Securities Act Registration No. 33-10830
Investment Company Act Registration No. 811-4959
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 14 [ X ]
__________________
Smith Barney Variable Account Funds
(a Maryland Corporation)
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street
New York, New York 10013
(Address of Principal Executive Offices)
(212) 816-6474
(Registrant's Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Variable Account Funds
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
_____________________
Copies to:
John Baumgardner, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Burt Leibert
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
______________
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective
(check appropriate
box):
[] Immediately upon filing pursuant to paragraph (b) of
Rule 485
[XX] On April 28, 2000 pursuant to paragraph (b) of Rule
485
[ ] 60 days after filing pursuant to paragraph (a) of
Rule 485
[ ] On (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of
rule 485
[ ] On (date) pursuant to paragraph (a)(2)of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates
a new effective date for a previously filed
post effective amendment.
Title of Securities Being Registered: Shares of Beneficial
Interest
SMITH BARNEY VARIABLE ACCOUNT FUNDS
PART A - PROSPECTUS
SMITH BARNEY VARIABLE ACCOUNT FUNDS
Prospectus
April 28, 2000
The Income and Growth Portfolio seeks current income and long-term
growth of income and capital by investing primarily in common stocks.
The U.S. Government/High Quality Securities Portfolio seeks high current
income and security of principal from a portfolio consisting primarily
of U.S. government obligations and other high-quality fixed income
securities. This Portfolio currently has insufficient assets to enable
it to invest in accordance with its investment program.
The Reserve Account Portfolio seeks current income from a portfolio of
money market instruments and other high-quality fixed income obligations
with limited maturities. This Portfolio currently has insufficient
assets to enable it to invest in accordance with its investment program.
Shares of each Portfolio are
offered only to insurance
company separate accounts
which fund certain variable
annuity and variable life
insurance contracts. This
prospectus should be read
together with the prospectus
for those contracts.
The Securities and Exchange
Commission has not approved or
disapproved these securities
or determined whether this
prospectus is accurate or
complete. Any statement to
the contrary is a crime.
Contents
Page
Investments, risks and performance 1
The Income and Growth Portfolio 1
The U.S. Government/High Quality Securities Portfolio 3
The Reserve Account Portfolio 5
More on the portfolios' investments 7
Management 9
Share transactions 10
Share price 10
Dividends, distributions and taxes 12
Financial highlights 13
The manager:
SSB Citi Fund Management LLC (successor to SSBC Fund
Management Inc.) ("SSB Citi" or "the manager") serves as
the manager and selects investments for each Portfolio.
SSB Citi is an affiliate of Salomon Smith Barney Inc.
("Salomon Smith Barney") and subsidiary of Citigroup
Inc. ("Citigroup"). Citigroup businesses produce a
broad range of financial services - asset management,
banking and consumer finance, credit and charge cards,
insurance, investments, investment banking and trading
- - and use diverse channels to make them available to
consumers and corporate customers around the world.
You should know:
An investment in a Portfolio is not a bank deposit and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government
agency.
Please note that the investment portfolios in Smith
Barney Variable Account Funds may be consolidated into
other substantially similar existing funds. In this
regard, an application may be filed for a Securities and
Exchange Commission Order of Substitution to consolidate
these portfolios. Please further note that the U.S.
Government/High Quality Securities Portfolio and The
Reserve Account Portfolio both have insufficient assets
to invest in accordance with their stated investment
objectives, and we suggest that you consider contacting
your financial consultant or Nationwide at 1-800-848-
6331 to arrange a transfer of your assets from these
funds to other available funds.
Investments, risks and performance The Income and Growth Portfolio
Investment objective
Current income and long-term growth of income and
capital.
Principal investment strategies
Key investments: The Portfolio invests primarily in
dividend paying common stocks of U.S. companies having
market capitalizations of at least $5 billion at the
time of investment.
Selection process
The manager employs a two-step selection process.
First, the manager uses proprietary models and
fundamental research to find stocks that are underpriced
in the market relative to their fundamental value.
Next, the manager looks for a positive catalyst in the
company's near-term outlook which, the manager believes,
would accelerate earnings.
In selecting individual companies for investment, the
manager looks for the following:
? Low market valuations measured by the manager's
valuation models
Above average dividend yields and established
dividend records
? Positive changes in earnings prospects because of
? New management
? Effective research, product development and
marketing
? A business strategy not yet recognized by the
marketplace
? Regulatory changes favoring the company
? High return on invested capital and strong cash flow
? Liquidity
Principal risks of investing in the portfolio
While an investment in common stocks offers the
potential for capital appreciation, it also involves
certain risks. Investors could lose money on their
investment in the Portfolio, or the Portfolio may not
perform as well as other investments, if any of the
following occurs:
? The U.S. stock market declines.
? Value stocks or larger capitalization stocks fall
temporarily out of favor with investors.
? An adverse event depresses the value of a company's
stock held by the Portfolio.
? The manager's judgment about the attractiveness,
value or potential appreciation of a particular stock
proves to be incorrect.
Portfolio performance
This bar chart indicates the risks of investing in the
Portfolio by showing changes in the Portfolio's
performance for each of the past 10 calendar years. The
risk return table shows how the Portfolio's average
annual returns for different calendar periods compare to
the return of the Standard & Poor's (S&P) 500 Index.
The S&P 500 Index is an index of widely held common
stocks listed on the New York and American Stock
Exchanges and the 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 as the Portfolio is. Past
performance does not necessarily indicate how the
Portfolio will perform in the future. Performance
figures do not reflect expenses incurred from investing
through a separate account; if these expenses had been
reflected, performance would have been lower. Please
refer to the separate account prospectus for more
information on expenses.
Risk return bar chart
[BAR CHART APPEARS HERE]
% Total Return
1990 (8.37)%
1991 31.34%
1992 11.48%
1993 18.61%
1994 (3.12)%
1995 27.56%
1996 21.02%
1997 28.11%
1998 12.89%
1999 (2.74)%
Calendar years ended
December 31
Quarterly Returns:
Highest: 15.10% in 1st quarter 1991
Lowest: (11.59)% in 3rd quarter 1998
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Ten Since
year years years inception*
- ------------------------------------
<S> <C> <C> <C> <C>
Portfolio (2.74)% 16.74% 12.82% 12.52%
S&P 500 Index 21.03% 28.54% 17.81% 17.81%
</TABLE>
- --------------------------------------------------------------------------------
* Inception date of 7/20/89
Index comparison begins on July 31, 1989
Portfolio manager
Ellen Cardozo Sonsino
Ellen Cardozo Sonsino is primarily responsible for the
day-to-day management of the Portfolio. Ms. Sonsino, an
investment officer of SSB Citi and a managing director
of Salomon Smith Barney, has been with Salomon Smith
Barney since 1984 and has 22 years of investment
management experience.
Investments, risks and performance
The U.S. Government/High Quality Securities
Portfolio
Investment objective
High current income and security of principal.
Principal investment strategies
Key investments: The Portfolio invests substantially
all of its assets in repurchase agreements and U.S.
treasury bills. The Portfolio has insufficient assets
to invest those assets according to the policies which
have been adopted by the board of trustees of the trust.
These policies provide for the Portfolio to invest
primarily in U.S. government securities and in U.S.
corporate fixed income obligations. These policies also
provide that a substantial portion of the Portfolio's
assets may be invested in mortgage-related securities,
including GNMA Certificates. GNMA Certificates
represent part ownership of a pool of mortgage loans
with the characteristic that the timely payment of
principal and interest from the pool is guaranteed by
the U.S. government.
Selection process
Because of insufficient assets, it is not anticipated by
the manager that the Portfolio will ever grow to a
sufficient size to utilize its investment election
process.
Credit quality: The Portfolio invests in repurchase
agreements which are fully collaterized as to principal
and interest by U.S. government securities and money
market instruments rated within the two highest rating
categories by a nationally recognized ratings agency or,
if unrated, are of equivalent quality as determined by
the manager. It may also invest in U.S. treasury bills
which are rated in the highest rating category and are
guaranteed by the full faith and credit of the U.S.
government.
Principal risks of investing in the portfolio
Because the Portfolio invests primarily in repurchase
agreements and U.S. treasury bills, the Portfolio is
subject to the risks associated with these investments.
The risks associated with entering into repurchase
agreements are described on page 8 below. Investments
in U.S. treasury bills subject the fund to interest rate
risk. If interest rates increase, the price of the
treasury bills will decline reducing the value of the
fund's portfolio.
Portfolio performance
This bar chart indicates the risks of investing in the
Portfolio by showing changes in the Portfolio's
performance for each of the past 10 calendar years. The
risk return table shows how the Portfolio's average
annual returns for different calendar periods compare to
the return of the Lehman Brothers GNMA Mutual Fund Index
(Lehman Brothers Index). The Lehman Brothers Index is
composed of 15-year and 30-year fixed-rate securities
backed by mortgage pools of the Government National
Mortgage Association. The index is unmanaged and is not
subject to the same management and trading expenses as
the Portfolio is. Past performance does not necessarily
indicate how the Portfolio will perform in the future.
Performance figures do not reflect expenses incurred
from investing through a separate account; if these
expenses had been reflected, performance would have been
lower. Please refer to the separate account prospectus
for more information on expenses.
Risk return bar chart
[BAR CHART APPEARS HERE]
% Total Return
1990 8.11%
1991 12.58%
1992 6.91%
1993 5.91%
1994 (0.35)%
1995 17.20%
1996 3.34%
1997 5.43%
1998 0.22%
1999 2.55%
Calendar years ended
December 31
Quarterly Returns:
Highest: 6.47% in 2nd quarter 1992
Lowest: (3.42)% in 1st quarter 1992
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Ten Since
year years years inception*
- ------------------------------------
<S> <C> <C> <C> <C>
Portfolio 2.55% 5.59% 6.07% 6.11%
Lehman Brothers Index 1.93% 8.08% 7.90% 7.90%
</TABLE>
- --------------------------------------------------------------------------------
* Inception date of 7/31/89
Index comparison begins on July 31, 1989
Portfolio manager
James E. Conroy
James E. Conroy is primarily responsible for the day-to-
day management of the Portfolio. Mr. Conroy, an
investment officer of SSB Citi and a managing director
of Salomon Smith Barney, has been with Salomon Smith
Barney since 1990 and has 22 years of investment
management experience.
Investments, risks and performance The Reserve Account Portfolio
Investment objective
Current income.
Principal investment strategies
Key investments: The Portfolio invests substantially
all of its assets in repurchase agreements and U.S.
treasury bills. The Portfolio has insufficient assets
to invest in accordance with the policies which have
been adopted by the board of trustees of the trust.
These policies provide for the Portfolio to invest
exclusively in money market instruments and other high-
quality fixed income obligations with limited maturities
Selection process
Because of insufficient assets, it is not anticipated by
the manager that the Portfolio will ever grow to a
sufficient size to utilize its investment election
process.
Credit quality: The Portfolio invests in repurchase
agreements which are fully collaterized as to principal
and interest by U.S. government securities and money
market instruments rated within the two highest rating
categories by a nationally recognized ratings agency or,
if unrated, are of equivalent quality as determined by
the manager. It may also invest in U.S. treasury bills
which are rated in the highest rating category and are
guaranteed by the full faith and credit of the U.S.
government.
Principal risks of investing in the portfolio
Because the Portfolio invests primarily in repurchase
agreements and U.S. treasury bills, the Portfolio is
subject to the risks associated with these investments.
The risks associated with entering into repurchase
agreements are described on page 8 below. Investments
in U.S. treasury bills subject the fund to interest rate
risk. If interest rates increase, the price of the
treasury bills will decline reducing the value of the
fund's portfolio.
Portfolio performance
This bar chart indicates the risks of investing in the
Portfolio by showing changes in the Portfolio's
performance for each of the past 10 calendar years. The
risk return table shows how the Portfolio's average
annual returns for different calendar periods compare to
the return of the Salomon Brothers 1-Year Treasury Index
(Salomon Brothers Index). The Salomon Brothers Index is
composed of one 1-Year United States Treasury Bond whose
return is tracked until its maturity. The index is
unmanaged and is not subject to the same management and
trading expenses as the Portfolio is. Past performance
does not necessarily indicate how the Portfolio will
perform in the future. Performance figures do not
reflect expenses incurred from investing through a
separate account; if these expenses had been reflected,
performance would have been lower. Please refer to the
separate account prospectus for more information on
expenses.
Risk return bar chart
[BAR CHART APPEARS HERE]
% Total Return
1990 8.30%
1991 10.64%
1992 4.82%
1993 4.59%
1994 1.99%
1995 8.83%
1996 1.57%
1997 1.36%
1998 (0.89)%
1999 3.40%
Calendar years ended
December 31
Quarterly Returns:
Highest: 3.37% in 4th quarter 1991
Lowest: (0.92)% in 4th quarter 1996
Risk return table
Average Annual Total Returns
(for the periods ended December 31, 1999)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
One Five Ten Since
year years years inception*
- ------------------------------------
<S> <C> <C> <C> <C>
Portfolio 3.40% 2.80% 4.40% 4.54%
Salomon Brothers Index 4.26% 6.00% 6.00% 6.00%
</TABLE>
- --------------------------------------------------------------------------------
* Inception date of 8/2/89
Index comparison begins on August 31, 1989
Portfolio manager
SSB Citi employs a team of investment professionals to
make the day-to-day investment decisions for the
Portfolio.
More on the portfolios' investments
Additional investments and investment techniques. Each
portfolio describes its investment objective and its
principal investment strategies and risks under
"Investments, risks and performance." This section
provides additional information about the Portfolios'
investments and certain portfolio management techniques
the Portfolios may use. More information about the
Portfolios' investments and portfolio management
techniques, some of which entail risks, is included in
the statement of additional information (SAI).
Fixed income investments. The U.S. Government/High
Quality Securities Portfolio and, to a limited extent,
the Income and Growth Portfolio, invest in fixed income
securities, including bonds, notes (as well as
structured notes), mortgage-related and asset-backed
securities (The U.S. Government/High Quality Securities
Portfolio only), convertible securities, preferred
stocks, and money market instruments. Fixed income
securities may be issued by U.S. corporations; U.S.
banks and U.S. branches of foreign banks; the U.S.
government, its agencies, authorities, instrumentalities
or sponsored enterprises; and state and municipal
governments.
These securities may have all types of interest rate
payment and reset terms, including fixed rate,
adjustable rate, zero coupon, contingent, deferred,
payment in kind and auction rate features.
Mortgage-related securities may be issued by private
companies or by agencies of the U.S. government and
represent direct or indirect participations in, or are
collateralized by and payable from, mortgage loans
secured by real property. Asset-backed securities
represent participation in, or are secured by and
payable from, assets such as installment sales or loan
contracts, leases, credit card receivables and other
categories of receivables.
Investment grade securities. Securities are investment
grade if:
? They are rated, respectively, in one of the top
four long-term rating categories of a nationally
recognized statistical rating organization.
? They have received a comparable short-term or
other rating.
? They are unrated securities that the manager
believes are of comparable quality to investment-
grade rated securities.
If a security receives different ratings by two or more
nationally recognized ratings agencies, a Portfolio will
treat the security as being rated in the highest rating
category. A Portfolio may choose not to sell securities
that are downgraded after their purchase below the
Portfolio's minimum acceptable credit rating. The
Income and Growth Portfolio's credit quality standards
also apply to counterparties to over-the-counter
derivatives contracts.
