SMITH BARNEY TRAVELERS SERIES FUND INC, 485A24F, 1995-06-30

SMITH BARNEY TRAVELERS SERIES FUND INC
485A24F, 1995-06-30

Previous: STATE STREET RESEARCH SECURITIES TRUST, 24F-2NT, 1995-06-30

Next: ALLIANCE WORLDWIDE PRIVATIZATION FUND INC, 497, 1995-06-30

FILE NO.33-75644
811-8372
SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549
__________
FORM N-1A
__________

POST-EFFECTIVE AMENDMENT NO. 1

TO THE

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF

1933 AND

THE INVESTMENT COMPANY ACT OF 1940

__________

SMITH BARNEY/TRAVELERS SERIES FUND INC.
(Formerly, SBA Variable Products Series Fund Inc.)
(Exact name of Registrant as specified in the
Charter)
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices)
(212) 698-5344
(Registrant's telephone number)

Christina T. Sydor
388 Greenwich Street, New York, New York 10013 (22nd
floor) (Name and address of agent for service)

__________

Rule 24f-2(a)(1) Declaration:

Registrant previously registered an indefinite number of
its shares pursuant to Rule 24f-2 of the Investment
Company Act of 1940.

Registrant has filed its Rule 24f-2 Notice on December 29,
1994 for its most recent fiscal year ended October 31,
1994.

It is proposed that this Post-Effective Amendment will
become effective seventy-five days after filing pursuant
to paragraph (a)(2) of Rule 485.

Total number of pages: _____
CROSS REFERENCE SHEET
(as required by Rule 495(a))

Part A
of Form N-1A Prospectus
Caption
1. Cover Page cover page
2. Synopsis not applicable

3. Condensed Financial
Information
"Financial Highlights"

4. General Description of Registrant "Shares of

the Fund"

cover page

"Investment Objectives"

"The Fund's Investment Program"

"Special Investment Techniques and Risk
Considerations"

5. Management of the Fund
"Management"

5A.Management Discussion of Fund
Performance not
applicable

6. Capital Stock and Other Securities "Shares of

the Fund"

"Redemption of Shares"

cover page

"Dividends, Distributions and Taxes"

7. Purchase of Securities
Being
Offered cover page

"Management"

"Determination of Net Asset Value"

"The Fund's Investment Program"

8. Redemption or Repurchase
"Redemption of Shares"

9. Pending Legal Proceedings
not applicable

Part B Statement of
Additional
of Form N-1A Information Caption

10. Cover Page cover
page

11. Table of Contents "Table of Contents"

12.General Information and History "The Fund"

13.Investment Objectives and Policies "Investment
Policies"

"Investment Restrictions"

14. Management of the Fund "Directors and
Officers"

Part B of Statement of
Additional
Form N-1A Information Caption

15.Control Persons and Principal
Holders of Securities See Prospectus - "Shares of
the Fund"

"Voting Rights"

"Directors and Officers"

16. Investment Advisory and
Other
Services See
Prospectus
- "Management"
Directors and
Officers"
"Management
Agreements"
"Custodians"
"Independent
Auditors"

17.Brokerage Allocation and Other
Practices See
Prospectus
- "Management"

18. Capital Stock and Other
Securities See
Prospectus - "Shares of the
Fund"
See Prospectus
"Dividends,
Distributions
and Taxes"
"Investment
Policies"
"Voting Rights"

19.Purchase, Redemption and Pricing of
Securities Being Offered
See Prospectus - "The
Fund's
Investment
Program"
See Prospectus
"Determination
of Net Asset
Value"
"Determination of
Net Asset Value"
"Redemption of
Shares"
"Financial
Statements"

20. Tax Status See
Prospectus - "Dividends,
Distributions
and Taxes"

21. Underwriters See
Prospectus - "Management"

22. Calculation of Performance
Data See Prospectus -
"Performance" "Performance
Information"

23. Financial Statements
"Financial Statements"
<PAGE>
- ------------------------------------------------------------------------------
- --

P R O S P E C T U S

-------------
Vintage
-------------

SMITH BARNEY/TRAVELERS SERIES FUND INC.

UNDERLYING FUND PROSPECTUS

August ___________

1995

- ------------------------------------------------------------------------------
- -<PAGE>

SMITH BARNEY/TRAVELERS SERIES FUND INC.
388 Greenwich Street
New York, New York
10013
1-800-842-8573

Smith Barney/Travelers Series Fund Inc. (the "Fund"), the investment
underlying certain variable annuity and variable life insurance contracts, is
an investment company offering a choice of the following twelve different
Portfolios.

Smith Barney Income and Growth Portfolio
Alliance Growth Portfolio
AIM Capital Appreciation Portfolio
American Capital Enterprise Portfolio
Smith Barney International Equity
Portfolio Smith Barney Pacific Basin
Portfolio
TBC Managed Income Portfolio
Putnam Diversified Income Portfolio
G.T. Global Strategic Income
Portfolio Smith Barney High Income
Portfolio MFS Total Return Portfolio
Smith Barney Money Market Portfolio

Shares of the Fund are offered only to insurance company separate
accounts (the "Separate Accounts"), which fund certain variable annuity and
variable life insurance contracts (the "Contracts"). The Separate Accounts
invest in shares of one or more of the Portfolios in accordance with
allocation instructions received from Contract owners. Such allocation rights
are further 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.

Shares of the Smith Barney Money Market Portfolio are not insured or
guaranteed by the U.S. Government. There is no assurance that the Portfolio
will be able to maintain a stable net asset value of $1.00 per share.

THIS PROSPECTUS, WHICH SETS FORTH CONCISE INFORMATION ABOUT THE FUND THAT
PROSPECTIVE INVESTORS SHOULD KNOW BEFORE INVESTING, SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE. A STATEMENT OF ADDITIONAL INFORMATION, ALSO
REFERRED TO AS "PART B", DATED AUGUST ___, 1995 IS HEREBY INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS AND IS AVAILABLE FROM THE FUND, WITHOUT CHARGE,
BY WRITING TO THE FUND AT THE ABOVE ADDRESS OR CALLING THE TELEPHONE NUMBER
LISTED ABOVE.
This Prospectus should be read in conjunction with the
prospectus for the Contracts.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS AUGUST __, 1995.

- ------------------------------------------------------------------------------
- -<PAGE>

TABLE OF CONTENTS -----------------------------

- --------------------------------------------------

==============================================================================

== FINANCIAL

HIGHLIGHTS.......................................................... 1 THE

FUND'S INVESTMENT PROGRAM................................................. 4

Smith Barney Income and Growth Portfolio.................................

4 Alliance Growth

Portfolio................................................ 5 AIM Capital

Appreciation Portfolio....................................... 6 American

Capital Enterprise Portfolio.................................... 7 Smith

Barney International Equity Portfolio.............................. 8

Smith Barney Pacific Basin

Portfolio.....................................10 TBC Managed Income

Portfolio.............................................11 Putnam

Diversified Income Portfolio......................................13 G.T.

Global Strategic Income Portfolio...................................16

Smith Barney High Income

Portfolio.......................................18 MFS Total Return

Portfolio...............................................20 Smith Barney

Money Market Portfolio......................................21

SPECIAL INVESTMENT TECHNIQUES AND RISK
CONSIDERATIONS.........................23 DIVIDENDS, DISTRIBUTIONS AND
TAXES............................................38 REDEMPTION OF
SHARES..........................................................39
PERFORMANCE...................................................................
39
MANAGEMENT....................................................................
39 SHARES OF THE
FUND............................................................47
DETERMINATION OF NET ASSET
VALUE..............................................48

APPENDIX
A....................................................................49

- ------------------------------------------------------------------------------
- -<PAGE>

FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
- -
==============================================================================
==

The following schedules of each of the portfolios within the Smith
Barney/Travelers Series Fund Inc. have been audited in conjunction with the
annual audits of the financial statements of the Fund by KPMG Peat Marwick
LLP, independent auditors. The 1994 financial statements and the independent
auditors' report thereon appear in the October 31, 1994 Annual Report to
Shareholders. No information is presented with respect to the AIM Capital
Appreciation Portfolio because it did not commence operations until August
1995.
For a share of each capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
Smith Barney
Alliance Income & Growth
Growth
1994 (1) Portfolio
Portfolio
- ----------------------------------------------------------------------------------------------------------
- -<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
- ----------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment income (2) 0.11 0.06
Net realized and unrealized gain on investment 0.03 0.59
- ----------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.14 0.65
- ----------------------------------------------------------------------------------------------------------
- -Less Distributions:
Dividends from net investment income -- --
- ----------------------------------------------------------------------------------------------------------
-Total Distributions -- --
- ----------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $10.14 $10.65
- ----------------------------------------------------------------------------------------------------------
- -Total Return 1.40%++ 6.50%++
- ----------------------------------------------------------------------------------------------------------
- -Net Assets, End of Period (000's) $6,377 $17,086
- ----------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 0.73%+ 0.88%+
Net investment income 2.82 + 1.47 +
- ----------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate 2.17% 36.66%
==========================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
Smith Barney Income and Growth Portfolio for $13,120 in expenses and the
Alliance Growth Portfolio for $3,500 in expenses. If such fees were not
waived and expenses not reimbursed, the per share decrease in net
investment income and the ratio of expenses to average net assets would
have been $0.05 and 2.08% (annualized), respectively, for the Smith
Barney Income and Growth Portfolio and $0.03 and 1.76% (annualized),
respectively, for the Alliance Growth Portfolio.

(+) Annualized.
(++) Not annualized as it may not be representative of the total return for
the year.
For a share of each capital stock outstanding throughout the period:
<TABLE>
<CAPTION>
American Smith Barney
Capital Enterprise International
Equity
1994 (1) Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------
- -<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
- --------------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment income (2) 0.03 (0.03)
Net realized and unrealized gain on investment 0.35 0.58
- --------------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.38 0.55
- --------------------------------------------------------------------------------------------------------------
- -Less Distributions:
Dividends from net investment income -- --
- --------------------------------------------------------------------------------------------------------------
-Total Distributions -- --
- --------------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $10.38 $10.55
- --------------------------------------------------------------------------------------------------------------
- -Total Return 3.80%++ 5.50%++
- --------------------------------------------------------------------------------------------------------------
- -Net Assets, End of Period (000's) $5,734 $13,811
- --------------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 0.84%+ 1.20%+
Net investment income 0.79 + (0.73) +
- --------------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate 54.74% --
==============================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
American Capital Enterprise Portfolio for $19,007 in expenses. If such
fees were not waived and expenses not reimbursed, the per share decrease
in net investment income and the ratio of expenses to average net assets
would have been $0.07 and 2.66% (annualized), respectively, for the
American Capital Enterprise Portfolio and $0.03 and 2.00% (annualized),
respectively, for the Smith Barney International Equity Portfolio.

(+) Annualized.

(++) Not annualized as it may not be representative of the total return for
the year.

<PAGE>

For a share of each capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith Barney
TBC
Pacific Basin Managed
Income 1994 (1) Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
- --------------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment loss (2) (0.04) 0.21
Net realized and unrealized gain (loss) on investment 0.14 (0.17)
- --------------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.10 0.04
- --------------------------------------------------------------------------------------------------------------
- -Less Distributions:
Dividends from net investment income -- --
- --------------------------------------------------------------------------------------------------------------
-Total Distributions -- --
- --------------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $10.10 $10.04
- --------------------------------------------------------------------------------------------------------------
- -Total Return 1.00%++ 0.40%++
- --------------------------------------------------------------------------------------------------------------
- -Net Assets, End of Period (000's) $4,238 $3,840
- --------------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 1.26%+ 0.87%+
Net investment income (0.93) + 5.67 +
- --------------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate -- 41.54%
==============================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
Smith Barney Pacific Basin Portfolio for $9,778 in expenses and the TBC
Managed Income Portfolio for $15,557 in expenses. If such fees were not
waived and expenses not reimbursed, the per share decrease in net
investment income and the ratio of expenses to average net assets would
have been $0.06 and 2.82% (annualized), respectively, for the Smith
Barney Pacific Basin Portfolio and $0.07 and 2.91% (annualized),
respectively, for the TBC Managed Income Portfolio.

(+) Annualized.

(++) Not annualized as it may not be representative of the total return for
the year.

For a share of each capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Putnam G.T. Global
Diversified Income Strategic
Income
1994 (1) Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------
- -<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
- -------------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment income (2) 0.23 0.17
Net realized and unrealized loss on investment (0.05) (0.22)
- -------------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.18 (0.05)
- -------------------------------------------------------------------------------------------------------------
- --
Less Distributions:
Dividends from net investment income -- --
- -------------------------------------------------------------------------------------------------------------
-Total Distributions -- --
- -------------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $10.18 $9.95
- -------------------------------------------------------------------------------------------------------------
- -Total Return 1.80%++ (0.50)%++
- -------------------------------------------------------------------------------------------------------------
- -Net Assets, End of Period (000's) $6,763 $2,624
- -------------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 0.98%+ 1.07%+
Net investment income 6.14 + 4.58 +
- -------------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate 20.02% 56.34%
=============================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
Putnam Diversified Income Portfolio for $19,028 in expenses and the G.T.
Global Strategic Income Portfolio for $18,556 in expenses. If such fees
were not waived and expenses not reimbursed, the per share decrease in
net investment income and the ratio of expenses to average net assets
would have been $0.07 and 2.92% (annualized), respectively, for the
Putnam Diversified Income Portfolio and $0.13 and 4.53% (annualized),
respectively, for the G.T. Global Strategic Income Portfolio.

(+) Annualized.

(++) Not annualized as it may not be representative of the total return for
the year.

- ------------------------------------------------------------------------------
- -2
<PAGE>

For a share of each capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith Barney MFS
Total High Income
Return
1994 (1) Portfolio
Portfolio
- ------------------------------------------------------------------------------------------------------------
- -<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
- ------------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment income (2) 0.29 0.13
Net realized and unrealized loss on investment (0.22) (0.15)
- ------------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.07 (0.02)
- ------------------------------------------------------------------------------------------------------------
- -Less Distributions:
Dividends from net investment income -- --
- ------------------------------------------------------------------------------------------------------------
-Total Distributions -- --
- ------------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $10.07 $9.98
- ------------------------------------------------------------------------------------------------------------
- -Total Return 0.70%++
(0.20)%++
- ------------------------------------------------------------------------------------------------------------
- --
Net Assets, End of Period (000's) $3,395 $8,504
- ------------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 0.69%+ 0.93%+
Net investment income 7.55 + 3.51 +
- ------------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate 14.74% 17.67%
============================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
Smith Barney High Income Portfolio for $17,664 in expenses and the MFS
Total Return Portfolio for $13,857 in expenses. If such fees were not
waived and expenses not reimbursed, the per share decrease in net
investment income and the ratio of expenses to average net assets would
have been $0.07 and 2.60% (annualized), respectively, for the Smith
Barney High Income Portfolio and $0.06 and 2.51% (annualized),
respectively, for the MFS Total Return Portfolio.

(+) Annualized.

(++) Not annualized as it may not be representative of the total return for
the year.

For a share of each capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith
Barney
Money
Market
1994 (1) Portfolio
- ------------------------------------------------------------------------------------------------------------
- -<S> <C>
Net Asset Value, Beginning of Period $ 1.00
- ------------------------------------------------------------------------------------------------------------
- -Income From Investment Operations:
Net investment income (2) 0.014
Net realized and unrealized gain(loss) on investment --
- ------------------------------------------------------------------------------------------------------------
-Total Income from Investment Operations 0.014
- ------------------------------------------------------------------------------------------------------------
- -Less Distributions:
Dividends from net investment income (0.014)
- ------------------------------------------------------------------------------------------------------------
-Total Distributions (0.014)
- ------------------------------------------------------------------------------------------------------------
- -Net Asset Value, End of Period $1.00
- ------------------------------------------------------------------------------------------------------------
- -Total Return 1.46%++
- ------------------------------------------------------------------------------------------------------------
- -Net Assets, End of Period (000's) $5,278
- ------------------------------------------------------------------------------------------------------------
- -Ratios to Average Net Assets:
Expenses (2) 0.66%+
Net investment income 3.83 +
- ------------------------------------------------------------------------------------------------------------
- -Portfolio Turnover Rate --
============================================================================================================
== </TABLE>

(1) For the period from June 16, 1994 (commencement of operations) to
October 31, 1994.

(2) The Manager has waived all of its fees for the period and reimbursed the
Smith Barney Money Market Portfolio for $15,423 in expenses. If such fees
were not waived and expenses not reimbursed, the per share decrease in
net investment income and the ratio of expenses to average net assets
would have been $0.005 and 2.11% (annualized), respectively.

(+) Annualized.

(++) Not annualized as it may not be representative of the total return for
the year.

- ------------------------------------------------------------------------------
- 3
<PAGE>

THE FUND'S INVESTMENT PROGRAM -----------------------
- --------------------------------------------------------
==============================================================================
==
The Fund consists of twelve investment portfolios, each with its own
investment objective and policies as described in more detail below. Of
course, no assurance can be given that a Portfolio's objective will be
achieved. Investors should realize that risk of loss is inherent in the
ownership of any securities and that shares of each Portfolio will fluctuate
with the market value of its securities. Additional information about each
Portfolio's investment policies and investment risks can be found herein under
"Special Investment Techniques and Risk Considerations" and in the Statement
of Additional Information.
The investment objectives and certain investment restrictions designated
as such in the Statement of Additional Information are fundamental and may not
be changed by the Directors without shareholder approval. Each Portfolio's
investment policies, however, are not fundamental and may be changed by the
Directors without shareholder approval.
Smith Barney Income and Growth Portfolio
Investment Objectives
The investment objectives of the Smith Barney Income and Growth Portfolio
are current income and long-term growth of income and capital. The Portfolio
attempts to achieve its objectives by investing primarily, but not
exclusively, in common stocks. The Portfolio is managed by Smith Barney Mutual
Funds Management Inc. ("SBMFM" or the "Manager") (See "Management--Smith
Barney Mutual Funds Management Inc.").

Investment Policies

The Smith Barney Income and Growth Portfolio invests primarily in common
stocks offering a current return from dividends and in interest-paying debt
obligations (such as U.S. Government securities, investment grade bonds and
debentures) and high quality short-term debt obligations (such as commercial
paper and repurchase agreements collateralized by U.S. Government securities
with broker/dealers or other financial institutions). The Portfolio may also
purchase preferred stocks and convertible securities. 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. Under unusual economic or market conditions as determined by
the Manager, for defensive purposes the Portfolio may temporarily invest all
or a major portion of its assets in short-term U.S. Government securities. A
higher percentage of debt securities may also be held when deemed advisable by
the Manager. To the extent the Portfolio's assets are invested for temporary
defensive purposes, such assets will not be invested in a manner designed to
achieve the Portfolio's investment objectives.

The Portfolio may make investments in foreign securities, 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
sponsored American Depositary Receipts, which are certificates issued by U.S.
banks representing the right to receive securities of a foreign issuer
deposited with that bank or a correspondent bank. The Portfolio will
ordinarily purchase foreign securities that are traded in the U.S. It may,
however, also purchase the securities of foreign issuers directly in foreign
markets. The Portfolio may also lend up to 20% of the value of its total
assets and may purchase or sell securities on a when-issued or delayed
delivery basis.
- ------------------------------------------------------------------------------
- -4
<PAGE>

Alliance Growth Portfolio

Investment Objective

The investment objective of the Alliance Growth Portfolio is to provide
long-term growth of capital. Current income is only an incidental
consideration. The Portfolio attempts to achieve its objective by investing
primarily in equity securities of companies with a favorable outlook for
earnings and whose rate of growth is expected to exceed that of the U.S.
economy over time. The Portfolio is managed by SBMFM; Alliance Capital
Management L.P. serves as the Portfolio's Sub-Adviser.

Investment Policies

The Alliance Growth Portfolio invests primarily in common stocks and
securities convertible into common stocks such as convertible bonds,
convertible preferred stocks and warrants convertible into common stocks.
Because the values of fixed-income securities are expected to vary inversely
with changes in interest rates generally, when the Sub-Adviser expects a
general decline in interest rates, the Portfolio may also invest for capital
growth in fixed-income securities. The Portfolio may invest up to 25% of its
total assets in fixedincome securities rated at the time of purchase below
investment grade, that is, securities rated Ba or lower by Moody's Investors
Service, Inc. ("Moody's") or BB or lower by Standard & Poor's Ratings Group
("S&P"), or in unrated fixedincome securities determined by the Sub-Adviser to
be of comparable quality. The Portfolio will generally invest in securities
with a minimum rating of Caa- by Moody's or CCC- by S&P or in unrated
securities judged by the Sub-Adviser to be of comparable quality.

The Portfolio may invest without limit in securities that are not
publicly traded in the U.S., although the Portfolio generally will not invest
more than 15% of its total assets in such securities. The Portfolio may also
invest a portion of its assets in developing countries or countries with new
or developing capital markets.

The Portfolio may invest in securities that are not publicly traded,
including securities sold pursuant to Rule 144A under the Securities Act of
1933 ("Rule 144A Securities"). Investment in non-publicly traded securities is
restricted to 5% of the Portfolio's total assets (not including Rule 144A
Securities, to the extent permitted by applicable law) and is also subject to
the Portfolio's restriction against investing more than 15% of net assets in
"illiquid securities". To the extent permitted by applicable law, Rule 144A
Securities will not be treated as illiquid for purposes of the foregoing
restriction so long as such securities meet liquidity guidelines established
by the Fund's Board of Directors.

The Portfolio may invest in high-yield, high-risk, fixed-income and
convertible securities rated at the time of purchase Ba or lower by Moody's or
BB or lower by S&P, or, if unrated, judged by the Sub-Adviser to be of
comparable quality. The Portfolio will generally invest in securities with a
minimum rating of Caa- by Moody's or CCC- by S&P or in unrated securities
judged by the Sub-Adviser to be of comparable quality. However, from time to
time, the Portfolio may invest in securities rated in the lowest grades of
Moody's (C) or S&P (D) or in unrated securities judged by the Sub-Adviser to
be of comparable quality, if the Sub-Adviser determines that there are
prospects for an upgrade or a favorable conversion into equity securities (in
the case of convertible securities). Securities rated Ba or lower (and
comparable unrated securities) are commonly referred to as "junk bonds."
Securities rated D by S&P are in default. See "Lower-Quality and Non-Rated
Securities." For a description of the ratings referred to above, See Appendix
A.
The Portfolio may also invest in zero-coupon bonds and payment-in-kind
bonds. It may also buy and sell stock index futures contracts ("index
futures") and may buy options on index futures and on stock indices for
- ------------------------------------------------------------------------------
- 5
<PAGE>

hedging purposes. The Portfolio may buy and sell call and put options on index
futures or on stock indices in addition to, or as an alternative to,
purchasing or selling index futures or, to the extent permitted by applicable
law, to earn additional income. The Portfolio may also, for hedging purposes,
purchase and sell futures contracts, options thereon and options with respect
to U.S. Treasury securities, including U.S. Treasury bills, notes and bonds.
The Portfolio may also seek to increase its current return by writing covered
call and put options on securities it owns or in which it may invest.

The Portfolio may lend portfolio securities amounting to not more than
25% of its total assets and may enter into repurchase agreements on up to 25%
of its total assets. It may also purchase securities for future delivery,
which may increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement date. For
temporary defensive purposes, the Portfolio may invest all or a major part of
its assets in money market instruments and repurchase agreements. To the
extent the Portfolio's assets are invested for temporary defensive purposes,
they will not be invested in a manner designed to achieve the Portfolio's
investment objective.

AIM Capital Appreciation Portfolio

Investment Objective

The investment objective of the AIM Capital Appreciation Portfolio is to
seek capital appreciation. The Portfolio is managed by SBMFM; A I M Capital
Management, Inc. serves as the Portfolio's Sub-Adviser.

Investment Policies

The AIM Capital Appreciation Portfolio aggressively seeks to increase
shareholders' capital by investing principally in common stocks, with emphasis
on medium-sized and smaller emerging growth companies. Management of the
Portfolio will be particularly interested in companies that are likely to
benefit from new or innovative products, services or processes that should
enhance such companies' prospects for future growth in earnings. As a result
of this policy, the market prices of many of the securities purchased and held
by the Portfolio may fluctuate widely. Any income received from securities
held by the Portfolio will be incidental, and an investor should not consider
a purchase of shares of the Portfolio as equivalent to a complete investment
program. The Portfolio primarily purchases securities of two basic categories
of companies: (a) "core" companies, which management considers to have
experienced aboveaverage and consistent long-term growth in earnings and to
have excellent prospects for outstanding future growth, and (b) "earnings
acceleration" companies, which management believes are currently enjoying a
dramatic increase in profits.

The Portfolio may invest, for temporary or defensive purposes, all or a
substantial portion of its assets in investment grade (high quality) corporate
bonds, commercial paper, or U.S. Government securities. To the extent the
Portfolio's assets are invested for temporary defensive purposes, they will
not be invested in a manner designed to achieve the Portfolio's investment
objective.
The Portfolio may also invest up to 15% of its net assets in illiquid
securities, including repurchase agreements with maturities in excess of seven
days. In addition, the Portfolio may purchase domestic stock index futures
contracts. It may also write (sell) covered call options on no more than 25%
of the value of its net assets. A portion of the Portfolio's assets may also
be held, from time to time, in cash, repurchase agreements, or other debt
securities (including U.S. Government securities), when such positions are
deemed advisable in light of economic or market conditions.
- ------------------------------------------------------------------------------
- -6
<PAGE>

American Capital Enterprise Portfolio

Investment Objective

The investment objective of the American Capital Enterprise Portfolio is
capital appreciation through investments in securities believed by the Sub
Adviser to have above-average potential for capital appreciation. Any income
received on such securities is incidental to the objective of capital
appreciation. The Portfolio is managed by SBMFM; American Capital Asset
Management, Inc., serves as the Portfolio's Sub-Adviser.

Investment Policies

The American Capital Enterprise Portfolio invests primarily in growth
common stocks. Such securities generally include those of companies with
established records of growth in sales or earnings, and companies with new
products, new services, or new processes. The Portfolio may also invest in
companies in cyclical industries during periods when their securities appear
attractive to the Sub-Adviser for capital appreciation. In addition to common
stocks of companies, the Portfolio may invest in warrants and preferred
stocks, and in investment companies. The Portfolio may also invest up to 15%
of the value of its total assets in securities of foreign governments and
companies.

The Portfolio generally holds a portion of its assets in investment grade
short-term debt securities in order to provide liquidity. The Portfolio may
also hold investment grade corporate or government bonds. The market prices of
such bonds can be expected to vary inversely with changes in prevailing
interest rates. Such investments may be increased when deemed appropriate by
the SubAdviser for temporary defensive purposes. Short-term investments may
include repurchase agreements with domestic banks or broker-dealers.

The Portfolio's primary approach is to seek what the Sub-Adviser believes
to be unusually attractive growth investments on an individual company basis.
The Portfolio may invest in securities that have above average price
volatility. Because prices of common stocks and other securities fluctuate,
the value of an investment in the Portfolio will vary upon the Portfolio's
investment performance. The Portfolio attempts to reduce overall exposure to
risk from declines in securities prices by spreading its investments over many
different companies in a variety of industries.

The Portfolio expects to utilize options, futures contracts and options
thereon in several different ways, depending upon the status of its Portfolio
and the Sub-Adviser's expectations concerning the securities markets.

In times of stable or rising stock prices, the Portfolio generally seeks
to obtain maximum exposure to the stock market, i.e., to be "fully invested."
Nevertheless, even when the Portfolio is fully invested, prudent management
requires that at least a small portion of assets be available as cash to honor
redemption requests and for other short term needs. The Portfolio may also
have cash on hand that has not yet been invested. The portion of the
Portfolio's assets that is invested in cash equivalents does not fluctuate
with stock market prices, so that, in times of rising market prices, the
Portfolio may underperform the market in proportion to the amount of cash
equivalents in its portfolio. By purchasing stock index futures contracts,
however, the Portfolio can "equitize" the cash portion of its assets and
obtain equivalent performance to investing 100% of its assets in equity
securities.
If the Sub-Adviser forecasts a market decline, the Portfolio may take a
temporary defensive position, reducing its exposure to the stock market by
increasing its cash position with respect to all or a major part of its
assets. To the extent the Portfolio's assets are invested for temporary
defensive purposes, they will not be invested in a manner designed to achieve
the Portfolio's investment objective. By selling stock index futures contracts
instead

- ------------------------------------------------------------------------------
- 7
<PAGE>

of portfolio securities, a similar result can be achieved to the extent that
the performance of the stock index futures contracts correlates to the
performance of the Portfolio's securities. Sale of futures contracts could
frequently be accomplished more rapidly and at less cost than the actual sale
of securities. Once the desired hedged position has been effected, the
Portfolio could then liquidate securities in a more deliberate manner,
reducing its futures position simultaneously to maintain the desired balance,
or it could maintain the hedged position.

As an alternative to selling stock index futures contracts, the Portfolio
can purchase stock index puts (or stock index futures puts) to hedge the
Portfolio's risk in a declining market. Since the value of a put increases as
the index declines below a specified level, the Portfolio's value is protected
against a market decline to the degree the performance of the index correlates
with the performance of its investment portfolio. If the market remains stable
or advances, the Portfolio can refrain from exercising the put and its
portfolio will participate in the advance, having incurred only the premium
cost for the put.

