectively. For the six
months ended April 30, 2004, total Rule 12b-1 Service Plan fees, which are
accrued daily and paid monthly, were as follows:
Smith Smith Smith Smith Smith Salomon Salomon Salomon
Barney Barney Barney Barney Barney Brothers Brothers Brothers
Class A Class B Class C Class O Class P Class A Class B* Class C*
- --------------------------------------------------------------------------------------------------------
Rule 12b-1 Service Plan Fees $366,541 $598,992 $30,918 $5,555 $77,609 $32 $5 $7
- -------------------------------------------------------------------------------------------------------
*For Salomon Brothers Class B and Salomon Brothers Class C shares, amounts are
for the period November 5, 2003 (inception date) to April 30, 2004.
14 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
For the six months ended April 30, 2004,
total Transfer Agency Service expenses were
as follows:
Smith Smith Smith Smith Smith Smith Smith Salomon Salomon Salomon
Barney Barney Barney Barney Barney Barney Barney Brothers Brothers Brothers
Class 1 Class A Class B Class C Class O Class P Class Y Class A Class B* Class C*
- ------------------------------------------------------------------------------------------------------------------------
Transfer Agency Service
Expenses $714,098 $421,392 $363,930 $3,528 $1,054 $13,381 $53 $9 $2 $2
- ------------------------------------------------------------------------------------------------------------------------
*For Salomon Brothers Class B and Salomon Brothers Class C shares, amounts are for the period November 5, 2003
(inception date) to April 30, 2004.
For the six months ended April 30, 2004, total Shareholder Communication expenses were as follows:
Smith Smith Smith Smith Smith Smith Smith Salomon Salomon Salomon
Barney Barney Barney Barney Barney Barney Barney Brothers Brothers Brothers
Class 1 Class A Class B Class C Class O Class P Class Y Class A Class B* Class C*
- ------------------------------------------------------------------------------------------------------------------------
Shareholder Communication Expenses $20,788 $13,459 $9,161 $254 $81 $1,263 $5 $3,134 $3,100 $3,100
- ------------------------------------------------------------------------------------------------------------------------
*For Salomon Brothers Class B and Salomon Brothers Class C shares, amounts are for the period November 5, 2003
(inception date) to April 30, 2004.
8. Distributions Paid to Shareholders by Class
Six Months Ended Year Ended
April 30, 2004 October 31, 2003*
- -------------------------------------------------------
Net Investment
Income
Smith Barney Class 1 $1,182,659 $1,877,177
Smith Barney Class A 119,702 236,104
Smith Barney Class Y 691,192 1,053,390
Salomon Brothers
Class A 23 --
- -------------------------------------------------------
Total $1,993,576 $3,166,671
- -------------------------------------------------------
*For Salomon Brothers Class A shares, amount is for the period October 3, 2003
(inception date) to October 31, 2003.
9. Shares of Beneficial Interest
The Fund has ten classes of beneficial interest, Smith Barney Class 1, Smith
Barney Class A, Smith Barney Class B, Smith Barney Class C, Smith Barney Class
O, Smith Barney Class P, Smith Barney Class Y, Salomon Brothers Class A,
Salomon Brothers Class B and Salomon Brothers Class C shares, each with a par
value of $0.00001 per share. There is an unlimited number of shares authorized.
Effective April 29, 2004, the Fund renamed Smith Barney Class L shares as Smith
Barney Class C shares and Salomon Brothers Class 2 shares as Salomon Brothers
Class C shares.