Foreign investments. The Income and Growth Portfolio
may purchase American Depositary Receipts (ADRs) which
are U.S. dollar denominated securities representing an
interest in an underlying foreign security. Because the
value of an ADR is dependent upon the market price of
the underlying foreign security, ADRs are subject to
most of the risks associated with foreign investing.
Foreign countries generally have markets that are less
liquid and more volatile than markets in the U.S. In
some foreign countries, there is also less information
available about foreign issuers and markets because of
less rigorous accounting and regulatory standards than
in the U.S. Currency fluctuations could erase
investment gains or add to investment losses.
Securities lending. Each Portfolio may engage in
securities lending to increase its net investment
income. Each Portfolio will only lend securities if the
loans are callable by the Portfolio at any time and the
loans are continuously secured by cash or liquid
securities equal to no less than the market value,
determined daily, of the securities loaned. The risks
in lending securities consist of possible delay in
receiving additional collateral, delay in recovery of
securities when the loan is called or possible loss of
collateral should the borrower fail financially.
Repurchase Agreements. Each Portfolio may enter into
repurchase agreements. A repurchase agreement arises
when a Portfolio purchases a security and simultaneously
agrees to resell it to the counterparty at an agreed-
upon future date, normally the next business day. The
Portfolio earns a rate of return on the repurchase
agreement because the resale price is higher than the
purchase price. In entering into a repurchase
agreement, a Portfolio bears a risk of loss in the event
that the counterparty defaults on its obligation to
repurchase the security and the Portfolio is delayed or
prevented from exercising its rights to dispose of the
security. This includes the risk of a possible decline
in the value of the security during the period in which
the Portfolio seeks to assert its rights to it, the risk
of incurring expenses associated with asserting those
rights and the risk of losing all or a part of the
income from the agreement. Each Portfolio only enters
into repurchase agreements with commercial banks or
broker-dealers considered creditworthy by the manager
and which are fully collateralized as to principal and
interest by U.S. Government securities and money market
instruments.
Reverse Repurchase Agreements. The U.S. Government/High
Quality Securities Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase
agreement, the Portfolio sells securities and agrees to
repurchase them at a mutually agreed upon date and
price. At the time the Portfolio enters into a reverse
repurchase agreement, it will establish a segregated
account containing cash or liquid assets having a value
not less than the repurchase price (including accrued
interest) that is marked to market daily. Reverse
repurchase agreements involve several risks. These
include the risk that the investments made with the cash
proceeds of the initial sale will incur losses or
otherwise generate a lower return than the interest
included in the amount of the repurchase price. They
also involve the risk that the market value of the
securities which the Portfolio is obligated to
repurchase may decline below the repurchase price or
that the counterparty may default on its obligation to
resell the securities. To the extent a fund enters into
reverse repurchase agreements to leverage its portfolio
this practice may have the effect of magnifying losses
or gains.
Defensive investing. Each Portfolio may depart from its
principal investment strategies in response to adverse
market, economic or political conditions by taking
temporary defensive positions in all types of money
market and short-term debt securities. If a Portfolio
takes a temporary defensive position, it may be unable
to achieve its investment goal.
Management
SSB Citi manages the investment operations of each
Portfolio and receives the following fees from each
Portfolio for these services. For the year ended
December 31, 1999, SSB Citi waived all of its
management fees and reimbursed expenses for the U.S.
Government/High Quality Securities and Reserve Account
Portfolios.
Portfolio
Actual management fee
paid for the fiscal
year ended December
31, 1999
(as a percentage
of the portfolio's
average daily net
assets)
Contractual
Management fee
(as a percentage
of the portfolio's
average daily net
assets)
The Income and Growth Portfolio
0.60%
0.60%
The U.S. Government/High Quality
Securities Portfolio
0%
0.45%
The Reserve Account Portfolio
0%
0.45%
Distributor:
Smith Barney Variable Account Funds have entered into
an agreement with CFBDS, Inc. to distribute each
Portfolio's shares.
Transfer Agent and Sub-Transfer Agent:
Citi Fiduciary Trust Company, (successor to Smith Barney
Private Trust Company) (the "transfer agent") located at
388 Greenwich Street, New York, New York 10013 serves as
the transfer agent and shareholder services agent for
the fund.
PFPC Global Fund Services, located at P.O. Box 9699
Providence, R.I. 02940-9699 serves as the fund's sub-
transfer agent to render certain shareholder record
keeping and accounting services functions.
Share transactions
Availability of the Portfolios
Shares of the Portfolios are available only through the
purchase of variable annuity or variable life insurance
contracts issued by insurance companies through their
separate accounts. The variable insurance products may
or may not make investments in all the Portfolios
described in this prospectus.
The interests of different variable insurance products
investing in a Portfolio could conflict due to
differences of tax treatment and other considerations.
The Company currently does not foresee any
disadvantages to investors arising from the fact that
each Portfolio may offer its shares to different
insurance company separate accounts that serve as the
investment medium for their variable annuity and
variable life products. Nevertheless, the board of
trustees intends to monitor events to identify any
material irreconcilable conflicts which may arise, and
to determine what action, if any, should be taken in
response to these conflicts. If a conflict were to
occur, one or more insurance companies' separate
accounts might be required to withdraw their investments
in one or more Portfolios and shares of another
Portfolio may be substituted. In addition, the sale of
shares may be suspended or terminated if required by law
or regulatory authority or is in the best interests of
the portfolios' shareholders.
Redemption of shares
The redemption price of the shares of each Portfolio
will be the net asset value next determined after
receipt by the Portfolio of a redemption order from a
separate account, which may be more or less than the
price paid for the shares. The Portfolio will
ordinarily make payment within one business day after
receipt of a redemption request in good order, though
redemption proceeds must be remitted to a separate
account on or before the seventh day following receipt
of the request in good order, except on a day on which
the New York Stock Exchange is closed or as permitted by
the Securities and Exchange Commission in extraordinary
circumstances.
Share price
Each Portfolio's net asset value is the value of its
assets minus its liabilities. Each Portfolio calculates
its net asset value every day the New York Stock
Exchange is open. The Exchange is closed on certain
holidays listed in the SAI. This calculation is done
when regular trading closes on the Exchange (normally
4:00 p.m., Eastern time). If the New York Stock Exchange
closes early, each Portfolio accelerates the calculation
of its net asset value to the actual closing time.
Each Portfolio generally values its portfolio securities
based on market prices or quotations. To the extent a
fund holds securities denominated in a foreign currency
the fund's currency conversions are done when the London
stock exchange closes, which is 12 noon Eastern time.
When reliable market prices or quotations are not
readily available, or when the value of a security has
been materially affected by events occurring after a
foreign exchange closes, the Portfolio may price those
securities at fair value. Fair value is determined in
accordance with procedures approved by the Portfolio's
board. A Portfolio that uses fair value to price
securities may value those securities higher or lower
than another portfolio that uses market quotations to
price the same securities.
International markets may be open on days when U.S.
markets are closed, and the value of foreign securities
owned by a Portfolio could change on days when Portfolio
shares may not be purchased or redeemed.
Unless there are extraordinary or unusual circumstances,
the Portfolios use the amortized cost method of valuing
their money market securities with remaining maturities
of 60 days or less. Under the amortized cost method,
assets are valued by constantly amortizing over the
remaining life of an instrument the difference between
the principal amount due at maturity and the cost of the
instrument to the Portfolio.
Dividends, distributions and taxes
Each Portfolio intends to continue to qualify and be
taxed as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), as amended. In order to qualify to be taxed as
a regulated investment company, each Portfolio must meet
certain income and diversification tests and
distribution requirements. As a regulated investment
company meeting these requirements, a Portfolio will not
be subject to federal income tax on its net investment
income and net capital gains, if any, that it
distributes to its shareholders. All income and capital
gain distributions are automatically reinvested in
additional shares of the Portfolio at net asset value
and are includable in the gross income of the separate
accounts holding such shares. The Income and Growth
Portfolio expects distributions to be primarily from
capital gains. The U.S. Government/High Quality
Securities Portfolio and the Reserve Account Portfolio
expect distributions to be primarily from income. See
the accompanying contract prospectus for information
regarding the federal income tax treatment of
distributions to the separate accounts and to holders of
the contracts.
Financial highlights
The financial highlights tables for the fiscal years ended December 31 are
intended to help you understand the performance of each Portfolio for the
past five years.The information in the following tables was audited
by KPMG LLP, independent accountants, whose report, along with each
Portfolio's financial statements, are included in the
annual report (available upon request). Certain information reflects
financial results for a single share. Total returns represent the rate
that a shareholder would have earned (or lost) on a share of a Portfolio
assuming reinvestment of all dividends and distributions.
Income From Investment
Operations
Distributions
Ratios to Average Net
Assets
Year
Ended
Net
Asset
Value,
Beginning of
Year
Net
Investment
Income
(Loss)
(1)
Net
Realized and
Unrealized
Gain
(Loss)
on
Investment
Total
Income
(Loss)
from
Investment
Operations
Dividends
from Net
Investment
Income
Distributions from
Net Realized
Gains
Total
Distributions
Net
Asset
Value,
End of Year
Total
Return
Net
Assets
End of
Year
(000's)
Expenses(1)
Net
Investment
Income
(Loss)
Portfolio
Turnover
Rate
INCOME AND GROWTH PORTFOLIO
1999
$13.98
$0.16
$(0.34)
$(0.18)
$(0.24)
$(2.59)
$(2.83)
$10.97
(2.74)%
$10,911
1.00%
1.11%
42%
1998
17.29
0.29
1.87
2.16
(0.49)
(4.98)
(5.47)
13.98
12.89
13,778
0.76
1.53
49
1997
14.69
0.47
3.61
4.08
(0.10)
(1.38)
(1.48)
17.29
28.11
16,236
0.77
2.18
38
1996
15.24
0.57
2.68
3.25
(0.56)
(3.24)
(3.80)
14.69
21.02
20,812
0.74
2.39
30
1995
13.05
0.45
3.12
3.57
(0.44)
(0.94)
(1.38)
15.24
27.56
29,782
0.77
2.77
46
U.S. GOVERNMENT/HIGH QUALITY SECURITIES PORTFOLIO
1999(2)
10.40
0.26
0
0.26
(0.03)
0
(0.03)
10.63
2.55
756
1.00
2.37
0
1998(2)
12.66
0.03
0
0.03
(1.06)
(1.23)
(2.29)
10.4
0
0.22
973
1.00
0.22
0
1997
12.90
0.72
(0.02)
0.70
(0.04)
(0.90)
(0.94)
12.66
5.43
1,617
1.00
4.33
43
1996
13.66
1.22
(0.76)
0.46
(1.22)
0
(1.22)
12.90
3.34
2,876
0.98
6.30
13
1995
12.46
0.94
1.20
2.14
(0.94)
0
(0.94)
13.66
17.20
4,856
0.87
6.36
0
RESERVE ACCOUNT PORTFOLIO
1999
7.36
0.25
0
0.25
0
0
0
7.61
3.40
43
1.00
2.96
0
1998
7.70
(0.07)
0
(0.07)
(0.27)
0
(0.27)
7.36
(0.89)
56
1.00
(1.00)
0
1997
10.99
.15
0
0.15
(0.25)
(3.19)
(3.44)
7.70
1.36
97
1.00
1.59
0
1996
12.71
1.92
(1.72)
0.20
(1.92)
0
(1.92)
10.9
9
1.57
435
1.00
4.98
0
1995
12.39
0.73
0.38
1.11
(0.74)
(0.05)
(0.79)
12.71
8.83
2,315
0.97
5.30
17
(1) Under a voluntary fee waiver, the aggregate expenses of the Portfolios may
not exceed 1.00% of the average daily net assets for any year. With respect to
the U.S. Government/High Quality Securities Portfolio, the investment manager
waived all or a portion of its fees in the amount of $0.05 per share (0.45% of
average net assets) in 1999 and 1998 and $0.08 per share (0.49% of average net
assets) in 1997. The investment manager also reimbursed the Portfolio for
$16,270, $4,832 and $719 in expenses for the years ended December 31, 1999,
1998 and 1997. In addition, if such fees were not waived and expenses
reimbursed, the net investment income (loss) per share would have been $0.00,
$(0.07) and $0.64 and the expense ratio would have been
3.37%, 1.86% and 1.49%, respectively, for the years ended December 31, 1999,
1998 and 1997. With respect to the Reserve Account Portfolio, the investment
manager waived all or a portion of its fees in the amount of $0.03 per share
(0.45% of average net assets) in 1999 and 1998, $1.61 per share (10.65% of
average net assets) in 1997 and, $0.15 per
shares (0.45%of average net assets) in 1996. The investment manager also
reimbursed the Portfolio for $29,987, $15,552, $19,395 and $19,861 in expenses
for the years ended December 31, 1999, 1998, 1997 and 1996, respectively. If
such fees were not waived and expenses not reimbursed, the net investment
income (loss) per share would have been $(4.38), $(1.56), $(1.76) and $1.27
and the
expense ratio would have been 63.63%, 20.81%, 11.65% and 2.79%, for the years
ended December 31, 1999, 1998, 1997 and 1996, respectively.
(2) Per share amounts have been calculated using the monthly average shares
method.
SMITH BARNEY VARIABLE ACCOUNT FUNDS
ADDITIONAL INFORMATION
Shareholder reports. Annual and semiannual reports to shareholders provide
additional information about each Portfolio's investments. These reports
discuss the market conditions and investment strategies that affected each
Portfolio's performance.
Each Portfolio sends one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information. The statement of additional information
provides more detailed information about the Portfolios. It is incorporated by
reference into this prospectus.
You can make inquiries about the Portfolios or obtain shareholder reports or
the statement of additional information (without charge) by calling
1-800-451-2010 or writing to Smith Barney Variable Account Funds, 388
Greenwich Street, MF2, New York, NY 10013.
Visit our web site. Your web site is located at www.smithbarney.com
Information about the Portfolios (including the SAI) can be reviewed and copied
at the Securities and Exchange Commission's (the "Commission") Public Reference
Room in Washington, D.C. In addition, information on the operation of the
Public Reference Room may be obtained by calling the commission at 1-202-942-
Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. Copies
of this information may be obtained for a duplicating fee by electronic request
at the following E-mail address: [email protected], or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.
If someone makes a statement about any of the Portfolios that is not in this
prospectus, you should not rely upon that information. The Portfolios are not
offering to sell their shares to any person to whom the Portfolios may not
lawfully sell their shares.
The Income and Growth Portfolio
The U.S. Government/High
Quality Securities Portfolio
The Reserve Account
Portfolio
(Investment Company Act file no. 811-04959)
PART B - STATEMENT OF ADDITIONAL INFORMATION
April 28, 2000
SMITH BARNEY VARIABLE ACCOUNT FUNDS
388 Greenwich Street
New York, New York 10013
STATEMENT OF ADDITIONAL INFORMATION
Shares of the Smith Barney Variable Account Funds (the
"fund") are offered with a choice of three Portfolios:
The Income and Growth Portfolio seeks current income
and long-term growth of income and capital by investing
primarily in common stocks.