The Portfolio may invest in a separate investment company, American
Capital Small Capitalization Fund, Inc. ("Small Cap Fund"), that invests in a
broad selection of small capitalization securities. The shares of the Small
Cap Fund are available only to investment companies advised by the Sub-
Adviser. The SubAdviser believes that the use of the Small Cap Fund provides
the Portfolio with the most effective exposure to the performance of the small
capitalization sector of the stock market while at the same time minimizing
costs. The SubAdviser charges no advisory fee for managing the Small Cap Fund,
nor are there any sales load or other charges associated with distribution of
its shares. Other expenses incurred by the Small Cap Fund are borne by it, and
thus indirectly by the Portfolio.
The securities of small and medium sized companies that the Small Cap
Fund may invest in may be subject to more abrupt or erratic market movements
than securities of larger, more established companies or the market averages
in general. In addition, small capitalization companies typically are subject
to a greater degree of change in earnings and business prospects than are
larger, more established companies. In light of these characteristics of small
capitalization companies and their securities, the Small Cap Fund may be
subject to greater investment risk than that assumed through investment in the
equity securities of larger capitalization companies.
The Portfolio will be deemed to own a pro rata portion of each investment
of the Small Cap Fund. For example, if the Portfolio's investment in the Small
Cap Fund were $10 million, and the Small Cap Fund had five percent of its
assets invested in the electronics industry, the Portfolio would be considered
to have an investment of $500,000 in the electronics industry.
Smith Barney International Equity Portfolio
Investment Objective
The investment objective of the Smith Barney International Equity
Portfolio is total return on its assets from growth of capital and income. The
Portfolio seeks to achieve its objective by investing at least 65% of its
assets in a diversified portfolio of equity securities of established non-U.S.
issuers. The Portfolio is managed by SBMFM.
Investment Policies
Under normal market conditions, the Smith Barney International Equity
Portfolio will invest at least 65% of its assets in a diversified portfolio of
equity securities consisting of dividend and non-dividend paying common stock,
preferred stock, convertible debt and rights and warrants to such securities
and up to 35% of its assets
- ------------------------------------------------------------------------------
- -8
<PAGE>

in bonds, notes and debt securities (consisting of securities issued in
Eurocurrency markets or obligations of the United States or foreign
governments and their political subdivisions) of established non-U.S. issuers.
Investments may be made for capital appreciation or for income or any
combination of both for the purpose of achieving a higher overall return than
might otherwise be obtained solely from investing for growth of capital or for
income. There is no limitation on the percent or amount of the Portfolio's
assets which may be invested for growth or income and, therefore, from time to
time the investment emphasis may be placed solely or primarily on growth of
capital or solely or primarily on income.

In seeking to achieve its objective, the Portfolio presently expects to
invest its assets primarily in common stocks of established non-U.S. companies
that, in the opinion of the Manager, have potential for growth of capital.
However, there is no requirement that the Portfolio invests exclusively in
common stocks or other equity securities, and, when the Manager believes that
the return on debt securities will equal or exceed the return on common
stocks, the Portfolio may, in seeking its objective of total return,
substantially increase its holdings (up to a maximum of 35% of its assets) in
debt securities. In determining whether the Portfolio will be invested for
capital appreciation or for income or any combination of both, the Manager
regularly analyzes a broad range of international equity and fixed income
markets in order to assess the degree of risk and level of return that can be
expected from each market.

The Portfolio will generally invest its assets broadly among countries
and will normally have represented in the portfolio business activities in not
less than three different countries. Except as stated below, the Portfolio
will invest at least 65% of its assets in companies organized or governments
located in any area of the world other than the U.S., such as the Far East
(e.g., Japan, Hong Kong, Singapore, Malaysia), Western Europe (e.g., United
Kingdom, Germany, the Netherlands, France, Italy, Switzerland), Eastern Europe
(e.g. Hungary, Poland, The Czech Republic and the countries of the former
Soviet Union), Central and South America (e.g., Mexico, Chile and Venezuela),
Australia, Canada and such other areas and countries as the Manager may
determine from time to time. However, under unusual economic or market
conditions as determined by the Manager, for defensive purposes the Portfolio
may temporarily invest all or a major portion of its assets in U.S. Government
securities or in debt or equity securities of companies incorporated in and
having their principal business activities in the United States. To the extent
the Portfolio's assets are invested for temporary defensive purposes, such
assets will not be invested in a
manner designed to achieve the Portfolio's investment objective.
In determining the appropriate distribution of investments among various
countries and geographic regions, the Manager ordinarily considers the
following factors: prospects for relative economic growth between countries;
expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors. In
the future, if any other relevant factors arise they will also be considered.
In analyzing companies for investment, the Manager ordinarily looks for one or
more of the following characteristics: an above-average earnings growth per
share; high return on invested capital; healthy balance sheet; sound financial
and accounting policies and overall financial strength; strong competitive
advantages; effective research and product development and marketing;
efficient service; pricing flexibility; strength of management; and general
operating characteristics which will enable the company to compete
successfully in its market place. Ordinarily, the Manager will not view a
company as being sufficiently well established to be considered for inclusion
in the Portfolio unless the company, together with any predecessors, has been
operating for at least three fiscal years.
It is expected that portfolio securities will ordinarily be traded on a
stock exchange or other market in the country in which the issuer is
principally based, but may also be traded on markets in other countries
including, in many cases, the United States securities exchanges and over-the-
counter markets.
- ------------------------------------------------------------------------------
- 9
<PAGE>

In order to protect the dollar equivalent value of its portfolio
securities against declines resulting from currency value fluctuations and
changes in interest rate or other market changes, the Portfolio may enter into
the following hedging transactions: forward foreign currency contracts,
interest rate and currency swaps and financial instrument and market index
futures contracts and related options contracts. In addition, the Portfolio
may engage in leveraging, enter into repurchase agreements and lend portfolio
securities.

Smith Barney Pacific Basin Portfolio

Investment Objective

The investment objective of the Smith Barney Pacific Basin Portfolio is
long-term capital appreciation through investment primarily in equity
securities of companies in Australia, Hong Kong, India, Indonesia, Japan,
Malaysia, New Zealand, Pakistan, Papua New Guinea, the People's Republic of
China, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand
and Vietnam and other such countries as the Manager may determine from time to
time ("Asian Pacific Countries"). The Portfolio is managed by SBMFM.

Investment Policies

The Smith Barney Pacific Basin Portfolio's investments will primarily
consist of (i) securities traded principally on stock exchanges in the Asia
Pacific Countries, (ii) securities of companies that derive 50% or more of
their total revenue from either goods produced, sales made, or services
performed in the Asian Pacific Countries and (iii) securities (including
American Depository Receipts) of companies organized under the laws of an
Asian Pacific Country that are publicly traded on recognized securities
exchanges outside of the Asian Pacific Countries.

The Portfolio will normally invest at least 80% of its total assets in
equity securities of companies in the Asia Pacific Countries, consisting of
the
securities listed above. For the purposes of the foregoing limitation equity
securities include common stocks, preferred stocks, securities convertible
into common or preferred stocks and warrants. The Portfolio may also invest up
to 20% of its total assets in debt securities and other types of investments
if the Manager believes they would help achieve the Portfolio's investment
objective. The Portfolio has no predetermined policy on the allocation of
funds for investment among such countries or securities.

Under unusual economic or market conditions as determined by the Manager,
for defensive purposes the Portfolio may temporarily invest all or a major
portion of its assets in U.S. Government securities or debt or equity
securities of companies incorporated in and having their principal business
activities in the U.S. To the extent the Portfolio's assets are invested for
temporary defensive purposes, such assets will not be invested in a manner
designed to achieve the Portfolio's investment objective.

In determining the appropriate distribution of investments among various
countries and geographic regions, the Manager ordinarily considers the
following factors: prospects for relative economic growth between countries;
expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors. In
the future, if any other relevant factors arise they will also be considered.
In analyzing companies for

- ------------------------------------------------------------------------------
- -10
<PAGE>

investment, the Manager ordinarily looks for one or more of the following
characteristics: an above-average earnings growth per share; high return on
invested capital; healthy balance sheet; sound financial and accounting
policies and overall financial strength; strong competitive advantages;
effective research and product development and marketing; efficient service;
pricing flexibility; strength of management; and general operating
characteristics which will enable the company to compete successfully in its
market place. Ordinarily, the Manager will not view a company as being
sufficiently well established to be considered for inclusion in the Portfolio
unless the company, together with any predecessors, has been operating for at
least three fiscal years.

It is expected that portfolio securities will ordinarily be traded on a
stock exchange or other market in the country in which the issuer is
principally based, but may also be traded on markets in other countries
including, in many cases, the U.S. securities exchanges and over-the-counter
markets. The Portfolio may invest in companies, large or small, whose earnings
are believed to be in a relatively strong growth trend, or in companies in
which significant further growth is not anticipated but whose market value per
share is thought to be undervalued. It may also invest in small and relatively
less well-known companies. Debt securities in which the Portfolio may invest
will generally be rated at the time of purchase at least Baa by Moody's or BBB
by S&P, and in any event the Portfolio will not invest in debt securities
rated less than Baa by Moody's and BBB by S&P if as a result more than 5% of
the Portfolio's assets would be invested in such securities. Debt securities
rated Baa or BBB have speculative characteristics and adverse economic
conditions may lead to a weakened capacity to pay interest and repay
principal. For a description of these ratings, see Appendix A.

To the extent that the Portfolio's assets are not otherwise invested as
described above, the assets may be held in cash, in any currency, or invested
in U.S. as well as foreign high quality money market instruments and
equivalents.
TBC Managed Income Portfolio
Investment Objective
The investment objective of the TBC Managed Income Portfolio is to seek
high current income consistent with what the Sub-Adviser believes to be
prudent risk of capital through investments in the following types of
securities: corporate debt obligations, such as bonds, debentures, obligations
convertible into common stocks and money market instruments; preferred stocks;
and obligations issued or guaranteed by the U.S. Government and its agencies
or instrumentalities. The Portfolio is managed by SBMFM; The Boston Company
Asset Management, Inc. serves as the Portfolio's Sub-Adviser.
Investment Policies
U.S. Government securities in which the TBC Managed Income Portfolio may
invest are limited to obligations issued or guaranteed as to both principal
and interest by the U.S. Government or backed by the full faith and credit of
the U.S. Government or its agencies or instrumentalities. Under normal market
conditions, (1) at least 65% of the Portfolio's total assets will be invested
in U.S. Government securities and in investment-grade corporate debt
obligations rated within the four highest ratings of Moody's or S&P or in
- -------------------------------------------------------------------------------
1
1
<PAGE>

unrated obligations of comparable quality; and (2) at least 65% of the
Portfolio's total assets will be invested in debt obligations having
maturities of 10 years or less. It should be noted that obligations rated in
the lowest of the top four ratings (Baa by Moody's or BBB by S&P) are
considered to have some speculative characteristics. Unrated securities will
be considered of investment-grade if deemed by the Sub-Adviser to be
comparable in quality to instruments so rated, or if other outstanding
obligations of the issuers of such securities are rated Baa/BBB or better. For
a description of the ratings referred to above, see Appendix A.

The Portfolio may invest up to 35% of its total assets in obligations
rated below the four highest ratings of Moody's or S&P, with no minimum rating
required. Such securities, which are considered to have speculative
characteristics, include securities rated in the lowest rating categories of
Moody's or S&P (commonly referred to as "junk bonds"), which are extremely
speculative and may be in default with respect to payment of principal or
interest. Further information about low rated securities is provided below
under "Lower-Quality and Non-Rated Securities."

The Portfolio may also invest up to 35% of its total assets in fixed-
income obligations having maturities longer than 10 years, up to 25% of its
total assets in convertible debt obligations and preferred stocks, and up to
20% of its total assets in securities of foreign issuers, including foreign
governments. The Portfolio will not invest in common stocks, and any common
stocks received through conversion of convertible debt obligations will be
sold in an orderly manner. Changes in interest rates will affect the value of
the Portfolio's portfolio investments.

When, in the opinion of the Sub-Adviser, a "defensive" investment posture
is warranted, the Portfolio is permitted to invest temporarily and without
limitation in high-grade, short-term money market instruments, consisting
exclusively of U.S. Government securities, bank certificates of deposit and
time deposits, bankers' acceptances, prime commercial paper, and high-grade,
shortterm corporate securities and repurchase agreements with respect to these
instruments. To this extent, the Portfolio may not achieve its investment
objective.

Bank certificates of deposit and bankers' acceptances in which the
Portfolio may invest are limited to U.S. dollar-denominated instruments of
domestic banks, including their branches located outside the United States,
and of domestic branches of foreign banks. In addition, the Portfolio may
invest in U.S. dollar-denominated, non-negotiable time deposits issued by
foreign branches of domestic banks and London branches of foreign banks; and
negotiable certificates of deposit issued by London branches of foreign banks.
The foregoing investments may be made provided that the bank has capital,
surplus and undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million as of the date of
investment. Investments in obligations of foreign branches of domestic banks,
foreign banks, and domestic branches of foreign banks involve risks that are
different from investments in securities of domestic banks, and are discussed
in more detail under "Foreign Securities."
The Portfolio is permitted to enter into repurchase agreements with
respect to U.S. Government securities, to purchase portfolio securities on a
when-issued basis, to purchase or sell portfolio securities for delayed-
delivery, and to lend its portfolio securities. In addition, the Portfolio may
invest up to 25% of its total assets in securities representing interests in
pools of assets such as mortgage loans, motor vehicle installment purchase
obligations and credit card receivables ("asset backed securities"), which
include classes of obligations collateralized by mortgage loans or mortgage-
pass through certificates ("CMOs"). The Portfolio is authorized to borrow
money for temporary administrative purposes and to pledge its assets in
connection with such borrowings. Finally, the Portfolio may invest up to 15%
of its net assets in illiquid securities (excluding Rule 144A Securities). See
"Special Techniques and Risk Considerations" for additional information about
the foregoing securities.
- ------------------------------------------------------------------------------
- -12
<PAGE>

Putnam Diversified Income Portfolio

Investment Objective

The Putnam Diversified Income Portfolio seeks high current income
consistent with preservation of capital. The Portfolio is managed by SBMFM;
Putnam Investment Management, Inc. serves as the Portfolio's Sub-Adviser.

Investment Policies

Basic investment strategy. The Putnam Diversified Income Portfolio will
allocate its investments among the following three sectors of the fixed-
income securities markets:

. a U.S. Government Sector, consisting primarily of securities of the
U.S. Government, its agencies and instrumentalities and related
options, futures and repurchase agreements;
. a High Yield Sector, consisting of high yielding, lower-rated, higher
risk U.S. and foreign fixed-income securities; and
. an International Sector, consisting of obligations of foreign
governments, their agencies and instrumentalities, other fixed-income
securities denominated in foreign currencies, and related options and
futures.

The Portfolio may invest significantly in lower rated and unrated U.S.
and foreign bonds whose credit quality is generally considered the equivalent
of U.S. corporate debt securities, commonly known as "junk bonds." Investments
of this type are subject to a greater risk of loss of principal and interest.
Purchasers should carefully assess the risks associated with an investment in
this Portfolio.
The Sub-Adviser believes that diversifying the Portfolio's investments
among these sectors, as opposed to investing in any one sector, will better
enable the Portfolio to preserve capital while pursuing its objective of high
current income. Historically, the markets for U.S. Government securities,
lowerrated, high yielding U.S. corporate fixed-income securities, and debt
securities of foreign issuers have tended to behave independently and have at
times moved in opposite directions. For example, U.S. Government securities
have generally been affected negatively by inflationary concerns resulting
from increased economic activity. High yield U.S. corporate fixed-income
securities, on the other hand, have generally benefitted from increased
economic activity due to improvement in the credit quality of corporate
issuers. The reverse has generally been true during periods of economic
decline. Similarly, U.S. Government securities have often been negatively
affected by a decline in the value of the dollar against foreign currencies,
while the bonds of foreign issuers held by U.S. investors have generally
benefitted from such decline. The Sub-Adviser believes that, when financial
markets exhibit such a lack of correlation, a pooling of investments among
these markets may produce greater preservation of capital and lower volatility
over the long term than would be obtained by investing exclusively in any one
of the markets.

The Sub-Adviser will determine the amount of assets to be allocated to
each of the three market sectors in which the Portfolio will invest based on
its assessment of the maximum level of current income that can be achieved
from a portfolio which is invested in all three sectors without incurring
undue risks to principal value. In making this determination, the Sub-Adviser
will rely in part on quantitative analytical techniques that measure relative
risks and opportunities of each market sector based on current and historical
market data for each sector, as well as on its own assessment of economic and
market conditions. The Sub-Adviser will
- -------------------------------------------------------------------------------
1
3
<PAGE>

continuously review this allocation of assets and make such adjustments as it
deems appropriate, although there are no fixed limits on allocations among
sectors, including investment in the High Yield Sector. Because of the
importance of sector diversification to the Portfolio's investment policies,
the Sub-Adviser expects that a substantial portion of the Portfolio's assets
will normally be invested in each of the three market sectors described below.
See "Defensive Strategies." The Portfolio's assets allocated to each of these
market sectors will be managed in accordance with particular investment
policies, which are described below. At times, the Portfolio may hold a
portion of its assets in cash and money market instruments.

U.S. Government Sector. The Portfolio will invest assets allocated to the
U.S. Government Sector primarily in U.S. Government securities and engage in
options, futures, and repurchase transactions with respect to such securities.
The Portfolio may also enter into forward commitments for the purchase of U.S.
Government securities and make secured loans of its portfolio securities with
respect to U.S. Government securities. In purchasing securities for the U.S.
Government Sector, the Sub-Adviser may take full advantage of the entire range
of maturities of U.S. Government securities and may adjust the average
maturity of the investments held in the portfolio from time to time, depending
on its assessment of relative yields of securities of different maturities and
its expectations of future changes in interest rates. Under normal market
conditions, the Portfolio will invest at least 20% of its net assets in U.S.
Government securities. The Portfolio may also invest assets allocated to the
U.S. Government Sector in a variety of debt securities, including asset-backed
and mortgage-backed securities, such as CMOs, that are issued by private U.S.
issuers. With respect to the U.S. Government Sector, the Portfolio will only
invest in privately issued debt securities that are rated at the time of
purchase at least A by Moody's or S&P, or in unrated securities that the Sub
Adviser determines are of comparable quality. The rating services'
descriptions
of these rating categories are included in Appendix A. The Portfolio will not
necessarily dispose of a security if its rating is reduced below these levels,
although the Sub-Adviser will monitor the investment to determine whether
continued investment in the security will assist in meeting the Portfolio's
investment objective.
High Yield Sector. The Portfolio will invest assets allocated to the High
Yield Sector primarily in high yielding, lower-rated higher risk U.S. and
foreign corporate fixed-income securities, including debt securities,
convertible securities and preferred stocks. Subject to the foregoing
sentence, the Portfolio may also purchase securities of foreign governmental
issuers and equity securities. As described below, however, the Portfolio may
invest all or any part of the High Yield Sector portfolio in higher-rated and
unrated fixedincome securities. The Portfolio will not necessarily invest in
the highest yielding securities available if in the Sub-Adviser's opinion the
differences in yield are not sufficient to justify the higher risks involved.
In addition, the Portfolio may invest up to 15% of its net assets in
securities that are not publicly traded and for which market quotations are
not readily available. The Portfolio may also invest in "zero-coupon" bonds
and "payment-in-kind" bonds.

At times, a substantial portion of the Portfolio's assets may be invested
in securities as to which the Portfolio, by itself or together with other
funds and accounts managed by the Sub-Adviser and its affiliates, holds a
major portion or all of such securities. Under adverse market or economic
conditions or in the event of adverse changes in the financial condition of
the issuer, the Portfolio could find it more difficult to sell such securities
when the SubAdviser believes it advisable to do so or may be able to sell such
securities only at prices lower than if such securities were more widely held.
Under such circumstances, it may also be more difficult to determine the fair
value of such securities for purposes of computing the Portfolio's net asset
value. In order to enforce its rights in the event of a default under such
securities, the Portfolio may be required to take possession of and manage
assets securing the issuer's obligations on such securities, which may
increase the Portfolio's operating expenses and adversely affect the
Portfolio's net asset value.

- ------------------------------------------------------------------------------
- -14
<PAGE>

The High Yield Sector may invest in any security which is rated, at the
time of purchase, at least Caa as determined by Moody's or CCC as determined
by S&P's or in any unrated security which the Sub-Adviser determines is at
least of comparable quality, although up to 5% of the net assets of the
Portfolio be invested in securities rated below such quality, or in unrated
securities that the Sub-Adviser determines are of comparable quality.
Securities rated below Caa by Moody's or CCC by S&P's are of poor standing and
may be in default. The rating services' descriptions of these rating
categories, including the speculative characteristics of the lower categories,
are included in Appendix A.
International Sector. The Portfolio will invest the assets allocated to
the International Sector in debt obligations and other fixed-income securities
denominated in non-U.S. currencies. These securities include:
. debt obligations issued or guaranteed by foreign, national,
provincial, state or other governments with taxing authority, or by
their agencies or instrumentalities;

. debt obligations of supranational entities (described below); and

. debt obligations and other fixed-income securities of foreign and U.S.
corporate issuers.
When investing in the International Sector, the Portfolio will purchase
only debt securities of issuers whose long-term debt obligations are rated A
or better at the time of purchase by Moody's or S&P or in unrated securities
that the Sub-Adviser determines are at least of comparable quality.

In the past, yields available from securities denominated in foreign
currencies have often been higher than those of securities denominated in U.S.
dollars. Although the Portfolio has the flexibility to invest in any country
where the Sub-Adviser sees potential for high income, it presently expects to
invest primarily in securities of issuers in industrialized Western European
countries (including Scandinavian countries) and in Canada, Japan, Australia,
and New Zealand. The Sub-Adviser will consider expected changes in foreign
currency exchange rates in determining the anticipated returns of securities
denominated in foreign currencies. The Sub-Adviser does not believe that the
credit risk inherent in the obligations of stable foreign governments is
significantly greater than in those of U.S. Government securities.
The obligations of foreign governmental entities, including supranational
issuers, have various kinds of government support. Obligations of foreign
governmental entities include obligations issued or guaranteed by national,
provincial, state or other governments with taxing power or by their agencies.
These obligations may or may not be supported by the full faith and credit of
a foreign government.

Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Steel and Coal Community, the Asian
Development Bank, and the Inter-American Development Bank. The governmental
members or "stockholders" usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowing. Each supranational entity's leading activities are limited to a
percentage of its total capital (including "callable capital" contributed by
members at the entity's call), reserves, and net income.

Defensive Strategies. At times, the Sub-Adviser may judge that conditions
in the securities market make pursuing the Portfolio's basic investment
strategy inconsistent with the best interests of its shareholders. At such

- -------------------------------------------------------------------------------
1
5
<PAGE>

times, the Sub-Adviser may temporarily use alternative strategies, primarily
designed to reduce fluctuations in the value of the Portfolio's assets. In
implementing these "defensive" strategies, depending on the circumstances, the
Portfolio may temporarily reduce or suspend its option writing activities,
shift its portfolio emphasis to higher-rated securities in the High Yield
Sector, hedge currency risks in the International Sector, or generally reduce
the average maturity of its holdings in any or all of the Sectors. Under
unusual market conditions, the Portfolio could invest up to 100% of its assets
in shortterm U.S. Government securities when the risks of investing in the
other Sectors are perceived to outweigh the possible benefits of sector
diversification. The Portfolio may also increase the portion of its assets
invested in cash or money market instruments for such defensive purposes or
for liquidity purposes. To the extent the Portfolio's assets are invested for
temporary defensive purposes, they will not be invested in a manner designed
to achieve the Portfolio's investment objective.

The Portfolio may also purchase securities of issuers located in emerging
markets, invest in sovereign debt, Brady Bonds, loan participations and
assignments and enter into dollar roll transactions. It may also engage in the
writing of covered call and put options with respect to foreign fixed-income
securities, foreign currencies, and related futures in order to supplement the
Fund's portfolio income. See "Special Investment Techniques and Risk
Considerations" below and in the Statement of Additional Information.

G.T. Global Strategic Income Portfolio

Investment Objectives

The investment objectives of the G.T. Global Strategic Income Portfolio
are primarily to seek high current income and secondarily to seek capital
appreciation. The Portfolio is managed by SBMFM; G.T. Capital Management, Inc.
serves as the Portfolio's Sub-Adviser.

The Portfolio invests significantly in lower-quality and unrated foreign
governmental bonds whose credit quality is generally considered the equivalent
of U.S. corporate debt securities commonly known as "junk bonds." Investments
of this type are subject to a greater risk of loss of principal and interest.
Purchasers should carefully assess the risks associated with an investment in
this Portfolio.

Investment Policies

The G.T. Global Strategic Income Portfolio allocates its assets among
debt securities of issuers in three separate investment areas: (1) the United
States, (2) developed foreign countries, and (3) emerging markets. The
Portfolio selects particular debt securities in each sector based on their
relative investment merits. Within each area, the Portfolio selects debt
securities from those issued by governments, their agencies and
instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Portfolio may invest include bonds,
notes, debentures, and other similar instruments. The Portfolio normally
invests at least 50% of its total assets in U.S. and foreign debt and other
fixed income securities that, at the time of purchase, are rated at least
investment grade or, if unrated, are determined by the Sub-Adviser to be of
comparable quality. No more than 50% of the Portfolio's total assets may be
invested in securities rated below investment grade, which involve a high
degree of risk and are predominantly speculative. See "LowerQuality and Non-
Rated Securities." The Portfolio may also invest in securities that are in
default as to payment of principal and/or interest.

For purposes of the Portfolio's operations, "emerging markets" will
consist of all countries determined by G.T. Capital to have developing or
emerging economies and markets. These countries generally are expected

- ------------------------------------------------------------------------------
- -16
<PAGE>

to include every country in the world except the United States, Canada, Japan,
Australia, New Zealand and most countries in Western Europe. The Portfolio
will consider investment in but not be limited to the following emerging
markets: Algeria, Argentina, Bolivia, Botswana, Brazil, Chile, China,
Columbia, Costa Rica, Czech Republic, Ecuador, Egypt, Finland, Greece, Hong
Kong, Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan, Kenya,
Malaysia, Mexico, Morocco, Nicaragua, Nigeria, Pakistan, Panama, Peru,
Philippines, Poland, Portugal, Russia, Singapore, Slovakia, Slovenia, South
Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey, Uruguay, Venezuela,
Vietnam and Zimbabwe.

As used in this Prospectus and the Statement of Additional Information,
an issuer in an emerging market is an entity: (i) for which the principal
securities trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue
from either goods produced, sales made or services performed in emerging
markets; or (iii) organized under the laws of, and with a principal office in,
an emerging market.

The Portfolio's investments in emerging market securities may consist
substantially of Brady Bonds (see "Brady Bonds" below) and other sovereign
debt securities issued by emerging market governments. "Sovereign debt
securities" are those issued by emerging market governments that are traded in
the markets of developed countries or groups of developed countries. See
"Sovereign Debt". The Sub-Adviser may invest in debt securities of emerging
market issuers that it
determines to be suitable investments for the Portfolio without regard to
ratings. Currently, the substantial majority of emerging market debt
securities are considered to have a credit quality below investment grade.
Because the Portfolio's investment in debt securities rated below investment
grade is limited to 50% of the Portfolio's total assets, the Portfolio's
investment in emerging market debt securities is therefore limited to 50% of
its total assets as well. See "Securities of Emerging Markets".
The Portfolio also may consider making carefully selected investments in
below-investment grade debt securities of corporate issuers in the United
States and in developed foreign countries, subject to the overall 50%
limitation. The Portfolio also may invest in bank loan participations and
assignments, which are fixed and floating rate loans arranged through private
negotiations between foreign entities. See "Loan Participations and
Assignments". The Portfolio may invest up to 15% of its net assets in illiquid
securities. The Portfolio also may borrow for investment purposes up to 33
1/3% of its total assets. See "Borrowing and Leverage".
Temporary Defensive Strategies. The Portfolio retains the flexibility to
respond promptly to changes in market and economic conditions. Accordingly,
with the intent of preserving shareholders' capital and consistent with the
Portfolio's investment objective, the Sub-Adviser may employ a temporary
defensive investment strategy if it determines such a strategy to be
warranted. Pursuant to such a defensive strategy, the Portfolio temporarily
may hold cash (U.S. dollars, foreign currencies or multinational currency
units) and/or invest up to 100% of its assets in high quality debt securities
or money market instruments of U.S. or foreign issuers, and most or all of the
Portfolio's investments may be made in the United States and denominated in
U.S. dollars. To the extent the Portfolio adopts a temporary defensive
investment posture, it will not be invested so as to achieve directly its
investment objectives.
In addition, pending investment of proceeds from new sales of Portfolio
shares or to meet ordinary daily cash needs, the Portfolio temporarily may
hold cash (U.S. dollars, foreign currencies or multinational currency units)
and may invest any portion of its assets in high quality foreign or domestic
money market instruments.
Asset Allocation. The Portfolio invests in debt obligations allocated
among diverse markets and denominated in various currencies, including U.S.
dollars, or in multinational currency units such as European Currency Units.
The Portfolio may purchase securities that are issued by the government or a
company or
- -------------------------------------------------------------------------------
1
7
<PAGE>

financial institution of one country but denominated in the currency of
another country (or a multinational currency unit). The Portfolio is designed
for investors who wish to accept the risks entailed in such investments, which
are different from those associated with a portfolio consisting entirely of
securities of U.S. issuers denominated in U.S. dollars.

The Sub-Adviser selectively will allocate the assets of the Portfolio in
securities of issuers in countries and in currency denominations where the
combination of fixed income market returns, the price appreciation potential
of fixed income securities and currency exchange rate movements will present
opportunities primarily for high current income and secondarily for capital
appreciation. In doing so, the Sub-Adviser intends to take full advantage of
the different yield, risk and return characteristics that investment in the
fixed income markets of different countries can provide for U.S. investors.
Fundamental economic strength, credit quality and currency and interest rate
trends will be the principal determinants of the emphasis given to various
country, geographic and industry sectors within the Portfolio. Securities held
by the Portfolio may be invested in without limitation as to maturity.