Transactions in shares of each class were as follows:
Six Months Ended Year Ended
April 30, 2004* October 31, 2003**
------------------------ ------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------
Smith Barney Class
1+
Shares sold 581,310 $ 8,324,498 1,258,123 $ 14,889,228
Shares issued on 83,642 158,372
reinvestment 1,182,658 1,877,176
Shares reacquired (2,571,374) (36,883,097) (6,508,330) (75,645,878)
- -----------------------------------------------------------------------
Net Decrease (1,906,422) $(27,375,941) (5,091,835) $(58,879,474)
- -----------------------------------------------------------------------
Smith Barney Class
A+
Shares sold 1,805,804 $ 25,707,854 3,283,089 $ 39,175,584
Shares issued on
reinvestment 8,091 114,408 19,201 225,352
Shares reacquired (1,975,519) (28,315,597) (3,750,095) (43,787,798)
- -----------------------------------------------------------------------
Net Decrease (161,624) $ (2,493,335) (447,805) $ (4,386,862)
- -----------------------------------------------------------------------
15 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Six Months Ended Year Ended
April 30, 2004* October 31, 2003**
---------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------
Smith Barney Class
B+
Shares sold 551,422 $ 7,522,440 1,606,684 $ 18,270,578
Shares reacquired (907,434) (12,319,740) (2,998,549) (33,804,525)
- ---------------------------------------------------------------------
Net Decrease (356,012) $ (4,797,300) (1,391,865) $(15,533,947)
- ---------------------------------------------------------------------
Smith Barney Class
C+++
Shares sold 45,571 $ 635,985 112,187 $ 1,351,536
Shares reacquired (46,488) (655,650) (97,670) (1,136,849)
- ---------------------------------------------------------------------
Net Increase
(Decrease) (917) $ (19,665) 14,517 $ 214,687
- ---------------------------------------------------------------------
Smith Barney Class
O+
Shares sold 779 $ 11,335 862 $ 9,949
Shares reacquired (8,876) (127,646) (29,389) (352,879)
- ---------------------------------------------------------------------
Net Decrease (8,097) $ (116,311) (28,527) $ (342,930)
- ---------------------------------------------------------------------
Smith Barney Class
P+
Shares sold 5,951 $ 85,287 16,828 $ 195,959
Shares reacquired (442,423) (6,283,149) (697,379) (8,174,198)
- ---------------------------------------------------------------------
Net Decrease (436,472) $ (6,197,862) (680,551) $ (7,978,239)
- ---------------------------------------------------------------------
Smith Barney Class
Y+
Shares sold 11,618 $ 170,909 779,555 $ 9,375,000
Shares reacquired (11,381) (165,952) (206,647) (2,369,516)
- ---------------------------------------------------------------------
Net Increase 237 $ 4,957 572,908 $ 7,005,484
- ---------------------------------------------------------------------
Salomon Brothers
Class A
Shares sold -- -- 1,800 $ 23,612
Shares issued on
reinvestment 2 $ 23 -- --
Shares reacquired -- -- (4) (49)
- ---------------------------------------------------------------------
Net Increase 2 $ 23 1,796 $ 23,563
- ---------------------------------------------------------------------
Salomon Brothers
Class B
Shares sold 1,114 $ 15,250 -- --
- ---------------------------------------------------------------------
Net Increase 1,114 $ 15,250 -- --
- ---------------------------------------------------------------------
Salomon Brothers
Class C++
Shares sold 174 $ 2,490 -- --
- ---------------------------------------------------------------------
Net Increase 174 $ 2,490 -- --
- ---------------------------------------------------------------------
* For Salomon Brothers Class B and Salomon Brothers Class C shares,
transactions are for the period November 5, 2003 (inception date) to April
30, 2004.
**For Salomon Brothers Class A shares, transactions are for the period October
3, 2003 (inception date) to October 31, 2003.
+ On May 9, 2003, Class 1, A, B, L, O, P and Y shares were renamed as Smith
Barney Class 1, Smith Barney Class A, Smith Barney Class B, Smith Barney
Class L, Smith Barney Class O, Smith Barney Class P and Smith Barney Class Y
shares, respectively.
++On April 29, 2004, Smith Barney Class L and Salomon Brothers Class 2 shares
were renamed as Smith Barney Class C and Salomon Bothers Class C shares,
respectively.
10.Additional Information
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
16 SB Growth and Income Fund | 2004 Semi-Annual Report
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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
approximately $17 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.
11.Legal Matters
Class action lawsuits have been filed against Citigroup Global Markets Inc.
(the "Distributor") and a number of its affiliates, including Smith Barney Fund
Management LLC and Salomon Brothers Asset Management Inc (the "Advisers"),
substantially all of the mutual funds managed by the Advisers (the "Funds"),
and directors or trustees of the Funds. The complaints allege, among other
things, that the Distributor created various undisclosed incentives for its
brokers to sell Smith Barney and Salomon Brothers funds. In addition, according
to the complaints, the Advisers caused the Funds to pay excessive brokerage
commissions to the Distributor for steering clients towards proprietary funds.