The U.S. Government/High Quality Securities Portfolio
seeks high current income and security of principal from a
portfolio consisting primarily of U.S. Government
Obligations
and other high quality fixed income securities. This
Portfolio currently has insufficient assets to enable it to
invest in accordance with its investment program.
The Reserve Account Portfolio seeks current income
from
a portfolio of money market instruments and other high
quality fixed income obligations with limited maturities
and
employs an immunization strategy to minimize the risk of
loss
of account value. This Portfolio currently has
insufficient
assets to enable it to invest in accordance with its
investment program.
This Statement of Additional Information ("SAI") is not a
prospectus. It is intended to provide more detailed
information
about the fund as well as matters already discussed in the
prospectus and therefore should be read in conjunction with
the
April 28, 2000 Prospectus which may be obtained free of
charge by
writing the fund at the address listed above, or by
contacting your
Salomon Smith Barney Financial Consultant. Shares of the
fund may
only be purchased by insurance company separate accounts.
TABLE OF CONTENTS
Statement of Additional Information
Page
Investment Objective and Management
Policies.....................
2
Investment Restrictions..................................................
5
Performance Data.........................................................
8
Trustees and Executive Officers of the
Fund..........................
8
Determination of Net Asset Value .....................................
11
Purchase of Shares........................................................
11
Redemption of Shares....................................................
12
Dividends, Distributions and Taxes....................................
12
Diversification.............................................................
12
Investment Management and Other
Services..........................
12
The Fund and Its Investments...........................................
13
Management Agreements................................................
14
Voting Rights..............................................................
16
Additional Information...................................................
16
Financial Statements.....................................................
17
Appendix-Ratings of Debt Obligations
...............................
18
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIE
The prospectus describes the investment
objectives and policies of each Portfolio. The
following discussion supplements the description of the
Portfolio's investment policies in the prospectus. The
investment objectives and policies of each Portfolio
are non-fundamental and thus may be modified by the
trustees of the fund provided that any modification is
not prohibited by the Portfolios' investment
restrictions or applicable laws. Each Portfolio's
investment adviser is SSB Citi Fund Management LLC
("SSB Citi" or the "manager") (successor to SSBC Fund
Management Inc.)
The fund is intended to provide a suitable
investment for variable annuity and variable life
insurance contracts (the "Contracts") and shares of the
Portfolios are offered only for purchase by insurance
company separate accounts (the "Separate Accounts") as
an investment for Contracts, as described in the
accompanying Contract prospectus. Shares of each
Portfolio are offered to Separate Accounts at their net
asset value, without a sales charge, next determined
after receipt of an order by an insurance company. The
offering of shares of a Portfolio may be suspended from
time to time and the fund reserves the right to reject
any specific purchase order.
The Income and Growth Portfolio invests primarily
in common stocks offering a current return from
dividends and will also normally include some interest-
paying fixed income securities (such as U.S. Government
securities, investment grade bonds and debentures) and
high quality money market instruments (such as
commercial paper and repurchase agreements
collateralized by U.S. Government securities with
broker/dealers or other financial institutions,
including the fund's custodian). At least 65% of the
Portfolio's assets will at all times be invested in
equity securities. The Portfolio may also purchase
preferred stocks and convertible securities. Temporary
defensive investments or investment in a higher
percentage of fixed income securities may be made when
deemed advisable. In the selection of common stock
investments, emphasis is generally placed on issues
with established dividend records as well as potential
for price appreciation. From time to time, however, a
portion of the assets may be invested in non-dividend
paying stocks. The Portfolio may make investments in
foreign securities (including EDRs, CDRs and GDRs)
though management currently intends to limit such
investments to 5% of the Portfolio's assets and an
additional 10% of its assets may be invested in
American Depository Receipts ("ADR"s) representing
shares in foreign securities that are traded in United
States securities markets. If in seeking to achieve its
investment objectives the fund believes opportunities
warrant its investment in foreign securities,
management would give appropriate consideration, in its
judgment, to risks that may be associated with foreign
investments, including currency exchange control
regulations and costs, the possibility of
expropriation, seizure, or nationalization of foreign
deposits, less liquidity and volume and more volatility
in foreign securities markets and the impact of
political, social, economic or diplomatic developments
or the adoption of other foreign government
restrictions that might adversely affect the payment of
principal and interest on securities in the Portfolio.
If it should become necessary, the fund might encounter
greater difficulties in invoking legal processes abroad
than would be case in the United States. In addition,
there may be less publicly available information about
a non-U.S. company, and non-U.S. companies are not
generally subject to uniform accounting and financial
reporting standards, practices and requirements
comparable to those applicable to U.S. companies.
Furthermore, some of these securities may be subject to
foreign brokerage and withholding taxes.
Although the Portfolio may, as described below,
sell short "against the box," buy or sell puts or calls
and borrow money, it has no intention of doing so in
the foreseeable future. Similarly, although the
Portfolio may lend money or assets, as described in
investment restriction 8 or 9 on page 6, the Portfolio
does not currently intend to, nor does it intend to
engage in loans other than short-term loans.
While the Portfolio is permitted to invest in
warrants (including 2% or less of the Portfolio's total
net assets in warrants that are not listed on the New
York Stock Exchange or American Stock Exchange), the
Portfolio has no intention of doing so in the
foreseeable future. For purposes of computing the
foregoing percentage, warrants acquired by the
Portfolio in units or attached to securities will be
deemed to be without value.
In addition, although the Income and Growth
Portfolio may buy or sell covered put and covered call
options up to 15% of its net assets, (including
collars, caps, floor and swaps) provided such options
are listed on a national securities exchange, the
Portfolio does not currently intend to commit more than
5% of its assets to be invested in or subject to put
and call options. A "call option" gives a holder the
right to purchase a specific stock at a specified price
referred to as the "exercise price," within a specific
period of time (usually 3, 6, or 9 months). A "put
option" gives a holder the right to sell a specific
stock at a specified price within a specified time
period. The initial purchaser of a call option pays
the "writer" a premium, which is paid at the time of
purchase and is retained by the writer whether or not
such option is exercised. Put and call options are
currently traded on The Chicago Board Options Exchange
and several other national exchanges. Institutions,
such as the fund, that sell (or "write") call options
against securities held in their investment portfolios
retain the premium. If the writer determines not to
deliver the stock prior to the option's being
exercised, the writer may purchase in the secondary
market an identical option for the same stock with the
same price and expiration date in fulfillment of the
obligation. In the event the option is exercised the
writer must deliver the underlying stock to fulfill the
option obligation. The brokerage commissions
associated with the buying and selling of call options
are normally proportionately higher than those
associated with general securities transactions.
The Portfolio may invest in investment grade
bonds, i.e. U.S. Government obligations or bonds rated
in the four highest rating categories of a nationally
recognized statistical rating organization (an
"NRSRO"), such as those rated Aaa, Aa, A and Baa by
Moody's Investors Service, Inc. ("Moody's") or AAA,
AA, A and BBB by Standard & Poor's Ratings Group
("S&P").
The Income and Growth Portfolio may, but need not, use
derivative contracts, such as futures and options on
securities, securities indices or currencies; options
on these futures; forward currency contracts; and
interest rate or currency swaps for any of the
following purposes:
To hedge against the economic impact of adverse
changes in the market value of its securities
because of changes in stock market prices, currency
exchange rates or interest rates
As a substitute for buying or selling securities
To enhance the Portfolio's return
A derivative contract will obligate or entitle the
Portfolio to deliver or receive an asset or cash
payment based on the change in value of one or more
securities, currencies or indices. Even a small
investment in derivative contracts can have a big
impact on a Portfolio's stock market, currency and
interest rate exposure. Therefore, using derivatives
can disproportionately increase losses and reduce
opportunities for gains when stock prices, currency
rates or interest rates are changing. The Portfolio
may not fully benefit from or may lose money on
derivatives if changes in their value do not correspond
accurately to changes in the value of the Portfolio's
holdings. The other parties to certain derivative
contracts present the same types of credit risk as
issuers of fixed income securities. Derivatives can
also make the Portfolio less liquid and harder to
value, especially in declining markets.
The U.S. Government/High Quality Securities
Portfolio currently has insufficient assets to enable
it to invest in accordance with its investment
policies. If the Portfolio were able to invest in
accordance with its investment policies, the Portfolio
would invest primarily in a combination of (i)
securities of the U.S. Government, its agencies or its
instrumentalities and (ii) other high quality fixed
income securities (including corporate bonds) rated
within the two highest categories by an NRSRO such as
S&P (AAA, AA) or Moody's (Aaa, Aa) or if unrated, are
determined to be of comparable quality by the manager.
Except when the Portfolio is in a temporary defensive
investment position, at least 65% of the Portfolio's
total assets will be invested in these securities,
including the securities held subject to repurchase
agreements.
It is anticipated that a substantial portion of
the Portfolio's investments will consist of GNMA
Certificates, which are mortgage-backed securities
representing part ownership of a pool of mortgage loans
on which timely payment of interest and principal is
guaranteed by the U.S. Government. As a hedge against
changes in interest rates, the Portfolio may enter into
agreements with dealers in GNMA Certificates whereby
the Portfolio agrees to purchase or sell an agreed-upon
principal amount of GNMA Certificates at a specified
price on a certain date; provided, however, that
settlement occurs within 120 days of the trade date.
The balance of the investments of the Portfolio will be
fixed income securities of private issuers and money
market instruments, including certificates of deposit,
bankers' acceptances, and commercial paper rated A-1 or
A-2 by S&P or Prime-1 or Prime-2 of Moody's.
The Reserve Account Portfolio currently has
insufficient assets to enable it to invest in
accordance with its investment policies. Instead, the
Portfolio invests all of its assets in repurchase
agreements. If the Portfolio were able to invest in
accordance with its investment policies, the Portfolio
would invest in high-grade fixed income obligations
(including money market instruments) with a maximum
maturity of seven years. These obligations include
U.S. Government Obligations; commercial paper rated A-1
or A-2 by S&P or Prime-1 or Prime-2 by Moody's; high
quality corporate notes and bonds, including floating
rate issues, rated within the two highest categories by
an NRSRO such as S&P or Moody's or, if not rated of
comparable quality as determined by the manager,
bankers' acceptances; certificates of deposit and
securities backed by letters of credit. Normally, a
portion of the Portfolio would consist of investments
that mature in two to seven years; however, it would be
expected there would be occasions when as much as all
of the Portfolio would be invested in money market
instruments.
The fund effects portfolio transactions with a
view towards attaining the investment objective of each
Portfolio and is not limited to a predetermined rate of
portfolio turnover. None of the Portfolios will engage
in the trading of securities for the purpose of
realizing short-term profits; however, each Portfolio
will adjust its portfolio as considered advisable in
view of prevailing or anticipated market conditions and
the Portfolio's investment objective. A high portfolio
turnover results in correspondingly greater transaction
costs.
The fund's Declaration of Trust permits the
trustees to establish additional Portfolios of the fund
from time to time. The investment objectives, policies
and restrictions applicable to additional Portfolios
would be established by the trustees at the time such
Portfolios were established and may differ from those
set forth in the Prospectus and this SAI.
GNMA Securities. Government National Mortgage
Association ("GNMA"), an agency of the United States
Government, guarantees the timely payment of monthly
installments of principal and interest on modified
pass-through Certificates, whether or not such amounts
are collected by the issuer of these Certificates on
the underlying mortgages. In the opinion of an
Assistant Attorney General of the United States, this
guarantee is backed by the full faith and credit of the
United States. Scheduled payments of principal and
interest are made each month to holders of GNMA
Certificates (such as the Government/High Quality
Portfolio). The average life of GNMA Certificates
varies with the maturities of the underlying mortgages
(with maximum maturities of 30 years) but is likely to
be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of
prepayments, refinancing of such mortgages or
foreclosure. Unscheduled prepayments of mortgages are
passed through to the holders of GNMA Certificates at
par with the regular monthly payments of principal and
interest, which have the effect of reducing future
payment of such Certificates.
GNMA Certificates have historically involved no
credit risk; however, due to fluctuations in interest
rates, the market value of such securities will vary
during the period of a shareholder's investment in the
Government/High Quality Portfolio. Prepayments and
scheduled payments of principal will be reinvested by
the fund in then available GNMA Certificates which may
bear interest at a rate lower or higher than the
Certificate from which the payment was received. As
with other debt securities, the price of GNMA
Certificates is likely to decrease in times of rising
interest rates; however, in periods of falling interest
rates the potential for prepayment may reduce the
general upward price increase of GNMA Certificates that
might otherwise occur.
Other U.S. Government Obligations. In addition
to GNMA Securities and direct obligations of the U.S.
Treasury (such as Treasury Bills, Notes and Bonds),
U.S. Government Obligations in which the fund may
invest include: (1) obligations of, or issued by, Banks
for Cooperatives, Federal Land Banks, Federal
Intermediate Credit Banks, Federal Home Loan Banks, the
Federal Home Loan Bank Board, any wholly-owned
Government corporation so designated in Section 9101
(3) of Title 31, or the Student Loan Marketing
Association; (2) other securities fully guaranteed as
to principal and interest by the United States of
America; (3) other obligations of, or issued by, or
fully guaranteed as to principal and interest by the
Federal National Mortgage Association or any agency of
the United States; and (4) obligations currently or
previously sold by the Federal Home Loan Mortgage
Corporation.
Bank Obligations. Obligations purchased from
U.S. banks or other financial institutions that are
members of the Federal Reserve System or the Federal
Deposit Insurance Corporation ("FDIC") (including
obligations of foreign branches of such members) if
either: (a) the principal amount of the obligation is
insured in fully by the FDIC, or (b) the issuer of such
obligation has capital, surplus and undivided profits
in excess of $100 million or total assets of $1 billion
(as reported in it most recently published financial
statements prior to the date of investment). These
obligations include:
Bankers' Acceptance: A short-term credit
instrument evidencing the obligation of a bank to
pay a draft drawn upon it by a customer. This
instrument reflects the obligation not only of
the drawer but also of the bank to pay the face
amount of the instrument upon maturity.
Certificate of Deposit: A certificate evidencing
the obligation of a bank to repay funds deposited
with it earning a specified rate of interest over
a given period.
Reverse Repurchase Agreements. The fund may
enter into reverse repurchase agreements on behalf of
the Reserve Account Portfolio and the U.S.
Government/High Quality Securities Portfolio. Each of
these Portfolios may enter into reverse repurchase
agreements with broker/dealers and other financial
institutions. Such agreements involve the sale of
Portfolio securities with an agreement to repurchase
the securities at an agreed-upon price, date and
interest payment and have the characteristics of
borrowing. Since the proceeds of borrowing under
reverse repurchase agreements are invested, this would
introduce the speculative factor known as "leverage."
The securities purchased with the funds obtained from
the agreement and securities collateralizing the
agreement will have maturity dates no later than the
repayment date. Generally the effect of such a
transaction is that the fund can recover all or most of
the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement,
while in many cases it will be able to keep some of the
interest income associated with those securities. Such
transactions are only advantageous if the Portfolio has
an opportunity to earn a greater rate of interest on
the cash derived from the transaction than the interest
cost of obtaining that cash. Opportunities to realize
earnings from the use of the proceeds equal to or
greater than the interest required to be paid may not
always be available, and the fund intends to use the
reverse repurchase technique only when the Manager
believes it will be advantageous to the Portfolio's
assets. The fund's custodian bank will maintain a
segregated account of the Portfolio with securities
having a value equal to or greater than such
commitments.