The Sub-Adviser generally evaluates currencies on the basis of
fundamental economic criteria (e.g., relative inflation and interest rate
levels and trends, growth rate forecasts, balance of payments status and
economic policies) as well as technical and political data. If the currency in
which a security is denominated appreciates against the U.S. dollar, the
dollar value of the security will increase. Conversely, if the exchange rate
of the foreign currency declines, the dollar value of the security will
decrease. However, the Portfolio may seek to protect itself against such
negative currency movements through the use of investment techniques that
include currency, options and futures transactions.
The Portfolio may also purchase securities on a "when-issued basis" and
may purchase or sell securities on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. The Portfolio
may invest up to 15% of its net assets in illiquid securities and is
authorized to borrow money from banks in an amount up to 33-1/3% of its total
assets (including the amount borrowed), less all liabilities and indebtedness
other than the borrowings and may use the proceeds for investment purposes.
The Portfolio will borrow for investment purposes only when the Sub-Adviser
believes that such borrowings will benefit the Portfolio, after taking into
account considerations such as the cost of the borrowing and the likely
investment returns on the securities purchased with the borrowed monies. In
addition, the Portfolio may borrow money for temporary or emergency purposes
or payments in an amount not exceeding 5% of the value of its total assets
(not including the amount borrowed) provided that the total amount borrowed by
the Portfolio for any purpose does not exceed 33-1/3% of its total assets. The
Portfolio may also enter into repurchase agreements, reverse repurchase
agreements and dollar roll transactions and may make loans of its portfolio
securities, invest in zerocoupon and other deep discount securities, invest in
commercial paper that is indexed to certain specific foreign currency exchange
rates, enter into interest rate, currency and index swaps and may purchase or
sell related caps, floors and collars and other derivative instruments. See
"Special Investment Techniques and Risk Considerations" for a description of
these types of securities.
Smith Barney High Income Portfolio
Investment Objectives
The primary investment objective of the Smith Barney High Income
Portfolio is to seek high current income. Capital appreciation is a secondary
objective. The Portfolio is managed by SBMFM.
- ------------------------------------------------------------------------------
- -18
<PAGE>

Investment Policies

The Smith Barney High Income Portfolio will seek to achieve its
investment objectives by investing, under normal circumstances, at least 65%
of its assets in high-yielding corporate debt obligations and preferred stock.
Although the Portfolio may invest in securities of any maturity, under current
market conditions the Portfolio intends that its portfolio will have an
average remaining maturity of between five and ten years. The Manager may
adjust the Portfolio's average maturity when, based on interest rate trends
and other market conditions, it deems it appropriate to do so. Up to 35% of
the Portfolio's assets may be invested in common stock or common stock
equivalents, including convertible securities, options, warrants and rights.
Equity investments may be made in securities of companies of any size
depending on the relative attractiveness of the company and the economic
sector in which it operates. Fixed income securities purchased by the
Portfolio will generally be rated in the lower rating categories of nationally
recognized securities rating organizations, as low as C by Moody's or D by
S&P, or in non-rated income securities that the Manager determines to be of
comparable quality. The Portfolio will not purchase securities rated lower
than B by both Moody's and S&P, if, immediately after such purchase, more than
10% of the Portfolio's total
assets are invested in such securities.
The Portfolio invests significantly in lower rated and unrated corporate
debt securities, commonly known as "junk bonds." Investments of this type are
subject to a greater risk of loss of principal and interest. Purchasers should
carefully assess the risks associated with an investment in this Portfolio.
See "Lower-Quality and Non-Rated Securities".

The Portfolio may invest in securities rated higher than Ba by Moody's
and BB by S&P without limitation when the difference in yields between quality
classifications is relatively narrow.
For temporary defensive purposes when the Manager anticipates adverse
market conditions, the Portfolio may invest all or a major portion of its
assets in securities rated higher than Ba by Moody's and BB by S&P.
Investments in higher rated issues may serve to lessen a decline in net asset
value but may also affect the amount of current income produced by the
Portfolio, since the yields from such issues are usually lower than those from
lower rated issues. A general description of Moody's and S&P's ratings of
corporate bonds is set forth in Appendix A. The Portfolio may also invest
without limitation in money market instruments, including commercial paper of
domestic and foreign corporations, certificates of deposit, bankers'
acceptances and other obligations of banks, repurchase agreements and short-
term obligations issued or guaranteed by the United States government or its
agencies. The yield on these securities will tend to be lower than the yield
on other securities to be purchased by the Portfolio. To the extent the
Portfolio's assets are invested for temporary defensive purposes, they will
not be invested in a manner designed to achieve the Portfolio's investment
objective.
The Portfolio may lend portfolio securities equal in value to not more
than 20% of its total assets and purchase or sell securities on a when-issued
or delayed-delivery basis. The Portfolio does not intend to leverage its
investments although it reserves the right to do so. The Portfolio may hedge
against possible declines in the value of its investments by entering into
interest rate futures contracts and related options, swaps and other financial
instruments.
The Portfolio may invest up to 20% of its assets in the securities of
foreign issuers that are denominated in currencies other than the U.S. dollar
and may invest without limitation in securities of foreign issuers that are
denominated in U.S. dollars.
- -------------------------------------------------------------------------------
1
9
<PAGE>

In connection with the investment objectives and policies described
above, the Portfolio may, but is not required to, utilize various investment
techniques to earn income, facilitate portfolio management and mitigate risk.
These investment techniques utilize interest rate and currency futures
contracts, put and call options on such futures contracts, currency exchange
transactions, illiquid securities, securities of unseasoned issuers and
securities of foreign governments and corporations including those of
developing countries. Any or all of such investment techniques available to
the Manager may be used at any time and there is no particular strategy that
dictates the use of one technique rather than another, since the use of any
investment technique is a function of numerous variables including market
conditions.

MFS Total Return Portfolio

Investment Objectives

The primary investment objective of the MFS Total Return Portfolio is to
obtain above-average income (compared to a portfolio entirely invested in
equity securities) consistent with the prudent employment of capital. While
current income is the primary objective, the Portfolio believes that there
should also
be a reasonable opportunity for growth of capital and income, since many
securities offering a better than average yield may also possess growth
potential. Thus, in selecting securities for its portfolio, the Portfolio
considers each of these objectives. Generally, at least 40% of the Portfolio's
assets are invested in equity securities. The Portfolio is managed by SBMFM;
Massachusetts Financial Services Company serves as the Portfolio's Sub-
Adviser.

Investment Policies

The MFS Total Return Portfolio's policy is to invest in a broad list of
securities, including short-term obligations. The list may be diversified not
only by companies and industries, but also by type of security. Fixed income
securities and equity securities (which include: common and preferred stocks;
securities such as bonds, warrants or rights that are convertible into stock;
and depository receipts for those securities) may be held by the Portfolio.
Some fixed income securities may also have a call on common stock by means of
a conversion privilege or attached warrants. The Portfolio may vary the
percentage of assets invested in any one type of security in accordance with
the SubAdviser's interpretation of economic and money market conditions,
fiscal and monetary policy and underlying security values. The Portfolio's
debt investments may consist of both "investment grade" securities (rated Baa
or better by Moody's or BBB or better by S&P or Fitch Investors Service, Inc.
("Fitch")) and securities that are unrated or are in the lower rating
categories (rated Ba or lower by Moody's or BB or lower by S&P or Fitch)
(commonly known as "junk bonds") including up to 20% of its assets in
nonconvertible fixed income securities that are in these lower rating
categories and comparable unrated securities. See "Lower-Quality and Non-Rated
Securities"). Generally, most of the Portfolio's long-term debt investments
will consist of "investment grade" securities. See Appendix A to this
Prospectus for a description of these ratings. It is not the Portfolio's
policy to rely exclusively on ratings issued by established credit rating
agencies but rather to supplement such ratings with the Sub-Adviser's own
independent and ongoing review of credit quality.

The Portfolio invests significantly in lower-rated and unrated corporate
debt securities, commonly known as "junk bonds." Investments of this type are
subject to a greater risk of loss of principal and interest. Purchasers should
carefully assess the risks associated with an investment in this Portfolio.
See "Lower-Quality and Non-Rated Securities".

Up to 20% of the Portfolio's total assets may be invested in foreign
securities. The Portfolio may also invest in American Depository Receipts. The
Portfolio may also invest in U.S. Government securities,

- ------------------------------------------------------------------------------
- -20
<PAGE>

mortgage pass-through securities, corporate asset-backed securities, zero-
coupon bonds, deferred interest bonds and payment-in-kind bonds. In addition,
the Portfolio may enter into repurchase agreements and mortgage dollar roll
transactions, may lend its portfolio securities, purchase securities on a when
issued or forward delivery basis, enter into swap transactions and invest in
indexed securities and loan participations. The Portfolio may invest up to 15%
of its net assets in illiquid securities and may also invest in restricted
securities, including Rule 144A Securities. Finally, the Portfolio may engage
in various options and futures transactions including options on securities,
options on stock indexes, options on foreign currencies, stock index and
foreign currency futures contracts, options on futures contracts, forward
foreign currency exchange contracts and yield curve options. See "Special
Investment Techniques and Risk Considerations" for additional information
about these types of securities.

In addition, when the Sub-adviser believes that investing for defensive
purposes is appropriate, such as during periods of unusual or unfavorable
market or economic conditions, or in order to meet anticipated redemption
requests, up to 100% of the Portfolio's assets may be temporarily invested in
cash (including
foreign currency) or cash equivalents including, but not limited to,
obligations of banks (including certificates of deposit, bankers' acceptances
and repurchase agreements) with assets of $1 billion or more, commercial
paper, short-term notes, obligations issued or guaranteed by the U.S. or any
foreign government or any of their agencies, authorities or instrumentalities
and repurchase agreements.
Smith Barney Money Market Portfolio
Investment Objectives
The investment objectives of the Smith Barney Money Market Portfolio are
maximum current income and preservation of capital. The Portfolio is managed
by SBMFM.
Investment Policies
The Smith Barney Money Market Portfolio seeks to achieve its objectives
by investing in bank obligations and high quality commercial paper, corporate
obligations and municipal obligations, in addition to U.S. Government
securities and related repurchase agreements. Shares of the Portfolio are not
insured or guaranteed by the U.S. Government. The Portfolio has adopted
certain investment policies to assure that, to the extent reasonably possible,
the Portfolio's price per share will not change from $1.00, although no
assurance can be given that this goal will be achieved on a continuous basis.
In order to minimize fluctuations in market price the Portfolio will not
purchase a security with a remaining maturity of greater than 13 months (or
that is deemed to have a remaining maturity of greater than 13 months) or
maintain a dollar-weighted average portfolio maturity in excess of 90 days
(securities used as collateral for repurchase agreements are not subject to
these restrictions). The Portfolio's investments will be limited to U.S.
dollar-denominated instruments that its Board of Directors determines present
minimal credit risks and which are "Eligible Securities" at the time of
acquisition by the Portfolio. The term Eligible Securities includes securities
rated by the "Requisite NRSROs" in one of the two highest short-term rating
categories, securities of issuers that have received such ratings with respect
to other short-term debt securities and comparable unrated securities.
"Requisite NRSROs" means (a) any two nationally recognized statistical rating
organizations ("NRSROs") that have issued a rating with respect to a security
or class of debt obligations of an issuer, or (b) one NRSRO, if only one NRSRO
has issued such a rating at the time that the Portfolio acquires the security.
The NRSROs currently designated as such by the Securities and Exchange
Commission (the "SEC") are S&P, Moody's, Fitch Investors Services, Inc., Duff
and Phelps Inc., IBCA Limited and its affiliate, IBCA, Inc. and Thomson
BankWatch. See Appendix A for a discussion of the ratings categories of the
NRSROs.
- -------------------------------------------------------------------------------
2
1
<PAGE>

The Portfolio may enter into repurchase agreements collateralized by U.S.
Government securities with any broker/dealer or other financial institution
that is deemed creditworthy by the Manager, under guidelines approved by the
Fund's Board of Directors. The Portfolio will not enter into a repurchase
agreement on behalf of the Portfolio if, as a result thereof, more than 10% of
the Portfolio's net assets (taken at current value) at that time would be
subject to repurchase agreements maturing in more than seven days.

The following are also permitted investments for the Portfolio:

High Quality Commercial Paper. The Portfolio's purchase of commercial
paper is restricted to direct obligations of issuers that at the time of
purchase are Eligible Securities that are rated by at least one NRSRO in the
highest category for short-term debt securities or comparable unrated
securities. The Portfolio may invest without limit in the commercial paper of
foreign issuers.

High Quality Corporate Obligations. Obligations of corporations that are:
(1) rated AA or better by S&P or Aa or better by Moody's or (2) issued by an
issuer that has a class of short-term debt obligations that are comparable in
priority and security with the obligation and that have been rated in one of
the two highest rating categories for short-term debt obligations. The
Portfolio will only invest in corporate obligations with remaining maturities
of 13 months or less.

Bank Obligations. Obligations (including certificates of deposit,
bankers' acceptances and fixed time deposits) and securities backed by letters
of credit of U.S. banks or other U.S. 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 full 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 its most recently published financial statements prior to the date of
investment). Under current FDIC regulations, the maximum insurance payable as
to any one certificate of deposit is $100,000; therefore, certificates of
deposit in denominations greater than $100,000 that are purchased by the Smith
Barney Money Market Portfolio will not be fully insured. The Portfolio
currently intends to limit its investment in fixed time deposits with a
maturity of from two business to seven calendar days to up to 5% of its net
assets and will invest in such time deposits only if, when combined with other
illiquid assets of the Portfolio, not more than 10% of its assets would be
invested in all such instruments. The Portfolio may also invest in securities
of foreign branches of U.S. banks. Such investments involve considerations
that are not ordinarily associated with investing in domestic certificates of
deposit. (See "Foreign Securities.") The Portfolio may invest in instruments
issued by domestic banks, including those issued by their branches outside the
United States and subsidiaries located in Canada, and instruments issued by
foreign banks through their branches located in the United States and the
United Kingdom. In addition, the Portfolio may invest in fixed time deposits
of foreign banks issued through their branches located in Grand Cayman Island,
Nassau, Tokyo and Toronto.

The purchase of obligations of foreign banks will involve similar
investment and risk considerations that are applicable to investing in
obligations of foreign branches of U.S. banks. (See "Foreign Securities.")
These factors will be carefully considered by the Manager in selecting
investments for the Portfolio.

High Quality Municipal Obligations. Debt obligations of states, cities,
counties, municipalities, municipal agencies and regional districts rated SP-
1+ or A-1 or AA or better by S&P or MIG 2, VMIG 2, or Prime-1 or Aa or better
by Moody's or, if not rated, are determined by the Sub-Adviser to be of
comparable quality. At certain times, supply/demand imbalances in the tax-
exempt market cause municipal obligations to yield more than taxable

- ------------------------------------------------------------------------------
- -22
<PAGE>

obligations of equivalent credit quality and maturity length. The purchase of
these securities could enhance the Portfolio's yield. The Portfolio will not
invest more than 10% of its total assets in municipal obligations.

The Portfolio may, to a limited degree, engage in short-term trading to
attempt to take advantage of short-term market variations, or may dispose of
the portfolio security prior to its maturity if it believes such disposition
advisable or it needs to generate cash to satisfy redemptions. In such cases,
the Portfolio may realize a gain or loss.

As a matter of fundamental policy, the Portfolio may borrow money from
banks for temporary purposes but only in an amount up to 10% of the value of
its total assets and may 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. The Portfolio may also lend its
portfolio securities to brokers, dealers and other financial organizations.
Such loans, if and when made, may not exceed 20% of the Portfolio's total
assets, taken at value.
Notwithstanding any of the foregoing investment restrictions, the Smith
Barney Money Market Portfolio may invest up to 100% of its assets in U.S.
Government securities.
SPECIAL INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS -----------
- --------------------------------------------------------------------
==============================================================================
==
Foreign Securities. Each of the Portfolios may purchase securities issued
by foreign governments, corporations or banks. The Smith Barney Money Market
Portfolio may also purchase securities of foreign branches of U.S. banks and
of domestic and foreign branches of foreign banks. Investments in foreign
securities involve risks that are different in some respects from investments
in securities of U.S. issuers, such as the risk of fluctuations in the value
of the currencies in which they are denominated, the risk of adverse
political, social, economic and diplomatic developments, the possible
imposition of exchange controls or other foreign governmental laws or
restrictions and, with respect to certain countries, the possibility of
expropriation of assets, nationalization or confiscatory taxation or
limitations on the removal of funds or other assets of the Portfolios.
Securities of some foreign companies and banks are less liquid and more
volatile than securities of comparable domestic companies and banks. Non-U.S.
securities markets, while growing in volume have, for the most part,
substantially less volume than U.S. markets, and there is generally less
government supervision and regulation of exchanges, brokers and issuers than
there is in the U.S. Dividend and interest income from non-U.S. securities
will generally be subject to withholding taxes by the country in which the
issuer is located and may not be recoverable by the Portfolio or the
investors. There also may be less publicly available information about foreign
issuers than domestic issuers, and foreign issuers generally are not subject
to the uniform accounting, auditing and financial reporting standards,
practices and requirements applicable to domestic issuers. Delays may be
encountered in settling securities transactions in certain foreign markets,
and the Portfolios will incur costs in converting foreign currencies into U.S.
dollars. Custody and transaction charges are generally higher for foreign
securities. There is also a risk of the adoption of government regulations
that might adversely affect the payment of principal and interest on
securities held by a Portfolio. In addition, a Portfolio may encounter greater
difficulties in invoking legal processes abroad than would be the case in the
U.S. Finally, changes in foreign currency exchange rates will, to the extent a
Portfolio does not adequately hedge against such fluctuations, affect the
value of securities in its portfolio and the unrealized appreciation or
depreciation of investments so far as U.S. investors are concerned.
- -------------------------------------------------------------------------------
2
3
<PAGE>

Securities of Emerging Markets. Because of the special risks associated
with investing in emerging markets, an investment in the Putnam Diversified
Income, G.T. Global Strategic Income or Smith Barney High Income Portfolios,
should be considered speculative. Investors are strongly advised to consider
carefully the special risks involved in emerging markets, which are in
addition to the usual risks of investing in developed foreign markets around
the world.

Investing in emerging markets involves risks relating to potential
political and economic instability within such markets and the risks of
expropriation, nationalization, confiscation of assets and property, the
imposition of restrictions on foreign investments and the repatriation of
capital invested. In Eastern Europe, for example, upon the accession to power
of
Communist regimes in the past, the governments of a number of Eastern European
countries expropriated a large amount of property. The claims of many property
owners against those governments were never finally settled. There can be no
assurance that any investments that a Portfolio might make in an emerging
market would not be expropriated, nationalized or otherwise confiscated at
some time in the future. In the event of such expropriation, nationalization
or other confiscation in any emerging market, each Portfolio could lose its
entire investment in that market. Many emerging market countries have also
experienced substantial, and in some periods extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation rates
have had and may continue to have negative effects on the economics and
securities of certain emerging market countries.

Economies in emerging markets generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be
affected adversely by trade barriers, exchange controls, managed adjustments
in relative currency values and other protectionist measures imposed or
negotiated by the countries with which they trade. These economies also have
been and may continue to be affected adversely by economic conditions in the
countries in which they trade.

The securities markets of emerging countries are substantially smaller,
less developed, less liquid and more volatile than the securities markets of
the United States and other more developed countries. Disclosure and
regulatory standards in many respects are less stringent than in the United
States and other major markets. There also may be a lower level of monitoring
and regulation of emerging securities markets and the activities of investors
in such markets, and enforcement of existing regulations has been extremely
limited.

In addition, brokerage commissions, custodial services and other costs
relating to investment in foreign markets generally are more expensive than in
the United States, particularly with respect to emerging markets. Such markets
have different settlement and clearance procedures. In certain markets there
have been times when settlements have been unable to keep pace with the volume
of securities transactions, making it difficult to conduct such transactions.
The inability of a Portfolio to make intended securities purchases due to
settlement problems could cause it to miss attractive investment
opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to a Portfolio due to
subsequent declines in value of the portfolio security or, if the Portfolio
has entered into a contract to sell the security, could result in possible
liability to the purchaser.

The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may
be substantially curtailed and prices for the portfolio securities in such
markets may not be readily available. Section 22(e) of the Investment Company
Act of 1940, as amended (the "1940 Act") permits a registered investment
company to suspend redemption of its shares for any period during which an
emergency exists, as determined by the SEC. Accordingly, if a Portfolio
believes that appropriate circumstances warrant, it will promptly apply to the
SEC for a determination that an emergency exists within the meaning of Section
22(a) of the 1940 Act. During the period commencing from a Portfolio's

- ------------------------------------------------------------------------------
- -24
<PAGE>

identification of such conditions until the date of SEC action, the portfolio
securities in the affected markets will be valued at fair value as determined
in good faith by or under the direction of the Board of Directors.

Sovereign Debt. The TBC Managed Income, the Putnam Diversified Income and
the G.T. Global Strategic Income Portfolios may each invest in sovereign debt
securities of emerging market governments including Brady Bonds. Investments
in such securities involve special risks. The issuer of the debt or the
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due in accordance with the
terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt, and in turn a Portfolio's net
asset value, to a greater extent than the volatility inherent in domestic
fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward principal international lenders and the political constraints to
which a sovereign debtor may be subject. Emerging market governments could
default on their sovereign debt. Such sovereign debtors also may be dependent
on expected disbursements from foreign governments, multilateral agencies and
other entities abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a sovereign debtor's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest
when due, may result in the cancellation of such third parties' commitments to
lend funds to the sovereign debtor, which may further impair such debtor's
ability or willingness to timely service its debts.

The occurrence of political, social or diplomatic changes in one or more
of the countries issuing sovereign debt could adversely affect a Portfolio's
investments. Emerging markets are faced with social and political issues and
some of them have experienced high rates of inflation in recent years and have
extensive internal debt. Among other effects, high inflation and internal debt
service requirements may adversely affect the cost and availability of future
domestic sovereign borrowing to finance governmental programs, and may have
other adverse social, political and economic consequences. Political changes
or a deterioration of a country's domestic economy or balance of trade may
affect the willingness of countries to service their sovereign debt. Although
management intends to manage each Portfolio in a manner that will minimize the
exposure to such risks, there can be no assurance that adverse political
changes will not cause a Portfolio to suffer a loss of interest or principal
on any of its holdings.
In recent years, some of the emerging market countries in which each
Portfolio expects to invest have encountered difficulties in servicing their
sovereign debt obligations. Some of these countries have withheld payments of
interest and/or principal of sovereign debt. These difficulties have also led
to agreements to restructure external debt obligations -- in particular,
commercial bank loans, typically by rescheduling principal payments, reducing
interest rates and extending new credits to finance interest payments on
existing debt. In the future, holders of emerging market sovereign debt
securities may be requested to participate in similar rescheduling of such
debt. Certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. Currently, Brazil, Mexico and
Argentina are among the largest debtors among developing countries. At times
certain emerging market countries have declared moratoria on the payment of
principal and interest on external debt; such a moratorium is currently in
effect in certain emerging market countries. There is no bankruptcy proceeding
by which a creditor may collect in whole or in part sovereign debt on which an
emerging market government has defaulted.
- -------------------------------------------------------------------------------
2
5
<PAGE>

The ability of emerging market governments to make timely payments on
their sovereign debt securities is likely to be influenced strongly by a
country's balance of trade and its access to trade and other international
credits. A country whose exports are concentrated in a few commodities could
be vulnerable to a decline in the international prices of one or more of such
commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payments for
its exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.

Investors should also be aware that certain sovereign debt instruments in
which the Portfolios may invest involve great risk. As noted above, sovereign
debt obligations issued by emerging market governments generally are deemed to
be the equivalent in terms of quality to securities rated below investment
grade by Moody's and S&P. Such securities are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and involve major
risk exposure to adverse conditions. Some of such securities, with respect to
which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
Portfolios may have difficulty disposing of and valuing certain sovereign debt
obligations because there may be a limited trading market for such securities.
Because there is no liquid secondary market for many of these securities, each
Portfolio anticipates that such securities could be sold only to a limited
number of dealers or institutional investors.

Brady Bonds. The Putnam Diversified Income and the G.T. Global Strategic
Income Portfolios may each invest in "Brady Bonds," which are debt
restructurings that provide for the exchange of cash and loans for newly
issued bonds. Brady Bonds have been issued by the governments of Argentina,
Brazil, Costa Rica, Ecuador, Mexico, Nigeria, Poland, Uruguay, Venezuela and
the Philippines. In addition, Peru and Panama have announced intentions to
issue Brady Bonds. Approximately $139 billion in principal amount of Brady
Bonds has been issued as of the date of this Prospectus, the largest
proportion having been issued by Mexico and Venezuela. Brady Bonds issued by
Mexico and Venezuela currently are rated below investment grade. As of the
date of this Prospectus, the Portfolios are not aware of the occurrence of any
payment defaults on Brady Bonds. Investors should recognize, however, that
Brady Bonds have been issued only recently and, accordingly, do not have a
long payment history. Brady Bonds may be collateralized or uncollateralized,
are issued in various currencies (primarily the U.S. dollar) and are actively
traded in the secondary market for Latin American debt. The Salomon Brothers
Brady Bond Index provides a benchmark that can be used to compare returns of
emerging market Brady Bonds with returns in other bond markets, e.g., the U.S.
bond market.

The Portfolios may invest in either collateralized or uncollateralized
Brady Bonds. U.S. dollar-denominated, collateralized Brady Bonds which may be
fixed rate par bonds or floating rate discount bonds, are collateralized in
full as to principal by U.S. Treasury zero coupon bonds having the same
maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time
and is adjusted at regular intervals thereafter.

Loan Participations and Assignments. The Putnam Diversified Income, the
G.T. Global Strategic Income Portfolio and the MFS Total Return Portfolio may
each invest a portion of its assets in loan participations ("Participations").
By purchasing a Participation, a Portfolio acquires some or all of the
interest of a bank or other lending institution in a loan to a corporate or
government borrower. The Participations typically will result in the Portfolio
having a contractual relationship only with the lender not the borrower. A
Portfolio will have the right to receive payments of principal, interest and
any fees to which it is entitled only

- ------------------------------------------------------------------------------
- -26
<PAGE>

from the lender selling the Participation and only upon receipt by the lender
of the payments from the borrower. In connection with purchasing
Participations, a Portfolio generally will have no right to enforce compliance
by the borrower with the terms of the loan agreement relating to the loan, nor
any rights of set-off against the borrower, and a Portfolio may not directly
benefit from any collateral supporting the loan in which it has purchased the
Participation. As a result, a Portfolio will assume the credit risk of both
the borrower and the lender that is selling the Participation. In the event of
the insolvency of the lender selling a Participation, a Portfolio may be
treated as a general creditor of the lender and may not benefit from any set-
off between the lender and the borrower. Each Portfolio will acquire
Participations only if the lender interpositioned between the Portfolio and
the borrower is determined by management to be creditworthy.

The Putnam Diversified Income and the G.T. Global Strategic Income
Portfolio may also invest in assignments of portions of loans from third
parties ("Assignments"). When it purchases Assignments from lenders, the
Portfolio will acquire direct rights against the borrower on the loan.
However, since Assignments are arranged through private negotiations between
potential assignees and assignors, the rights and obligations acquired by the
Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning lender.

The Portfolios may have difficulty disposing of Assignments and
Participations. The liquidity of such securities is limited and, each
Portfolio anticipates that such securities could be sold only to a limited
number of institutional investors. The lack of a liquid secondary market could
have an adverse impact on the value of such securities and on each Portfolio's
ability to dispose of particular Assignments or Participations when necessary
to meet the Portfolio's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the borrower. The
lack of a liquid secondary market for Assignments and Participations also may
make it more difficult for the Portfolio to assign a value to those securities
for purposes of valuing the Portfolio's portfolio and calculating its net
asset value.

Lower-Quality and Non-Rated Securities. The Alliance Growth, TBC Managed
Income, Putnam Diversified Income, G.T. Global Strategic Income, Smith Barney
High Income and MFS Total Return Portfolios may each invest in lower-quality
securities. Investments in lower-rated securities are subject to special
risks, including a greater risk of loss of principal and non-payment of
interest. An investor should carefully consider the following factors before
investing in these Portfolios.

Generally, lower-quality securities offer a higher return potential than
higher-rated securities but involve greater volatility of price and greater
risk of loss of income and principal, including the possibility of default or
bankruptcy of the issuers of such securities. Lower-quality securities and
comparable non-rated securities will likely have large uncertainties or major
risk exposure to adverse conditions and are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. The occurrence of adverse
conditions and uncertainties would likely reduce the value of securities held
by a Portfolio, with a commensurate effect on the value of the Portfolio's
shares.

The markets in which lower-quality securities or comparable non-rated
securities are traded generally are more limited than those in which higher
quality securities are traded. The existence of limited markets for these
securities may restrict the availability of securities for a Portfolio to
purchase and also may restrict the ability of a Portfolio to obtain accurate
market quotations for purposes of valuing securities and calculating net asset
value or to sell securities at their fair value. The public market for lower
quality securities and comparable non-rated securities is relatively new and
has not fully weathered a major economic recession. Any such economic downturn
could adversely affect the ability of issuers' lower-quality securities to
repay principal and pay interest thereon.

- -------------------------------------------------------------------------------
2
7
<PAGE>

While the market values of lower-quality securities and comparable non
rated securities tend to react less to fluctuations in interest rate levels
than do those of higher-quality securities, the market values of certain of
these securities also tend to be more sensitive to individual corporate
developments and changes in economic conditions than higher-quality
securities. In addition, lower-quality securities and comparable non-rated
securities generally present a higher degree of credit risk. Issuers of lower-
quality securities and comparable non-rated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their debt obligations during an
economic downturn or during sustained periods of rising interest rates may be
impaired. The risk of loss due to default by such issuers is significantly
greater because lower-quality securities and comparable non-rated securities
generally are unsecured and frequently are subordinated to the prior payment
of senior indebtedness. A Portfolio may incur additional expenses to the
extent that it is required to seek recovery upon a default in the payment of
principal or interest on its portfolio holdings.
Fixed-income securities, including lower-quality securities and
comparable non-rated securities, frequently have call and buy-back features
that permit their issuers to call or repurchase the securities from their
holders, such as the Portfolios. If an issuer exercises these rights during
periods of declining interest rates, a Portfolio may have to replace the
security with a lower yielding security, resulting in a decreased return to
the Portfolio.
In general, the ratings of nationally recognized statistical rating
organizations represent the opinions of these agencies as to the quality of
securities that they rate. Such ratings, however, are relative and subjective,
and are not absolute standards of quality and do not evaluate the market value
risk of the securities. It is possible that an agency might not change its
rating of a particular issue to reflect subsequent events. These ratings will
be used by each Portfolio as initial criteria for the selection of portfolio
securities, but each Portfolio also will rely upon the independent advice of
the Manager or the Sub-Adviser, as the case may be, to evaluate potential
investments.
In light of these risks, management will take various factors into
consideration in evaluating the creditworthiness of an issue, whether rated or
non-rated. These factors may include, among others, the issuer's financial
resources, its sensitivity to economic conditions and trends, the operating
history of and the community support for the facility financed by the issue,
the ability of the issuer's management and regulatory matters.
Securities Lending. Each Portfolio except the American Capital Enterprise
Portfolio may seek to increase its net investment income by lending portfolio
securities to unaffiliated brokers, dealers and other financial institutions,
provided such loans are callable at any time and are continuously secured by
cash or U.S. Government securities or other high grade liquid debt securities
equal to no less than the market value, determined daily, of the securities
loaned. The risks in lending portfolio securities consist of possible delay in
receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail
financially.
Repurchase Agreements. Each Portfolio may on occasion enter into
repurchase agreements, wherein the seller agrees to repurchase a security from
the Portfolio at an agreed-upon future date, normally the next business day.
The resale price is greater than the purchase price, which reflects the agreed-
upon rate of return for the period the Portfolio holds the security and which
is not related to the coupon rate on the purchased security. Each Portfolio
requires continual maintenance of the market value of the collateral in
amounts at least equal to the resale price, thus risk is limited to the
ability of the seller to pay the agreed-upon amount on the delivery date;
however, if the seller
defaults, realization upon the collateral by the Portfolio may be delayed or
limited or the Portfolio might incur a loss if the value of the collateral
securing the repurchase

- ------------------------------------------------------------------------------
- -28
<PAGE>

agreement declines and might incur disposition costs in connection with
liquidating the collateral. Repurchase agreements are considered loans by the
Portfolios. The Portfolios will only enter into repurchase agreements with
broker/dealers or other financial institutions that are deemed creditworthy by
management, under guidelines approved by the Board of Directors.