The complaints also allege that the defendants breached their fiduciary duty to
the Funds by improperly charging Rule 12b-1 fees and by drawing on Fund assets
to make undisclosed payments of soft dollars and excessive brokerage
commissions. The complaints seek injunctive relief and compensatory and
punitive damages, rescission of the Funds' contracts with the Advisers,
recovery of all fees paid to the Advisers pursuant to such contracts and an
award of attorneys' fees and litigation expenses. Citigroup Asset Management
believes that the suits are without merit and intends to defend the cases
vigorously.
Additional lawsuits arising out of these circumstances and presenting similar
allegations and requests for relief may be filed against the defendants in the
future. Neither Citigroup Asset Management nor the Funds believe that any of
the pending actions will have a material adverse effect on the Funds or the
ability of the Distributor or the Advisers to perform under their respective
contracts with the Funds.
17 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Smith Barney Class 1 Shares/(1)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)/ 2000/(3)/ 1999/(3)/
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.53 $11.05 $13.08 $19.03 $21.36 $18.53
- --------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.04 0.07 0.05 0.10 0.08 0.09
Net realized and unrealized gain (loss) 0.60 2.46 (2.02) (4.62) 1.11 3.60
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.64 2.53 (1.97) (4.52) 1.19 3.69
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.03) (0.05) (0.05) (0.06) (0.07) (0.08)
Net realized gains -- -- -- (1.37) (3.45) (0.78)
Capital -- -- (0.01) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.03) (0.05) (0.06) (1.43) (3.52) (0.86)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.14 $13.53 $11.05 $13.08 $19.03 $21.36
- --------------------------------------------------------------------------------------------------------------
Total Return 4.73%++ 22.91% (15.13)% (25.18)% 5.39% 20.27%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $534 $536 $494 $678 $1,017 $1,122
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.95%+ 1.00% 0.99% 0.73% 0.85% 0.84%
Net investment income 0.57+ 0.56 0.38 0.62 0.43 0.43
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69% 63% 53%
- --------------------------------------------------------------------------------------------------------------
Smith Barney Class A Shares/(4)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)/ 2000/(3)/ 1999/(3)/
- --------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.52 $11.06 $13.07 $19.03 $21.35 $18.53
- --------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.02 0.02 0.02 0.03 0.04 0.03
Net realized and unrealized gain (loss) 0.61 2.45 (2.02) (4.61) 1.11 3.60
- --------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.63 2.47 (2.00) (4.58) 1.15 3.63
- --------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) (0.01) (0.00)* (0.01) (0.02) (0.03)
Net realized gains -- -- -- (1.37) (3.45) (0.78)
Capital -- -- (0.01) -- -- --
- --------------------------------------------------------------------------------------------------------------
Total Distributions (0.01) (0.01) (0.01) (1.38) (3.47) (0.81)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.14 $13.52 $11.06 $13.07 $19.03 $21.35
- --------------------------------------------------------------------------------------------------------------
Total Return 4.63%++ 22.36% (15.29)% (25.51)% 5.14% 19.93%
- --------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $289 $278 $233 $295 $215 $181
- --------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.23%+ 1.35% 1.25% 1.17% 1.06% 1.12%
Net investment income 0.28+ 0.21 0.12 0.19 0.21 0.15
- --------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69% 63% 53%
- --------------------------------------------------------------------------------------------------------------
(1)On May 9, 2003, Class 1 shares were renamed as Smith Barney Class 1 shares.
(2)For the six months ended April 30, 2004 (unaudited).
(3)Per share amounts have been calculated using the monthly average shares
method.
(4)On May 9, 2003, Class A shares were renamed as Smith Barney Class A shares.
*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.