Securities Lending. Each Portfolio may seek to
increase its net investment income by lending its
securities provided such loans are callable at any time
and are continuously secured by cash or U.S. Government
obligations equal to no less than the market value,
determined daily, of the securities loaned. The
Portfolio will receive amounts equal to dividends or
interest on the securities loaned. It will also earn
income for having made the loan because cash collateral
pursuant to these loans will be invested in short-term
money market instruments. In connection with lending
of securities the fund may pay reasonable finders,
administrative and custodial fees. Management will
limit such lending to not more than thirty-three and
one-third percent of the value of a Portfolio's total
assets. Where voting or consent rights with respect to
loaned securities pass to the borrower, management will
follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of
such voting or consent rights if the issues involved
have a material effect on the Portfolio's investment in
the securities loaned. Apart from lending its
securities and acquiring debt securities of a type
customarily purchased by financial institutions, none
of the Portfolios will make loans to other persons.
Delayed Delivery. A delayed delivery transaction
involves the purchase of securities at an agreed-upon
price on a specified future date. At the time the fund
enters into a binding obligation to purchase securities
on a delayed delivery basis the Portfolio will
establish with the Custodian a segregated account with
assets of a dollar amount sufficient to make payment
for the securities to be purchased. The value of the
securities on the delivery date may be more or less
than their purchase price. Securities purchased on a
delayed delivery basis do not generally earn interest
until their scheduled delivery date.
INVESTMENT RESTRICTIONS
The trust has adopted the following restrictions
and fundamental policies that cannot be changed without
approval by a "vote of a majority of the outstanding
voting securities" of each Portfolio affected by the
change as defined in the Investment Company Act of 1940
(the "Act") and Rule 18f-2 thereunder.
Without the approval of a majority of its
outstanding voting securities, the Income and Growth
Portfolio may not:
1. With respect to 75% of its assets, invest
more than 5% of the value of its total assets in any
one issuer, except securities of the U.S. Government,
its agencies or its instrumentalities; 2. Invest more
than 25% of the value of its total assets in any one
industry, except that securities of the U.S.
Government, its agencies and instrumentalities are not
considered an industry for purposes of this limitation;
3. Purchase securities on margin; 4. Make short sales
of securities or maintain a short position unless at
all times when a short position is open, the Portfolio
owns or has the right to obtain, at no added cost,
securities identical to those sold short; 5. Borrow
money, except as a temporary measure for extraordinary
or emergency purposes, and then not in excess of the
lesser of 10% of its total assets taken at cost or 5%
of the value of its total assets; or mortgage or pledge
any of its assets, except to secure such borrowings; 6.
Act as an underwriter of securities except to the
extent the fund may be deemed to be an underwriter in
connection with the sale of portfolio holdings; 7.
Invest in real estate (the purchase by the Portfolio of
securities for which there is an established market of
companies engaged in real estate activities or
investments shall not be deemed to be prohibited by
this fundamental investment limitation); 8. Purchase
or sell commodities; and 9. Make loans, except the
Portfolio will purchase debt obligations, may enter
into repurchase agreements and may lend its securities.
Without the approval of a majority of its
outstanding voting securities the U.S. Government/High
Quality Securities Portfolio may not:
1. With respect to 75% of its assets, invest
more than 5% of the value of its total assets in any
one issuer, except securities of the U.S. Government,
its agencies or instrumentalities; 2. Invest more than
25% of the value of its total assets in any one
industry, except that securities of the U.S.
Government, its agencies and instrumentalities are not
considered an industry for purposes of this limitation;
3. Purchase securities on margin; 4. Sell securities
short (provided however the Portfolio may sell short if
it maintains a segregated account of cash or U.S.
Government obligations with the Custodian, so that the
amount deposited in it plus the collateral deposited
with the broker equals the current market value of the
securities sold short and is not less than the market
value of the securities at the time they were sold
short); 5. Borrow money, except from banks for
temporary purposes and then in amounts not in excess of
5% of the value of its assets at the time of such
borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any such borrowing and
in amounts not in excess of 7 1/2% of the value of the
fund's assets at the time of such borrowing. (This
borrowing provision is not for investment leverage, but
solely to facilitate management of the Portfolio by
enabling it to meet redemption requests where the
liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient.) Borrowings may take
the form of a sale of portfolio securities accompanied
by a simultaneous agreement as to their repurchase; 6.
Act as an underwriter of securities except to the
extent the fund may be deemed to be an underwriter in
connection with the sale of portfolio holdings; 7.
Invest in real estate (the Portfolio, however, will
purchase mortgage-related securities); 8. Purchase or
sell commodities; and 9. Make loans, except the
Portfolio will purchase debt obligations, may enter
into repurchase agreements and may lend its securities.
Without the approval of a majority of its
outstanding voting securities the Reserve Account
Portfolio may not:
1. With respect to 75% of its assets, invest
more than 5% of its assets in the securities of any one
issuer, except securities of the U.S. Government, its
agencies or instrumentalities; 2. Invest more than 25%
of the value of its total assets in any one industry,
except that securities of the U.S. Government, its
agencies and instrumentalities are not considered an
industry for purposes of this limitation; 3. Purchase
securities on margin; 4. Sell securities short; 5.
Borrow money except from banks for temporary purposes
in an amount up to 10% of the value of its total assets
and may mortgage or pledge its assets in an amount up
to 10% of the value of its total assets only to secure
such borrowings. The Portfolio will borrow money only
to accommodate requests for the redemption of shares
while effecting an orderly liquidation of portfolio
securities or to clear securities transactions and not
for leveraging purposes. This restriction shall not be
deemed to prohibit the Portfolio from entering into
reverse repurchase agreements so long as not more than
33 1/3% of the Portfolio's total assets are subject to
such agreements; 6. Act as an underwriter of
securities except to the extent the fund may be deemed
to be an underwriter in connection with the sale of
portfolio holdings; 7. Invest in commodities; and 8.
Make loans, except the Portfolio will purchase debt
obligations, may enter into repurchase agreements and
may lend its securities.
The investment objective and policies of each
Portfolio are non-fundamental and, as such, may be
modified by the trustees of the fund provided such
modification is not prohibited by the investment
restrictions set forth above or applicable law, and any
such change will first be disclosed in the then current
prospectus. The restrictions below are non-fundamental
and may be changed by the trustees without shareholder
approval or ratification. Each of the Portfolios may
not:
1. Invest more than 5% of its total assets in
issuers with less than three years of continuous
operation (including that of predecessors) or so-called
"unseasoned" equity securities that are not either
admitted for trading on a national stock exchange or
regularly quoted in the over-the-counter market (this
restriction, however, would not apply to a newly
created agency or instrumentality of the U.S.
Government); 2. Purchase more than 10% of any class of
the outstanding securities, or any class of voting
securities, of any issuer; 3. Invest in or hold
securities of an issuer if those officers and trustees
of the fund, its manager, or Salomon Smith Barney
owning beneficially more than 1/2 of 1% of the
securities of such issuer together own more than 5% of
the securities of such issuer; 4. Purchase securities
of another investment company except as part of a
merger, consolidation or acquisition or as permitted by
Section l2(d)(l) of the Investment Company Act of 1940;
5. Have more than 15% of its net assets at any time
invested in or subject to puts, calls or combinations
thereof and may not purchase, sell or write options
that are not listed on a national securities exchange;
6. Invest in interests in oil or gas or other mineral
exploration or development programs; and 7. The U.S.
Government/High Quality Securities Portfolio and the
Reserve Account Portfolio each may not purchase common
stocks, preferred stocks, warrants or other equity
securities.
The foregoing percentage restrictions apply at
the time an investment is made; a subsequent increase
or decrease in percentage may result from changes in
values or net assets.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
PERFORMANCE DATA
From time to time the fund may advertise a
Portfolio's cumulative total return, average annual
total return, yield and current distribution return in
advertisements and other types of sales literature.
These figures are based on historical earnings and are
not intended to indicate future performance. In
addition, these figures will not reflect the deduction
of the charges that are imposed on the Contracts by the
Separate Account (see Contract prospectus) which, if
reflected, would reduce the performance quoted. The
total return shows what an investment in the Portfolio
would have earned over a specified period of time (one,
five or ten years) assuming that all distributions and
dividends by the Portfolio were invested on the
reinvestment dates during the period less all recurring
fees. Cumulative total return is computed for a
specified period of time assuming reinvestment of all
income dividends and capital gains distributions at net
asset value on the ex-dividend dates at prices
calculated as stated in the prospectus, then dividing
the value of the investment at the end of the period so
calculated by the initial amount invested and
subtracting 100%. The standard average annual total
return, as prescribed by the Securities and Exchange
Commission ("SEC"), is derived from this total return,
which provides the ending redeemable value. Such
standard total return information may also be
accompanied with nonstandard total return information
over different periods of time by means of aggregate,
average, year-by-year, or other types of total return
figures.
Each Portfolio's cumulative total return and
average annual total return for the one, five year and
ten year periods, and since each Portfolio's inception
date are shown below.
Portfolio
Cumulative Total Returns as of 12/31/99
1 year
5 years
10 years
Since
Inception
of the fund
Income and Growth Portfolio
(2.74) %
116.79 %
234.32%
243.19
%*
U.S. Gov't/High Quality
Securities Portfolio
2.55
%
31.24
%
80.23%
80.23 %*
Reserve Account Portfolio
3.40
%
14.82
%
53.81%
58.83% **
Portfolio
Average Annual Total Returns as of 12/31/99
1 year
5 years
10 years
Since
Inception
of the fund
Income and Growth Portfolio
(2.74) %
16.74 %
12.82%
12.52 %*
U.S. Gov't/High Quality
Securities Portfolio
2.55
%
5.59 %
6.07%
6.11%*
Reserve Account Portfolio
3.40
%
2.80 %
4.40%
4.54 %**
* Index comparisons begin on July 31, 1989
** Index comparisons begin on August 31, 1989
Each cumulative Portfolio's yield is computed by
dividing the net investment income per share earned
during a specified thirty day period by the net asset
value per share on the last day of such period and
annualizing the result. For purposes of the yield
calculation, interest income is determined based on a
yield to maturity percentage for each long-term fixed
income obligation in the Portfolio; income on short-
term obligations is based on current payment rate. For
the fiscal year ended December 31, 1999, the yields for
U.S. Government/High Quality Securities Portfolio and
Reserve Account Portfolio were 4.53% and 5.88%,
respectively
The fund calculates current distribution return
for the Income and Growth Portfolio by dividing the
distributions from investment income declared during
the most recent twelve months by the net asset value on
the last day of the period for which current
distribution return is presented. The fund calculates
current distribution return for the U.S. Government
Securities Portfolio by annualizing the most recent
quarterly distribution from investment income and
dividing by the net asset value on the last day of the
period for which current distribution return is
presented. The fund calculates current distribution
return for the Reserve Portfolio by annualizing the
most recent monthly distribution and dividing by the
net asset value on the last day of the period for which
current distribution return is presented. A
Portfolio's current distribution return may vary from
time to time depending on market conditions, the
composition of its investment portfolio and operating
expenses. These factors and possible differences in
the methods used in calculating current distribution
return, and the charges that are imposed on the
Contracts by the Separate Account, should be considered
when comparing the Portfolio's current distribution
return to yields published for other investment
companies and other investment vehicles. From time to
time, the fund may include its current distribution
return in information furnished to present or
prospective shareowners.
A Portfolio's current distribution return may
vary from time to time depending on market conditions,
the composition of its investment portfolio and
operating expenses. These factors and possible
differences in the methods used in calculating current
distribution return, and the charges that are imposed
on the Contracts by the Separate Account, should be
considered when comparing a Portfolio's current
distribution return to yields published for other
investment companies and other investment vehicles.
Current distribution return should also be considered
relative to changes in the value of the Portfolio's
shares and to the risks associated with the Portfolio's
investment objective and policies. For example, in
comparing current distribution returns with those
offered by Certificate of Deposit ("CDs"), it should be
noted that CDs are insured (up to $100,000) and offered
a fixed rate of return. Returns of the Reserve Account
Portfolio may from time to time be compared with
returns of money market funds measured by Donoghue's
Money fund Report, a widely-distributed publication on
money market funds.
Performance information may be useful in
evaluating a Portfolio and for providing a basis for
comparison with other financial alternatives. Since
the performance of each Portfolio changes in response
to fluctuations in market conditions, interest rate and
Portfolio expenses, no performance quotation should be
considered a representation as to the Portfolio's
performance for any future period.
TRUSTEES AND EXECUTIVE OFFICERS
The names of the trustees of the trust and executive
officers of the portfolios, together with information
as to their principal business occupations, are set
forth below. The executive officers of the portfolios
are employees of organizations that provide services to
the fund. Each trustee who is an "interested person"
of the fund, as defined in the 1940 Act, is indicated
by an asterisk. The address of the "non-interested"
trustees and the executive officers of the portfolios
is 388 Greenwich Street, New York, New York 10013,
unless otherwise indicated.
LEE ABRAHAM, Trustee
Retired; Trustee of 12 investment companies associated
with Citigroup Inc. ("Citigroup"). Director of R.G.
Barry Corp., a footwear manufacturer, Signet Group plc,
a specialty retailer, and eNote.com, Inc., a computer
hardware company. Formerly Chairman and Chief Executive
Officer of Associated Merchandising Corporation, a
major retail merchandising and sourcing organization
and formerly Director of Galey & Lord and Liz
Claiborne. His address is 106 Barnes Road, Stamford,
Connecticut 06902; Age 72.
ALLAN J. BLOOSTEIN, Trustee
President of Allan J. Bloostein Associates, a
consulting firm; Trustee of 19 investment companies
associated with Citigroup. Director of CVS Corporation,
a drugstore chain, and Taubman Centers Inc., a real
estate development company; Retired Vice Chairman and
Director of The May Department Stores Company. His
address is 27 West 67th Street, New York, New York
10023; Age 70.
JANE F. DASHER, Trustee
Investment Officer; Korsant Partners, a family
investment company. Trustee of 12 investment companies
associated with Citigroup. Prior to 1997, Independent
Financial Consultant. Her address is 283 Greenwich
Avenue, Greenwich, Connecticut 06830; Age 50.
DONALD R. FOLEY, Trustee
Retired; Trustee of 12 investment companies associated
with Citigroup. Formerly Vice President of Edwin Bird
Wilson, Incorporated (an advertising agency); His
address is 3668 Freshwater Drive, Jupiter, Florida
33477; Age 77.
RICHARD E. HANSON, JR., Trustee
Head of School, The New Atlanta Jewish Community High
School, Atlanta Georgia. Trustee of 12 investment
companies associated with Citigroup. Formerly
Headmaster, The Peck School, Morristown, New Jersey.
His address is 58 Ivy Chase, Atlanta, Georgia 30342;
Age 58.
PAUL HARDIN, Trustee
Professor of Law at University of North Carolina at
Chapel Hill. Trustee of 14 investment companies
associated with Citigroup. Director of The Summit
Bancorporation; Formerly, Chancellor of the University
of North Carolina at Chapel Hill; His address is 12083
Morehead, Chapel Hill, North Carolina 27514; Age 68.