Reverse Repurchase Agreements. The G.T. Global Strategic Income Portfolio
may enter into reverse repurchase agreements with the same parties with whom
it may enter into repurchase agreements. Under a reverse repurchase agreement,
the Portfolio will sell securities and agree to repurchase them at a
particular price at a future date. At the time the Portfolio enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid high grade
securities that have a value no less than the repurchase price, including
accrued interest. Reverse repurchase agreements involve the risk that the
market value of the securities retained in lieu of sale by the Portfolio may
decline below the price of the securities the Portfolio has sold but is
obliged to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether
to enforce the Portfolio's obligation to repurchase the securities, and the
Portfolio's use of the proceeds of the reverse repurchase agreements may
effectively be restricted pending such decision. Reverse repurchase agreements
will be treated as borrowings and will be considered in the Portfolio's
overall borrowing limitation. The Portfolio may enter into reverse repurchase
agreements, although it does not currently intend to do so with respect to
more than 5% of its total assets.

Dollar Roll Transactions. The TBC Managed Income, the Putnam Diversified
Income and the G.T. Global Strategic Income Portfolios may each enter into
"dollar rolls", in which a Portfolio sells fixed income securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date. The MFS Total Return Portfolio may enter into similar
transactions pursuant to which the Portfolio sells mortgage-backed securities
for delivery in the future (generally within 30 days). During the roll period,
a Portfolio would forego principal and interest paid on such securities. The
Portfolio would be compensated by the difference between the current sales
price and the forward price for the future purchase, as well as by the
interest earned on the cash proceeds of the initial sale. Since a Portfolio
will receive interest on the securities in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such
securities must satisfy the quality requirements of the Portfolio and will
mature on or before the settlement date on the transaction, management
believes that such transactions do not present the risks to the Portfolios
that are associated with other types of leverage. The MFS Total Return
Portfolio will only enter into covered rolls, where there is an offsetting
cash position or a cash equivalent security position which matures on or
before the forward settlement date of the dollar roll transaction. Dollar roll
transactions are considered borrowings by the Portfolios and will be subject
to each Portfolio's overall borrowing limitation. Dollar roll transactions are
considered speculative.

When-Issued, Delayed Delivery and Forward Commitment Securities. The
Smith Barney Income and Growth, Alliance Growth, TBC Managed Income, Putnam
Diversified Income, G.T. Global Strategic Income, Smith Barney High Income and
MFS Total Return Portfolios may each purchase or sell securities on a when
issued, delayed delivery or forward commitment basis. Such transactions arise
when securities are purchased or sold by a Portfolio with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Portfolio at the time of entering into the
transaction. Purchasing such securities involves the risk of loss if the value
of the securities declines prior to settlement date. The sale of securities
for delayed delivery involves the risk that the prices available in the market
on the delivery date may be greater than those obtained in the sale
transaction. Each Portfolio's custodian will
- -------------------------------------------------------------------------------
2
9
<PAGE>

maintain, in a segregated account on behalf of the Portfolio, cash, U.S.
Government securities or other liquid high-grade debt obligations having a
value equal to or greater than the Portfolio's purchase commitments; the
custodian will likewise segregate securities sold on a delayed basis.

Convertible Securities. Each Portfolio except the Smith Barney Money
Market Portfolio can invest in convertible securities. Convertible securities
are fixed-income securities that may be converted at either a stated price or
stated rate into underlying shares of common stock. Convertible securities
have general characteristics similar to both fixed-income and equity
securities. Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the
underlying common stocks and, therefore, also will react to variations in the
general market for equity securities.
Convertible securities are investments which provide for a stable stream
of income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Synthetic convertible securities differ from
convertible securities in certain respects, including that each component of a
synthetic convertible security has a separate market value and responds
differently to market fluctuations. Investing in synthetic convertible
securities involves the risk normally involved in holding the securities
comprising the synthetic convertible security.
Short Sales Against the Box. The American Capital Enterprise, the G.T.
Global Strategic Income, the AIM Capital Appreciation and the Smith Barney
High Income Portfolios may each make short sales of securities in order to
reduce market exposure and/or to increase its income if, at all times when a
short position is open, the Portfolio owns an equal or greater amount of such
securities or owns preferred stock, debt or warrants convertible or
exchangeable into an equal or greater number of the shares of the securities
sold short. Short sales of this kind are referred to as short sales "against
the box."
Securities of Unseasoned Issuers. Securities in which the Smith Barney
High Income Portfolio may invest may lack a significant operating history and
be dependent on products or services without an established market share.
Borrowing and Leverage. Each Portfolio may borrow from banks, on a
secured or unsecured basis. If the Portfolio borrows and uses the proceeds to
make additional investments, income and appreciation from such investments
will improve its performance if they exceed the associated borrowing costs but
impair its performance if they are less than such borrowing costs. This
speculative factor is known as "leverage". Only the Smith Barney International
Equity, Smith Barney Pacific Basin and G.T. Global Strategic Income Portfolios
will utilize leverage.
In addition, the AIM Capital Appreciation Portfolio may, but has no
current intention to, engage in leverage. Should the Portfolio engage in
leverage, immediately after such borrowing the value of its assets, including
the amount borrowed, less liabilities, must be equal to at least 300% of the
amount borrowed, plus all outstanding borrowings.

Leverage creates an opportunity for increased returns to shareholders of
a Portfolio but, at the same time, creates special risk considerations. For
example, leverage may exaggerate changes in the net asset value of a
Portfolio's shares and in the Portfolio's yield. Although the principal or
stated value of such borrowings will be fixed, the portfolio assets may change
in value during the time the borrowing is outstanding. Leverage will

- ------------------------------------------------------------------------------
- -30
<PAGE>

create interest or dividend expense for a Portfolio which can exceed the
income from the assets retained. To the extent the income or other gain
derived from securities purchased with borrowed funds exceeds the interest and
other charges the Portfolio will have to pay in respect thereof, the
Portfolio's net income or other gain will be greater than if leverage had not
been used. Conversely, if the income or other gain from the incremental assets
is not sufficient to cover the cost of leverage, the net income or other gain
of the Portfolio will be less than if leverage had not been used. If the
amount of income from the incremental securities is insufficient to cover the
cost of borrowing, securities might have to be liquidated to obtain required
funds. Depending on market or other conditions, such liquidations could be
disadvantageous to a Portfolio.

Illiquid and Restricted Securities. Each Portfolio may purchase
securities that are not registered ("restricted securities") under the
Securities Act of 1933, as amended (the "1933 Act"), but can be offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act
("Rule 144A"). Each Portfolio may also invest a portion of its assets in
illiquid investments, which include repurchase agreements maturing in more
than seven days and restricted securities. The Board of Directors may
determine, based upon a continuing review of the trading markets for the
specific restricted security, that such restricted securities are liquid. The
Board of Directors has adopted guidelines and delegated to management the
daily function of determining and monitoring liquidity of restricted
securities available pursuant to Rule 144A. The Board, however, retains
sufficient oversight and is ultimately responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market for
Rule 144A restricted securities will develop, the Board will carefully monitor
each Portfolio's investments in these securities, focusing on such important
factors, among others, as valuation, liquidity and availability of
information. Investments in restricted securities could have the effect of
increasing the level of illiquidity in a Portfolio to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities. The Portfolios may also purchase restricted
securities that are not registered under Rule 144A.

Zero-Coupon Bonds, Deferred Interest Bonds and Payment-in-Kind Bonds. The
Alliance Growth, the TBC Managed Income, Putnam Diversified Income, G.T.
Global Strategic Income and MFS Total Return Portfolios may each invest in
zero-coupon and payment-in-kind bonds. The MFS Total Return and Putnam
Diversified Income Portfolios also may each invest in deferred interest bonds.
Zero-coupon and deferred interest bonds are issued at a significant discount
from their principal amount. While zero-coupon bonds do not require the
periodic payment of interest, deferred interest bonds provide for a period of
delay before the regular payment of interest begins. Payment-in-kind bonds
allow the issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. The value of zero-coupon bonds is
subject to greater fluctuation in market value in response to changes in
market interest rates than bonds of comparable maturity which pay interest
currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds that pay interest currently.
Even though such bonds do not pay current interest in cash, the Portfolio is
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Accordingly, for a
Portfolio to continue to qualify for tax treatment as a regulated investment
company and to avoid certain excise
taxes, the Portfolio may be required to distribute as a dividend an amount
that is greater than the total amount of cash it actually receives. These
distributions must be made from the Portfolio's cash assets or, if necessary,
from the proceeds of sales of portfolio securities. The Portfolio will not be
able to purchase additional income-producing securities with cash used to make
such distributions and its current income ultimately may be reduced as a
result.
Futures, Options and Currency Transactions. Consistent with its
investment objective and policies, each of the Alliance Growth, AIM Capital
Appreciation, American Capital Enterprise, Smith Barney
- -------------------------------------------------------------------------------
3
1
<PAGE>

International Equity, Smith Barney Pacific Basin, Putnam Diversified Income,
G.T. Global Strategic Income, Smith Barney High Income and MFS Total Return
Portfolios may enter into contracts for the purchase or sale for future
delivery of fixed-income securities, foreign currencies or contracts based on
financial indices including interest rates or an index of U.S. Government or
foreign government securities or equity or fixed-income securities ("futures
contracts"), and may buy and write put and call options to buy or sell futures
contracts ("options on futures contracts"). When a Portfolio buys or sells a
futures contract it incurs a contractual obligation to receive or deliver the
underlying instrument (or a cash payment based on the difference between the
underlying instrument's closing price and the price at which the contract was
entered into) at a specified price on a specified date. An option on a futures
contract gives a Portfolio the right (but not the obligation) to buy or sell a
futures contract at a specified price on or before a specified date.

The Portfolios will not enter into transactions in futures contracts and
options on futures contracts for speculation and will not enter into such
transactions other than to hedge against potential changes in interest or
currency exchange rates or the price of a security or a securities index which
might correlate with or otherwise adversely affect either the value of the
Portfolio's securities or the prices of securities which the Portfolio is
considering buying at a later date. The Smith Barney International Equity,
Smith Barney Pacific Basin, MFS Total Return and Smith Barney High Income
Portfolios, however, may enter into futures contracts and options on futures
contracts for non-hedging purposes, provided that the aggregate initial margin
and premiums on such non-hedging positions does not exceed 5% of the
liquidation value of a Portfolio's assets.

Although futures contracts by their terms call for the delivery or
acquisition of the underlying commodities or a cash payment based on the value
of the underlying commodities, in most cases the contractual obligation is
offset before the delivery date of the contract by buying, in the case of a
contractual obligation to sell, or selling, in the case of a contractual
obligation to buy, an identical futures contract on a commodities exchange.
Such a transaction cancels the obligation to make or take delivery of the
commodities. Since all transactions in the futures market are made through a
member of, and are offset or fulfilled through a clearinghouse associated
with, the exchange on which the contracts are traded, a Portfolio will incur
brokerage fees when it buys or sells futures contracts.

A Portfolio will not (1) enter into any futures contracts or options on
futures contracts if immediately thereafter the aggregate margin deposits on
all outstanding futures contracts positions held by the Portfolio and premiums
paid on outstanding options on futures contracts, after taking into account
unrealized profits and losses, would exceed 5% of the market value of the
total assets of the Portfolio or (2) enter into any futures contracts or
options on futures contracts if the aggregate amount of the Portfolio's
commitments under outstanding futures contracts positions and options on
futures contracts written by the Portfolio would exceed the market value of
the total assets of the Portfolio. See the Statement of Additional Information
for further discussion of the use, risks and costs associated with futures
contracts and options on
futures contracts.

Forward Currency Transactions. The Alliance Growth, Smith Barney
International Equity, Smith Barney Pacific Basin, Putnam Diversified Income,
G.T. Global Strategic Income, Smith Barney High Income and MFS Total Return
Portfolios may each enter into forward foreign currency exchange contracts
("forward currency contracts") to attempt to minimize the risk to the
Portfolio from adverse changes in the relationship between the U.S. dollar and
other currencies. A forward currency contract is an obligation to buy or sell
an amount of a specified currency for an agreed price (which may be in U.S.
dollars or a foreign currency) at a future date which is individually
negotiated between currency traders and their customers. A Portfolio may enter
into a forward currency contract, for example, when it enters into a contract
to buy or sell a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of the security ("transaction hedge"). Additionally,
when a Portfolio believes that a foreign currency in which the portfolio
securities are denominated may suffer

- ------------------------------------------------------------------------------
- -32
<PAGE>

a substantial decline against the U.S. dollar, the Portfolio may enter into a
forward currency contract to sell an amount of that foreign currency
approximating the value of some or all of the portfolio securities denominated
in that currency, or, when the Portfolio believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, the Portfolio may
enter into a forward currency contract to buy that foreign currency for a
fixed U.S. dollar amount ("position hedge"). A Portfolio also may enter into a
forward currency contract with respect to a currency where the Portfolio is
considering the purchase of investments denominated in that currency but has
not yet done so ("anticipatory hedge"). In any of these circumstances the
Portfolio may, alternatively, enter into a forward currency contract with
respect to a different foreign currency when the Portfolio believes that the
U.S. dollar value of that currency will correlate with the U.S. dollar value
of the currency in which portfolio securities of, or being considered for
purchase by, the Portfolio are denominated ("cross hedge"). A Portfolio may
invest in forward currency contracts with stated contract values of up to the
value of the Portfolio's assets. The MFS Total Return Portfolio may also enter
into forward currency contracts for non-hedging purposes, subject to
applicable law.

A Portfolio also may enter into forward contracts to buy or sell at a
later date instruments in which the Portfolio may invest directly or on
financial indices based on those instruments. The market for those types of
forward contracts is developing and it is not currently possible to identify
instruments on which forward contracts might be created in the future. See the
Statement of Additional Information for further discussion of the use, risks
and costs of forward contracts.

A Portfolio may also enter into currency swaps where each party exchanges
one currency for another on a particular date and agrees to reverse the
exchange on a later date at a specific exchange rate.

Currency Risks. The Portfolios that invest substantially in securities
denominated in currencies other than the U.S. dollar, or that hold foreign
currencies, will be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of
each Portfolio's shares and also may affect the value of dividends and
interest earned by the Portfolios and gains and losses realized by the
Portfolios. Currencies generally are evaluated on the basis of fundamental
economic criteria (e.g., relative inflation and interest rate levels and
trends, growth rate forecasts, balance of payments status and economic
policies) as well as technical and political data. The exchange rates between
the U.S. dollar and other currencies are determined by supply and demand in
the currency exchange markets, the international balance of payments,
governmental intervention,
speculation and other economic and political conditions. If the currency in
which a security is denominated appreciates against the U.S. dollar, the
dollar value of the security will increase. Conversely, a decline in the
exchange rate of the currency would adversely affect the value of the security
expressed in U.S. dollars.
Options on Securities and on Foreign Currencies. In an effort to reduce
fluctuations in net asset value or to increase its portfolio return, the
Portfolios may write covered put and call options and may buy put and call
options and warrants on securities traded on U.S. and foreign securities
exchanges. The AIM Capital Appreciation Portfolio may write (sell) only
covered call options. The purpose of such transactions is to hedge against
changes in the market value of portfolio securities caused by fluctuating
interest rates, fluctuating currency exchange rates and changing market
conditions, and to close out or offset existing positions in such options or
futures contracts as described below. A Portfolio may write and buy options on
the same types of securities that the Portfolio could buy directly and may buy
options on financial indices as described above with respect to futures
contracts. There are no specific limitations on the writing and buying options
on securities.

A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a

- -------------------------------------------------------------------------------
3
3
<PAGE>

security to the writer of the option on or before a fixed date at a
predetermined price. A call option gives the holder the right, upon payment of
a premium, to call upon the writer to deliver a specified amount of a security
on or before a fixed date at a predetermined price.

A call option is "covered" if a Portfolio owns the underlying security
covered by the call. If a "covered" call option expires unexercised, the
writer realizes a gain in the amount of the premium received. If the covered
call option is exercised, the writer realizes either a gain or loss from the
sale or purchase of the underlying security with the proceeds to the writer
being increased by the amount of the premium. Prior to its expiration, a call
option may be closed out by means of a purchase of an identical option. Any
gain or loss from such transaction will depend on whether the amount paid is
more or less than the premium received for the option plus related transaction
costs. A Portfolio also may write a covered call option to cross-hedge if the
Portfolio does not own the underlying security. The option is designed to
provide a hedge against a decline in value in another security which the
Portfolio owns or has the right to acquire.
In purchasing an option, the Portfolio would be in a position to realize
a gain if, during the option period, the price of the underlying security
increased (in the case of a call) or decreased (in the case of a put) by an
amount in excess of the premium paid and would realize a loss if the price of
the underlying security did not increase (in the case of a call) or decrease
(in the case of a put) during the period by more than the amount of the
premium. If a put or call option bought by the Portfolio were permitted to
expire without being sold or exercised, the Portfolio would lose the amount of
the premium.
Although they entitle the holder to buy equity securities, warrants on
and options to purchase equity securities do not entitle the holder to
dividends or voting rights with respect to the underlying securities, nor do
they represent any rights in the assets of the issuer of those securities.
If a put or call option written by a Portfolio were exercised, the
Portfolio would be obligated to buy or sell the underlying security at the
exercise price. Writing a put option involves the risk of a decrease in the
market value of the underlying security, in which case the option could be
exercised and the underlying security would then be sold by the option holder
to the Portfolio at a higher price than its current market value. Writing a
call
option involves the risk of an increase in the market value of the underlying
security, in which case the option could be exercised and the underlying
security would then be sold by the Portfolio to the option holder at a lower
price than its current market value. Those risks could be reduced by entering
into an offsetting transaction. The Portfolio retains the premium received
from writing a put or call option whether or not the option is exercised.

A Portfolio may buy put and call options and may write covered put and
call options on foreign currencies to hedge against declines in the U.S.
dollar value of foreign currency-denominated securities held by the Portfolio
and against increases in the U.S. dollar cost of foreign currency-denominated
securities being considered for purchase by the Portfolio. As in the case of
other options, however, the writing of an option on a foreign currency will
constitute only a partial hedge, up to the amount of the premium received, and
the Portfolio could be required to buy or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates, although, in the event of rate movements
adverse to the Portfolio's options position, the option may expire worthless
and the Portfolio will lose the amount of the premium. There is no specific
percentage limitation on a Portfolio's investments in options on foreign
currencies.

A Portfolio may buy or write options in privately negotiated transactions
on the types of securities and indices based on the types of securities in
which the Portfolio is permitted to invest directly. The Portfolio will

- ------------------------------------------------------------------------------
- -34
<PAGE>

effect such transactions only with investment dealers and other financial
institutions (such as commercial banks or savings and loan institutions)
deemed creditworthy, and only pursuant to procedures adopted by management for
monitoring the creditworthiness of those entities. To the extent that an
option bought or written by the Portfolio in a negotiated transaction is
illiquid, the value of an option bought or the amount of the Portfolio's
obligations under an option written by the Portfolio, as the case may be, will
be subject to the Portfolio's limitation on illiquid investments. In the case
of illiquid options, it may not be possible for the Portfolio to effect an
offsetting transaction at a time when management believes it would be
advantageous for the Portfolio to do so. See the Statement of Additional
Information for a further discussion of the use, risks and costs of option
trading.

Swaps and Swap-Related Products. As one way of managing its exposure to
different types of investments, each of the Smith Barney International Equity,
Smith Barney Pacific Basin, G.T. Global Strategic Income, Smith Barney High
Income and MFS Total Return Portfolios may enter into interest rate swaps,
currency swaps and other types of available swap agreements, such as caps,
collars and floors. Swaps involve the exchange by a Portfolio with another
party of cash payments based upon different interest rate indexes, currencies,
and other prices or rates, such as the value of mortgage prepayment rates. For
example, in the typical interest rate swap, a Portfolio might exchange a
sequence of cash payments based on a floating rate index for cash payments
based on a fixed rate. Payments made by both parties to a swap transaction are
based on a principal amount determined by the parties.

A Portfolio may also purchase and sell caps, floors and collars. In a
typical cap or floor agreement, one party agrees to make payments only under
specified circumstances, usually in return for payment of a fee by the
counterparty. For example, the purchase of an interest rate cap entitles the
buyer, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal
amount from the counterparty selling such interest rate cap. The sale of an
interest rate floor obligates the seller to make payments to the extent that a
specified interest rate falls below an agreed-upon level. A collar arrangement
combines elements of buying a cap and selling a floor.

Swap agreements will tend to shift a Portfolio's investment exposure from
one type of investment to another. For example, if a Portfolio agreed to
exchange payments in dollars for payments in foreign currency, in each case
based on a fixed rate, the swap agreement would tend to decrease the
Portfolio's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of a Portfolio's investments and
its share price and yield.

Swap agreements are sophisticated hedging instruments that typically
involve a small investment of cash relative to the magnitude of risks assumed.
As a result, swaps can be highly volatile and may have a considerable impact
on a Portfolio's performance. Swap agreements are subject to risks related to
the counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. A Portfolio may also suffer
losses if it is unable to terminate outstanding swap agreements or reduce its
exposure through offsetting transactions.
Swaps, caps, floors and collars are highly specialized activities which
involve certain risks. See the Statement of Additional Information for a
further discussion on the risks involved in these activities.
Special Investment Considerations and Risks With Respect to Futures,
Options and Currency Transactions and Swaps and Swap-Related Products. The
successful use of the investment practices described above with respect to
futures contracts, options on futures contracts, forward contracts, options on
- -------------------------------------------------------------------------------
3
5
<PAGE>

securities and on foreign currencies, and swaps and swap-related products
draws upon skills and experience which are different from those needed to
select the other instruments in which the Portfolio invests. Should interest
or exchange rates or the prices of securities or financial indices move in an
unexpected manner, a Portfolio may not achieve the desired benefits of
futures, options, swaps and forwards or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many exchange-
traded futures contracts and options on futures contracts, there are no daily
price fluctuation limits with respect to options on currencies, forward
contracts and other negotiated or over-the-counter instruments, and adverse
market movements could therefore continue to an unlimited extent over a period
of time. In addition, the correlation between movements in the price of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.

With respect to interest rate swaps, each Portfolio recognizes that such
arrangements are relatively illiquid and will include the principal amount of
the obligations owed to it under a swap as an illiquid security for purposes
of the Portfolio's investment restrictions except to the extent a third party
(such as a large commercial bank) has guaranteed the Portfolio's ability to
offset the swap at any time.

A Portfolio's ability to dispose of its positions in the foregoing
instruments will depend on the availability of liquid markets in the
instruments. Markets in a number of the instruments are relatively new and
still developing, and it is impossible to predict the amount of trading
interest that may exist in those instruments in the future. Particular risks
exist with respect to the use of each of the foregoing instruments and could
result in such adverse consequences to the Portfolio as the possible loss of
the entire premium paid for an option bought by the Portfolio, the inability
of the Portfolio, as the writer of a covered call option, to benefit from the
appreciation of the underlying securities above the exercise price of the
option and the possible need to defer closing out positions in certain
instruments to avoid adverse tax
consequences. As a result, no assurance can be given that the Portfolio will
be able to use those instruments effectively for the purposes set forth above.
See the Statement of Additional Information for a further discussion of the
use, risks and costs of these instruments.

In connection with its transactions in futures, options, swaps and
forwards, each Portfolio may be required to place assets in a segregated
account with the Portfolio's custodian bank to ensure that the Portfolio will
be able to meet its obligations under these instruments. Assets held in a
segregated account generally may not be disposed of for so long as the
Portfolio maintains the positions giving rise to the segregation requirement.
Segregation of a large percentage of the Portfolio's assets could impede
implementation of the Portfolio's investment policies or the Portfolio's
ability to meet redemption requests or other current obligations.

Mortgage-Backed Securities. The TBC Managed Income, Putnam Diversified
Income and MFS Total Return Portfolios may invest in mortgage-backed
securities, which represent pools of mortgage loans assembled for sale to
investors by various governmental agencies and government-related
organizations, such as Government National Mortgage Association ("GNMA"),
Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC"), as well as by private issuers such as commercial banks,
savings and loan institutions, mortgage bankers and private mortgage insurance
companies. Mortgage-backed securities provide a monthly payment consisting of
interest and principal payments. Additional payment may be made out of
unscheduled repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that
may be incurred. Prepayments of principal on mortgage-backed securities may
tend to increase due to refinancing of mortgages as interest rates decline.
Prompt payment of principal and interest on GNMA mortgage pass through
certificates is backed by the full faith and credit of the United States. FNMA
guaranteed mortgage passthrough certificates are solely the obligations of
those entities but are supported by the discretionary

- ------------------------------------------------------------------------------
- -36
<PAGE>

authority of the U.S Government to purchase the agencies' obligations.
Mortgage pools created by private organizations generally offer a higher rate
of interest than governmental and government-related pools because there are
no direct or indirect guarantees of payments in the former pools. Timely
payment of interest and principal in these pools, however, may be supported by
various forms of private insurance or guarantees, including individual loan,
title, pool and hazard insurance. There can be no assurance that the private
insurers can meet their obligations under the policies.

Collateralized mortgage obligations are a type of bond secured by an
underlying pool of mortgages or mortgage pass-through certificates that are
structured to direct payments on underlying collateral to different series of
classes of the obligations.

To the extent that each Portfolio purchases mortgage-related securities
at a premium, mortgage foreclosures and prepayments of principal (which may be
made at any time without penalty) may result in some loss of the Portfolio's
principal investment to the extent of the premium paid. The yield of a
Portfolio that invests in mortgage-related securities may be affected by
reinvestment of prepayments at higher or lower rates than the original
investment. In addition, like other debt securities, the values of mortgage-
related securities, including government and government related mortgage
pools, generally will fluctuate in response to market interest rates.

Other Asset-Backed Securities. The TBC Managed Income, Putnam Diversified
Income and MFS Total Return Portfolios may invest in asset-backed securities
arising through the grouping by governmental, government-related and private
organizations of loans, receivables and other assets originated by various
lenders. Interests in pools of these assets differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Instead,
assetbacked securities provide periodic payments which generally consist of
both interest and principal payments.
The estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will be primarily
a function of current market interest rates, although other economic and
demographic factors may be involved. For example, falling interest rates
generally result in an increase in the rate of prepayments of mortgage loans
while rising interest rates generally decrease the rate of prepayments. An
acceleration in prepayments in response to sharply falling interest rates will
shorten the security's average maturity and limit the potential appreciation
in the security's value relative to a conventional debt security.
Consequently, asset-backed securities are not as effective in locking in high
long-term yields. Conversely, in periods of sharply rising rates, prepayments
generally slow, increasing the security's average life and its potential for
price depreciation.

U.S. Government Securities. Each Portfolio may invest in U.S. Government
securities, which are debt obligations issued or guaranteed as to payment of
principal and interest by the U.S. Government (including Treasury bills, notes
and bonds, certain mortgage participation certificates and collateralized
mortgage obligations) or by its agencies and instrumentalities (such as GNMA,
the Student Loan Marketing Association, the Tennessee Valley Authority, the
Bank for Cooperatives, the Farmers Home Administration, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks, Federal
Land Banks, the Export-Import Bank of the U.S., the Federal Housing
Administration, FHLMC, the U.S. Postal Service, the Federal Financing Bank and
FNMA). Some of these securities (such as Treasury bills) are supported by the
full faith and credit of the U.S. Treasury; others (such as obligations of the
Federal Home Loan Bank) are supported by the right of the issuer to borrow
from the Treasury; while still others (such as obligations of FNMA and the
Student Loan Marketing Association) are supported only by the credit of the
instrumentality.

- -------------------------------------------------------------------------------
3
7
<PAGE>

Indexed Commercial Paper. The G.T. Global Strategic Income Portfolio may
invest without limitation in commercial paper which is indexed to certain
specific foreign currency exchange rates. The terms of such commercial paper
provide that its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. The Portfolio will purchase
such commercial paper with the currency in which it is denominated and, at
maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the
two specified currencies between the date the instrument is issued and the
date the instrument matures. While such commercial paper entails the risk of
loss of principal, the potential for realizing gains as a result of changes in
foreign currency exchange rates enables the Portfolio to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Portfolio will not purchase such commercial paper for speculation. The
staff of the SEC is currently considering whether the purchase of this type of
commercial paper by mutual funds such as the Portfolio would result in the
issuance of a "senior security" within the meaning of the 1940 Act. The
Portfolio believes that such investments do not involve the creation of such a
senior security but, nevertheless, has undertaken, pending the resolution of
this issue by the SEC staff, to establish a segregated account with respect to
its investments in this type of commercial paper and to maintain in such
account cash not available for investment or U.S. Government securities or
liquid, high grade debt securities having a value equal
to the aggregate, outstanding principal amount of the commercial paper of this
type that is held by the Portfolio.
Portfolio Turnover. Although it is anticipated that most investments of
each Portfolio will be long-term in nature, the rate of portfolio turnover
will depend upon market and other conditions, and it will not be a limiting
factor when management believes that portfolio changes are appropriate. Each
Portfolio's historical portfolio turnover rates are included in the Financial
Highlights tables above. It is generally expected that the AIM Capital
Appreciation Portfolio's annual turnover rate will not exceed 100% in normal
circumstances. A higher rate of portfolio turnover may result in higher
transaction costs, including brokerage commissions.
DIVIDENDS, DISTRIBUTIONS AND TAXES ---------------------
- ----------------------------------------------------------
==============================================================================
==
Each Portfolio of the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code (the "Code"). To
qualify, each Portfolio must meet certain tests, including distributing at
least 90% of its investment company taxable income, and deriving less than 30%
of its gross income from the sale or other disposition of certain investments
held for less than three months. Each Portfolio except the Smith Barney Money
Market Portfolio intends at least annually to declare and make distributions
of substantially all of its taxable income and net taxable capital gains to
its shareowners (i.e. the Separate Accounts). The Smith Barney Money Market
Portfolio intends to declare daily and pay monthly substantially all of its
taxable income and to make distributions of net realized capital gains, if
any, at least annually. Such distributions are automatically reinvested in
additional shares of the Portfolio at net asset value and are includable in
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.