18 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Smith Barney Class B Shares/(1)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)/ 2000/(3)/ 1999/(3)/
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $12.91 $10.66 $12.73 $18.70 $21.16 $18.48
- ---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.05) (0.10) (0.11) (0.10) (0.10) (0.12)
Net realized and unrealized gain (loss) 0.58 2.35 (1.96) (4.50) 1.09 3.58
- ---------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.53 2.25 (2.07) (4.60) 0.99 3.46
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains -- -- -- (1.37) (3.45) (0.78)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (1.37) (3.45) (0.78)
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.44 $12.91 $10.66 $12.73 $18.70 $21.16
- ---------------------------------------------------------------------------------------------------------------
Total Return 4.11%++ 21.11% (16.26)% (26.10)% 4.36% 19.03%
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $117 $117 $111 $160 $232 $208
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 2.31%+ 2.42% 2.28% 2.00% 1.81% 1.87%
Net investment loss (0.79)+ (0.85) (0.91) (0.65) (0.54) (0.60)
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69% 63% 53%
- ---------------------------------------------------------------------------------------------------------------
Smith Barney Class C Shares/(4)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)/ 2000/(3)(5)/
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.33 $10.94 $13.00 $19.04 $18.49
- ---------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment loss (0.02) (0.03) (0.07) (0.08) (0.02)
Net realized and unrealized gain (loss) 0.61 2.42 (1.99) (4.59) 0.57
- ---------------------------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.59 2.39 (2.06) (4.67) 0.55
- ---------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net realized gains -- -- -- (1.37) --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions -- -- -- (1.37) --
- ---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $13.92 $13.33 $10.94 $13.00 $19.04
- ---------------------------------------------------------------------------------------------------------------
Total Return 4.43%++ 21.85% (15.85)% (25.99)% 2.97%++
- ---------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $5,932 $5,696 $4,516 $5,774 $205
- ---------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.78%+ 1.80% 1.89% 1.85% 1.71%+
Net investment loss (0.27)+ (0.25) (0.52) (0.49) (1.23)+
- ---------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69% 63%
- ---------------------------------------------------------------------------------------------------------------
(1)On May 9, 2003, Class B shares were renamed as Smith Barney Class B shares.
(2)For the six months ended April 30, 2004 (unaudited).
(3)Per share amounts have been calculated using the monthly average shares
method.
(4)On May 9, 2003, Class L shares were renamed as Smith Barney Class L shares.
On April 29, 2004, Smith Barney Class L shares were renamed as Smith Barney
Class C shares.
(5)For the period October 9, 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.
19 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Smith Barney Class O Shares/(1)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)(4)/
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.40 $10.97 $13.04 $16.55
- ----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) 0.00* 0.01 (0.06) (0.03)
Net realized and unrealized gain (loss) 0.61 2.42 (2.01) (3.48)
- ----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.61 2.43 (2.07) (3.51)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.01 $13.40 $10.97 $13.04
- ----------------------------------------------------------------------------------------------
Total Return 4.55%++ 22.15% (15.87)% (21.21)%++
- ----------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $1,524 $1,566 $1,595 $2,453
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.49%+ 1.52% 1.82% 1.53%+
Net investment income (loss) 0.02+ 0.05 (0.45) (0.18)+
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69%
- ----------------------------------------------------------------------------------------------
Smith Barney Class P Shares/(5)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)(4)/
- --------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.44 $11.00 $13.04 $16.55
- ----------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss) (0.00)* 0.01 (0.03) (0.03)
Net realized and unrealized gain (loss) 0.60 2.43 (2.01) (3.48)
- ----------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.60 2.44 (2.04) (3.51)
- ----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.04 $13.44 $11.00 $13.04
- ----------------------------------------------------------------------------------------------
Total Return 4.46%++ 22.18% (15.64)% (21.21)%++
- ----------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $17,896 $22,993 $26,301 $47,719
- ----------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.56%+ 1.51% 1.61% 1.53%+
Net investment income (loss) (0.02)+ 0.06 (0.23) (0.20)+
- ----------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69%
- ----------------------------------------------------------------------------------------------
(1)On May 9, 2003, Class O shares were renamed as Smith Barney Class O shares.
(2)For the six months ended April 30, 2004 (unaudited).
(3)Per share amounts have been calculated using the monthly average shares
method.
(4)For the period December 8, 2000 (inception date) to October 31, 2001.
(5)On May 9, 2003, Class P shares were renamed as Smith Barney Class P shares.
* 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.