*HEATH B. McLENDON, Chairman of the Board, President
and Chief Executive Officer
Managing Director of Salomon Smith Barney; Chairman,
Co-Chairman or Trustee of the Board of 71 investment
companies associated with Citigroup. Director and
President of SSB Citi and Travelers Investment
Advisers, Inc. ("TIA"). His address is 7 World Trade
Center, New York, New York 10048; Age 66.
RODERICK C. RASMUSSEN, Trustee
Investment Counselor; Director of 12 investment
companies associated with Citigroup. Formerly Vice
President of Dresdner and Company Inc. (investment
counselors); His address is 9 Cadence Court,
Morristown, New Jersey 07960; Age 73.
JOHN P. TOOLAN, Trustee
Retired; Director of 12 investment companies associated
with Citigroup. Trustee of John Hancock Funds;
Formerly, Director and Chairman of Smith Barney Trust
Company, Director of Smith Barney Holdings Inc. and
various subsidiaries, Senior Executive Vice President,
Director and Member of the Executive Committee of Smith
Barney; His address is 13 Chadwell Place, Morristown,
New Jersey 07960; Age 69.
*LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Salomon Smith Barney; Senior Vice
President or Executive Vice President and Treasurer of
61 investment companies associated with Citigroup;
Director and Senior Vice President of the Manager and
TIA; Age 42.
ELLEN CARDOZO SONSINO, Vice President
Managing Director of Salomon Smith Barney and Vice
President of [certain other] investment companies
associated with Citigroup; 49.
JAMES CONROY, Vice President
Investment Officer of SSB Citi; Managing Director of
Salomon Smith Barney and Vice President of [certain
other] investment companies associated with Citigroup;
48.
*PAUL BROOK, Controller
Controller; Director of Salomon Smith Barney;
Controller or Assistant Treasurer of 43 investment
companies associated with Citigroup; from 1997-1998
Managing Director of AMT Capital Services Inc.; prior
to 1997, Partner with Ernst & Young LLP, Age 46.
*CHRISTINA T. SYDOR, Secretary
Managing Director of Salomon Smith Barney; Secretary of
61 investment companies associated with Citigroup;
Secretary and General Counsel of the Manager and TIA;
Age 49.
The following table shows the compensation paid by the
fund to each person who was a trustee during the fund's
last fiscal year. None of the officers of the fund
received any compensation from the fund for such
period. Officers and interested trustees of the fund
are compensated by Salomon Smith Barney.
COMPENSATION TABLE
Name of Person
Aggregate
Compensatio
n from the
Fund Fiscal
Year Ended
12/31/99
Pension or
Retirement
Benefits
Accrued as
Part of Fund's
Expenses
Total
Compensation
from Fund
and Fund
Complex Paid
to Trustees
for the
Calendar
Year Ended
12/31/99
Total Number of
Funds for Which
Person Serves
within Fund
Complex for the
Calendar Year
Ended 12/31/99
Lee Abraham
$
6
$
0
$
71,133
12
Allan J.
Bloostein
$
6
$
0
$
112,483
19
Jane Dasher
$
6
$
0
$
65,733
12
Donald R.
Foley**
$ 606
$
0
$
71,300
12
Richard E.
Hanson
$
6
$
0
$
68,233
12
Paul Hardin
$ 609
$
0
$
90,450
14
Heath B.
McLendon*
$
0
$
0
0
71
Roderick C.
Rasmussen
$ 609
$
0
$
76,200
12
John P. Toolan**
$
0
$
0
$
69,100
12
________________________________________
* Designates a trustee who is an "interested person" of
the fund.
** Pursuant to a deferred compensation plan, the
indicated persons elected to defer the following
amounts of their compensation from the fund: Donald R.
Foley: $3, and John P. Toolan: $309, and the following
amounts of their total compensation from the fund
Complex: Donald R. Foley: $21,600, and John P.
Toolan: $69,100.
+Upon attainment of age 72 the fund's current trustees
may elect to change to emeritus status. Any trustee
elected or appointed to the board of trustees in the
future will be required to change to emeritus status
upon attainment of age 80. trustees Emeritus are
entitled to serve in emeritus status for a maximum of
10 years during which time they are paid 50% of the
annual retainer fee and meeting fees otherwise
applicable to the fund's trustees, together with
reasonable out-of-pocket expenses for each meeting
attended. During the fund's last fiscal year aggregate
compensation from the fund to Emeritus Trustees totaled
$304.
On April 19, 2000, trustees and officers owned in the
aggregate less than 1% of the outstanding securities of
the fund.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Portfolio's share
will be determined on any day that the New York Stock
Exchange is open. The New York Stock Exchange is
closed on the following holidays: New Year's Day,
Martin Luther King Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PURCHASE OF SHARES
The fund offers its shares of capital stock on a
continuos basis. Shares can be acquired only by buying
a Contract from a life insurance company designated by
the fund and directing the allocation of part or all of
the net purchase payment to one or more of eight
subaccounts, each of which invests in a Portfolio as
permitted under the Contract prospectus. Investors
should read this SAI and the fund's prospectus dated
April 28, 2000 along with the Contract prospectus.
REDEMPTION OF SHARES
Redemption payments shall be made wholly in cash
unless the trustees believe that economic conditions
exist that would make such a practice detrimental to
the best interests of the fund and its remaining
shareowners. If a redemption is paid in portfolio
securities, such securities will be valued in
accordance with the procedures described under "Share
Price" in the Prospectus and a shareholder would incur
brokerage expenses if these securities were then
converted to cash.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio of the fund intends to qualify as
a "regulated investment company" under the Internal
Revenue Code (the "Code") and to declare and make
annual distributions of substantially all of its
investment company taxable income and net capital gains
to its shareowners (i.e., the Separate Accounts). Such
distributions are automatically invested in additional
shares of the Portfolio at net asset value and are
includable in the gross income of the Separate Accounts
holding such shares. See the accompanying Contract
Prospectus for information regarding the federal income
tax treatment of distributions to the Separate Accounts
and to holders of the Contracts.
DIVERSIFICATION
Each Portfolio of the fund is subject to asset
diversification regulations promulgated by the U.S.
Treasury Department under the Code. The regulations
generally provide that, as of the end of each calendar
quarter or within 30 days thereafter, no more than 55%
of the total assets of the Portfolio may be represented
by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments,
and no more than 90% by any four investments. For this
purpose all securities of the same issuer are
considered a single investment. If a Portfolio should
fail to comply with these regulations, Contracts
invested in that Portfolio would not be treated as
annuity, endowment or life insurance contracts under
the Code.
INVESTMENT MANAGEMENT AND OTHER SERVICES
CUSTODIAN, TRANSFER AGENT AND SUB-TRANSFER AGENT
PNC Bank, National Association ("PNC" or "custodian"),
located at 17th and Chestnut Streets, Philadelphia,
Pennsylvania, 19103, serves as the custodian of the
fund. Under its custody agreement with the fund, PNC
holds the fund's securities and keeps all necessary
accounts and records. For its services, PNC receives a
monthly fee based upon the month-end market value of
securities held in custody and also receives securities
transactions charges. The assets of the fund are held
under bank custodianship in compliance with the 1940
Act.
Citi Fiduciary Trust Company, (formerly know as Smith
Barney Private Trust Company) (the "transfer agent")
located at 388 Greenwich Street, New York, New York
10013 serves as the transfer agent and shareholder
services agent for the fund.
PFPC Global Fund Services ("PFPC" or "sub-transfer
agent"), located at Exchange Place, Boston,
Massachusetts 02109, serves as the trust's sub-transfer
agent. Under the transfer agency agreement, the sub-
transfer agent maintains the shareholder account
records for the trust, handles certain communications
between shareholders and the trust and distributes
dividends and distributions payable by the trust. For
these services, the sub-transfer agent receives a
monthly fee computed on the basis of the number of
shareholder accounts it maintains for the trust during
the month, and is reimbursed for out-of-pocket
expenses.
DISTRIBUTOR
CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 serves as the fund's
distributor pursuant to a written agreement dated
October 8, 1998 (the "Distribution Agreement") which
was approved by the fund's Board of Trustees, including
a majority of the independent trustees on July 15,
1998. Prior to the merger of Travelers Group, Inc. and
Citicorp Inc. on October 8, 1998, Salomon Smith Barney
served as the fund's distributor.
INDEPENDENT AUDITORS
KPMG LLP, 757 Third Avenue, New York, NY 10017,
has been selected as the fund's independent auditors to
examine and report on each of the fund's financial
statements and highlights for the fiscal year ending
December 31, 2000.
THE FUND AND ITS INVESTMENTS
The fund, an open-end, diversified, managed
investment company, is organized as a "Massachusetts
business trust" pursuant to the Declaration of Trust
dated December 18, 1986. Pursuant to the Declaration
of Trust, the trustees have authorized the issuance of
three series of shares, each representing shares in one
of three separate Portfolios - the Income and Growth
Portfolio, the U.S. Government/High Quality Securities
Portfolio and the Reserve Account Portfolio. Pursuant
to such authority, the trustees may also authorize the
creation of additional series of shares and additional
classes of shares within any series (which would be
used to distinguish among the rights of different
categories of shareholders, as might be required by
future regulations or other unforeseen circumstances).
The investment objectives, policies and
restrictions applicable to additional Portfolios would
be established by the trustees at the time such
Portfolios were established and may differ from those
set forth in the Prospectus and this SAI. In the event
of liquidation or dissolution of a Portfolio or of the
fund, shares of a Portfolio are entitled to receive the
assets belonging to that Portfolio and a proportionate
distribution, based on the relative net assets of the
respective Portfolios, of any general assets not
belonging to any particular Portfolio that are
available for distribution.
The assets of each Portfolio will be segregated
and separately managed. Each share of a Portfolio
represents an equal proportionate interest in that
Portfolio with each other share of the same Portfolio
and is entitled to such dividends and distributions out
of the net income of that Portfolio as are declared in
the discretion of the trustees. Shareowners are
entitled to one vote for each share held and will vote
by individual Portfolio except to the extent required
by the Act. The fund is not required to hold annual
shareowner meetings, although special meetings may be
called for the fund as a whole, or a specific
Portfolio, for purposes such as electing or removing
trustees, changing fundamental policies or approving a
management contract. Shareowners may, in accordance
with the Declaration of Trust, cause a meeting of
shareowners to be held for the purpose of voting on the
removal of trustees. In accordance with current law
and as explained further in the accompanying Contract
Prospectus, the Separate Account will vote its shares
in accordance with instructions received from
policyowners.
The Declaration of Trust may be amended only by a
"majority shareholder vote" as defined therein, except
for certain amendments that may be made by the
trustees. The Declaration of Trust and the By-Laws of
the fund are designed to make the fund similar in most
respects to a Massachusetts business corporation. The
principal distinction between the two forms relates to
shareowner liability described below. Under
Massachusetts law, shareowners of a business trust may,
under certain circumstances, be held personally liable
as partners for the obligations of the trust, which is
not the case with a corporation. The Declaration of
Trust of the fund provides that shareowners shall not
be subject to any personal liability for the acts or
obligations of the fund and that every written
obligation, contract, instrument or undertaking made by
the fund shall contain a provision to the effect that
the shareowners are not personally liable thereunder.
Special counsel for the fund are of the opinion
that no personal liability will attach to the
shareowner under any undertaking containing such
provision when adequate notice of such provision is
given, except possibly in a few jurisdictions. With
respect to all types of claims in the latter
jurisdictions and with respect to tort claims, contract
claims where the provision referred to is omitted from
the undertaking, claims for taxes and certain statutory
liabilities in other jurisdictions, a shareowner may be
held personally liable to the extent that claims are
not satisfied by the fund; however, upon payment of any
such liability the shareowner will be entitled to
reimbursement from the general assets of the fund. The
trustees intend to conduct the operations of the fund,
with the advice of counsel, in such a way so as to
avoid, as far as possible, ultimate liability of the
shareowners for liabilities of the fund.
The Declaration of Trust further provides that no
trustee, officer or employee of the fund is liable to
the fund or to a shareowner, except as such liability
may arise from his or its own bad faith, willful
misfeasance, gross negligence, or reckless disregard of
his or its duties, nor is any trustee, officer or
employee personally liable to any third persons in
connection with the affairs of the fund. It also
provides that all third persons shall look solely to
the fund property or the property of the appropriate
Portfolio of the fund for satisfaction of claims
arising in connection with the affairs of the fund or a
particular Portfolio, respectively. With the
exceptions stated, the Declaration of Trust provides
that a trustee, officer or employee is entitled to be
indemnified against all liability in connection with
the affairs of the fund.
The fund shall continue without limitation of
time subject to the provisions in the Declaration of
Trust concerning termination of the trust or any of the
series of the trust by action of the shareowners or by
action of the trustees upon notice to the shareowners.
MANAGEMENT AGREEMENTS
The trustees are responsible for the direction
and supervision of the fund's business and operations.
The fund employs SSB Citi, a wholly-owned subsidiary of
Salomon Smith Barney Holdings Inc. ("Holdings"), to
manage the day to day operations of each Portfolio
pursuant to a management agreement entered into by the
fund on behalf of each Portfolio. Holdings is also the
parent company of Salomon Smith Barney Inc. ("Salomon
Smith Barney") and is a subsidiary of Citigroup Inc., a
diversified financial service holding company. The
manager was incorporated on March 12, 1968 under the
laws of the State of Delaware and converted to a
Delaware limited liability company in 1999. As of
March 2000 the manager renders investment advice to
investment companies that had aggregate assets under
management in excess of $197 billion. The manager,
Salomon Smith Barney and Holdings are each located at
388 Greenwich Street, New York, NY 10013. The term
"Smith Barney" in the title of the fund has been
adopted by permission of Salomon Smith Barney and is
subject to the right of Salomon Smith Barney to elect
that the fund stop using the term in any form or
combination of its name.
The manager provides each Portfolio with advice
and assistance with respect to the acquisition, holding
or disposal of securities and recommendations with
respect to other aspects of the business and affairs of
each Portfolio and furnishes each Portfolio with
bookkeeping, accounting and administrative services,
office space and equipment, and the services of the
officers and employees of the fund. By written
agreement Salomon Smith Barney's Research and other
departments and staff will furnish the manager with
information, advice and assistance and will be
available for consultation on the fund's Portfolios,
thus Salomon Smith Barney may also be considered an
investment adviser to the fund. Salomon Smith Barney's
services are paid for by the manager; there is no
charge to the fund for such services. For the services
provided by the manager, the fund pays the manager
monthly fees equal to 1/12 of .60% of the average daily
net assets of the Income and Growth Portfolio and 1/12
of .45% of the average daily net assets of the U.S.
Government/High Quality Portfolio and the Reserve
Account Portfolio. The manager has agreed to waive its
fee to the extent that the aggregate expenses of any
Portfolio exclusive of taxes, brokerage, interest and
extraordinary expenses, such as litigation and
indemnification expenses, exceed 1% of the average
daily net assets for any fiscal year of the Portfolio.
The 1% voluntary expense limitation shall be in effect
until it is terminated by notice to shareowners and by
supplement to the then current prospectus.