Each Portfolio of the Fund is also 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 each
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.

- ------------------------------------------------------------------------------
- -38
<PAGE>

REDEMPTION OF SHARES ----------------------------
- ---------------------------------------------------
==============================================================================
==
The redemption price of the shares of each Portfolio will be the net
asset value next determined after receipt by the Fund of a redemption order
from a Separate Account, which may be more or less than the price paid for the
shares. The Fund will ordinarily make payment within one business day, though
redemption proceeds must be remitted to a Separate Account on or before the
seventh day following receipt of proper tender, except on a day on which the
New York Stock Exchange is closed or as permitted by the SEC in extraordinary
circumstances. The Fund anticipates that, in accordance with regulatory
changes, beginning on or about June 1, 1995, the proceeds will be remitted on
or before the third business day after receipt of proper tender. Payment to
the Contract owner is described in the accompanying Contract prospectus.
PERFORMANCE
- ------------------------------------------------------------------------------
- -
==============================================================================
==
From time to time the Fund may include a Portfolio's total return,
average annual total return, yield and current distribution return in
advertisements and/or 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. 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 this 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 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. The yield of a Portfolio refers to the
net investment income earned by investments in the Portfolio over a thirty-day
period. This net investment income is then annualized, i.e., the amount of
income earned by the investments during that thirty-day period is assumed to
be earned each 30-day period for twelve periods and is expressed as a
percentage of the investments. The yield quotation is calculated according to
a formula prescribed by the SEC to facilitate comparison with yields quoted by
other investment companies. The Fund calculates current distribution return
for each Portfolio by dividing the distributions from investment income
declared during the most recent period 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.
MANAGEMENT
- ------------------------------------------------------------------------------
- -
==============================================================================
==

Smith Barney Mutual Funds Management Inc.

Prior to December 31, 1994, Mutual Management Corp. ("MMC"), an affiliate
of Smith Barney and an indirect wholly-owned subsidiary of The Travelers Inc.
("Travelers"), managed the investment operations of each Portfolio pursuant to
management agreements entered into by the Fund on behalf of each Portfolio.
Effective December 31, 1994, the Board of Directors of the Fund approved the
transfer of all of the management agreements with MMC to Smith Barney Mutual
Funds Management Inc. ("SBMFM"), another indirect wholly-owned subsidiary of
Travelers. Investment management of each Portfolio under SBMFM is conducted by
the

- -------------------------------------------------------------------------------
3
9
<PAGE>

same personnel who managed each Portfolio under MMC. The reporting
requirements for these individuals has also remained unchanged. In addition,
because the original management agreements with MMC were simply transferred to
SBMFM, the terms of the agreements (including the fees) have remained the
same.

Under each management agreement SBMFM is responsible for furnishing or
causing to be furnished to each Portfolio advice and assistance with respect
to the acquisition, holding or disposal of investments and recommendations
with respect to other aspects and affairs of each Portfolio, bookkeeping,
accounting
and administrative services, office space and equipment, and the services of
the officers and employees of the Fund.
Also effective December 31, 1994, the Fund's Board of Directors approved
the transfer to SBMFM of each of the subadvisory agreements MMC had previously
entered into on behalf of each of the Alliance Growth Portfolio, the American
Capital Enterprise Portfolio, the TBC Managed Income Portfolio, the Putnam
Diversified Income Portfolio, the G.T. Global Strategic Income Portfolio and
the MFS Total Return Portfolio (see "The Sub-Advisers" below). Pursuant to
each subadvisory agreement, each sub-investment adviser ("Sub-Adviser") is
responsible for the day to day operations and investment decisions for the
respective Portfolio and is authorized, in its discretion and without prior
consultation with SBMFM, to: (a) manage the Portfolio's assets in accordance
with the Portfolio's investment objective(s) and policies as stated in the
Prospectus and the Statement of Additional Information; (b) make investment
decisions for the Portfolio; (c) place purchase and sale orders for portfolio
transactions on behalf of the Portfolio; and (d) employ professional portfolio
managers and securities analysts who provide research services to the
Portfolio.
By written agreement the research and other departments and staff of
Smith Barney Inc. ("Smith Barney") furnish SBMFM with information, advice and
assistance and are available for consultation on the Fund's Portfolios, thus
Smith Barney may also be considered an investment adviser to the Fund. Smith
Barney's services are paid for by SBMFM on the basis of direct and indirect
costs to Smith Barney of performing such services; there is no charge to the
Fund for such services.
For the services provided by SBMFM, each Portfolio pays SBMFM an annual
management fee calculated at a rate equal to the following percentage of its
average daily net assets, paid monthly.

Smith Barney Income and Growth Portfolio 0.65%
Alliance Growth Portfolio 0.80%
AIM Capital Appreciation Portfolio
0.70%
American Capital Enterprise Portfolio
0.70%
Smith Barney International Equity Portfolio
0.90%
Smith Barney Pacific Basin Portfolio
0.90%
TBC Managed Income Portfolio
0.65%
Putnam Diversified Income Portfolio
0.75%
G.T. Global Strategic Income Portfolio
0.80%
Smith Barney High Income Portfolio
0.60%
MFS Total Return Portfolio
0.80%
Smith Barney Money Market Portfolio
0.60%

Although the management fee paid by
each of the Alliance Growth Portfolio, the
AIM Capital Appreciation Portfolio, the
American Capital Enterprise Portfolio, the
Smith Barney International Equity Portfolio,
the Smith Barney Pacific Basin Portfolio,
the Putnam Diversified Income Portfolio, the
G.T. Global Strategic Income Portfolio and
the MFS Total Return Portfolio is greater
than that paid by most mutual funds,
management has determined that each fee is
comparable to the fee charged by other
investment advisers of mutual funds that
have similar investment objectives and
policies.

- --------------------------------------------
- -----------------------------------40
<PAGE>

Each management agreement further provides
that all other expenses not
specifically assumed by SBMFM under the
management agreement on behalf of a
Portfolio are borne by the Fund. Expenses
payable by the Fund include, but are not
limited to, all charges of custodians and
shareholder servicing agents, expenses of
preparing, printing and distributing all
prospectuses, proxy material, reports and
notices to shareholders, all expenses of
shareholders' and directors' meetings,
filing fees and expenses relating to the
registration and qualification of the Fund's
shares and the Fund under federal and state
securities laws and maintaining such
registrations and qualifications (including
the printing of the Fund's registration
statements), fees of auditors and legal
counsel, costs of performing portfolio
valuations, out-of-pocket expenses of
directors and fees of directors who are not
"interested persons" as defined in the 1940
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
are charged to each of the Fund's
Portfolios; general corporate expenses are
allocated on the basis of relative net
assets.
SBMFM, which until recently operated
under the name, Smith, Barney Advisers,
Inc., was incorporated in 1968 under the
laws of Delaware. It is a wholly-owned
subsidiary of Smith Barney Holdings Inc.,
the parent company of Smith Barney. Smith
Barney Holdings Inc. is a wholly-owned
subsidiary of Travelers, which is a
financial services holding company engaged,
through its subsidiaries, principally in
four business segments: Investment Services,
Consumer Finance Services, Life Insurance
Services and Property & Casualty Insurance
Services. SBMFM, Smith Barney and Smith
Barney Holdings Inc. are each located at 388
Greenwich Street, New York, New York 10013.
SBMFM also acts as investment manager to
numerous other investment companies having
aggregate assets as of the date of this
Prospectus of approximately $54 billion.
Smith Barney serves as investment manager of
the Inefficient-Market Fund, Inc., a closed-
end investment company. Smith Barney also
advises profit-sharing and pension accounts.
Smith Barney and its affiliates may in the
future act as investment advisers for other
accounts.
Portfolio Management by SBMFM. SBMFM
serves as the investment adviser to Smith
Barney Income and Growth Portfolio, Smith
Barney International Equity Portfolio, Smith
Barney Pacific Basin Portfolio, Smith Barney
High Income Portfolio and Smith Barney Money
Market Portfolio. SBMFM will manage the day
to day operations of each such Portfolio
pursuant to a management agreement entered
into by the Fund on behalf of each
Portfolio. Under each management agreement,
SBMFM will (a) manage the Portfolio's assets
in accordance with the Portfolio's
investment objective(s) and policies as
stated in the Prospectus and the Statement
of Additional Information; (b) make
investment decisions for the Portfolio; (c)
place purchase and sale orders for portfolio
transactions on behalf of the Portfolio; (d)
employ professional portfolio managers and
securities analysts who provide research
services to the Portfolio; and (e)
administer the Portfolio's corporate affairs
and, in connection therewith, furnish the
Portfolio with office facilities and with
clerical, bookkeeping and recordkeeping
services at such office facilities. In
providing those services, SBMFM will conduct
a continual program of investment,
evaluation and, if appropriate, sale and
reinvestment of each Portfolio's assets.
Bruce D. Sargent, a Vice President of
the Fund, is the portfolio manager of the
Smith Barney Income and Growth Portfolio.
Mr. Sargent co-manages the day to day
operations of the Smith Barney Income and
Growth Portfolio and has been involved in
equity investing for over 25 years. He
currently manages over $1 billion of assets.
Ayako Weissman, Managing Director of
Smith Barney, serves as co-manager of the
Smith Barney Income and Growth Portfolio.
Ms. Weissman has been involved in equity
investing for Smith Barney for over 8 years
and currently manages over $250 million of
assets.
- -------------------------------------------------------------------------------
4
1
<PAGE>

The Smith Barney International Equity
Portfolio and the Smith Barney Pacific Basin
Portfolio are each managed by Maurits E.
Edersheim and a team of seasoned
international equity portfolio managers, who
collectively have over 120 years of
experience and who are responsible for the
day to day operations of these Portfolios,
including making all investment decisions.
Mr. Edersheim is Chairman and Advisory
Director of Smith Barney World Funds, Inc.
and is Deputy Chairman of Smith Barney
International Incorporated. Prior to joining
Smith
Barney in 1990, Mr. Edersheim was Deputy
Chairman and Director of Drexel Burnham
Lambert Incorporated ("Drexel Burnham"). Mr.
James Conheady and Mr. Jeffrey Russell, both
Vice Presidents of the Fund and Managing
Directors of Smith Barney are members of the
international equity team. Together, Mr.
Conheady and Mr. Russell currently manage in
excess of $1.6 billion in global equity
assets for other investment companies and
managed accounts. Prior to joining Smith
Barney in February 1990, Mr. Conheady was a
First Vice President and Mr. Russell was a
Vice President of Drexel Burnham.
Mr. John C. Bianchi, a Managing Director of
the Greenwich Street Advisors
division of SBMFM, is responsible for the
management of the Smith Barney High Income
Portfolio. Mr. Bianchi has more than
fourteen years of investment advisory
experience. He joined Greenwich Street
Advisors in 1985. Prior thereto, Mr. Bianchi
was employed as a Senior Investment Analyst
at Metropolitan Life Insurance Company,
where he worked in all sectors of the bond
market, specializing in high grade and high
yield corporate bonds and notes.

The Sub-Advisers:

Alliance Capital Management L.P.
Alliance Capital Management L.P. ("Alliance
Capital") will serve as Sub-Adviser to the
Alliance Growth Portfolio and will manage
the day to day operations of the Portfolio
pursuant to a subadvisory agreement.
Pursuant to the subadvisory agreement SBMFM
will pay Alliance Capital an annual fee
calculated at the rate of 0.375% of the
Portfolio's average daily net assets, paid
monthly.
Alliance Capital is a Delaware limited
partnership with principal offices
at 1345 Avenue of the Americas, New York,
New York 10105. It is a major international
investment manager, supervising client
accounts with assets as of October 31, 1994
totaling more than $123 billion. Alliance
Capital serves its clients, who primarily
are major corporate employee benefit funds,
public employee retirement systems,
investment companies, foundations and
endowment funds, with a staff of more than
1,400 employees operating out of five
domestic offices and the overseas offices of
five subsidiaries. The 49 registered
investment companies managed by Alliance
Capital comprising 93 separate investment
portfolios currently have over one million
shareholders.

Alliance Capital Management Corporation
("ACMC") the sole general partner of
Alliance Capital, is an indirect wholly-
owned subsidiary of The Equitable Life
Assurance Society of the United States, one
of the largest life insurance companies in
the United States, which is itself a wholly-
owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled
by AXA, a member of a large French insurance
group. AXA is indirectly controlled by a
group of five mutual insurance companies.

Tyler Smith, who is a Senior Vice President
of Alliance Capital, is the
portfolio manager of the Alliance Growth
Portfolio and is principally responsible for
the Portfolio's investment program. Prior to
joining Alliance Capital in July 1993, Mr.
Smith was employed by Equitable Capital
Management Corporation ("Equitable
Capital"), or its affiliates for more than
20 years.

A I M Capital Management, Inc. A I
M Capital Management, Inc. ("AIM Capital")
will serve as Sub-Adviser to the AIM Capital
Appreciation Portfolio and will manage the
day to day operations of the Portfolio
pursuant to a subadvisory agreement.
Pursuant to the subadvisory agreement SBMFB
will pay AIM Capital an annual fee
calculated at the rate of 0.375% of the
Portfolio's average daily net assets, paid
monthly.
- --------------------------------------------
- -----------------------------------42
<PAGE>

AIM Capital is a Texas corporation
and is located at 11 Greenway Plaza, Suite
1919, Houston, TX 77046-1173. AIM Capital is
a wholly-owned subsidiary of A I M Advisors,
Inc. ("AIM"), which is a wholly-owned
subsidiary of A I M Management Group Inc.
("AIM Management"). AIM Management is a
holding
company engaged in the financial services
business. AIM acts as manager or adviser to
37 investment company portfolios. As of June
9, 1995, the total assets of the investment
company portfolios advised or managed by AIM
or its affiliates were approximately $31.8
billion.
AIM Capital uses a team approach
and a disciplined investment process in
providing investment advisory services to
all of its accounts, including the AIM
Capital Appreciation Portfolio. AIM
Capital's investment staff consists of
approximately 93 individuals. While
individual members of AIM Capital's
investment staff are assigned primary
responsibility for the day to day management
of each of AIM Capital's accounts, all
accounts are reviewed on a regular basis by
AIM Capital's Investment Policy Committee to
ensure that they are being invested in
accordance with the account's and AIM
Capital's investment policies.
Jonathan C. Schoolar, David P. Barnard and
Robert M. Kippes are
primarily responsible for the day to day
management of the AIM Capital Appreciation
Portfolio. Mr. Schoolar, a chartered
financial analyst, is Senior Vice President
and Director of AIM Capital, Vice President
of AIM and Senior Vice President of AIM
Equity Funds, Inc. and has been associated
with AIM and/or its affiliates since 1986
and has eleven years of experience as an
investment professional. Mr. Barnard is Vice
President of AIM Capital and Vice President
of AIM Equity Funds, Inc. Mr. Barnard has
been associated with AIM and/or its
affiliates since 1982 and has 21 years of
experience as an investment professional.
Mr. Kippes is Vice President of AIM Capital.
Mr. Kippes has been associated with AIM
and/or its affiliates since 1989 and has six
years of experience as an investment
professional.

American Capital Asset Management, Inc.
American Capital Asset Management, Inc.
("ACAM") will serve as Sub-Adviser to the
American Capital Enterprise Portfolio and
will manage the day to day operations of the
Portfolio pursuant to a subadvisory
agreement. Pursuant to the subadvisory
agreement, SBMFM will pay ACAM an annual fee
calculated at the rate of .325% of the
Portfolios's average daily net assets, paid
monthly.

ACAM, which is located at 2800 Post Oak
Boulevard, Houston, Texas 77056, is a wholly-
owned subsidiary of American Capital
Management & Research, Inc., an indirect
wholly-owned subsidiary of VKM Holding, Inc.
Together with its predecessors, ACAM has
been in the investment advisory business
since 1926. It presently manages the assets
of 45 investment company portfolios with
total net assets of over $16.8 billion at
October 31, 1994.

Jeff New is responsible for the day-to-
day management of the Portfolio. Mr. New has
been an associate portfolio manager with
American Capital since April, 1990. Prior to
that he was a securities analyst with Texas
Commerce Investment Management Company.

G.T. Capital Management, Inc. G.T.
Capital Management, Inc. ("G.T. Capital")
serves as Sub-Adviser to the G.T. Global
Strategic Income Portfolio pursuant to a
subadvisory agreement. Pursuant to the
subadvisory agreement, SBMFM pays G.T.
Capital an annual fee calculated at the rate
of 0.375% of the Portfolio's average daily
net assets, paid monthly.

G.T. Capital, organized in 1973,
provides investment management and/or
administration services to all the G.T.
Global Mutual Funds as well as to other
institutional, corporate and individual
clients. The offices of G.T. Capital are
located at 50 California Street, San
Francisco, California 94111.

- -------------------------------------------------------------------------------
4
3
<PAGE>

G.T. Capital is the U.S. member of the G.T.
Group, an international
investment advisory organization established
in 1969 for the purpose of rendering
international portfolio management services
to both institutional and individual
clients. Since the G.T. Group was
established, it has gained a
reputation as a leader in identifying and
investing in emerging and established
markets around the world. As of December 1,
1994, aggregate assets under G.T. Group
management exceeded $23 billion, of which
more than $22 billion was invested in the
securities of non-U.S. issuers. Of the G.T.
Group's total assets, more than $6 billion
was invested in the securities of issuers in
emerging markets.

In addition to the San Francisco office, the
G.T. Group maintains fully
staffed investment offices in London, Hong
Kong, Tokyo, Singapore and Sydney. Many of
G.T. Capital's investment managers are
natives of countries in which they invest
and have the advantage of being close to the
financial markets they follow and speaking
the languages of local corporate and
government leaders. G.T. Capital's
experienced management team is situated to
react quickly to changes in foreign markets
which are in time zones different from those
in the U.S.

G.T. Capital and other companies in the
G.T. Group are subsidiaries of BIL GT Group
Limited ("BIL GT Group"), a financial
services holding company. BIL GT Group in
turn is controlled by the Prince of
Liechtenstein Foundation, which serves as
the parent organization for the various
business enterprises of the Princely Family
of Liechtenstein. Its principal business
address is Harrengasse 12, FL-9490, Vaduz,
Liechtenstein.

In managing the G.T. Global Strategic Income
Portfolio, G.T. Capital
employs a team approach, taking advantage of
the resources of its various investment
offices around the world in seeking to
achieve the Portfolio's objectives. In
addition, in managing the Portfolio, these
individuals utilize the research and related
work of other members of G.T. Capital's
investment staff. Gary Kreps, Simon Nocera
and Donald Mattersdorff are responsible for
the day-to-day management of the Portfolio.
Mr. Kreps has been employed by G.T. Capital
Management since 1992 as Chief Investment
Officer-Global Fixed Income Investments.
From 1988 to 1992, Mr. Kreps served as
Senior Vice President for Global Fixed
Income at Putnam Management Co. (Boston).
Mr. Nocera has been a Portfolio Manager and
Economist at G.T. Capital since 1992. From
1991 to 1992, he was Senior Vice President
and Director of Global Fixed Income at The
Putnam Companies. Prior thereto, Mr. Nocera
held a position as a Financial Economist at
the International Monetary Fund. Mr.
Mattersdorff joined G.T. Capital in 1994 as
a Global Fixed Income portfolio manager.
From 1993 to 1994 he was a Senior Trader in
Global Fixed Income at Cargill Financial
Services. Prior thereto, he was a Vice
President and Global Fixed Income portfolio
manager at the Putnam Companies.

Massachusetts Financial Services
Company. Massachusetts Financial Services
Company ("MFS") serves as Sub-Adviser to the
MFS Total Return Portfolio pursuant to a
subadvisory agreement. Pursuant to the
subadvisory agreement SBMFM pays MFS an
annual fee calculated at the rate of 0.375%
of the Portfolio's average daily net assets.

MFS also serves as investment adviser
to each of the funds in the MFS Family of
Funds and to MFS/Sun Life Series Trust, MFS
Institutional Trust, MFS Municipal Income
Trust, MFS Variable Insurance Trust, MFS
Union Standard Trust, MFS Government Markets
Income Trust, MFS Multimarket Income Trust,
MFS Intermediate Income Trust, MFS Charter
Income Trust, MFS Special Value Trust, Sun
Growth Variable Annuity Portfolio, Inc. and
seven variable accounts, each of which is a
registered investment company established by
Sun Life Assurance Company of Canada
(U.S.)("Sun Life of Canada (U.S.)") in
connection with the sale of Compass-2 and
Compass-3 combination fixed/variable annuity
contracts. MFS Asset Management, Inc., a
subsidiary of the Sub-Adviser, provides
investment advice to substantial private
clients.

- --------------------------------------------
- -----------------------------------44
<PAGE>

MFS is located at 500 Boylston Street,
Boston, Massachusetts 02116. MFS is
America's oldest mutual fund organization.
MFS and its predecessor organizations
have a history of money management dating
from 1924 and the founding of the first
mutual fund in the United States,
Massachusetts Investors Trust. Net assets
under the management of the MFS organization
were approximately $33.2 billion on behalf
of approximately 1.6 million investors
accounts as of November 30, 1994. As of such
date, the MFS organization managed
approximately $18.2 billion of assets in
fixed income securities. MFS is a subsidiary
of Sun Life of Canada (U.S.) which in turn
is a subsidiary of Sun Life Assurance
Company of Canada ("Sun Life"). Sun Life, a
mutual life insurance company, is one of the
largest international life insurance
companies and has been operating in the U.S.
since 1895, establishing a headquarters
office here in 1973. The executive officers
of MFS report to the Chairman of Sun Life.
Richard E. Dahlberg, a Senior Vice
President of MFS serves as portfolio manager
of the MFS Total Return Portfolio. Mr.
Dahlberg has over 34 years of experience and
currently manages over $3.7 billion of
assets.
Putnam Investment Management, Inc.
Putnam Investment Management, Inc. ("Putnam
Management") will serve as Sub-Adviser to
the Putnam Diversified Income Portfolio
pursuant to a subadvisory agreement.
Pursuant to the subadvisory agreement SBMFM
pays Putnam Management an annual fee
calculated at the rate of 0.35% of the
Portfolio's average daily net assets, paid
monthly.
Putnam Management principal offices are
located at One Post Office Square, Boston,
Massachusetts 02109. Putnam is wholly-owned
subsidiary of Putnam Investments, Inc., a
holding company which is in turn wholly
owned by Marsh & McLennan Companies, Inc., a
publicly owned holding company whose
principal businesses are international
insurance and reinsurance brokerage,
employee benefit consulting and investment
management.
Putnam has been managing mutual funds
since 1937. The firm serves as the
investment manager for the funds in the
Putnam family, with approximately $68
billion in assets in over three million
shareholder accounts as of October 31, 1994.
The Putnam Advisory Company, Inc., an
affiliate, manages domestic and foreign
institutional accounts and foreign mutual
funds. Another affiliate, Putnam Fiduciary
Trust Company, provides investment advice to
institutional clients under its banking and
fiduciary powers. Putnam and its affiliates
managed over $96 billion in assets as of
October 31, 1994.
Rosemary H. Thomsen, Senior Vice
President of Putnam Management, D. William
Kohli, Senior Vice President of Putnam
Management and Neil J. Powers, Vice
President of Putnam Management are primarily
responsible for the day-to-day management of
the Portfolio. Mr. Kohli has been employed
by Putnam Management since September, 1994.
Prior to September, 1994, Mr. Kohli was
Executive Vice President and Co-Director of
Global Bond Management and Senior Portfolio
Manager from 1988 to 1993 at Franklin
Advisors/Templeton Investment Counsel.
The Boston Company Asset Management,
Inc. The Boston Company Asset Management,
Inc. ("TBCAM") will serve as Sub-Adviser to
the TBC Managed Income Portfolio pursuant to
a subadvisory agreement. Pursuant to the
subadvisory agreement SBMFM will pay TBCAM
an annual fee calculated at the rate of
0.30% of the Portfolio's average daily net
assets, paid monthly.
TBCAM is located at One Boston Place,
Boston, Massachusetts 02108. TBCAM is a
wholly-owned subsidiary of The Boston
Company, Inc., a financial services holding
company, which is an indirect wholly-owned
subsidiary of Mellon Bank Corporation
("Mellon"). TBCAM provides investment
management and investment advisory services
to accounts having total assets at October
31, 1994 of $15.7 billion.
- -------------------------------------------------------------------------------
4
5
<PAGE>

Mellon is a publicly-owned multibank
holding company registered under the Federal
Bank Holding Company Act of 1956 and is the
twenty-fourth largest bank holding company
in the United States, based on total assets
as of October 31,
1994 of $36.6 billion. Through its
subsidiaries Mellon provides a comprehensive
range of financial products and services in
domestic and selected international markets,
including domestic retail banking, worldwide
commercial banking, trust banking,
investment management, commercial financial
services, equipment leasing, data
processing, residential real estate
financing, commercial and consumer real
estate financing, stock transfer services,
cash management, mortgage servicing and
trust and investment management services.

The Portfolio is managed by a team of
portfolio managers consisting of
three individuals, Almond G. Goduti, Jr.,
William R. Leach and Arthur J. MacBride,
III. Almond Goduti, Vice President of TBCAM,
is a member of the Fixed Income Strategy
Committee and is also responsible for the
taxable fixed income investment portfolio of
Boston Safe Deposit and Trust Company. Mr.
Goduti began his career with The Boston
Company in 1984 as a Portfolio Manager in
the Personal Trust Division. He holds a BS
in Finance and Computer Science from Boston
College.

Mr. Leach is a Senior Vice President of
TBCAM and is Chairman of the Fixed Income
Strategy Committee. He is also responsible
for the investment and research of mortgage
derivatives and convertible securities.
Prior to joining The Boston Company in 1988,
Mr. Leach was Vice President of Fixed Income
Investments for Beneficial Standard Life
Insurance Company, a subsidiary of CalFed
Inc. Mr. Leach graduated from Pomona
College, Claremont, with a BA in Economics.
He also holds a Master of Science degree in
Industrial Administration (MSIA) from
Carnegie-Mellon University in Pittsburgh. He
is a member of the Los Angeles Society of
Financial Analysts and has taught fixed
income analysis for LASFA's CFA Review
course at the University of Southern
California from 1988 to 1991.

Prior to joining The Boston Company in 1988,
Mr. MacBride, a Senior Vice
President of TBCAM, was a Principal and the
National Sales Manager at Manufacturers
Hanover Securities Corporation, where he was
responsible for the sale of all fixed income
securities. Previously, he did corporate
finance/underwriting work in both the U.S.
and Europe. In London and Toronto, he worked
extensively on the Eurobond Market (coupon
and currency swaps). He is a graduate from
Franklin and Marshall College and holds a
MBA from Fordham University.

Portfolio Transactions and Distribution

SBMFM and each Sub-Adviser are subject
to the supervision and direction of the
Fund's Board of Directors and manage the
applicable Portfolio in accordance with its
investment objective and policies, make
investment decisions for the Portfolio,
place orders to purchase and sell securities
and employ professionals who provide
research services. All orders for
transactions in securities on behalf of a
Portfolio are made by management, with
broker-dealers selected by management,
including affiliated brokers. In placing
orders management will seek to obtain the
most favorable price and execution
available. In selecting brokerdealers,
management may consider research and
brokerage services furnished to it and its
affiliates.

- --------------------------------------------
- -----------------------------------46
<PAGE>

transactions. The Fund will not deal with
Smith Barney in any transaction in
which Smith Barney acts as principal. In
addition, the Alliance Growth Portfolio may
not deal with Donaldson, Lufkin & Jenrette
("DLJ") (an affiliate of Alliance Capital)
in any transaction in which DLJ acts as
principal.
SHARES OF THE
FUND ---------------------------------------
- ----------------------------------------
============================================
====================================
General
The Fund, an open-end, diversified, managed
investment company, was
incorporated in Maryland on February 22,
1994. The Fund has an authorized capital of
6,000,000,000 shares with a par value of
$.00001 per share. The Board of Directors
has authorized the issuance of eleven series
of shares, each representing shares in one
of eleven separate Portfolios - the Smith
Barney Income and Growth Portfolio, the
Alliance Growth Portfolio, the American
Capital Enterprise Portfolio, the Smith
Barney International Equity Portfolio, the
Smith Barney Pacific Basin Portfolio, the
TBC Managed Income Portfolio, the Putnam
Diversified Income Portfolio, the G.T.
Global Strategic Income Portfolio, the Smith
Barney High Income Portfolio, the MFS Total
Return Portfolio and the Smith Barney Money
Market Portfolio. The Directors also have
the power to create additional series of
shares. The assets of each Portfolio will be
segregated and separately managed and a
shareowner's interest is in the assets of
the Portfolio in which he or she holds
shares.

Voting Rights

The Fund offers its shares only for
purchase by insurance company separate
accounts. Thus, the insurance company is
technically the shareholder of the Fund and,
under the 1940 Act, is deemed to be in
control of the Fund. Nevertheless, with
respect to any Fund shareholder meeting, an
insurance company will solicit and accept
timely voting instructions from its
contractowners who own units in a separate
account investment division which
corresponds to shares in the Fund in
accordance with the procedures set forth in
the accompanying prospectus for the
applicable contract issued by the insurance
company and to the extent required by law.
Shares of the Fund attributable to
contractowner interests for which no voting
instructions are received will be voted by
an insurance company in proportion to the
shares for which voting instructions are
received.

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 Directors. Shareowners are
entitled to one vote for each share held and
will vote by individual Portfolio except to
the extent required by the 1940 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 Directors,
changing fundamental policies or approving a
management contract. Shareowners may cause a
meeting of shareowners to be held upon a
vote of 10% of the Fund's outstanding shares
for the purpose of voting on the removal of
Directors.