20 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Smith Barney Class Y Shares/(1)/ 2004/(2)(3)/ 2003/(3)/ 2002/(3)/ 2001/(3)(4)/
- ------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.55 $11.08 $13.08 $16.55
- --------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income 0.06 0.11 0.09 0.10
Net realized and unrealized gain (loss) 0.61 2.44 (2.01) (3.51)
- --------------------------------------------------------------------------------------------
Total Income (Loss) From Operations 0.67 2.55 (1.92) (3.41)
- --------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.05) (0.08) (0.07) (0.06)
Capital -- -- (0.01) --
- --------------------------------------------------------------------------------------------
Total Distributions (0.05) (0.08) (0.08) (0.06)
- --------------------------------------------------------------------------------------------
Net Asset Value, End of Period $14.17 $13.55 $11.08 $13.08
- --------------------------------------------------------------------------------------------
Total Return 4.97%++ 23.16% (14.77)% (20.65)%++
- --------------------------------------------------------------------------------------------
Net Assets, End of Period (millions) $182 $174 $136 $161
- --------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.67%+ 0.67% 0.67% 0.67%+
Net investment income 0.84+ 0.88 0.70 0.68+
- --------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 63% 44% 69%
- --------------------------------------------------------------------------------------------
(1)On May 9, 2003, Class Y shares were renamed as Smith Barney Class Y shares.
(2)For the six months ended April 30, 2004 (unaudited).
(3)Per share amounts have been calculated using the monthly average shares
method.
(4)For the period December 8, 2000 (inception date) to October 31, 2001.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
21 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout each
year ended October 31, unless otherwise noted:
Salomon Brothers Class A Shares 2004/(1)(2)/ 2003/(2)(3)/
- ------------------------------------------------------------------
Net Asset Value, Beginning of Period $13.52 $13.12
- ----------------------------------------------------------------
Income (Loss) From Operations:
Net investment income (loss)/(4)/ 0.02 (0.00)*
Net realized and unrealized gain 0.61 0.40
- ----------------------------------------------------------------
Total Income From Operations 0.63 0.40
- ----------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) --
- ----------------------------------------------------------------
Total Distributions (0.01) --
- ----------------------------------------------------------------
Net Asset Value, End of Period $14.14 $13.52
- ----------------------------------------------------------------
Total Return/(5)/ 4.68%++ 3.05%++
- ----------------------------------------------------------------
Net Assets, End of Period (000s) $25 $24
- ----------------------------------------------------------------
Ratios to Average Net Assets:
Expenses/(4)/ 1.25%+ 1.25%+
Net investment income (loss) 0.27+ (0.21)+
- ----------------------------------------------------------------
Portfolio Turnover Rate 25% 63%
- ----------------------------------------------------------------
(1)For the six months ended April 30, 2004 (unaudited).
(2)Per share amounts have been calculated using the monthly average shares
method.
(3)For the period October 3, 2003 (inception date) to October 31, 2003.
(4)The Manager has reimbursed the Fund for $9,300 in expenses for the six
months ended April 30, 2004. If such expenses were not reimbursed, the per
share decrease to net investment income and the actual annualized expense
ratio would have been $1.74 and 25.49%, respectively.
(5)Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
* Amount represents less than $0.01 per share.
22 SB Growth and Income Fund | 2004 Semi-Annual Report
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share of each class of beneficial interest outstanding throughout the
period ended April 30:
Salomon Brothers Class B Shares 2004/(1)(2)/
- ----------------------------------------------------
Net Asset Value, Beginning of Period $12.90
- ---------------------------------------------------
Income (Loss) From Operations:
Net investment loss/(3)/ (0.02)
Net realized and unrealized gain 0.60
- ---------------------------------------------------
Total Income From Operations 0.58
- ---------------------------------------------------
Net Asset Value, End of Period $13.48
- ---------------------------------------------------
Total Return/(4)/ 4.50%++
- ---------------------------------------------------
Net Assets, End of Period (000s) $15
- ---------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 2.00%+
Net investment loss (0.65)+
- ---------------------------------------------------
Portfolio Turnover Rate 25%
- ---------------------------------------------------
Salomon Brothers Class C Shares/(5)/ 2004/(1)(2)/
- ----------------------------------------------------
Net Asset Value, Beginning of Period $13.32
- ---------------------------------------------------
Income (Loss) From Operations:
Net investment loss/(3)/ (0.04)
Net realized and unrealized gain 0.63
- ---------------------------------------------------
Total Income From Operations 0.59
- ---------------------------------------------------
Net Asset Value, End of Period $13.91
- ---------------------------------------------------
Total Return/(4)/ 4.43%++
- ---------------------------------------------------
Net Assets, End of Period (000s) $2
- ---------------------------------------------------
Ratios to Average Net Assets:
Expenses/(3)/ 2.00%+
Net investment loss (0.49)+
- ---------------------------------------------------
Portfolio Turnover Rate 25%
- ---------------------------------------------------
(1)For the period November 5, 2003 (inception date) to April 30, 2004
(unaudited).