For 1997 the management fee for the Income and
Growth Portfolio was $109,300, the management fee for
U.S. Government/High Quality Portfolio was $9,382, and
the management fee for the Reserve Account Portfolio
was $857. For the year ended December 31, 1998, SSB
Citi waived all of its management fees and reimbursed
expenses of $4,832 and $15,552 for the U.S.
Government/High Quality Securities and Reserve Account
Portfolios, respectively. For the year ended December
31, 1999, the management fee for the Income and Growth
Portfolio was $77,096, for the U.S. Government/High
Quality Securities and Reserve Account Portfolios, SSBI
Citi waived all of its management fees and reimbursed
expenses of $16,270 and $29,987, respectively.
The Management Agreement for each of the fund's
Portfolios provides that all other expenses not
specifically assumed by the manager under the
Management Agreement on behalf of the Portfolio are
borne by the fund. Expenses payable by the fund
include, but are not limited to, all charges of
custodians (including sums as custodian and sums for
keeping books and for rendering other services to the
fund) and shareowner servicing agents, expenses of
preparing and printing its prospectuses, proxy
material, reports and notices sent to shareowners, all
expenses of shareowners' and trustees' meetings, filing
fees and expenses relating to the registration
statements, fees of auditors and legal counsel, out-of-
pocket expenses of trustees and fees of trustees who
are not "interested persons" as defined in the Act,
interest, taxes and governmental fees, fees and
commissions of every kind, expenses of issue,
repurchase or redemption of shares, insurance expense,
association membership dues, all other costs incident
to the fund's existence and extraordinary expenses such
as litigation and indemnification expenses. Direct
expenses of each Portfolio of the fund, including but
not limited to the respective management fees, are
charged to that Portfolio, and general trust expenses
are allocated among the Portfolios on the basis of
relative net assets. No sales or promotion expenses
are incurred by the fund, but expenses incurred in
complying with laws regulating the issue or sale of the
fund's shares, which are paid by the fund, are not
deemed sales or promotion expenses.
In addition, brokerage is allocated to Salomon
Smith Barney, provided that, in the judgment of the
trustees of the fund, the commission, fee or other
remuneration received or to be received by Salomon
Smith Barney (or any broker/dealer affiliate of Salomon
Smith Barney that is also a member of a securities
exchange) is reasonable and fair compared to the
commission, fee or other remuneration received by other
brokers in connection with comparable transactions
involving similar securities being purchased or sold on
a securities exchange during the same or comparable
period of time. In all trades to be directed to
Salomon Smith Barney, the fund has been assured that
its orders will be accorded priority over those
received from Salomon Smith Barney for its own account
or for any of its trustees, officers or employees. It
may expect that the preponderance of transactions in
the Government/High Quality Portfolio and the Reserve
Account Portfolio will be principal transactions, and
the fund will not deal with Salomon Smith Barney in any
transaction in which Salomon Smith Barney acts as
principal.
During fiscal year 1999, the percentage of total
brokerage commissions paid to Salomon Smith Barney was
28.43% and the percentage of total transactions
involving commissions paid to Salomon Smith Barney was
19.09% for Income and Growth Portfolio only. Shown
below are the total brokerage fees paid by the fund for
each of the past three years on behalf of the Income
and Growth Portfolio, the portion paid to Smith Barney
and the portion paid to other brokers for the execution
of orders allocated in consideration of research and
statistical services or solely for their ability to
execute the order.
Commissions
Total
To Salomon Smith Barney
To Others
for
Execution
Only
To Others For Execution
and Research and
Statistical Services
1997
1998
1999
$28,199
$20,477
$11,912
$11,006
$10,449
$ 2,637 39.2%
$ -0- -0-%
$ -0-
$ -0- -0-%
$17,139
$10,028
$ 9,275
60.8%
The board of trustees of the fund has adopted certain
policies and procedures incorporating the standard of
Rule l7e-l issued by the Securities and Exchange
Commission under the Act which requires that the
commissions paid to Salomon Smith Barney must be
"reasonable and fair compared to the commission, fee or
other remuneration received or to be received by other
brokers in connection with comparable transactions
involving similar securities during a comparable period
of time." The Rule and the policy and procedures also
contain review requirements and require the Manager to
furnish reports to the board of trustees and to
maintain records in connection with such reviews.
Code of Ethics. Pursuant to Rule 17j-1 of the 1940 Act,
the funds, their investment advisers and principal
underwriter have adopted codes of ethics that permit
personnel to invest in securities for their own
accounts, including securities that may be purchased or
held by the funds. All personnel must place the
interests of clients first and avoid activities,
interests and relationships that might interfere with
the duty to make decisions in the best interests of the
clients. All personal securities transactions by
employees must adhere to the requirements of the codes
and must be conducted in such a manner as to avoid any
actual or potential conflict of interest, the
appearance of such a conflict, or the abuse of an
employee's position of trust and responsibility.
A copy of the Fund's Code of Ethics is on file with the
Securities and Exchange Commission.
VOTING RIGHTS
The trustees themselves have the power to alter
the number and the terms of office of the trustees, and
they may at any time lengthen their own terms or make
their terms of unlimited duration (subject to certain
removal procedures) and appoint their own successors,
provided that in accordance with the Act always at
least a majority, but in most instances, at least two-
thirds of the trustees have been elected by the
shareowners of the fund. Shares do not have cumulative
voting rights and therefore the owners of more than 50%
of the outstanding shares of the fund may elect all of
the trustees irrespective of the votes of other
shareowners. Shares of the fund entitle their owners
to one vote per share; however, on any matter submitted
to a vote of the shareowners, all shares then entitled
to vote will be voted by individual Portfolio unless
otherwise required by the Act (in which case all shares
will be voted in the aggregate). For example, a change
in investment policy for a Portfolio would be voted
upon only by shareowners of the Portfolio involved.
Additionally, approval of each Portfolio's management
agreement is a matter to be determined separately by
that Portfolio. Approval of a proposal by the
shareowners of one Portfolio is effective as to that
Portfolio whether or not enough votes are received from
the shareowners of the other Portfolio to approve the
proposal as to that Portfolio.
As of April 19, 2000, Nationwide Life Insurance Co.
owned 891,114.622 (100%) of the outstanding shares of
the Income and Growth Portfolio, 60,316.934 (100%) of
the outstanding shares of the U.S. Government/High
Quality Securities Portfolio, and 4,704.546 (100%) of
the outstanding shares of the Reserve Account
Portfolio.
ADDITIONAL INFORMATION
Styles of Fund Management: In an industry where the
average portfolio manager has seven years of experience
(source: ICI, 1998), the portfolio managers of Smith
Barney mutual funds average 21 years in the industry
and 15 years with the firm.
Smith Barney mutual funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management
that can be tailored to suit each investor's unique
financial goals.
Style Pure Series - Our style Pure Series funds stay
fully invested within their asset class and investment
style, enabling investors to make asset allocation
decisions in conjunction with their Salomon Smith
Barney Financial Consultant.
Classic Investor Series - Our Classic Investor Series
funds offer a range of equity and fixed income
strategies that seek to capture opportunities across
asset classes and investment styles using disciplined
investment approaches.
The Concert Allocation Series - As a fund of funds,
investors can select a Concert Portfolio that may help
their investment needs. As needs change, investors can
easily choose another long-term, diversified investment
from our Concert family.
Special Discipline Series - Our Special Discipline
Series funds are designed for investors who are looking
beyond more traditional market categories: from natural
resources to a roster of state-specific municipal
funds.
FINANCIAL STATEMENTS
The fund's annual report for the fiscal year ended
December 31, 1999 is incorporated herein by reference
in its entirety. The annual report was filed on March
8, 2000, Accession Number 91155-00-000190.
APPENDIX - RATINGS OF DEBT OBLIGATIONS
BOND (AND NOTES) RATINGS
Moody's Investors Service, Inc.
Aaa - Bonds that are rated "Aaa" are judged to be
of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is
secure. While the various protective elements are
likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are rated "Aa" are judged to be
of high quality by all standards. Together with the
"Aaa" group they comprise what are generally known as
high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large
as in "Aaa" securities or fluctuation of protective
elements may be of greater amplitude or there may be
other elements present that make the long term risks
appear somewhat larger than in "Aaa" securities.
A - Bonds that are rated "A" possess many
favorable investment attributes and are to be
considered as upper medium grade obligations. Factors
giving security to principal and interest are
considered adequate by elements may be present that
suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds that are rated "Baa" are considered as
medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative
characteristics as well.
Ba - Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered
as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class.
B - Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance
of interest and principal payments or of maintenance of
other terms of the contract over any long period of
time may be small.
Caa - Bonds which are rated Caa are of poor
standing. Such issues may be in default or there may
be present elements of danger with respect to principal
or interest.
Ca - Bonds which are rated Ca represent
obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest class
of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining
any real investment standing.
Con (..) - Bonds for which the security depends
upon the completion of some act or the fulfillment of
some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in
operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical
rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: The modifier 1 indicates that the security
ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Standard & Poor's Ratings Group
AAA - Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated "AA" has a very strong capacity
to pay interest and repay principal and differs from
the highest rated issues only in small
degree.
A- Debt rated "A" has a strong capacity to pay
interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB - Debt rated "BBB" is regarded as having an
adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated 'BB', 'B', 'CCC',
'CC' and 'C' is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the
obligation. 'BB' indicates the lowest degree of
speculation and 'C' the highest degree of speculation.
While such debt will likely have some quality and
protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
Plus (+) or Minus (-): The ratings from 'AA' to
'B' may be modified by the addition of a plus or minus
sign to show relative standing within the
major rating categories.
Provisional Ratings: The letter "p" indicates that the
rating is provisional. A provisional rating assumes
the successful completion of the project being financed
by the debt being rated and indicates that payment of
debt service requirements is largely or entirely
dependent upon the successful and timely completion of
the project. This rating, however, while addressing
credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor
should exercise judgment with respect to such
likelihood and risk.
L The letter "L" indicates that the rating
pertains to the principal amount of those bonds where
the underlying deposit collateral is fully insured by
the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.
* Continuance of the rating is contingent upon
S&P's receipt of closing documentation confirming
investments and cash flow.
* Continuance of the rating is contingent upon
S&P's receipt of an executed copy of the escrow
agreement.
NR Indicates no rating has been requested, that
there is insufficient information on which to base a
rating, or that S&P does not rate a particular type of
obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.
Issuers rated "Prime-1" (or related supporting
institutions) have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment
will normally be evidenced by the following
characteristics: leading market positions in well-
established industries; high rates of return on funds
employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection;
broad margins in earnings coverage of fixed financial
changes and high internal cash generation; well-
established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated "Prime-2" (or related supporting
institutions) have strong capacity for repayment of
short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above
but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still
appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
Standard & Poor's Ratings Group
A-1 - This designation indicates that the degree
of safety regarding timely payment is either
overwhelming or very strong. Those issuers determined
to possess overwhelming safety characteristics will be
denoted with a plus (+) sign designation.
A-2 - Capacity for timely payment on issues with
this designation is strong. However, the
relative degree of safety is not as high as for issues
designated A-1.
- - 3 -
PART C - OTHER INFORMATION
Item 23 . Exhibits
(a) Declaration of Trust dated as of December
18, 1986 is
incorporated herein by reference to Exhibit 1 to Pre-
Effective Amendment No.
1 to the Registration Statement N. 33-10839.
(b) Bylaws of the Trust are incorporated by
reference to
Exhibit 2 to Pre-Effective Amendment No. 4.
(c) Not applicable.
(d) (1) Management Agreement between the
Income and
Growth Portfolio and Smith, Barney Advisers, Inc. is
incorporated by
reference to Exhibit 5(a)(i) to Pre-Effective Amendment No.
4.
(d) (2) Management Agreement between U.S.
Government/High Quality Securities Portfolio and Smith,
Barney Advisers, Inc.
by reference to Exhibit 5(a)(ii) to Pre-Effective Amendment
No. 4.
(d) (3) Management Agreement between
Reserve Account
Portfolio and Smith Barney Advisers, Inc. is incorporated
by reference to
Exhibit (5)(a)(iii) to Pre-Effective Amendment No. 4.
(d) (4) Subadvisory Agreement between
Smith, Barney
Advisers, Inc. and Smith Barney, Harris Upham & Co.
Incorporated is
incorporated by reference to Exhibit (5)(b) to Pre-
Effective Amendment No. 4.
(e) Distribution Agreement between Smith
Barney Variable
Account Funds and CFBDS, Inc. is incorporated by reference
to Exhibit (e)
to Post-Effective Amendment No.11.
(f) Not applicable.
(g) Custodian Agreement between Registrant
and Provident
National Bank is incorporated herein by reference to
Exhibit 8 to Pre-
Effective Amendment No. 4.
(h) (1) Transfer Agency Agreement between
Registrant and
Provident Financial Processing Corp. is incorporated herein
by reference
to Exhibit 9 to Pre-Effective Amendment No. 4.
(h) (2) Form of Transfer Agency Agreement
between
Registrant and First Data Investor Services Group, Inc. is
incorporated herein by reference to Exhibit 9(b) to Post-
Effective
Amendment No. 8.
(i) (1) Opinion of Sullivan & Cromwell is
incorporated
by reference to Pre-Effective Amendment No. 1.
(i) (2) Opinion of Gaston & Snow is
incorporated herein
by reference to Exhibit 10 to Pre-Effective Amendment No.
4.
(j) Auditors' Consent (filed herewith)
(k) Not applicable.
(l) Subscription Agreement between the Fund and
Smith, Barney Advisers, Inc. dated June 27, 1989 is
incorporated
herein by reference to Exhibit 13 to Pre-Effective
Amendment No. 4.
(m) Not applicable.
(n) Financial Data Schedule is filed
herewith.
(o) Plan 3 pursuant to Rule 18f-3 is
incorporated by
reference to Exhibit 18 to Post-Effective Amendment No. 7
(p) Code of Ethics is filed herewith.
Item 24. Persons Controlled by or under Common Control
with Registrant.
The Registrant is not controlled directly or
indirectly by
any person. Information with respect to the Registrant's
investment manager
is set forth under the caption "Management" in the
prospectus included in
Part A of this Amendment to the Registration Statement on
Form N-1A.
Item 25. Indemnification
Reference is made to ARTICLE V of Registrant's
Declaration
of Trust for a complete statement of its terms. Section
52. of ARTICLE V
provides: "No Trustee, officer, employee or agent of the
Trust shall be
liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer,
employee or agent thereof for any action or failure to act
(including without
limitation the failure to compel in any way any former or
acting Trustee to
redress any breach of trust) except for his own bad faith,
willful
misfeasance, gross negligence or reckless disregard of his
or its duties."
Emphasis added.
Item 26. Business and other Connections of the Manager and
Investment
Adviser
Investment Adviser - SSB Citi Fund Management LLC ("SSB
Citi")
(successor to SSBC Fund Management Inc.) was incorporated
in December 1968 under the laws of the State of Delaware.
On September 21, 1999, SSB Citi was converted into a
Delaware Limited Liability Company. SSB Citi is a wholly
owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"), which in turn is a wholly owned subsidiary of
Citigroup Inc. (formerly known as Travelers Group Inc.).
SSB Citi is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") and
has, through its predecessors, been in the investment
counseling business since 1968.