Availability of the Fund

Investment in the Fund is only
available to owners of either variable
annuity or variable life insurance contracts
issued by insurance companies through their
separate accounts. It is possible that in
the future it may become disadvantageous for
both variable annuity and variable life
insurance separate accounts to be invested
simultaneously in the Fund. However, the
Fund does not currently foresee any
disadvantages to the contractowners of the
different contracts which are funded by such
separate accounts. The Board monitors events
for the existence of any material
irreconcilable conflict between or among
such owners, and each

- -------------------------------------------------------------------------------
4
7
<PAGE>
insurance company will take whatever
remedial action may be necessary to resolve
any such conflict. Such action could include
the sale of Fund shares by one or more of
the insurance company separate accounts
which fund these contracts, which could have
adverse consequences to the Fund. Material
irreconcilable conflicts could result from,
for example: (a) changes in state insurance
laws; (b) changes in U.S. federal income tax
laws; or (c) differences in voting
instructions between those given by variable
annuity contractowners and those given by
variable life insurance contractowners. If
the Board were to conclude that separate
series of the Fund should be established for
variable annuity and variable life separate
accounts, each insurance company would bear
the attendant expenses. Should this become
necessary, contractowners would presumably
no longer have the economies of scale
resulting from a larger combined mutual
fund.
DETERMINATION OF NET
ASSET VALUE --------------------------------
- --------------------------------------------
- ---
============================================
====================================
The net asset value of each Portfolio's
shares is determined as of the
close of regular trading on the New York
Stock Exchange ("NYSE"), which is currently
4:00 P.M. New York City time on each day
that the NYSE is open, by dividing the
Portfolio's net assets by the number of its
shares outstanding. Securities owned by a
Portfolio for which market quotations are
readily available are valued at current
market value or, in their absence, at fair
value. Securities traded on an exchange are
valued at last sales price on the principal
exchange on which each such security is
traded, or if there were no sales on that
exchange on the valuation date, the last
quoted sale, up to the time of valuation, on
the other exchanges. If instead there were
no sales on the valuation date with respect
to these securities, such securities are
valued at the mean of the latest published
closing bid and asked prices. Over-the-
counter securities are valued at last sales
price or, if there were no sales that day,
at the mean between the bid and asked
prices. Options, futures contracts and
options thereon that are traded on exchanges
are also valued at last sales prices as of
the close of the principal exchange on which
each is listed or if there were no such
sales on the valuation date, the last quoted
sale, up to the time of valuation, on other
exchanges. In the absence of any sales on
the valuation date, valuation shall be the
mean of the latest closing bid and asked
prices. Fixed income obligations are valued
at the mean of bid and asked prices based on
market quotations for those securities or if
no quotations are available, then for
securities of similar type, yield and
maturity. Securities with a remaining
maturity of 60 days or less are valued at
amortized cost where the Board of Directors
has determined that amortized cost is fair
value. Premiums received on the sale of call
options will be included in the Portfolio's
net assets, and current market value of such
options sold by a Portfolio will be
subtracted from that Portfolio's net assets.
Any other investments of a Portfolio,
including restricted securities and listed
securities for which there is a thin market
or that trade infrequently (i.e., securities
for which prices are not readily available),
are valued at a fair value determined by the
Board of Directors in good faith. This value
generally is determined as the amount that a
Portfolio could reasonably expect to receive
from an orderly disposition of these assets
over a reasonable period of time but in no
event more than seven days. The value of any
security or commodity denominated in a
currency other than U.S. dollars will be
converted into U.S. dollars at the
prevailing market rate as determined by
management.

Foreign securities trading may not take
place on all days on which the NYSE is open.
Further, trading takes place in various
foreign markets on days on which the NYSE is
not open. Accordingly, the determination of
the net asset value of a Portfolio may not
take place contemporaneously with the
determination of the prices of investments
held by such Portfolio. Events affecting the
values of investments that occur between the
time their prices are determined and 4:00
P.M. on each day that the NYSE is open will
not be reflected in a Portfolio's net asset
value unless management under the
supervision of the Fund's Board of
Directors, determines that the particular
event would materially affect the net asset
value. As a result, a Portfolio's net asset
value may be significantly
affected by such trading on days when a
shareholder has no access to such Portfolio.
- --------------------------------------------
- -----------------------------------48
<PAGE>

APPENDIX A
- --------------------------------------------
- -----------------------------------
==================

==================

======== RATINGS

ON 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 but 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.

- -------------------------------------------------------------------------------
4
9
<PAGE>

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' or `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.

- --------------------------------------------
- -----------------------------------50
<PAGE>

Fitch Investors Service, Inc.

AAA - Bonds considered to be investment
grade and of the highest credit
quality. The obligor has an exceptionally
strong ability to pay interest and repay
principal which is unlikely to be affected
by reasonably foreseeable events.

AA - Bonds considered to be investment grade
and of very high credit
quality. The obligor's ability to pay
interest and repay principal is very strong,
although not quite as strong as bonds rated
"AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly
vulnerable to foreseeable future
developments, short-term debt of these
issuers is generally rated "F-1+".

A - Bonds considered to be investment
grade and of very high credit quality. The
obligor's ability to pay interest and repay
principal is considered to be strong, but
may be more vulnerable to adverse changes in
economic conditions and circumstances than
bonds with higher ratings.

BBB - Bonds considered to be investment
grade and of satisfactory credit quality.
The obligor's ability to pay interest and
repay principal is considered to be
adequate. Adverse changes in economic
conditions and circumstances, however, are
more likely to have adverse impact on these
bonds, and therefore impair timely payment.
The likelihood that the ratings of these
bonds will fall below investment grade is
higher than for bonds with higher ratings.

BB - Bonds are considered speculative. The
obligor's ability to pay
interest and repay principal may be affected
over time by adverse economic changes.
However, business and financial alternatives
can be identified which could assist the
obligor in satisfying its debt service
requirements.

B - Bonds are considered highly
speculative. While bonds in this class are
currently meeting debt service requirements,
the probability of continued timely payment
of principal and interest reflects the
obligor's limited margin safety and the need
for reasonable business and economic
activity throughout the life of the issue.

CCC - Bonds have certain identifiable
characteristics which if not remedied, may
lead to default. The ability to meet
obligations requires an advantageous
business and economic environment.

CC - Bonds are minimally protected. Default
in payment of interest and/or
principal seems probable over time.

C - Bonds are in imminent default in payment
of interest or principal.

Plus (+) Minus (-) - Plus and minus
signs are used with a rating symbol to
indicate the relative position of a credit
within the rating category. Plus and minus
signs, however, are not used in the "AAA"
category.

NR - Indicates that Fitch does not rate
the specific issue.

Conditional - A conditional rating is
premised on the successful completion of a
project or the occurrence of a specific
event.

Suspended - A rating is suspended when
Fitch deems the amount of information
available from the issuer to be inadequate
for rating purposes.

Withdrawn - A rating will be withdrawn
when an issue matures or is called or
refinanced and at Fitch's discretion when an
issuer fails to furnish proper and timely
information.

FitchAlert - Ratings are placed on
FitchAlert to notify investors of an
occurrence that is likely to result in a
rating change and the likely direction of
such change. These are designated as
"Positive", indicating a potential
upgrade, "Negative", for potential
downgrade, or "Evolving", where ratings may
be lowered. FitchAlert is relatively short-
term, and should be resolved within 12
months.
- -------------------------------------------------------------------------------
5
1
<PAGE>

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.
IBCA Limited or its affiliate, IBCA Inc.
A-1+ - This designation indicates the
highest capacity for timely repayment.
A-1 - Capacity for timely repayment on
issues with this designation is very strong.
A-2 - This designation indicates a strong
capacity for timely repayment,
although such capacity may be susceptible to
adverse changes in business, economic or
financial conditions.

Fitch Investors Service, Inc.

F-1+ - Indicates the strongest degree of
assurance for timely payment.

F-1 - This designation reflects an assurance
of timely payment only
slightly less in degree than issues rated F-
1+.

F-2 - This indicates a satisfactory
degree of assurance for timely payment,
although the margin of safety is not as
great as indicated by the F-1+ and F-1
categories.

Duff & Phelps Inc.

Duff 1+ - Indicates the highest certainty of
timely payment: short-term
liquidity is clearly outstanding, and safety
is just below risk-free United
States Treasury short-term obligations.
- --------------------------------------------
- -----------------------------------52
<PAGE>

Duff 1 - Indicates a high certainty of
timely payment.
Duff 2 - Indicates a good certainty of
timely payment: liquidity factors
and company fundamentals are sound.

The Thomson BankWatch ("TBW")

TBW-1 - Indicates a very high degree of
likelihood that principal and
interest will be paid on a timely basis.

TBW-2 - While the degree of safety
regarding timely repayment of principal and
interest is strong, the relative degree of
safety is not as high as for issues rated
TBW-1.

- -------------------------------------------------------------------------------
5
3
<PAGE>

- --------------------------------------------
- ------------------------------------

VINTAGE TIFFANY LAMP

[ARTWORK APPEARS HERE]

P R O S P E C

T U S

12410 Smith Barney/Travelers
Series Fund Inc. SB Ed. 12-94

- --------------------------------------------
- ------------------------------------

Part B

August __,

1995

SMITH BARNEY/TRAVELERS SERIES FUND INC.
388 Greenwich Street
New York, New York 10013
STATEMENT OF ADDITIONAL INFORMATION

Shares of the Smith Barney/Travelers
Series Fund Inc. (the "Fund") are offered
with a choice of twelve Portfolios:

The Smith Barney Income and Growth Portfolio seeks current
income and long-term growth of income and capital. This
Portfolio invests primarily, but not exclusively, in common
stocks.

The Alliance Growth Portfolio seeks long-term growth of
capital. Current income is only an incidental consideration.

The AIM Capital Appreciation Portfolio seeks capital
appreciation by investing principally in common stocks,
with emphasis on medium-sized and smaller emerging growth
companies.

The American Capital Enterprise Portfolio seeks
capital appreciation through investment in securities
believed by its investment adviser to have above average
potential for capital appreciation.

The Smith Barney International Equity Portfolio seeks
total return on its assets from growth of capital and income
and will invest at least 65% of its assets in a diversified
portfolio of equity securities of established non-U.S.
issuers.

The Smith Barney Pacific Basin Portfolio seeks long-term
capital appreciation through investment primarily in equity
securities of the Asian Pacific Countries.

The TBC Managed Income Portfolio seeks high current
income consistent with what its investment adviser
believes to be prudent risk of capital through investment in
various types of debt securities.

The Putnam Diversified Income Portfolio seeks high current
income consistent with preservation of capital.

The G.T. Global Strategic Income Portfolio seeks high
current income and, secondarily, capital appreciation by
investing in the debt securities of issuers in the United
States, developed foreign countries and emerging markets.

The Smith Barney High Income Portfolio seeks high current
income by investing at least 65% of its assets in high-
yielding corporate debt obligations. Capital appreciation is
a secondary objective.

The MFS Total Return Portfolio seeks above-average
income (compared to a portfolio invested entirely in equity
securities) consistent with prudent employment of capital.

The Smith Barney Money Market Portfolio seeks maximum
current
income and preservation of capital.

This Statement of Additional Information is not a Prospectus.

It is intended to provide more detailed information about

Smith Barney/Travelers Series Fund Inc. as well as matters

already discussed in the Prospectus and therefore should be

read in conjunction with the August __, 1995 Prospectus

which may be obtained from the Fund or your Financial

Consultant. Shares of the Fund may only be purchased by

insurance company separate accounts.

TABLE OF CONTENTS

Directors and Officers 3

Investment Policies 5

Investment Restrictions 25

Performance Information 42

Determination of Net Asset Value

42 Redemption of Shares 43

Custodians 43

Independent Auditors 43

The Fund 43

Management Agreements 44

Voting Rights 48

Financial Statements 49

DIRECTORS AND OFFICERS

VICTOR K. ATKINS, Director
Retired; 120 Montgomery Street, San Francisco, CA.
Former President of Lips Propellers, Inc. Director of two
investment companies associated with Smith Barney Inc. ("Smith
Barney"); 73.

ROBERT A. BELFER, Director
Private investor, One Dag Hammarskjold, New York, NY.
Director and Member of the Executive Committee of Enron Corp.
(natural gas pipeline company); Director of NAC Re
Corporation. Former Chairman of Belco Petroleum Corp.
(production and exploration of oil and gas). Director of
two investment companies associated with Smith Barney; 59.

JESSICA M. BIBLIOWICZ, Director and President
Executive Vice President of Smith Barney; President of
forty investment companies associated with Smith Barney and
Director of twelve investment companies associated with Smith
Barney; prior to January, 1994, Director of Sales and
Marketing of Prudential Mutual Funds; prior to September,
1991, Assistant Portfolio Manager to Shearson Lehman
Brothers; 35.

ALGER B. CHAPMAN, Director
Chairman and Chief Executive Officer, Chicago Board
Options Exchange; 400 S. LaSalle, Chicago, Il. Director
of seven investment companies associated with Smith Barney;
67.

ROBERT A. FRANKEL, Director
Managing Partner of Robert A. Frankel Managing Consultants,
108 Grand Street, Croton-on-Hudson, NY; Director of seven
investment companies associated with Smith Barney; Former Vice
President of The Readers Digest; 67.

RAINER GREEVEN, Director
Partner of the law firm Greeven & Ercklentz; 30
Rockefeller Plaza, Suite 3030, New York, NY. Director of
two investment companies associated with Smith Barney; 58.

SUSAN M. HEILBRON, Director
Attorney; 411 West End Avenue, New York, NY. Prior to
November 1990, Vice President and General Counsel of
MacMillan, Inc. and Executive Vice President of The Trump
Organization. Director of two investment companies associated
with Smith Barney; 50.
HEATH B, McLENDON, Chairman of the Board and Chief
Executive Officer
Managing Director of Smith Barney; Director of forty-
one
investment companies associated with Smith Barney; President
of the Manager; Chairman of Smith Barney Strategy Advisers
Inc., prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers, Inc.; Vice Chairman of
Shearson Asset
Management; 61.

JAMES M. SHUART, Director
President, Hofstra University; 1000 Fulton Avenue, Hempstead,
NY. Director of European American Bank; Director of Long
Island
Tourism and Convention Commission; and Director of Association
of Colleges and Universities of the State of New York.
Director of two investment companies with Smith Barney; 63.

*LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Smith Barney, Senior Vice President
and Treasurer of forty-one investment companies associated with
Smith Barney, and Senior Vice President of the Manager; 37.

*BRUCE D. SARGENT, Vice President
Managing Director of Smith Barney and Vice President and
Director of the Manager; Vice President of three other
investment companies associated with Smith Barney; 51.

*JAMES B. CONHEADY, Vice President
Managing Director of Smith Barney; Vice President of
Fenimore International Management Corporation ("FIMC"); Vice
President of Smith Barney World Funds, Inc.; Formerly First
Vice President of Drexel Burnham Lambert Incorporated; 59.

*JEFFREY RUSSELL, Vice President
Managing Director of Smith Barney; Vice President and
Assistant Secretary of FIMC; Vice President of Smith Barney
World Funds, Inc.; Formerly Vice President of Drexel
Burnham Lambert Incorporated; 37.

*JOHN C. BIANCHI, Vice President
Managing Director of Greenwich Street Advisors division of
the Manager; Vice President of five investment companies
associated with Smith Barney; 39.

*MARTIN HANLEY, Vice President
Vice President in the money fund group; Vice President of
six investment companies associated with Smith Barney; 29.

*EVELYN R. ROBERTSON, Vice President
Investment Officer; Vice President of Greenwich Street
Advisors; Vice President of two other investment companies
associated with Smith Barney; prior to July 1993 Vice
President and Portfolio Manager of Shearson Lehman Advisors;
39.

*PHYLLIS M. ZAHORODNY, Vice President
Vice President and Investment Officer. Managing Director
of Greenwich Street Advisors; Vice President of two other
investment companies associated with Smith Barney; prior
to July 1993 Managing Director of Shearson Lehman Advisors;
37.

*THOMAS M. REYNOLDS, Controller
Director of Smith Barney in the Asset Management Division,
and Controller and Assistant Secretary of thirty-five
investment companies associated with Smith Barney; Prior to
September 1991, Assistant Treasurer of Aquila Management
Corporation and its associated investment companies; 35.

*CHRISTINA T. SYDOR, Secretary
Managing Director of Smith Barney and Secretary of forty-
one investment companies associated with Smith Barney, and
of the Manager; 44.

___________________
*Designates "interested persons" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")
whose business address is 388 Greenwich Street, New York,
New York 10013, unless otherwise noted. Such persons
are not separately
compensated for their services as Fund officers or
Directors.

On June 28, 1995, Directors and officers owned in
the
aggregate less than 1% of the outstanding securities of the

Fund.

INVESTMENT POLICIES

Repurchase and Reverse Repurchase Agreements.
Each Portfolio may on occasion enter into repurchase
agreements, wherein the seller agrees to repurchase a
security from the Portfolio at an agreed-upon future
date, normally the next business day. The resale price
is greater than the purchase price, which reflects the
agreed-upon rate of return for the period the Portfolio
holds the security and which is not related to the coupon
rate on the purchased security. Each Portfolio requires
continual maintenance of the market value of the
collateral in amounts at least equal to the repurchase price
plus accrued interest, thus risk is limited to the ability
of the seller to pay the agreed-upon amount on the
delivery date; however, if the seller defaults, realization
upon the collateral by the Portfolio may be delayed or limited
or the Portfolio might incur a loss if the value of the
collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating
the collateral. A Portfolio will only enter into repurchase
agreements with broker/dealers or other financial
institutions that are deemed creditworthy by the Manager under
guidelines approved by the Board of Directors. It is the
policy of each Portfolio (except the Smith Barney Money Market
Portfolio) not to invest in repurchase agreements that do not
mature within seven days if any such investment together with
any other illiquid assets held by a Portfolio amount to more
than 15% of that Portfolio's net assets. The Smith Barney
Money Market Portfolio may not invest in such securities if,
together with any other illiquid assets held by it amount to
more than 10% of its total assets.
The Smith Barney International Equity Portfolio and
the Smith Barney Pacific Basin Portfolio may each enter into
reverse repurchase agreements with broker/dealers and other
financial institutions with up to 5% of its net assets. The
G.T. Global Strategic Income Portfolio may enter into such
transactions with up to 33-1/3% of its total assets, so long
as the total amount of that Portfolio's borrowings do not
exceed 33-1/3% of its total assets. 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 borrowings 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 Portfolio 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
Portfolio intends to use the reverse repurchase technique
only when management believes it will be advantageous
to the
Portfolio. The use of reverse repurchase agreements
may
exaggerate any interim increase or decrease in the value of
the participating Portfolio's assets. The Portfolio's
custodian bank will maintain a separate account for the
Portfolio with
securities having a value equal to or greater than
such
commitments.

Securities Lending. Each Portfolio (except the
American
Capital Enterprise Portfolio and the Smith Barney Money
Market 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 securities 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 Portfolio may pay reasonable
finders,
administrative and custodial fees. Management will limit
such lending to not more than: (a) 33 1/3% of the value of the
total assets of each of the TBC Managed Income Portfolio and
the AIM Capital Appreciation Portfolio; (b) 30% of the value
of the total assets of each of the G.T. Global Strategic Income
Portfolio and the MFS Total Return Portfolio; (c) 20% of the
value of the total assets of each of the Smith Barney Income
and Growth Portfolio and the Smith Barney High Income
Portfolio; (d) 25% of the value of the total assets of each of
the Alliance Growth Portfolio and the Putnam Diversified Income
Portfolio; and (e) 15% of the value of the total assets of
each of the Smith Barney International Equity Portfolio and
the Smith Barney Pacific Basin Portfolio. 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 foregoing Portfolios will make loans to other
persons. The risks in
lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower
fail financially. Loans will only be made to borrowers whom
management deems to be
of good standing and will not be made unless, in the judgment
of management, the interest to be earned from such loans
would justify the risk.

By lending its securities, a Portfolio can increase
its income by continuing to receive interest on the
loaned securities, by investing the cash collateral in
short-term instruments or by obtaining yield in the form of
interest paid by the borrower when U.S. Government
securities are used as
collateral. Each Portfolio will adhere to the
following
conditions whenever it lends its securities: (1) the
Portfolio must receive at least 100% cash collateral or
equivalent securities from the borrower, which amount of
collateral will be
maintained by daily marking to market; (2) the borrower
must increase the collateral whenever the market value
of the
securities loaned rises above the level of the collateral;
(3) the Portfolio must be able to terminate the loan at any
time; (4) the Portfolio must receive reasonable interest on
the loan, as
well as any dividends, interest or other distributions on
the
loaned securities, and any increase in market value; (5)
the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the loaned
securities may pass to the borrower, except that, if a
material event adversely affecting the investment in the
loaned securities occurs, the Portfolio's Board of Directors
must terminate the loan and regain the Portfolio's right to
vote the securities.
Foreign Investments. Each Portfolio each may invest
its assets in the securities of foreign issuers as described
in the Prospectus. Investments in foreign securities
involve certain risks not ordinarily associated with
investments in securities of domestic issuers. Such risks
include 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 a Portfolio. If it should become
necessary, a Portfolio might encounter greater difficulties in
invoking legal processes abroad than would be the case in
the United States. Because a Portfolio may invest in
securities denominated or quoted in currencies other than
the U.S. dollar, changes in foreign currency exchange rates
may adversely affect the value of portfolio securities and
the appreciation or depreciation of investments. 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. Investments in
foreign securities also may result in higher expenses due to
the cost of converting foreign currency to U.S. dollars, the
payment of fixed brokerage commission on foreign exchanges,
the expense
of
maintaining securities with foreign custodians, the imposition
of transfer taxes or transaction charges associated with
foreign exchanges or foreign withholding taxes.

For many foreign securities, there are U.S.
dollar-
denominated American Depositary Receipts ("ADRs"), which
are traded in the United States on exchanges or over the
counter and are sponsored and issued by domestic banks. ADRs
represent the right to receive securities of foreign issuers
deposited in a domestic bank or a correspondent bank.
Because ADRs trade on United States securities exchanges,
they are not generally treated as foreign securities.
However, ADRs are subject to many of the risks inherent in
investing in the securities of foreign issuers.
By investing in ADRs rather than directly in foreign
issuers' stock, a Portfolio can avoid currency risks during
the settlement period for either purchases or sales. In
general, there is a large, liquid market in the United States
for many ADRs. The information available for ADRs is
subject to the accounting, auditing and financial reporting
standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more
exacting that those to which many foreign issuers may be
subject.

The AIM Capital Appreciation Portfolio, which may not
invest more that 20% of its total assets in foreign
securities, does include ADRs as well as European Depository
Receipts ("EDRs") and other securities representing underlying
securities of foreign issuers as foreign securities for
purposes of this limitation. EDRs which sometimes are
referred to as Continental Depositary Receipts ("CDRs") are
receipts issued in Europe typically by foreign banks and
trust companies that evidence ownership of either foreign
or domestic securities. Generally, ADRs, in
registered form, are designed for use in the United
States securities markets, and EDRs, in bearer form, are
designed for use in European securities markets.
Emerging Markets. The Putnam Diversified Income
Portfolio, the G.T. Global Strategic Income Portfolio and the
Smith Barney High Income Portfolio may invest in debt
securities in emerging markets. Investing in securities in
emerging countries may entail greater risks than investing
in debt securities in developed countries. These risks
include (i) less social, political and economic stability;
(ii) the small current size of the markets for such
securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater
price volatility; (iii) certain national policies which
may restrict the each such Portfolio's investment
opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national
interests; (iv) foreign taxation; and (v) the absence of
developed structures governing private or foreign investment
or allowing for judicial redress for injury to private
property.
Investors should note that upon the accession to power
of authoritarian regimes, the governments of a number of
emerging market countries previously expropriated large
quantities of real and personal property similar to the
property which maybe represented by the securities
purchased by the Portfolios. The claims of property owners
against those governments were never finally settled. There
can be no assurance that any property represented by
securities purchased by Portfolios will not also be
expropriated, nationalized, or otherwise confiscated. If such
confiscation were to occur, the Portfolios could lose
a substantial portion of their investments in such countries.
Each Portfolio's investments would similarly be adversely
affected by exchange control regulation in any of those
countries.
Certain countries in which the Portfolios may invest
may have vocal minorities that advocate radical
religious
or
revolutionary philosophies or support ethnic independence.
Any disturbance on the part of such individuals could
carry the potential for wide-spread destruction or
confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the
Portfolios' investment in those countries.

U.S. Government Securities. Each Portfolio may invest
in direct obligations of the United States and obligations
issued by U.S. Government agencies and instrumentalities.
Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which
differ principally in terms of their maturities. Included
among the securities issued by U.S.
Government agencies and instrumentalities are:
Securities that are supported by the full faith and credit of
the United States (such as Government National Mortgage
Association certificates); securities that are supported by the
right of the issuer to borrow from the U.S. Treasury (such
as securities of Federal Home Loan Banks); and securities
that are supported by the credit of the instrumentality
(such as Federal National Mortgage Association and Federal
Home Loan Mortgage Corporation bonds).

Zero Coupon, Pay-In-Kind and Delayed Interest
Securities. The Alliance Growth Portfolio, the TBC Managed
Income Portfolio, the
Putnam Diversified Income Portfolio, the G.T. Global
Strategic Income Portfolio and the MFS Total Return Portfolio
may invest in zero coupon, pay-in-kind and delayed
interest securities as well as custodial receipts or
certificates
underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal
payments or both on certain U.S. Government securities. Zero
coupon securities pay no cash income to their holders until
they mature and are issued at substantial discounts from
their value at maturity. When held to maturity, their
entire return comes from the difference between their
purchase price and their maturity value. Pay-in-kind securities
pay interest through the issuance to the holders of
additional securities, and delayed interest securities are
securities which do not pay interest for a specified period.
Because interest on zero coupon, pay-in-kind and delayed
interest securities is not paid on a current basis, the
values of securities of this type are subject to greater
fluctuations than are the values of securities that distribute
income regularly and may be more speculative than such
securities. Accordingly, the values of these securities may
be highly volatile as interest rates rise or fall. In
addition, the Portfolio's investments in zero coupon, pay-in-
kind and delayed interest securities will result in
special tax consequences. Although zero coupon securities
do not make interest payments, for tax purposes a portion
of the difference between a zero coupon security's
maturity value and its purchase price is taxable income of
the Portfolio each year.
Custodial receipts evidencing specific coupon or
principal payments have the same general attributes as zero
coupon U.S. Government securities but are not considered
to be U.S.
Government securities. Although under the terms of a
custodial receipt a Portfolio is typically authorized to assert
its rights directly against the issuer of the underlying
obligation, the Portfolio may be required to assert through
the custodian bank such rights as may exist against the
underlying issuer. Thus, in the event the underlying issuer
fails to pay principal and/or interest when due, a Portfolio
may be subject to delays, expenses and risks that are
greater than those that would have been involved if the
Portfolio had purchased a direct obligation of the issuer.
In addition, in the event that the trust or custodial
account in which the underlying security has been
deposited is determined to be an association taxable as
a corporation, instead of a non-taxable entity, the yield on
the underlying security would be reduced in respect of any
taxes paid.

Loan Participations and Other Direct Indebtedness.
The
Putnam Diversified Income Portfolio, the G.T. Global
Strategic Income Portfolio and the MFS Total Return Portfolio
may purchase loan participations and other direct claims
against a borrower. In purchasing a loan participation, a
Portfolio acquires some or all of the interest of a bank or
other lending institution in a loan to a corporate
borrower. Many such loans are secured, although some may be
unsecured. Such loans may be in default at the time of
purchase. Loans that are fully secured offer a Portfolio
more protection than an unsecured loan in the event of non-
payment of scheduled interest or principal. However, there is
no assurance that the liquidation of collateral from a
secured loan would satisfy the corporate borrower's
obligation, or that the collateral can be liquidated.

These loans are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-
outs and other corporate activities. Such loans are typically
made by a syndicate of lending institutions, represented
by an agent lending institution which has negotiated and
structured the loan and is responsible for collecting
interest, principal and other amounts due on its own behalf
and on behalf of the others in the syndicate, and for
enforcing its and their other rights against
the borrower. Alternatively, such loans may be structured as
a novation, pursuant to which a Portfolio would assume all of
the rights of the lending institution in a loan, or as an
assignment, pursuant to which the Portfolio would purchase an
assignment of a portion of a lender's interest in a loan either
directly from the lender or through an intermediary. A
Portfolio may also purchase trade or other claims against
companies, which generally represent money owed by the
company to a supplier of goods or
services. These claims may also be purchased at a time when
the company is in default.

Certain of the loan participations acquired by a
Portfolio may involve
revolving credit facilities or other standby
financing commitments which obligate the Portfolio to
pay
additional cash on a certain date or on demand. These
commitments may have the effect of requiring a Portfolio to
increase its investment in a company at a time when it might
not otherwise decide to do so (including at a time when the
company's financial condition makes it unlikely that such
amounts will be repaid). To the extent that a Portfolio is
committed to advance additional funds, it will at all times
hold and maintain in a segregated account cash or other high
grade debt obligations in an amount sufficient to meet
such commitments.A Portfolio's ability to
receive payments of principal, interest and other amounts due
in
connection with these investments will depend primarily on
the financial condition of the borrower. In selecting the
loan participations and other direct investments which a
Portfolio will purchase, management will rely upon its (and not
that of the original lending institution's) own credit
analysis of the borrower. As a Portfolio may be required to
rely upon another lending institution to collect and pass on
to it amounts payable with respect to the loan and to
enforce its rights under the loan, an insolvency, bankruptcy
or reorganization of the lending institution may delay or
prevent a Portfolio from receiving such amounts. In such
cases, a Portfolio will evaluate as well the
creditworthiness of the lending institution and will treat
both the borrower and the lending institution as an "issuer"
of the loan
participation for purposes of certain investment
restrictions pertaining to the diversification of the
Portfolio's portfolio investments. The highly leveraged nature
of many such loans may make such loans especially
vulnerable to adverse changes in economic or market
conditions. Investments in such loans may involve additional
risks to a Portfolio. For example, if a loan is foreclosed, a
Portfolio could become part owner of
any collateral, and would bear the costs and
liabilities
associated with owning and disposing of the collateral.
In
addition, it is conceivable that under emerging legal theories
of lender liability, a Portfolio could be held liable
as a
co-lender. It is unclear whether loans and other forms of
direct indebtedness offer securities law protection against
fraud and misrepresentation. In the absence of definitive
regulatory
guidance, a Portfolio relies on management's research in
an
attempt to avoid situations where fraud or
misrepresentation could adversely affect the Portfolio.
In addition, loan
participations and other direct investments may not be in
the form of securities or may be subject to restrictions on
transfer, and only limited
opportunities may exist to resell such
instruments. As a result, a Portfolio may be unable to sell
such investments at an opportune time or may have to resell
them at
less than fair market value. To the extent that
management determines that any such investments are illiquid,
a Portfolio will include them in the investment limitations
described below.