(2)Per share amounts have been calculated using the monthly average shares
method.
(3)The Manager has reimbursed the Fund for $9,300 in expenses for the period
ended April 30, 2004. If such expenses were not reimbursed, the per share
increases to net investment loss and the actual expense ratios would have
been as follows:
Per Share Increases Expense Ratios Without
to Net Investment Loss Expense Reimbursements
---------------------- ----------------------
Salomon Brothers Class B $18.05 614.28%+
Salomon Brothers Class C 37.63 463.20+
(4)Performance figures may reflect fee waivers and/or expense reimbursements.
Past performance is no guarantee of future results. In the absence of fee
waivers and/or expense reimbursements, the total return would be reduced.
(5)On April 29, 2004, Salomon Brothers Class 2 shares were renamed as Salomon
Brothers Class C shares.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
23 SB Growth and Income Fund | 2004 Semi-Annual Report
SMITH BARNEY
GROWTH AND INCOME FUND
TRUSTEES OFFICERS (cont'd.)
Elliott J. Berv Robert I. Frenkel
Donald M. Carlton Secretary and
A. Benton Cocanougher Chief Legal Officer
Mark T. Finn
R. Jay Gerken, CFA INVESTMENT MANAGER
Chairman Smith Barney Fund Management LLC
Stephen Randolph Gross
Diana R. Harrington DISTRIBUTORS
Susan B. Kerley Citigroup Global Markets Inc.
Alan G. Merten PFS Distributors, Inc.
R. Richardson Pettit
CUSTODIAN
OFFICERS State Street Bank and
R. Jay Gerken, CFA Trust Company
President and Chief
Executive Officer TRANSFER AGENT
Citicorp Trust Bank, fsb.
Andrew B. Shoup 125 Broad Street, 11th Floor
Senior Vice President and New York, New York 10004
Chief Administrative Officer
SUB-TRANSFER AGENTS
Kevin Caliendo PFPC Inc.
Vice President and P.O. Box 9699
Investment Officer Providence, Rhode Island
02940-9699
Michael Kagan
Vice President and Primerica Shareholder Services
Investment Officer P.O. Box 9662
Providence, Rhode Island
Andrew Beagley 02940-9662
Chief Anti-Money Laundering
Compliance Officer
Kaprel Ozsolak
Controller
Smith Barney Investment Series
SB Growth and Income Fund
The Fund is a separate investment fund of the Smith Barney Investment Series, a
Massachusetts business trust.
A description of the policies and procedures that the Fund uses to determine
how to vote proxies relating to portfolio securities is available without
charge, upon request, by telephoning the Fund (toll-free) at 1-800-451-2010 and
by visiting the SEC's web site at www.sec.gov.
This report is submitted for the general information of the shareholders of
Smith Barney Investment Series -- SB Growth and Income Fund. It is not
authorized for distribution to prospective investors unless accompanied or
preceded by a current Prospectus.
SB GROWTH AND INCOME FUND
Smith Barney Mutual Funds
3120 Breckinridge Boulevard
Duluth, Georgia 30099-0001
This document must be preceded or accompanied by a free prospectus. Investors
should consider the fund's investment objectives, risks, charges and expenses
carefully before investing. The prospectus contains this and other important
information about the fund. Please read the prospectus carefully before you
invest or send money.
www.smithbarneymutualfunds.com
(C)2004 Citigroup Global Markets Inc.
Member NASD, SIPC
FD02329 6/04 04-6780
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- 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) 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 8, 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: July 8, 2004
By: /s/ Andrew B. Shoup
-----------------------------------
(Andrew B. Shoup)
Chief Administrative Officer of
Smith Barney Investment Series
Date: July 8, 2004