The list required by this Item 26 of officers and directors
of SSB Citi together with information as to any other
business, profession, vocation or employment of a
substantial nature engaged in by such officers and
directors during the past two fiscal years, is incorporated
by reference to Schedules A and D of FORM ADV filed by SSB
Citi pursuant to the Advisers Act (SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM
Large Cap
Growth Portfolio, CitiFundsSM Intermediate Income
Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash
Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM
Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid
Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free
Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM
Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth &
Income
Portfolio,CitiFundsSM Small Cap Growth Portfolio,
CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free
Income
Portfolio,CitiSelect VIP Folio 200, Citiselect VIP Folio
300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect
Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400, and CitiSelect
Folio
500.
CFBDS is also the placement agent for Large Cap Value
Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves
Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment Trust
Smith Barney Investment Funds Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Sector Series Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS also serves as the distributor for the following
funds: The
Travelers Fund UL for Variable Annuities, The Travelers
Fund VA for
Variable Annuities, The Travelers Fund BD for Variable
Annuities, The
Travelers Fund BD II for Variable Annuities, The Travelers
Fund BD
III for Variable Annuities, The Travelers Fund BD IV for
Variable
Annuities, The Travelers Fund ABD for Variable Annuities,
The
Travelers Fund ABD II for Variable Annuities, The Travelers
Separate
Account PF for Variable Annuities, The Travelers Separate
Account PF
II for Variable Annuities, The Travelers Separate Account
QP for
Variable Annuities, The Travelers Separate Account TM for
Variable
Annuities, The Travelers Separate Account TM II for
Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable
Annuities,
The Travelers Separate Account Seven for Variable
Annuities, The
Travelers Separate Account Eight for Variable Annuities,
The
Travelers Fund UL for Variable Annuities, The Travelers
Fund UL II
for Variable Annuities, The Travelers Variable Life
Insurance
Separate Account One, The Travelers Variable Life Insurance
Separate
Account Two, The Travelers Variable Life Insurance Separate
Account
Three, The Travelers Variable Life Insurance Separate
Account Four,
The Travelers Separate Account MGA, The Travelers Separate
Account
MGA II, The Travelers Growth and Income Stock Account for
Variable
Annuities, The Travelers Quality Bond Account for Variable
Annuities,
The Travelers Money Market Account for Variable Annuities,
The
Travelers Timed Growth and Income Stock Account for
Variable
Annuities, The Travelers Timed Short-Term Bond Account for
Variable
Annuities, The Travelers Timed Aggressive Stock Account for
Variable
Annuities, The Travelers Timed Bond Account for Variable
Annuities.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
In addition, CFBDS is also the distributor for the
Centurion Funds,
Inc.
(b) The information required by this Item 27 with respect
to each
director and officer of CFBDS is incorporated by reference
to
Schedule A of Form BD filed by CFBDS pursuant to the
Securities and
Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records
PNC Bank, National Association, 17th and
Chestnut Streets,
Philadelphia, Pennsylvania 19103, and First Data Investor
Services Group,
Inc., Exchange Place, Boston, Massachusetts 02109-2873,
will maintain the
custodian and the shareholders servicing agent records,
respectively required
by Section 31(a) of the Investment Company Act of 1940, as
amended (the 1940
Act).
All other records required by Section 31(a) of the
1940 Act are
maintained at the offices of the Registrant at 388
Greenwich Street, New
York, New York 10013 (and preserved for the periods
specified by Rule
31a-2 of the 1940 Act).
Item 29. Management Services
Not applicable.
Item 30. Undertakings
None
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933
and the Investment Company Act of 1940, the Registrant
certifies that it meets
all of the requirements for effectiveness of this Post-
Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under
the Securities Act
of 1933 and has duly caused this Post-Effective Amendment
to its
Registration Statement to be signed on its behalf by the
undersigned, and
where applicable, the true and lawful attorney-in-fact,
thereto duly
authorized, in the City of New York, and State of New York
on the 27th day
of April 2000.
SMITH BARNEY VARIABLE ACCOUNT FUNDS
By/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this
Post-Effective Amendment to the Registration Statement has
been signed below
by the following persons in the capacities and on the date
indicated.
Signatures Title Date
/s/ Heath B. McLendon Chairman of the Board April
27, 2000
(Heath B. McLendon) and Chief Executive Officer
/s/ Lewis E. Daidone Senior Vice President
(Lewis E. Daidone) and Treasurer
April 27, 2000
Lee Abraham* Trustee
April 27, 2000
(Lee Abraham)
Alan J. Bloostein* Trustee
April 27, 2000
(Alan J. Bloostein)
Jane R. Dasher* Trustee April
27, 2000
(Jane R. Dasher)
Donald R. Foley* Trustee
April 27, 2000
(Donald R. Foley)
Richard E. Hanson, Jr. Trustee April
27, 2000
(Richard E. Hanson, Jr.)
Paul Hardin* Trustee
April 27, 2000
(Paul Hardin)
Roderick C. Rasmussen* Trustee
April 27, 2000
(Roderick C. Rasmussen)
John P. Toolan* Trustee
April 27, 2000
(John P. Toolan)
*By: /s/ Christina T. Sydor
April 27, 2000
Christina T. Sydor
Pursuant to Power of Attorney
EXHIBIT INDEX
j. Auditors'Consent
n. Financial Data Schedule
p. Code of Ethics
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
Smith Barney Variable Account Funds:
We consent to the incorporation by reference, with respect
to the portfolios listed below for the Smith Barney Variable
Account Funds (the Funds), in this Prospectus and Statement
of Additional Information, of our report dated February 11,
2000, on the statement of assets and liabilities as of
December 31, 1999 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 five-year period then ended. These financial statements
and financial highlights and our report thereon are included
in the Annual Report of the Funds as filed on Form N-30D.
We also consent to the references to our firm under the
headings "Financial Highlights" in the Prospectus and
"Independent Auditors" in the Statement of Additional
Information.
Portfolio
Income and Growth Portfolio
U.S. Government/High Quality Securities Portfolio
Reserve Account Portfolio
KPMG
LLP
New York, New York
April 25, 2000
Page
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PERSONAL INVESTMENT POLICY
FOR
SSB CITI ASSET MANAGEMENT GROUP - NORTH AMERICA
AND CERTAIN REGISTERED INVESTMENT COMPANIES
SSB Citi Asset Management Group ("SSB Citi") , and
those U.S.?registered investment companies advised or
managed by SSB Citi that have adopted this policy
("Funds"), have adopted this policy on securities
transactions in order to accomplish two goals: first,
to minimize conflicts and potential conflicts of
interest between employees of SSB Citi and SSB Citi's
clients (including the Funds), and between Fund
directors or trustees and their Funds, and second, to
provide policies and procedures consistent with
applicable law, including Rule 17j-1 under the
Investment Company Act of 1940, to prevent fraudulent
or manipulative practices with respect to purchases
or sales of securities held or to be acquired by
client accounts. All U.S. employees of SSB Citi,
including employees who serve as Fund officers or
directors, and all directors or trustees
("directors") of each Fund, are Covered Persons under
this policy. Other Covered Persons are described in
Section II below.
I. Statement of Principles - All SSB Citi
employees owe a fiduciary duty to SSB Citi's clients
when conducting their personal investment
transactions. Employees must place the interests of
clients first and avoid activities, interests and
relationships that might interfere with the duty to
make decisions in the best interests of the clients.
All Fund directors owe a fiduciary duty to each Fund
of which they are a director and to that Fund's
shareholders when conducting their personal
investment transactions. At all times and in all
matters Fund directors shall place the interests of
their Funds before their personal interests. The
fundamental standard to be followed in personal
securities transactions is that Covered Persons may
not take inappropriate advantage of their positions.
All personal securities transactions by Covered
Persons shall adhere to the requirements of this
policy and shall be conducted in such a manner as to
avoid any actual or potential conflict of interest,
the appearance of such a conflict, or the abuse of
the person's position of trust and responsibility.
While this policy is designed to address both
identified conflicts and potential conflicts, it
cannot possibly be written broadly enough to cover
all potential situations. In this regard, Covered
Persons are expected to adhere not only to the
letter, but also the spirit of the policies contained
herein.
Employees are reminded that they also are subject to
other Citigroup policies, including policies on
insider trading, the purchase and sale of securities
listed on any applicable SSB Citi restricted list,
the receipt of gifts and service as a director of a
publicly traded company. Employees must never trade
in a security or commodity while in possession of
material, non-public information about the issuer or
the market for those securities or commodities, even
if the employee has satisfied all other requirements
of this policy.
The reputation of SSB Citi and its employees for
straightforward practices and integrity is a
priceless asset, and all employees have the duty and
obligation to support and maintain it when conducting
their personal securities transactions.
II. Applicability - SSB Citi Employees - This
policy applies to all U.S. employees of SSB Citi,
including part-time employees. Each employee,
including employees who serve as Fund officers or
directors, must comply with all of the provisions of
the policy applicable to SSB Citi employees unless
otherwise indicated. Certain employees are considered
to be "investment personnel" (i.e., portfolio
managers, traders and research analysts (and each of
their assistants)), and as such, are subject to
certain additional restrictions outlined in the
policy. All other employees of SSB Citi are
considered to be "advisory personnel."
Generally, temporary personnel and consultants
working in any SSB Citi business are subject to the
same provisions of the policy as full-time employees,
and their adherence to specific requirements will be
addressed on a case-by-case basis.
The personal investment policies, procedures and
restrictions referred to herein also apply to an
employee's spouse and minor children. The policies
also apply to any other account over which the
employee is deemed to have beneficial ownership. This
includes: accounts of any immediate family members
sharing the same household as the employee; accounts
of persons or other third parties for whom the
employee exercises investment discretion or gives
investment advice; a legal vehicle in which the
employee has a direct or indirect beneficial interest
and has power over investment decisions; accounts for
the benefit of a third party (e.g., a charity) which
may be directed by the employee (other than in the
capacity of an employee); and any account over which
the employee may be deemed to have control. For a
more detailed description of beneficial ownership,
see Exhibit A attached hereto.
These policies place certain restrictions on the
ability of an employee to purchase or sell securities
that are being or have been purchased or sold by an
SSB Citi managed fund or client account. The
restrictions also apply to securities that are
"related" to a security being purchased or sold by an
SSB Citi managed fund or client account. A "related
security" is one whose value is derived from the
value of another security (e.g., a warrant, option or
an indexed instrument).
Fund Directors - This policy applies to all directors
of Funds that have adopted this policy. The personal
investment policies, procedures and restrictions that
specifically apply to Fund directors apply to all
accounts and securities in which the director has
direct or indirect beneficial ownership. See Exhibit
A attached hereto for a more detailed description of
beneficial ownership.
Securities are defined as stocks, notes, bonds,
closed-end mutual funds, debentures, and other
evidences of indebtedness, including senior debt,
subordinated debt, investment contracts, commodity
contracts, futures and all derivative instruments
such as options, warrants and indexed instruments,
or, in general, any interest or instrument commonly
known as a "security."
III. Enforcement - It is the responsibility of each
Covered Person to act in accordance with a high
standard of conduct and to comply with the policies
and procedures set forth in this document. SSB Citi
takes seriously its obligation to monitor the
personal investment activities of its employees. Any
violation of this policy by employees will be
considered serious, and may result in disciplinary
action, which may include the unwinding of trades,
disgorgement of profits, monetary fine or censure,
and suspension or termination of employment. Any
violation of this policy by a Fund director will be
reported to the Board of Directors of the applicable
Fund, which may impose such sanctions as it deems
appropriate.
IV. Opening and Maintaining Employee Accounts - All
employee brokerage accounts, including spouse
accounts, accounts for which the employee is deemed
to have beneficial ownership, and any other accounts
over which the employee and/or spouse exercise
control, must be maintained either at Salomon Smith
Barney ("SSB") or at Citicorp Investment Services
("CIS"). For spouses or other persons who, by
reason of their employment, are required to conduct
their securities, commodities or other financial
transactions in a manner inconsistent with this
policy, or in other exceptional circumstances,
employees may submit a written request for an
exemption to the Compliance Department. If approval
is granted, copies of trade confirmations and monthly
statements must be sent to the Compliance Department.
In addition, all other provisions of this policy will
apply.
V. Excluded Accounts and Transactions - The
following types of accounts/transactions need not be
maintained at SSB or CIS, nor are they subject to the
other restrictions of this policy:
1. Accounts at outside mutual funds that hold only
shares of open-end funds purchased directly from that
fund company. Note: transactions relating to
closed-end funds are subject to the pre-clearance,
blackout period and other restrictions of this
policy;
2. Estate or trust accounts in which an employee
or related person has a beneficial interest, but no
power to affect investment decisions. There must be
no communication between the account(s) and the
employee with regard to investment decisions prior to
execution. The employee must direct the trustee/bank
to furnish copies of confirmations and statements to
the Compliance Department;
3. Fully discretionary accounts managed by either
an internal or external registered investment adviser
are permitted and may be custodied away from SSB and
CIS if (i) the employee receives permission from the
Regional Director of Compliance and the unit's Chief
Investment Officer, and (ii) there is no
communication between the manager and the employee
with regard to investment decisions prior to
execution. The employee must designate that copies
of trade confirmations and monthly statements be sent
to the Compliance Department;
4. Employees may participate in direct investment
programs which allow the purchase of securities
directly from the issuer without the intermediation
of a broker/dealer provided that the timing and size
of the purchases are established by a pre-arranged,
regularized schedule (e.g., dividend reinvestment
plans). Employees must pre-clear the transaction at
the time that the dividend reinvestment plan is being
set up. Employees also must provide documentation of
these arrangements and direct periodic (monthly or
quarterly) statements to the Compliance Department;
and
5. In addition to the foregoing, the following
types of securities are exempted from pre-clearance,
blackout periods, reporting and short-term trading
requirements: open-ended mutual funds; open-end unit
investment trusts; U.S. Treasury bills, bonds and
notes; mortgage pass-throughs (e.g. Ginnie Maes) that
are direct obligations of the U.S. government;
bankers acceptances; bank certificates of deposit;
commercial paper; and high quality short-term debt
instruments (meaning any instrument that has a
maturity at issuance of less than 366 days and that
is rated in one of the two highest rating categories
by a nationally recognized statistical rating
organization, such as S&P or Moody's), including
repurchase agreements.
VI. Securities Holding Period/Short-Term Trading -
Securities transactions must be for investment
purposes rather than for speculation. Consequently,
employees may not profit from the purchase and sale,
or sale and purchase, of the same or equivalent
securities within sixty (60) calendar days,
calculated on a First In, First Out (FIFO) basis
(i.e., the security may be sold on the 61st day).
Citigroup securities received as part of an
employee's compensation are not subject to the 60-day
holding period. All profits from short-term trades
are subject to disgorgement. However, with the prior
written approval of both a Chief Investment Officer
and the Regional Director of Compliance, and only in
rare and/or unusual circumstances, an employee may
execute a short-term trade that results in a
significant loss or in break-even status.
VII. Pre-Clearance - All SSB Citi employees must
pre-clear all personal securities transactions (see
Section V for a listing of accounts, transactions and
securities that do not require pre-clearance). A copy
of the pre-clearance form is attached as Exhibit B.