Mortgage-Backed Securities. The TBC Managed
Income
Portfolio, the Putnam Diversified Income Portfolio and the
MFS Total Return Portfolio may invest in mortgage backed
securities,
which are securities representing interests in "pools"
of mortgage loans. Monthly payments of interest and principal
by the individual borrowers on mortgages are "passed through"
to the
holders of the securities (net of fees paid to the issuer
or guarantor of the securities) as the mortgages in the
underlying mortgage pools are paid off. The average lives
of mortgage pass-throughs are variable when issued because
their average
lives depend on prepayment rates. The average life of
these securities is likely to be substantially shorter
than their stated final maturity as a result of
unscheduled principal prepayment. Prepayments on underlying
mortgages result in a loss of anticipated interest, and all
or part of a premium if any has been paid, and the actual
yield (or total return) to a Portfolio may be different than
the quoted yield on the securities. Mortgage prepayments
generally increase with falling interest rates and decrease
with rising interest rates. Like other fixed income
securities, when interest rates rise the value of a
mortgage pass-through security generally will decline;
however, when interest rates are declining, the value
of mortgage
pass-through securities with prepayment features may not
increase as much as that of other fixed-income securities.

Payment of principal and interest on some
mortgage pass-through securities (but not the market
value of the
securities themselves) may be guaranteed by the full faith
and credit of the U.S. Government (in the case of
securities guaranteed by the Government National Mortgage
Association (the GNMA); or guaranteed by agencies or
instrumentalities of the
U.S. Government (such as the Federal National
Mortgage
Association (FNMA) or the Federal Home Loan
Mortgage
Corporation, (FHLMC) which are supported only by
the
discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage pass-through securities may
also be issued by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage
insurance
companies, mortgage bankers and other secondary market
issuers). Some of these mortgage pass-through securities may
be supported by various forms of insurance or guarantees.

Interests in pools of mortgage-related securities
differ from other forms of debt securities, which normally
provide for periodic payment of interest in fixed amounts
with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment
which consists of both interest and principal payments. In
effect, these payments are a "pass-through" of the monthly
payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments
are caused by prepayments of principal resulting from the
sale, refinancing or foreclosure of the underlying property,
net of
fees or costs which may be incurred. Some mortgage pass-
through securities (such as securities issued by the GNMA) are
described as "modified pass-through." These securities entitle
the holder to receive all interests and principal payments
owed on the
mortgages in the mortgage pool, net of certain fees, at
the
scheduled payment dates regardless of whether the
mortgagor actually makes the payment.

The principal governmental guarantor of
mortgage
pass-through securities is the GNMA. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing
and Urban Development. GNMA is authorized to guarantee, with
the full faith and credit of the U.S. Government, the
timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as
savings and loan institutions, commercial banks and
mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages. These
guarantees, however, do not apply to the market value or
yield of mortgage pass-through securities. GNMA securities are
often purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will
be lost if prepayment occurs.
Government-related guarantors (i.e., whose guarantees
are not backed by the full faith and credit of the U.S.
Government) include the FNMA and the FHLMC. FNMA is a
government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. FNMA
purchases conventional residential mortgages (i.e., mortgages
not insured or guaranteed by any governmental agency) from a
list of approved seller/servicers which include state and
federally-chartered savings and loan associations, mutual
savings banks, commercial banks, credit unions and
mortgage bankers. Pass-through securities issued by FNMA
are guaranteed as to timely payment by FNMA of
principal and interest.

FHLMC is also a government-sponsored corporation owned
by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in
conventional mortgages (i.e., not federally insured or
guaranteed) from FHLMC's national portfolio. FHLMC guarantees
timely payment of interest and ultimate collection of
principal regardless of the status of the underlying mortgage
loans.
Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-through pools of
mortgage loans. Such issuers may also be the originators
and/or servicers of the underlying mortgage-related
securities. Pools created by such non-governmental issuers
generally offer a higher rate
of
interest than government and government-related pools
because there are no direct or indirect government or agency
guarantees of payments in the former pools. However, timely
payment of interest and principal of mortgage loans in these
pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard
insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private
insurers and the mortgage poolers. There can be no assurance
that the private insurers or guarantors can meet their
obligations under the insurance policies or guarantee
arrangements. A Portfolio may also buy mortgage-
related
securities without insurance or guarantees.

Other Asset-Backed Securities: The TBC Managed
Income Portfolio, the Putnam Diversified Income Portfolio and
the MFS Total Return Portfolio may invest in other
asset-backed securities. These securities, issued by
trusts and special purpose corporations, are backed by a
pool of assets, such as credit card and automobile loan
receivables, representing the obligations of a number of
different parties.

Corporate asset-backed securities present certain risks.
For instance, in the case of credit card receivables,
these
securities may not have the benefit of any security interest
in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing
the balance due. Most issuers of
automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were
to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to
that of the
holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile
receivables may not have a proper security interest in all
of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on
these securities.
Corporate asset-backed securities are often backed by a
pool of assets representing the obligations of a number of
different parties. To lessen the effect of failures by
obligers to make payments on underlying assets, the
securities may contain
elements of credit support which fall into two categories:
(i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the
underlying assets. Liquidity protection
refers to the provision of advances,
generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool
occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through
insurance policies or letters of credit obtained by the
issuer or sponsor from third parties. A Portfolio will not pay
any additional or separate fees for credit support. The
degree of credit support provided for each issue is
generally based on historical information respecting the
level of credit risk associated with
the
underlying assets. Delinquency or loss in excess of
that
anticipated or failure of the credit support could
adversely affect the return on an instrument in such a
security.

"Dollar Roll" Transactions. As described in the
Prospectus, the TBC Managed Income Portfolio, the Putnam
Diversified Income Portfolio and the G.T. Global Strategic
Income Portfolio may enter into "dollar roll" transactions
pursuant to which they sell fixed income securities for
delivery in the current month and simultaneously contract
to repurchase substantially similar
securities on a specified future date. The MFS Total
Return Portfolio may enter in similar transactions pursuant to
which the Portfolio sells mortgage-backed securities for
delivery in the future and simultaneously contracts to
repurchase substantially similar securities on a specified
future date. During the roll period, a Portfolio forgoes
principal and interest paid on the securities. The Portfolio
is compensated for the lost interest by the difference
between the current sales price and the lower price for the
future purchase (often referred to as the "drop") as well as
by the interest earned on the cash proceeds of the initial
sale. A Portfolio may also be compensated by receipt of a
commitment fee.

Convertible Securities and Synthetic Convertible
Securities. The Smith Barney Income and Growth Portfolio, the
Alliance Growth Portfolio, the AIM Capital Appreciation
Portfolio, the American Capital Enterprise Portfolio, the
Smith Barney International Equity Portfolio, the Smith
Barney Pacific Basin Portfolio, the TBC Managed Income
Portfolio, the Putnam Diversified Income Portfolio, the G.T.
Global Strategic Income Portfolio, the Smith Barney High
Income Portfolio and the MFS Total Return Portfolio may
invest in convertible securities and synthetic convertible
securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or
stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar
to both fixed-income and equity securities. Although to a
lesser extent than with fixedincome securities generally, the
market value of convertible securities tends to decline
as interest rates increase and, conversely, tends to
increase as interest rates decline. In
addition, because of the conversion feature, the market value
of convertible securities tends to vary with fluctuations in
the market value of the underlying common stocks and,
therefore, also will react to variations in the general
market for equity securities.
Like fixed-income securities, convertible securities
are investments which provide for a stable stream of income
with generally higher yields than common stocks. Of course,
like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible
securities may default on their obligations. Convertible
securities, however, generally offer lower interest or
dividend yields than nonconvertible securities of similar
quality because of the
potential for capital appreciation. A convertible security,
in addition to providing fixed income, offers the potential
for capital appreciation through the conversion feature,
which
enables the holder to benefit from increases in the market
price of the underlying common stock. However, there can
be no
assurance of capital appreciation because securities
prices fluctuate.

Convertible securities generally are subordinated to
other similar but non-convertible securities of the same
issuer, although convertible bonds enjoy seniority in right of
payment to all equity securities, and convertible preferred
stock is senior to common stock of the same issuer. Because
of the subordination feature, however, convertible securities
typically have lower ratings than similar non-convertible
securities.

Unlike a convertible security, which is a single security,
a synthetic convertible security is comprised of
distinct securities that together resemble convertible
securities in certain respects. Synthetic convertible
securities are typically created by combining non-convertible
bonds or preferred stocks with warrants or stock call
options. The options that will form elements of synthetic
convertible securities may be listed on a securities
exchange or on the National Association of Securities Dealers
Automated Quotation System or may be privately traded. The
components of a synthetic convertible security generally are
not offered as a unit and may be purchased and sold by
the Portfolio at different times. Synthetic convertible
securities differ from convertible securities in certain
respects, including that each component of a synthetic
convertible security has a separate market value and
responds differently to market
fluctuations. Investing in synthetic convertible
securities involves the risk normally involved in holding
the securities comprising the synthetic convertible security.

When-Issued, Delayed Delivery and Forward
Commitment Securities. The Smith Barney Income and Growth
Portfolio, the Alliance Growth Portfolio, the TBC Managed
Income Portfolio, the Putnam Diversified Income Portfolio,
the G.T. Global Strategic Income Portfolio, the Smith Barney
High Income Portfolio and the MFS Total Return Portfolio may
purchase securities on a whenissued basis, or may purchase
or sell securities for delayed delivery. In when-issued
or delayed delivery transactions, delivery of the
securities occurs beyond normal settlement periods, but no
payment or delivery will be made by a Portfolio prior to the
actual delivery or payment by the other party to the
transaction. A Portfolio will not accrue income with respect
to a when-issued or delayed delivery security prior to its
stated delivery date. A Portfolio will establish with its
custodian a segregated account consisting of cash, U.S.
Government securities or other liquid high grade debt
obligations, in an amount equal
to the amount of the Portfolio's when-issued and delayed
delivery purchase commitments. Placing securities rather than
cash in the segregated
account may have a leveraging effect on the
Portfolio's net asset value per share; that is, to the
extent
that the Portfolio remains substantially fully invested
in securities at the same time that it has committed to
purchase securities on a when-issued or delayed delivery
basis, greater fluctuations in its net asset value per share
may occur than if it had set aside cash to satisfy its
purchase commitments. Securities purchased on a when-issued
or delayed delivery basis may expose a
Portfolio to risk because the securities may
experience fluctuations in value prior to their
delivery. Purchasing securities on a when-issued or delayed
delivery basis can involve the additional risk that the yield
available in the market when
the delivery takes place may be higher than that
obtained in the transaction itself.

Short Sales Against the Box. The American
Capital
Enterprise Portfolio, the G.T. Global Strategic Income
Portfolio, the AIM Capital Appreciation Portfolio and the
High Income Portfolio may each make short sales of securities
in order to reduce market
exposure and/or to increase its income if, at all
times when a short position is open, (the "AIM
Capital
Appreciation Portfolio will limit investments such that nor
more than 10% of the value of its nets assets will be
deposited as collateral for such sales at any time) the
Portfolio owns an equal or greater amount of such
securities or owns preferred stock, debt or warrants
convertible or exchangeable into an equal or greater
number of the shares of the securities sold short.
Short sales of this kind are referred to as short sales
"against the box." The broker-dealer that executes a short
sale generally invests the cash proceeds of the sale until they
are paid to the Portfolio.
Arrangements may be made with the broker-dealer to
obtain a portion of the interest earned by the broker on
the
investment of short sale proceeds. The Portfolio will
segregate the securities against which short sales against
the box have been made in a special account with its
custodian.

Commercial Bank Obligations. For the purposes of
each Portfolio's investment policies with respect to bank
obligations, obligations of
foreign branches of U.S. banks and of foreign
banks may be general obligations of the parent bank in
addition to the issuing bank, or may be limited by the terms of
a specific obligation and by government regulation. As with
investment in non-U.S. securities in general, investments in
the obligations of foreign branches of U.S. banks and of
foreign banks may subject the Portfolio to investment risks
that are different in some respects from those of
investments in obligations of domestic issuers. Although a
Portfolio will typically acquire obligations issued and
supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of U.S.
$1 billion (or the equivalent thereof), this U.S. $1 billion
figure is not a fundamental investment policy or restriction
of the Portfolio. For calculation purposes with respect to
the U.S. $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S.
branches.

Commercial Paper. With respect to each
Portfolio's investment policies with respect to commercial
paper, such security consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by
corporations in order to finance their current
operations. A variable amount master demand note
(which is a type of commercial paper) represents a
direct borrowing arrangement involving periodically
fluctuating
rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender, pursuant
to which the
lender may determine to invest varying amounts. Transfer of
such notes is usually restricted by the issuer, and there
is no secondary trading market for such notes. Each Portfolio
(except the Smith Barney Money Market Portfolio), therefore,
may not invest in a master demand note, if as a result more
than 15% of the value of each such Portfolio's total assets
would be invested in such notes and other illiquid
securities. The Smith Barney Money Market Portfolio may not
invest in such notes if more than 10% of the value of its
total assets would be invested in such notes and other
illiquid securities.
Options, Futures Contracts and Related Options.
The
following information on options, futures contracts and
related options applies to the Portfolios as described in the
Prospectus. In addition, new options and futures contracts
and various combinations thereof continue to be developed and
the Portfolios may invest in any such options and contracts
as may be developed to the extent consistent with its
investment objective and regulatory requirements applicable
to investment companies.

Writing Covered Call Options. The Smith Barney Income
and Growth Portfolio, the Alliance Growth Portfolio, the AIM
Capital Appreciation
Portfolio, the American Capital Enterprise
Portfolio, the Smith Barney International Equity Portfolio,
the Smith Barney Pacific Basin Portfolio, the Putnam
Diversified Income Portfolio, the G.T. Global Strategic Income
Portfolio, the High Income Portfolio and the MFS Total
Return Portfolio may write (sell) covered call options. A
Portfolio may write (sell) covered call options for hedging
purposes or to increase its portfolio return. Covered call
options will generally be written on securities and currencies
which, in the opinion of management, are not expected to make
any major price moves in the near future but which, over the
long term, are deemed to be attractive investments for the
Portfolio. (the "AIM Capital Appreciation Portfolio" will
not write covered call options for speculative purposes).

A call option gives the holder (buyer) the right to
purchase a security or currency at a specified price (the
exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of
a call option continues, he may be assigned an exercise
notice by the broker-dealer through whom such option was
sold, requiring him to deliver
the
underlying security or currency against payment of the
exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by
purchasing an option identical to that previously sold.
Management believes that the writing of covered call
options is less risky than writing uncovered or "naked"
options, which the Portfolios will not do.

Portfolio securities or currencies on which call options
may be written will be purchased solely on the basis of
investment considerations consistent with each Portfolio's
investment objective. When writing a covered call option, the
Portfolio, in return for the premium, gives up the opportunity
for profit from a price increase in the underlying security or
currency above the exercise price and retains the risk of loss
should the price of the security or currency decline. Unlike
one who owns securities or currencies not subject to an
option, the Portfolio has no control over when it may be
required to sell the underlying securities or currencies,
since the option may be exercised at any time prior to the
option's expiration. If a call option which the Portfolio
has written expires, the Portfolio will realize a gain in
the amount of the premium; however, such gain may be offset
by a decline in the market value of the underlying
security or currency during the option period. If the
call option is exercised, the Portfolio will realize a gain
or loss from the sale of the underlying security or
currency. The
security or currency covering the call option will be
maintained in a segregated account of the Portfolio's
custodian. The
Portfolio does not consider a security or currency covered by
a call option to be "pledged" as that term is used in
the Portfolio's policy which limits the pledging or mortgaging
of its assets.

The premium the Portfolio receives for writing a call
option is deemed to constitute the market value of an
option. The
premium the Portfolio will receive from writing a call
option will reflect, among other things, the current market
price of the underlying security or currency, the relationship
of the exercise price to such market price, the historical
price volatility of the underlying security or currency, and
the length of the option period. In
determining whether a particular call option should
be written on a particular security or currency, management
will consider the reasonableness of the anticipated premium
and the likelihood that a liquid secondary market will exist
for those options. The premium received by the Portfolio
for writing covered call options will be recorded as a
liability in the Portfolio's statement of assets and
liabilities. This liability will be adjusted daily to the
option's current market value, which will be calculated as
described in "Determination of Net Asset Value" in the
Prospectus. The liability will
be
extinguished upon expiration of the option or delivery of
the underlying security or currency upon the exercise of the
option. The liability with respect to a listed option will
also be extinguished upon the purchase of an identical
option in a closing transaction.

Closing transactions will be effected in order to realize
a profit on an outstanding call option, to prevent an
underlying security or currency from being called, or to permit
the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the
Portfolio to write another call option on the underlying
security or currency with either a different exercise price,
expiration date or both. If
the
Portfolio desires to sell a particular security or currency
from its portfolio on which it has written a call option or
purchases a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the
security or currency. There is no assurance that the Portfolio
will be able to effect such closing transactions at a
favorable price. If the Portfolio cannot enter into such a
transaction, it may be required to hold a security or
currency that it might otherwise have sold, in which case it
would continue to be a market risk with respect to the
security or currency.

Each Portfolio will pay transaction costs in connection
with the writing of options and in entering into closing
purchase contracts. Transaction costs relating to options
activity are normally higher than those applicable to
purchases and sales of portfolio securities.

Call options written by each Portfolio will normally
have expiration dates of less than nine months from the date
written. The exercise price of the options may be below, equal
to or above the current market values of the underlying
securities or currencies at the time the options are written.
From time to time, the Portfolio may purchase an
underlying security or currency for delivery in accordance
with the exercise of an option, rather than delivering such
security or currency from its portfolio. In such cases,
additional costs will be incurred.

Each Portfolio will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is
less or more, respectively, than the premium received from the
writing of the option. Because increases in the market price
of a call option will generally reflect increases in the
market price of the underlying security or currency, any
loss resulting from the repurchase of a call option is likely
to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Portfolio.
Purchasing Put Options. The Smith Barney Income and
Growth Portfolio, the Alliance Growth Portfolio, the American
Capital Enterprise Portfolio, the Smith Barney
International Equity Portfolio, the Smith Barney Pacific
Basin Portfolio, the Putnam Diversified Income Portfolio, the
G.T. Global Strategic Income Portfolio, the Smith Barney
High Income Portfolio and the MFS Total Return Portfolio
may purchase put options. As the holder of a put option,
the Portfolio has the right to sell the underlying
security or currency at the exercise price at any time during
the option period. The Portfolio may enter into closing sale
transactions with respect to such options, exercise them or
permit them to expire.
Each Portfolio may purchase a put option on an
underlying security or currency (a "protective put") owned by
the Portfolio as a hedging technique in order to protect
against an anticipated decline in the value of the security
or currency. Such hedge protection is provided only during
the life of the put option when the Portfolio, as the holder
of the put option, is able to sell the underlying security
or currency at the put exercise price regardless of any
decline in the underlying security's market price or
currency's exchange value. For example, a put option may
be purchased in order to protect unrealized appreciation
of a security or currency when management deems it desirable
to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any
transaction costs would reduce any capital gain
otherwise available for distribution when the security or
currency is eventually sold.
Each Portfolio may also purchase put options at a time
when the Portfolio does not own the underlying security or
currency. By purchasing put options on a security or currency
it does not own, the Portfolio seeks to benefit from a
decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining
value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise
price during the life of the put option, the Portfolio will
lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the
market price of the underlying security or currency must
decline sufficiently below the exercise price to cover the
premium and transaction costs, unless the put option is sold in
a closing sale transaction.
The premium paid by a Portfolio when purchasing a put
option will be recorded as an asset in the Portfolio's
statement of assets and liabilities. This asset will be
adjusted daily to the option's current market value, which
will be calculated as described in
"Determination of Net Asset Value" in the
Prospectus. The asset will be extinguished upon expiration
of the option or the delivery of the underlying security or
currency upon the exercise of the option. The asset with
respect to a listed option will also be extinguished upon
the writing of an identical option in a closing transaction.

Purchasing Call Options. The Smith Barney Income and
Growth Portfolio, the Alliance Growth Portfolio, the American
Capital Enterprise Portfolio, the Smith Barney
International Equity Portfolio, the Smith Barney Pacific
Basin Portfolio, the Putnam Diversified Income Portfolio, the
G.T. Global Strategic Income Portfolio, the Smith Barney
High Income Portfolio and the MFS Total
Return Portfolio may purchase call options. As the holder
of a call option, a Portfolio has the right to purchase
the
underlying security or currency at the exercise price at any
time during the option period. The Portfolio may enter into
closing sale transactions with respect to such options,
exercise them or permit them to expire. Call options may
be purchased by the Portfolio for the purpose of acquiring
the underlying security or currency for its portfolio.
Utilized in this fashion, the purchase of call options
enables the Portfolio to acquire the security or currency
at the exercise price of the call option plus the premium
paid. At times the net cost of acquiring the security or
currency in this manner may be less than the cost of acquiring
the security or currency directly. This technique may also
be useful to the Portfolio in purchasing a large block of
securities that would be more difficult to acquire by
direct market purchases. So long as it holds such a call
option rather than the underlying security or currency itself,
the Portfolio is partially protected from any unexpected
decline in the market price
of the underlying security or currency and in such event
could allow the call option to expire, incurring a loss only
to
the extent of the premium paid for the option.

A Portfolio may also purchase call options on
underlying securities or currencies it owns in order to
protect unrealized gains
on call options previously written by it. A call option
would be purchased for this purpose where tax considerations
make it inadvisable to realize such gains through a closing
purchase transaction. Call options may also be purchased at
times to avoid
realizing losses that would result in a reduction of the
Portfolio's current return. It is a policy of the G.T.
Global Strategic Income Portfolio that aggregate premiums paid
for put and call options will not exceed 5% of the
Portfolio's total assets at the time of purchase.

Interest Rate, Securities Index, Financial Futures
and
Currency Futures Contracts. The Alliance Growth Portfolio,
the Smith Barney International Equity Portfolio, the Smith
Barney
Pacific Basin Portfolio, the Putnam Diversified Income
Portfolio, the G.T. Global Strategic Income Portfolio, the
Smith Barney High Income Portfolio and the MFS Total Return
Portfolio may enter in interest rate, securities index,
financial futures and currency futures contracts ("Futures"
or "Futures Contracts"). The AIM Capital Appreciation
Portfolio may enter into stock under futures contracts and the
American Capital Enterprise Portfolio may enter in stock index
and interest rate futures contracts. A Portfolio may enter
into Futures Contracts as a hedge against changes in
prevailing levels of interest rates or currency exchange rates
in order to establish more definitely the effective
return on
securities or currencies held or committed to be acquired by
the Portfolio. A Portfolio's hedging may include holding
Futures as an offset against anticipated changes in interest
or currency exchange rates. A Portfolio may also enter
into Futures Contracts based on financial indices including
any index of U.S. Government securities, foreign government
securities or corporate debt securities. The Smith Barney
International Equity Portfolio and the Smith Barney Pacific
Basin Portfolio may also enter into Futures Contracts for non-
hedging purposes, subject to applicable law.

A Futures Contract provides for the future sale by one
party and purchase by another party of a specified amount of a
specific financial instrument or currency for a specified
price at a designated date, time and place. The purchaser
of a Futures Contract on an index agrees to take or make
delivery of an amount of cash equal to the difference
between a specified dollar multiple of the value of the
index on the expiration date of the contract ("current
contract value") and the price at which the contract was
originally struck. No physical delivery of the debt securities
underlying the index is made. Brokerage fees are incurred
when a Futures Contract is bought or sold, and margin
deposits must be maintained at all times that the
Futures Contract is outstanding.
The principal interest rate and currency Futures
exchanges in the United States are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange.
Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodity Futures Trading
Commission. Futures are traded in London at the London
International Financial Futures Exchange.
Although techniques other than sales and purchases
of Futures Contracts could be used to reduce the
Portfolio's exposure to interest
rate and currency exchange rate
fluctuations, the Portfolio may be able to hedge its
exposure more effectively and at a lower cost through
using Futures Contracts.

Although Futures Contracts typically require future
delivery of and payment for financial instruments or
currencies, Futures Contracts are usually closed out before
the delivery date. Closing out an open Futures Contract sale
or purchase is effected by entering into an offsetting Futures
Contract purchase or sale, respectively, for the same
aggregate amount of the identical financial instrument or
currency and the same delivery date. If
the offsetting purchase price is less than the original
sale price, the Portfolio realizes a gain; if it is
more, the Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase
price, the Portfolio realizes a gain; if it is less, the
Portfolio realizes a loss. The
transaction costs must also be included in these
calculations. There can be no assurance, however, that
the
Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at
a particular time. If the Portfolio is not able to enter
into an offsetting transaction, the Portfolio will continue
to be required to maintain the margin
deposits of the underlying financial
instrument or currency on the relevant delivery date.

As an example of an offsetting transaction, the
contractual obligations arising from the sale of one Futures
Contract of September Treasury Bills on an exchange may be
fulfilled at any time before delivery under the Futures
Contract is required (i.e., on a specific date in September,
the "delivery month") by the purchase of another Futures
Contract of September Treasury Bills on the same exchange.
In such instance the difference between the price at which
the Futures Contract was sold and the price paid for the
offsetting purchase, after allowance for transaction costs,
represents the profit or loss to the
Portfolio.

Persons who trade in Futures Contracts may be
broadly classified as "hedgers" and "speculators."
Hedgers, whose business activity involves investment or
other commitment in securities or other obligations, use
the Futures markets to
offset unfavorable changes in value that may occur because
of fluctuations in the value of the securities and obligations
held or committed to be acquired by them or fluctuations in
the value of the currency in which the securities or
obligations are denominated. Debtors and other obligers
may also hedge the interest cost of their obligations.
The speculator, like the hedger, generally expects neither
to deliver nor to receive the financial instrument underlying
the Futures Contract, but, unlike the hedger, hopes to
profit from fluctuations in prevailing interest rates or
currency exchange rates.
Each Portfolio's Futures transactions will be entered
into for traditional hedging purposes; that is, Futures
Contracts will be sold to protect against a decline in the
price of securities or currencies that the Portfolio owns, or
Futures Contracts will be purchased to protect a Portfolio
against an increase in the price of securities or currencies
it has committed to purchase or expects to purchase. The
Smith Barney International Equity Portfolio, the Smith
Barney Pacific Basin Portfolio, the MFS Total Return
Portfolio and the Smith Barney High Income Portfolio may each
also enter into Futures transactions for non-hedging
purposes, provided that the aggregate initial margin and
premiums on such
non-hedging positions does not exceed 5% of the
liquidation value of a Portfolio's assets.

"Margin" with respect to Futures Contracts is the amount
of funds that must be deposited by the Portfolio with a
broker in order to initiate Futures trading and to maintain
the Portfolio's open
positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin")
is intended to assure the Portfolio's performance of the
Futures Contract. The margin required for a particular Futures
Contract is set by the exchange on which the Futures Contract
is traded, and may be significantly modified from time to
time by the exchange during the term of the Futures
Contract. Futures
Contracts are customarily purchased and sold on margins,
which may be 5% or less of the value of the Futures
Contract being traded.

If the price of an open Futures Contract changes
(by increase in the case of a sale or by decrease in the case
of a purchase) so that the loss on the Futures Contract
reaches a point at which the margin on deposit does not
satisfy margin requirements, the broker will require an
increase in the margin deposit
("variation margin"). If, however, the value of a
position increases because of favorable price changes in
the Futures Contract so that the margin deposit exceeds the
required margin, it is anticipated that the broker will pay
the excess to the Portfolio.
In computing daily net asset values, the Portfolio
will mark to market the current value of its open
Futures
Contracts. Each Portfolio expects to earn interest income on
its margin deposits.

Risks of Using Futures Contracts. The prices of
Futures Contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates,
which in turn are affected by fiscal and monetary policies
and national and international political and economic events.

At best, the correlation between changes in prices
of Futures Contracts and of the securities or currencies
being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances such
as: variations in speculative market demand for Futures and
for debt securities or currencies, including technical
influences in Futures trading;
and differences between the financial instruments being
hedged and the instruments underlying the standard Futures
Contracts available for trading, with respect to interest
rate levels, maturities, and creditworthiness of issuers.
A decision of whether, when, and how to hedge involves skill
and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market
behavior or interest rate trends.
Because of the low margin deposits required, Futures
trading involves an extremely high degree of leverage. As a
result, a relatively small price movement in a Futures
Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the
time of purchase, 10% of the value of
the Futures Contract is deposited as margin, a
subsequent 10% decrease in the value of the Futures
Contract would
result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were
then closed out. A 15% decrease would result in a loss equal
to 150% of the original margin deposit, if the Futures
Contract were closed out. Thus, a purchase or sale of a
Futures Contract may result in losses in excess of the amount
invested in the Futures Contract. The Portfolio, however,
would presumably have sustained comparable losses if,
instead of the Futures Contract, it had invested in the
underlying financial instrument and sold it after the
decline. Where the International Equity Portfolio enters into
Futures transactions for non-hedging purposes, it will be
subject to greater risks and could sustain losses which are
net offset by gains on other portfolio assets.

Furthermore, in the case of a Futures Contract purchase,
in order to be
certain that the Portfolio has sufficient assets to
satisfy its obligations under a Futures Contract, the
Portfolio sets aside and commits to back the Futures Contract
an amount of cash, U.S.
Government securities and other liquid, high-grade
debt securities equal in value to the current value of
the underlying instrument less the margin deposit. In the case
of a Futures Contract sale, a Portfolio will either set aside
amounts as in the case of a Futures Contract purchase, own
the security underlying the Contract, or hold a call option
permitting the Portfolio to purchase the same Futures
Contract at a price no higher than the Contract price.
Assets used as cover cannot be sold while the position in the
corresponding Futures Contract is open, unless they are
replaced with similar assets. As a result, the commitment of a
significant portion of the Portfolio's assets to cover could
impede portfolio management or the Portfolio's ability to meet
redemption requests or other current obligations.