In addition, employees are prohibited from engaging
in more than twenty (20) transactions in any calendar
month, except with prior written approval from their
Chief Investment Officer, or designee. A transaction
must not be executed until the employee has received
the necessary approval. Pre-clearance is valid only
on the day it is given. If a transaction is not
executed on the day pre-clearance is granted, it is
required that pre-clearance be sought again on a
subsequent day (i.e., open orders, such as limit
orders, good until cancelled orders and stop-loss
orders, must be pre-cleared each day until the
transaction is effected). In connection with
obtaining approval for any personal securities
transaction, employees must describe in detail any
factors which might be relevant to an analysis of the
possibility of a conflict of interest. Any trade
that violates the pre-clearance process may be
unwound at the employee's expense, and the employee
will be required to absorb any resulting loss and to
disgorge any resulting profit.
In addition to the foregoing, the CGAM NA Director of
Global Equity Research, or his designate, must
approve all personal securities transactions for
members of the CGAM Research Department prior to pre-
clearance from the Compliance Department as set forth
in this section. Pre-approval by the Director of
Research, or his designate, is in addition to and
does not replace the requirement for the pre-
clearance of all personal securities transactions.
VIII. Blackout Periods - No Covered Person shall
purchase or sell, directly or indirectly, any
security in which he/she has, or by reason of the
transaction acquires, any direct or indirect
beneficial ownership if he/she has knowledge at the
time of such transaction that the security is being
purchased or sold, or is being considered for
purchase or sale, by a managed fund or client account
or in the case of a Fund director, by the director's
Fund. In addition, the following Blackout Periods
apply to the categories of SSB Citi employees listed
below:
1. Portfolio Managers and Portfolio Manager
Assistants - may not buy or sell any securities for
personal accounts seven (7) calendar days before or
after managed funds or client accounts he/she manages
trade in that security.
2. Traders and Trader Assistants - may not buy or
sell any securities for personal accounts three (3)
calendar days before or seven (7) calendar days after
managed funds or client accounts he/she executes
trades for trade in that security.
3. Research Analysts and Research Assistants - may
not buy or sell any securities for personal accounts:
seven (7) calendar days before or after the issuance
of or a change in any recommendation; or seven (7)
calendar days before or after any managed fund or
client account about which the employee is likely to
have trading or portfolio information (as determined
by the Compliance Department) trades in that
security.
4. Advisory Personnel (see Section II for details)
- - may not buy or sell any securities for personal
accounts on the same day that a managed fund or
client account about which the employee is likely to
have trading or portfolio information (as determined
by the Compliance Department) trades in that
security.
5. Unit Trust Personnel - all employees assigned
to the Unit Trust Department are prohibited from
transacting in any security when a SSB Citi-sponsored
Unit Trust portfolio is buying the same (or a
related) security, until seven business days after
the later of the completion of the accumulation
period or the public announcement of the trust
portfolio. Similarly, all UIT employees are
prohibited from transacting in any security held in a
UIT (or a related security) seven business days prior
to the liquidation period of the trust.
Employees in the above categories may also be
considered Advisory Personnel for other accounts
about which the employee is likely to have trading or
portfolio information (as determined by the
Compliance Department).
Any violation of the foregoing provisions will
require the employee's trade to be unwound, with the
employee absorbing any resulting loss and disgorging
any resulting profit. Advisory personnel are subject
to the unwinding of the trade provision; however,
they may not be required to absorb any resulting loss
(at the discretion of the Compliance Department and
the employee's supervisor). Please be reminded that,
regardless of the provisions set forth above, all
employees are always prohibited from effecting
personal securities transactions based on material,
non-public information.
Blackout period requirements shall not apply to any
purchase or sale, or series of related transactions
involving the same or related securities, involving
500 or fewer shares in the aggregate if the issuer
has a market capitalization (outstanding shares
multiplied by the current price per share) greater
than $10 billion and is listed on a U.S. Stock
Exchange or NASDAQ. Note: Pre-clearance is still
required. Under certain circumstances, the Compliance
Department may determine that an employee may not
rely upon this "Large Cap/De Minimis" exemption. In
such a case, the employee will be notified prior to
or at the time the pre-clearance request is made.
IX. Prohibited Transactions - The following
transactions by SSB Citi employees are prohibited
without the prior written approval from the Chief
Investment Officer, or designee, and the Regional
Compliance Director:
1. The purchase of private placements; and
2. The acquisition of any securities in an initial
public offering (new issues of municipal debt
securities may be acquired subject to the other
requirements of this policy (e.g., pre-clearance).)
X. Transactions in Options and Futures - SSB Citi
employees may buy or sell derivative instruments such
as individual stock options, options and futures on
indexes and options and futures on fixed-income
securities, and may buy or sell physical commodities
and futures and forwards on such commodities. These
transactions must comply with all of the policies and
restrictions described in this policy, including pre-
clearance, blackout periods, transactions in
Citigroup securities and the 60-day holding period.
However, the 60-day holding period does not apply to
individual stock options that are part of a hedged
position where the underlying stock has been held for
more than 60 days and the entire position (including
the underlying security) is closed out.
XI. Prohibited Recommendations - No Covered Person
shall recommend or execute any securities transaction
by any managed fund or client account, or, in the
case of a Fund director, by the director's Fund,
without having disclosed, in writing, to the Chief
Investment Officer, or designee, any direct or
indirect interest in such securities or issuers,
except for those securities purchased pursuant to the
"Large Cap/De Minimis" exemption described in Section
VIII above. Prior written approval of such
recommendation or execution also must be received
from the Chief Investment Officer, or designee. The
interest in personal accounts could be in the form
of:
1. Any direct or indirect beneficial ownership of
any securities of such issuer;
2. Any contemplated transaction by the person in
such securities;
3. Any position with such issuer or its
affiliates; or
4. Any present or proposed business relationship
between such issuer or its affiliates and the person
or any party in which such person has a significant
interest.
XII. Transactions in Citigroup Securities - Unless
an SSB Citi employee is a member of a designated
group subject to more restrictive provisions, or is
otherwise notified to the contrary, the employee may
trade in Citigroup securities without restriction
(other than the pre-clearance and other requirements
of this policy), subject to the limitations set forth
below.
Employees whose jobs are such that they know about
Citigroup's quarterly earnings prior to release may
not engage in any transactions in Citigroup
securities during the "blackout periods" beginning on
the first day of a calendar quarter and ending on the
second business day following the release of earnings
for the prior quarter. Members of the SSB Citi
Executive Committee and certain other senior SSB Citi
employees are subject to these blackout periods.
Stock option exercises are permitted during a
blackout period (but the simultaneous exercise of an
option and sale of the underlying stock is
prohibited). With regard to exchange traded options,
no transactions in Citigroup options are permitted
except to close or roll an option position that
expires during a blackout period. Charitable
contributions of Citigroup securities may be made
during the blackout period, but an individual's
private foundation may not sell donated Citigroup
common stock during the blackout period. "Good 'til
cancelled" orders on Citigroup stock must be
cancelled before entering a blackout period and no
such orders may be entered during a blackout period.
No employee may engage at any time in any personal
transactions in Citigroup securities while in
possession of material non-public information.
Investments in Citigroup securities must be made with
a long-term orientation rather than for speculation
or for the generation of short-term trading profits.
In addition, please note that employees may not
engage in the following transactions:
Short sales of Citigroup securities;
Purchases or sales of options ("puts" or
"calls") on Citigroup securities, except writing a
covered call at a time when the securities could have
been sold under this policy;
Purchases or sales of futures on Citigroup
securities; or
Any transactions relating to Citigroup
securities that might reasonably appear speculative.
The number of Citigroup shares an employee is
entitled to in the Citigroup Stock Purchase Plan is
not treated as a long stock position until such time
as the employee has given instructions to purchase
the shares of Citigroup. Thus, employees are not
permitted to use options to hedge their financial
interest in the Citigroup Stock Purchase Plan.
Contributions into the firm's 401(k) Plan are not
subject to the restrictions and prohibitions
described in this policy.
XIII. Acknowledgement and Reporting Requirements -
SSB Citi Employees - All new SSB Citi employees must
certify that they have received a copy of this
policy, and have read and understood its provisions.
In addition, all SSB Citi employees must:
1. Acknowledge receipt of the policy and any
modifications thereof, in writing (see Exhibit C for
the form of Acknowledgement);
2. Within 10 days of becoming an SSB Citi
employee, disclose in writing all information with
respect to all securities beneficially owned and any
existing personal brokerage relationships (employees
must also disclose any new brokerage relationships
whenever established). Such information should be
provided on the form attached as Exhibit D;
3. Direct their brokers to supply, on a timely
basis, duplicate copies of confirmations of all
personal securities transactions (Note: this
requirement may be satisfied through the transmission
of automated feeds);
4. Within 10 days after the end of each calendar
quarter, provide information relating to securities
transactions executed during the previous quarter for
all securities accounts (Note: this requirement may
be satisfied through the transmission of automated
feeds);
5. Submit an annual holdings report containing
similar information that must be current as of a date
no more than 30 days before the report is submitted,
and confirm at least annually all brokerage
relationships and any and all outside business
affiliations (Note: this requirement may be
satisfied through the transmission of automated feeds
or the regular receipt of monthly brokerage
statements); and
6. Certify on an annual basis that he/she has read
and understood the policy, complied with the
requirements of the policy and that he/she has pre-
cleared and disclosed or reported all personal
securities transactions and securities accounts
required to be disclosed or reported pursuant to the
requirements of the policy.
Fund Directors - Fund Directors shall deliver the
information required by Items 1 through 6 of the
immediately preceding paragraph, except that a Fund
director who is not an "interested person" of the
Fund within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940, and who would be
required to make reports solely by reason of being a
Fund Director, is not required to make the initial
and annual holdings reports required by Items 2 and
5. Also, a "non-interested" Fund Director need not
supply duplicate copies of confirmations of personal
securities transactions required by Item 3, and need
only make the quarterly transactions reports required
by Item 4 as to any security if at the time of a
transaction by the Director in that security, he/she
knew or in the ordinary course of fulfilling his/her
official duties as a Fund Director should have known
that, during the 15-day period immediately preceding
or following the date of that transaction, that
security is or was purchased or sold by that
Director's Fund or was being considered for purchase
or sale by that Director's Fund.
Disclaimer of Beneficial Ownership - The reports
described in Items 4 and 5 above may contain a
statement that the reports shall not be construed as
an admission by the person making the reports that
he/she has any direct or indirect beneficial
ownership in the securities to which the reports
relate.
XIV. Handling of Disgorged Profits - Any amounts
that are paid/disgorged by an employee under this
policy shall be donated by SSB Citi to one or more
charities. Amounts donated may be aggregated by SSB
Citi and paid to such charity or charities at the end
of each year.
XV. Confidentiality - All information obtained from
any Covered Person pursuant to this policy shall be
kept in strict confidence, except that such
information will be made available to the Securities
and Exchange Commission or any other regulatory or
self-regulatory organization or to the Fund Boards of
Directors to the extent required by law, regulation
or this policy.
XVI. Other Laws, Rules and Statements of Policy -
Nothing contained in this policy shall be interpreted
as relieving any person subject to the policy from
acting in accordance with the provision of any
applicable law, rule or regulation or, in the case of
SSB Citi employees, any statement of policy or
procedure governing the conduct of such person
adopted by Citigroup, its affiliates and
subsidiaries.
XVII. Retention of Records - All records relating to
personal securities transactions hereunder and other
records meeting the requirements of applicable law,
including a copy of this policy and any other
policies covering the subject matter hereof, shall be
maintained in the manner and to the extent required
by applicable law, including Rule 17j-1 under the
1940 Act. The Compliance Department shall have the
responsibility for maintaining records created under
this policy.
XVIII. Monitoring - SSB Citi takes seriously its
obligation to monitor the personal investment
activities of its employees and to review the
periodic reports of all Covered Persons. Employee
personal investment transaction activity will be
monitored by the Compliance Department. All noted
deviations from the policy requirements will be
referred back to the employee for follow-up and
resolution (with a copy to be supplied to the
employee's supervisor). Any noted deviations by Fund
directors will be reported to the Board of Directors
of the applicable Fund for consideration and follow-
up as contemplated by Section III hereof.
XIX. Exceptions to the Policy - Any exceptions to
this policy must have the prior written approval of
both the Chief Investment Officer and the Regional
Director of Compliance. Any questions about this
policy should be directed to the Compliance
Department.
XX. Board Review - Fund management and SSB Citi
shall provide to the Board of Directors of each Fund,
on a quarterly basis, a written report of all
material violations of this policy, and at least
annually, a written report and certification meeting
the requirements of Rule 17j-1 under the 1940 Act.
XXI. Other Codes of Ethics - To the extent that any
officer of any Fund is not a Covered Person
hereunder, or an investment subadviser of or
principal underwriter for any Fund and their
respective access persons (as defined in Rule 17j-1)
are not Covered Persons hereunder, those persons must
be covered by separate codes of ethics which are
approved in accordance with applicable law.
XXII. Amendments - SSB Citi Employees - Unless
otherwise noted herein, this policy shall become
effective as to all SSB Citi employees on March 30,
2000. This policy may be amended as to SSB Citi
employees from time to time by the Compliance
Department. Any material amendment of this policy
shall be submitted to the Board of Directors of each
Fund for approval in accordance with Rule 17j-1 under
the 1940 Act.
Fund Directors - This policy shall become
effective as to a Fund upon the approval and adoption
of this policy by the Board of Directors of that Fund
in accordance with Rule 17j-1 under the 1940 Act or
at such earlier date as determined by the Secretary
of the Fund. Any material amendment of this policy
that applies to the directors of a Fund shall become
effective as to the directors of that Fund only when
the Board of Directors of that Fund has approved the
amendment in accordance with Rule 17j-1 or at such
earlier date as determined by the Secretary of the
Fund.
March 15, 2000
EXHIBIT A
EXPLANATION OF BENEFICIAL OWNERSHIP
You are considered to have "Beneficial Ownership" of
Securities if you have or share a direct or indirect
"Pecuniary Interest" in the Securities.
You have a "Pecuniary Interest" in Securities if you
have the opportunity, directly or indirectly, to
profit or share in any profit derived from a
transaction in the Securities.
The following are examples of an indirect Pecuniary
Interest in Securities:
1. Securities held by members of your immediate
family sharing the same household; however, this
presumption may be rebutted by convincing evidence
that profits derived from transactions in these
Securities will not provide you with any economic
benefit.
"Immediate family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law,
and includes any adoptive relationship.
2. Your interest as a general partner in
Securities held by a general or limited partnership.
3. Your interest as a manager-member in the
Securities held by a limited liability company.
You do not have an indirect Pecuniary Interest in
Securities held by a corporation, partnership,
limited liability company or other entity in which
you hold an equity interest, unless you are a
controlling equityholder or you have or share
investment control over the Securities held by the
entity.
The following circumstances constitute Beneficial
Ownership by you of Securities held by a trust:
1. Your ownership of Securities as a trustee where
either you or members of your immediate family have a
vested interest in the principal or income of the
trust.
2. Your ownership of a vested interest in a trust.
3. Your status as a settlor of a trust, unless the
consent of all of the beneficiaries is required in
order for you to revoke the trust.
The foregoing is a summary of the meaning of
"beneficial ownership". For purposes of the attached
policy, "beneficial ownership" shall be interpreted
in the same manner as it would be in determining
whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and
the rules and regulations thereunder