Most United States Futures exchanges limit the amount
of fluctuation permitted in Futures Contract prices during a
single trading day. The daily limit establishes the maximum
amount that the price of a Futures Contract may vary either up
or down from the previous day's settlement price at the end
of a trading session. Once the
daily limit has been reached in a particular
type of Futures Contract, no trades may be made on that day at
a price beyond
that limit. The daily limit governs only price
movement during a particular trading day and therefore does
not limit
potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract
prices have
occasionally moved to the daily limit for several
consecutive trading days with little or no trading,
thereby preventing prompt liquidation of Futures positions and
subjecting some Futures traders to substantial losses.

Options on Futures Contracts. The Alliance
Growth Portfolio, the American Capital Enterprise Portfolio,
the Smith Barney International Equity Portfolio, the Smith
Barney Pacific
Basin Portfolio, the Putnam Diversified Income Portfolio,
the G.T. Global Strategic Income Portfolio, the Smith Barney
High Income Portfolio and the MFS Total Return Portfolio may
enter into options on Futures Contracts. Options on Futures
Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser
the right, in return for the premium paid, to assume a
position in a Futures Contract (a long position if the
option is a call and a short position if the option is a
put), rather than to purchase or sell the Futures Contract, at
a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the
Futures position by the writer of the option to the holder of
the option will be accompanied by delivery of the accumulated
balance in the writer's Futures margin account which
represents the amount by which the market price of the
Futures Contract, at exercise, exceeds (in the case of a call)
or is less than (in the case of a put) the exercise price of
the option on the Futures Contract. If an option is exercised
on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash equal to
the difference between the exercise price of the option and the
closing level of the securities or currencies upon which the
Futures Contracts are based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
As an alternative to purchasing call and put options
on Futures, each Portfolio may purchase call and put options on
the underlying securities or currencies themselves (see
"Purchasing Put Options" and "Purchasing Call Options" above).
Such options would be used in a manner identical to the use
of options on Futures Contracts.
To reduce or eliminate the leverage then employed by
the Portfolio or to reduce or eliminate the hedge position
then currently held by the Portfolio, the Portfolio may seek to
close out an option position by selling an option covering
the same securities or currency and having the same exercise
price and expiration date. The ability to establish and
close out
positions on options on Futures Contracts is subject to
the existence of a liquid market. It is not certain that this
market will exist at any specific time.

In order to assure that the Portfolios will not be deemed
to be "commodity pools" for purposes of the Commodity Exchange
Act, regulations of the Commodity Futures Trading Commission
("CFTC") require that each Portfolio enter into transactions
in Futures Contracts and options on Futures Contracts only (i)
for bona fide hedging purposes (as defined in CFTC
regulations), or (ii) for non-hedging purposes, provided that
the aggregate initial margin and premiums on such non-hedging
positions does not exceed 5% of the liquidation value of the
Portfolio's assets.

Forward Currency Contracts and Options on Currency.
The
Alliance Growth Portfolio, the Smith Barney International
Equity Portfolio, the Smith Barney Pacific Basin Portfolio,
the Putnam Diversified Income Portfolio, the G.T. Global
Strategic Income Portfolio, the Smith Barney High Income
Portfolio and the MFS Total Return Portfolio may enter into
forward currency contracts and options on currency. A
forward currency contract is an obligation to purchase or
sell a currency against another currency at a future
date and price as agreed upon by the parties. A Portfolio
may either accept or make delivery of the currency at the
maturity of the forward contract or, prior to maturity, enter
into a closing transaction involving the purchase or sale of
an offsetting contract. A Portfolio engages in
forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The
Portfolio might sell
a particular foreign currency forward, for example,
when it holds bonds denominated in that currency but
anticipates, and seeks to be protected against, decline in
the currency against the U.S. dollar. Similarly, the
Portfolio might sell the U.S. dollar forward when it holds
bonds denominated in U.S. dollars but anticipates, and
seeks to be protected against, a decline in
the U.S. dollar relative to other currencies.
Further, the Portfolio might purchase a currency forward to
"lock in" the price of securities denominated in that currency
which it anticipates purchasing.

The matching of the increase in value of a forward
contract and the decline in the U.S. dollar equivalent
value of the foreign currency denominated asset that is the
subject of the hedge
generally will not be precise. In addition, the Portfolio
may not always be able to enter into foreign currency
forward contracts at attractive prices and this will
limit the
Portfolio's ability to use such contract to hedge or cross-
hedge its assets. Also, with regard to the Portfolio's use of
crosshedges, there can be no assurance that historical
correlations between the movement of certain foreign
currencies relative to the U.S.
dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates
of the foreign currencies underlying the Portfolio's cross-
hedges and the movements in the exchange rates of the foreign
currencies in which the Portfolio's assets that are the
subject of such cross-hedges are denominated. The MFS
Total Return Portfolio may also enter into forward currency
contracts for non-hedging purposes, subject to applicable law.

Forward contracts are traded in an interbank
market conducted directly between currency traders
(usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement and is
consummated without payment of any commission. A Portfolio,
however, may enter into forward contracts with deposit
requirements or commissions.

A put option on currency gives the Portfolio, as
purchaser, the right (but not the obligation) to sell a
specified amount of currency at the exercise price until
the expiration of the option. A
call option gives the Portfolio, as purchaser, the
right (but not the obligation) to purchase a specified amount
of currency at the exercise price until its expiration.
The
Portfolio might purchase a currency put option, for example,
to protect itself during the contract period against a
decline in the value of a currency in which it holds or
anticipates holding securities. If the currency's value should
decline, the loss in currency value should be offset, in
whole or in part, by an increase in the value of the put.
If the value of the currency instead should rise, any gain to
the Portfolio would be reduced by the premium it had paid for
the put option. A currency call option might be purchased,
for example, in anticipation of, or to protect against, a rise
in the value of a currency in which the Portfolio anticipates
purchasing securities.

A Portfolio's ability to establish and close out
positions in foreign currency options is subject to the
existence of a liquid market. There can be no assurance
that a liquid market will exist for a particular option at
any specific time. In
addition, options on foreign currencies are affected by all
of those factors that influence foreign exchange rates
and
investments generally.

A position in an exchange-listed option may be closed
out
only on an exchange that provides a secondary market
for identical options. Exchange markets for options on
foreign currencies exist but are relatively new, and the
ability to establish and close out positions on the exchanges
is subject to maintenance of a liquid secondary market.
Closing transactions may be effected with respect to options
traded in the over-thecounter ("OTC") markets (currently
the primary markets for options on foreign currencies) only
by negotiating directly with the other party to the option
contract or in a secondary market for the option if such
market exists. Although the Portfolio intends to purchase
only those options for which there appears to be an active
secondary market, there is no assurance that a liquid
secondary market will exist for any particular option at any
specific time. In such event, it may not be possible to
effect closing transactions with respect to certain options,
with the result that the Portfolio would have to exercise
those options which it has purchased in order to realize any
profit. Any OTC options acquired by each Portfolio and assets
used as "cover" for OTC options written by the Portfolio
would be considered illiquid and subject to each Portfolio's
limitation on investing in such securities.
Options on Securities Indices. The Alliance
Growth Portfolio, the American Capital Enterprise Portfolio,
the Smith Barney International Equity Portfolio, the Smith
Barney Pacific Basin
Portfolio, the Putnam Diversified Income Portfolio, the
G.T. Global Strategic Income Portfolio, the Smith Barney
High Income Portfolio and the MFS Total Return Portfolio may
enter into options on securities indices. Through the
writing or purchase of index options, a Portfolio can achieve
many of the same objectives as through the use of options
on individual securities. Options on securities indices are
similar to options on a security except that, rather than the
right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount
of cash if the closing level of the securities index upon
which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price
of the option. This amount of cash is equal to the
difference between the closing price of the index and the
exercise price of the option. The writer of the option
is obligated, in return for the premium received, to make
delivery of this amount. Unlike options on securities
(which require, upon exercise, delivery of the underlying
security), settlements of options on securities indices, upon
exercise thereof, are in cash, and
the gain or loss of an option on an index depends on
price movements in the market generally (or in a
particular
industry or segment of the market on which the underlying
index base) rather than price movements in individual
securities, as is the case with respect to options on
securities.

When the Portfolio writes an option on a securities
index, it will be required to deposit with its custodian
eligible securities equal in value to 100% of the exercise
price in the case of a put, or the contract's value in the
case of a call. In addition, where the Portfolio writes a
call option on a securities index at a time when the
contract value exceeds the exercise price, the Portfolio
will segregate, until the option expires or is closed out,
cash or cash equivalents equal in value to such excess.

Options on securities and index options involve
risks similar to those risks relating to transactions in
financial futures described above. Also, an option
purchased by the Portfolio may expire worthless, in which
case the Portfolio would lose the premium paid therefor.

The staff of the Securities and Exchange Commission
("SEC") has taken the position that purchased over-the-
counter options and assets used to cover written over-the-
counter options are illiquid and, therefore, together with
other illiquid securities cannot, exceed a certain percentage
of a Portfolio's assets (the "SEC illiquidity ceiling").
Although management disagrees with this position, it intends
to limit each Portfolio's writing of over-the-counter
options in accordance with the following procedure.
Except as provided below, each Portfolio intends to
write over-the-counter options only with primary U.S.
Government
securities dealers recognized by the Federal Reserve Bank of
New York. Also, the contracts which each Portfolio has in
place with
such primary dealers will provide that each Portfolio has
the absolute right to repurchase an option it writes at any
time at a price
which represents the fair market value, as determined in
good faith through negotiation between the parties, but which
in no event will exceed a price determined pursuant to a
formula in the contract. Although the specific formula may
vary between contracts with different primary dealers,
the formula will generally be based on a multiple of the
premium received by a Portfolio for writing the option, plus
the amount, if any, of the option's intrinsic value (i.e., the
amount that the option is inthe-money). The formula may also
include a factor to account for the difference between the
price of the security and the strike price of the option if
the option is written out-of-money. Each Portfolio will
treat all or a part of the formula price as illiquid for
purposes of the SEC illiquidity ceiling. Each Portfolio
may also write over-the-counter options with nonprimary
dealers, including foreign dealers, and will treat the assets
used to cover these options as illiquid for purposes of such
SEC illiquidity ceiling.

Yield Curve Options. The MFS Total Return Portfolio
may also enter into options on the "spread," or yield
differential, between two fixed income securities, in
transactions referred to as "yield curve" options. In
contrast to other types of options, a yield curve option is
based on the difference between the yields of designated
securities, rather than the prices of the individual
securities, and is settled through cash payments.
Accordingly, a yield curve option is profitable to the holder
if this differential widens (in the case of a call) or narrows
(in the case of a put), regardless of whether the yields
of the underlying securities increase or decrease.

Yield curve options may be used for the same purposes
as other options on securities. Specifically, the
Portfolio may
purchase or write such options for hedging purposes.
For
example, the Portfolio may purchase a call option on the
yield spread between two securities, if it owns one of the
securities and anticipates purchasing the other security and
wants to hedge against an adverse change in the yield spread
between the two securities. The Portfolio may also purchase
or write yield curve options for other than hedging purposes
(i.e., in an effort to increase its current income) if, in
the judgement of management, the Portfolio will be able to
profit from movements in the spread between the yields of the
underlying securities. The trading of yield
curve options is subject to all of the risks associated
with the trading of other types of options. In
addition, however, such options present risk of loss even if
the yield of one of the underlying securities remains
constant, if the spread moves
in a direction or to an extent which was not anticipated.
Yield curve options written by the Portfolio will be
"covered".
A call (or put) option is covered if the Portfolio holds
another call (or put) option on the spread between the
same two securities and maintains in a segregated
account with its
custodian cash or cash equivalents sufficient to cover
the Portfolio's net liability under the two options.
Therefore, the Portfolio's liability for such a covered
option is generally limited to the difference between the
amount of the Portfolio's liability under the option written
by the Portfolio less the value of the option held by the
Portfolio. Yield curve options may also be covered in such
other manner as may be in accordance with the requirements of
the counterparty with which the option is traded and
applicable laws and regulations. Yield curve options are
traded over-the-counter and because they have been only
recently introduced, established trading markets for these
securities have not yet developed.
Swaps and Swap Related Products. Among the
hedging transactions into which the Smith Barney
International Equity Portfolio, the Smith Barney Pacific
Basin Portfolio, the G.T. Global Strategic Income Portfolio,
the Smith Barney High Income Portfolio and the MFS Total
Return Portfolio may enter are interest rate swaps,
currency swaps and other types of swap agreements such as
caps, collars and floors. Each Portfolio expects to enter
into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio
or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later
date. Each Portfolio intends to use these transactions as a
hedge and not as a speculative investment. Swap
agreements may be
individually negotiated and structured to include exposure to
a variety of different types of investments or market
factors. Depending on their structure, swap agreements may
increase or
decrease a Portfolio's exposure to long or short-term
interest rates (in the U.S. or abroad), foreign currency
values, mortgage securities, corporate borrowing rates, or
other factors such as
securities prices or inflation rates. Swap agreements can
take many different forms and are known by a variety of
names. A
Portfolio is not limited to any particular form or variety
of
swap agreement if management determines it is consistent with
the Portfolio's investment objective and policies.

A Portfolio may enter into swaps, caps and floors on
either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will
usually enter into interest rate swaps on a net basis, i.e.,
the two payment streams are netted but, with the Portfolio
receiving or paying, as the case may be, only the net
amount of the two payments. Inasmuch as these hedging
transactions are entered into for good faith hedging
purposes, management and the Portfolios believe such
obligations do not constitute senior securities and,
accordingly will not treat them as being subject to its
borrowing restrictions. The net amount of the excess, if
any, of a Portfolio's obligations over its entitlements
with respect to
each interest rate swap will be accrued on a daily basis and
an
amount of cash or liquid securities having an aggregate net
asset value at least equal to the accrued excess will be
maintained in
a segregated account by its custodian. If a Portfolio
enters into a swap agreement on other than a net basis, it will
maintain cash or liquid assets with a value equal to the full
amount of
such Portfolio's accrued obligations under the agreement.
The
Portfolios will not enter into any swap, cap, floor or
collar transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in
the highest rating category of at
least one nationally recognized rating
organization at the time of entering into such transaction.
The
most significant factor in the performance of swaps, caps,
floors and collars is the change in specific interest rate,
currency or
other factor that determines the amount of payments to be
made under the arrangement. If management is incorrect
in its
forecasts of such factors, the investment performance of
the Portfolio would be less than what it would have been if
these investment techniques had not been used. If a swap
agreement calls for payments by the Portfolio the
Portfolio must be prepared to make such payments when due.
In addition, if the counterparty's creditworthiness declined,
the value of the swap agreement would be likely to decline,
potentially resulting in losses. If the
counterparty defaults, the Portfolio's risk of
loss consists of the net amount of payments that the Portfolio
is contractually entitled to receive. The Portfolio
anticipates that it will be able to eliminate or reduce its
exposure under these arrangements by assignment or other
disposition or by entering into an offsetting agreement with
the same or another counterparty. The swap market has grown
substantially in recent years with a large number of banks
and investment banking firms acting both as principals
and as agents utilizing swap documentation. As a
result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.

Additional Policies

Options (Smith Barney Income and Growth
Portfolio). Although the Smith Barney Income and Growth
Portfolio may buy or sell covered put and covered call
options up to 15% of its net assets, 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.
Selection of Debt Investments (G.T. Global Strategic
Income
Portfolio). In determining the appropriate distribution
of investments among various countries and geographic regions
for the Portfolio, management ordinarily considers the
following factors: prospects for relative economic growth
among the
different countries in which the Portfolio may invest;
expected levels of inflation; government policies
influencing business conditions; the outlook for currency
relationships; and the range of the
individual investment opportunities available to
international investors.

Although the Portfolio values assets daily in terms of
U.S. dollars, the Portfolio does not intend to convert
holdings of foreign currencies into U.S. dollars on a
daily basis. The Portfolio will do so from time to time, and
investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based
on the difference ("spread") between the prices at which
they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to sell that currency to
the dealer.

The Portfolio may invest in the following types of
money market instruments (i.e., debt instruments with
less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or
guaranteed by the U.S. or foreign governments, their agencies,
instrumentalities or municipalities; (b) obligations of
international organizations designed or supported by multiple
foreign governmental entities to promote economic
reconstruction or development; (c) finance company
obligations, corporate commercial paper and other
short-term commercial obligations: (d) bank
obligations
(including certificates of deposit, time deposits,
demand
deposits and bankers' acceptances), subject to the
restriction that the Portfolio may not invest more than 25%
of its total assets in bank securities; (e) repurchase
agreements with respect to all the foregoing; and (f)
other substantially similar short-term debt securities with
comparable characteristics.
Investments in Other Investment Companies (G.T.
Global
Strategic Income Portfolio). With respect to certain
countries, investments by the Portfolio presently may be
made only by acquiring shares of other investment
companies with local governmental approval to invest in
those countries. The Portfolio may invest in the securities of
closed-end investment companies within the limits of the
1940 Act. These limitations currently provide that, in
general, the Portfolio may purchase shares of a closed-end
investment company unless (a) such a purchase would cause
the Portfolio to own in the aggregate more than 3 percent of
the total outstanding voting securities of the investment
company or (b) such a purchase would cause the Portfolio to
have more than 5 percent of its total assets invested
in the investment company or more than 10 percent of its
aggregate assets invested in an aggregate of all such
investment companies. Investment in such investment companies
may also involve the payment of substantial premiums
above the value of such
companies' portfolio securities. The Portfolio does not intend
to invest in such vehicles or funds unless, in the
judgment of management, the potential benefits of such
investments justify the payment of any applicable
premiums. The yield of such securities will be reduced
by operating expenses of such
companies including payments to the investment managers of
those investment companies. At such time as direct investment
in these countries is allowed, the Portfolio will
anticipate investing directly in these markets.

Samurai and Yankee Bonds (G.T. Global Strategic
Income
Portfolio). Subject to its fundamental investment
restrictions, the Portfolio may invest in yen-denominated
bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in
the United States by non-U.S. issuers ("Yankee bonds"). It
is the policy of the Portfolio to invest in Samurai or
Yankee bond issues only after taking into account
considerations of quality and liquidity, as well as yield.

Warrants or Rights (G.T. Global Strategic Income
Portfolio
and AIM Capital Appreciation Portfolio). Warrants or rights
may be acquired by each Portfolio in connection with other
securities or separately and provide the Portfolio with
the right to purchase at a later date other securities of
the issuer. Each
Portfolio has undertaken that its investment in warrants
or rights, valued at the lower of cost or market, will not
exceed 5% of the value of its net assets and not more than
2% of such assets will be invested in warrants and rights
which are not listed on the American or New York Stock
Exchange. Warrants or rights acquired by a Portfolio in units
or attached to securities will be deemed to be without
value for purposes of this restriction.

Special Situations (Aim Capital Appreciation
Portfolio).
Although AIM Capital Appreciation Portfolio does not
currently intend to do so, it may invest in "special
situations." A special situation arises when, in the opinion
of management, the securities of a particular company will,
within a reasonably estimable period of time, be accorded
market recognition at an appreciated value solely by reason
of a development applicable to that company, and regardless
of general business conditions or movements of the market
as a whole. Developments creating
special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical
breakthroughs and new management or management
policies. Although large and well known companies may
be
involved, special situations more often involve
comparatively small or unseasoned companies. Investments
in unseasoned companies and special situations often involve
much greater risk than is inherent in ordinary
investments securities. The Portfolio will not, however,
purchase securities of any company with a record of less
than three year's continuous operation (including that of
predecessors) if such purchase cause the Portfolio's
investment in all such companies, taken at cost, to exceed 5%
of the value of its total assets.

INVESTMENT RESTRICTIONS

The Portfolios have adopted the following restrictions
and fundamental policies that cannot be changed unless
Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or
SEC staff interpretations thereof are amended or modified
or unless
approved by a "vote of a majority of the outstanding
voting securities" of each Portfolio affected by the change as
defined in the 1940 Act and Rule 18f-2 thereunder (see
"Voting"). If a Portfolio adheres to a percentage
restriction at the time of investment, a later increase or
decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will
not be considered a violation of any of the following
policies.

Each of the Smith Barney Income and Growth, Smith
Barney International Equity and Smith Barney Pacific Basin
Portfolios may not:

1. With respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of any
single issuer and purchase more than 10% of the
outstanding voting securities of an issuer (except securities
of the U.S. Government and its agencies and instrumentalities).

2. Invest more than 25% of its total assets in a
particular
industry. This limitation shall not apply to any
obligations
issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.

3. Purchase or sell real estate, although the Portfolio
may
purchase securities of issuers which engage in real
estate operations and securities secured by real estate or
interests therein.

4. Invest in securities of another investment
company except as permitted by Section 12(d)(1) of the 1940
Act, or as part of a merger, consolidation, or acquisition.
5. Purchase or sell physical commodities or
contracts thereon except for purchases of currencies, futures
and options and other related contracts as described in the
Prospectus.
6. Borrow money (including borrowings through entering
into
reverse repurchase agreements) in excess of 33 1/3% of its
total assets (including the amount of money borrowed but
excluding any liabilities and indebtedness not constituting
senior securities, or letters of credit solely for purposes of
participating in a captive insurance company sponsored by
the Investment Company Institute
to provide fidelity and directors and officers
liability insurance), or pledge its assets other than to
secure such borrowings or in connection with short sales,
when-issued
and delayed delivery transactions and similar
investment
strategies. Whenever borrowings exceed 5% of the value of
the Portfolio's total assets, the Portfolio will not
make any additional investments. If at any time any
borrowings exceed 331/3% of the value of a Portfolio's total
assets, the Portfolio will reduce its borrowings within
three business days to the extent necessary to comply with
the 33-1/3% limitation.

7. Make loans, except the Portfolio may purchase
debt
obligations, may enter into repurchase agreements and may
lend securities.

8. Underwrite securities of other issuers, except to
the
extent the Portfolio, in disposing of portfolio securities,
may be deemed an underwriter within the meaning of the
Securities Act of 1933, as amended (the "1933 Act").

9. Issue senior securities, except as permitted under
the
1940 Act or any rule, order or interpretation thereunder.

Notwithstanding any other investment restriction of
the Smith Barney Income and Growth Portfolio, the Smith
Barney International Equity Portfolio or the Smith Barney
Pacific Basin Portfolio, each such Portfolio may invest all
of its investable assets in an open-end management
investment company having its same investment objective and
restrictions.

In addition, the following policies have also been
adopted by the Smith Barney Income and Growth Portfolio, the
Smith Barney International Equity Portfolio and the Smith
Barney Pacific Basin Portfolio, but are not fundamental and
accordingly may be changed by approval of the Board of
Directors. The Portfolios may not:

1. Purchase any securities on margin, provided that
the
Portfolio may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of
securities and except that it may, if otherwise permitted,
make margin deposits in connection with futures contracts.

2. 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.

3. Have more than 15% of its net assets invested in
puts, calls, straddles, spreads or combinations thereof.

4. Purchase oil, gas or other mineral leases, rights
or royalty contracts or exploration or development programs,
except that the Portfolio may invest in the securities of
companies which operate, invest in, or sponsor such programs.

5. Invest more than 5% of its total assets in any
issuer
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.

6. Invest in or hold securities of an issuer if
those
officers and directors of the Fund, its Adviser, or 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.

7. Invest in any company for the purpose of
exercising
control of management.

8. Acquire securities subject to restrictions
on
disposition or securities for which there is no readily
available market,
enter into repurchase agreements or purchase time
deposits or variable amount master demand notes, if any of
the foregoing have a term or demand feature of more than seven
days, or purchase OTC options or set aside assets to cover OTC
options written
by the Portfolio if, immediately after and as a result,
the value of such securities would exceed, in the aggregate,
15% of the Portfolio's total assets. Subject to this
limitation, the Fund's Board of Directors has authorized the
Portfolio to invest in restricted securities if such
investment is consistent with the Portfolio's investment
objective and has authorized such securities to be
considered to be liquid to the extent the Manager
determines on a daily basis that there is a liquid
institutional market for such securities. The Board of
Directors retains
ultimate ongoing responsibility for the determination
that a restricted security is liquid.

9. Purchase warrants if as a result the Portfolio would
then have more than 5% of its net assets (determined at the
time of investment) invested in warrants. Warrants will be
valued at the lower of cost or market and investment in
warrants which are not listed on the New York Stock
Exchange or the American Stock Exchange will be limited to
2% of the Portfolio's net assets (determined at the time of
investment). For the purpose of this limitation, warrants
acquired in units or attached to securities are deemed to be
without value.

The Smith Barney Money Market Portfolio may not:

1. Borrow money except from banks for temporary purposes
in
an amount up to 10% of the value of its total assets and
may pledge its assets in an amount up to 10% of the value
of its total assets only to secure such borrowings. The
Portfolio may 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.
Whenever borrowings exceed 5% of the value of a Portfolio's
total assets, the Portfolio will not make any additional
investments.

2. With respect to 75% of its assets invest more than 5%
of
its assets in the securities of any one issuer, except
securities issued or guaranteed as to principal and interest
by the U.S. Government, its agencies or instrumentalities.1

3. Invest more than 25% of its assets in the securities
of
issuers in any industry, except it may not invest less than
25%
of its assets in bank obligations (including both domestic
and
foreign bank obligations) and it reserves freedom of action
to
concentrate in securities issued or guaranteed as to
principal and interest by the U.S. Government, its
agencies or
instrumentalities.

4. Make loans to others (except through the purchase of
debt obligations and the lending of portfolio securities
referred to under "Smith Barney Money Market Portfolio" in
the Prospectus), except that the Portfolio may purchase and
simultaneously resell for later delivery, obligations issued
or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities; provided,
however, that the Portfolio will not enter into such a
repurchase agreement if, as a result thereof, more than 10%
of its total assets (taken at current value) at that time
would be subject to repurchase agreements maturing in
more than seven days.
5. Invest in securities of another investment
company except as permitted by Section 12(d)(1) of the 1940
Act, or as part of a merger, consolidation, or acquisition.
6. Underwrite securities of other issuers, except to
the extent the Portfolio, in disposing of portfolio
securities, may be deemed an underwriter within the meaning of
the 1933 Act.
7. Issue senior securities, except as permitted under
the 1940 Act or any rule, order or interpretation thereunder.
Notwithstanding any other investment restriction of
the Smith Barney Money Market Portfolio, the Portfolio may
invest all of its investable assets in an open-end
management investment company having the same investment
objective and restrictions as the Portfolio.
In addition, the following policies have also been
adopted by the Smith Barney Money Market Portfolio
but are not
fundamental and accordingly may be changed by approval of
the Board of Directors. The Portfolio may not:

1. Acquire securities subject to restrictions on
disposition or securities for which there is no readily
available market, enter into repurchase agreements or
purchase time deposits or
variable amount master demand notes, if any of the foregoing
have a term or demand feature of more than seven days if,
immediately after and as a result, the value of such securities
would exceed, in the aggregate, 10% of the Portfolio's total
assets. Subject to this limitation, the Fund's Board of
Directors has authorized the Portfolio to invest in
restricted securities if such
investment is consistent with the Portfolio's
investment objective and has authorized such securities to be
considered to be liquid to the extent the Manager determines
on a daily basis that there is a liquid institutional market
for such securities. The Board of Directors retains ultimate
ongoing responsibility for the determination that a restricted
security is liquid.

2. Sell securities short.

3. Write or purchase put or call options.

4. Purchase illiquid securities (such as
repurchase agreements with maturities in excess of seven
days) or other securities that are not readily marketable if
more than 10% of the net assets of the Portfolio would
be invested in such securities.

5. Purchase or sell real estate, real estate
investment trust securities, commodities, or oil and gas
interests.

6. Invest in companies for the purposes of
exercising control.

The Alliance Growth Portfolio may not:

1. Borrow money in excess of 10% of the value (taken at
the lower of cost or current value) of its total
assets (not
including the amount borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely
disposition of portfolio investments or pending settlement
of securities transactions or
for extraordinary or emergency purpose.
2. Underwrite securities issued by other persons except
to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an
underwriter under certain federal securities laws.
3. Purchase or retain real estate or interests in
real estate, although the Portfolio may purchase securities
which are secured by real estate and securities of companies
which invest in or deal in real estate.
4. Make loans to other persons except by the purchase
of obligations in which the Portfolio may invest consistent
with its investment policies and by entering into repurchase
agreements, or by lending its portfolio securities representing
not more than 25% of its total assets.
5. Issue any senior securities, except as permitted by
the 1940 Act or any rule, order or interpretation thereunder.
For
the purposes of this restriction, collateral arrangements
with respect to options, futures contracts and options on
futures contracts and collateral arrangements with respect to
initial and variation margins are not deemed to be the issuance
of a senior security. (There is no intention to issue
senior securities except as set forth in paragraph 1 above.)

6. Invest more than 5% of its total assets in
the securities of any one issuer (other than U.S.
Government securities and repurchase agreements relating
thereto), although up to 25% of the Portfolio's total assets
may be invested without regard to this restriction.

7. Invest 25% or more of its total assets in the
securities of any one industry. (Obligations of a foreign
government and its
agencies or instrumentalities constitute a separate
"industry" from those of another foreign government.)

It is also a fundamental policy of the Portfolio that it
may purchase and sell futures contracts and related options.

Notwithstanding any other investment restriction of
the Alliance Growth Portfolio, the Portfolio may invest all
of its investable assets in an open-end management
investment company having the same investment objective and
restrictions as the Portfolio.

In addition, the following policies have also been
adopted by the Alliance Growth Portfolio, but are not
fundamental and accordingly may be changed by approval of the
Board of Directors. The Portfolio may not:

1. Pledge, mortgage, hypothecate or otherwise encumber
an amount of its assets taken at current value in excess of
15% of its total assets (taken at the lower of cost or
current value) and then only to secure borrowings permitted
by restriction (1) above. For
the purpose of this restriction, the deposit of
securities and other collateral arrangements with respect
to reverse
repurchase agreements, options, futures contracts,
forward contracts and options on foreign currencies and
payments of initial and variation margin in connection
therewith are not considered pledges or other encumbrances.
This restriction shall not be deemed to prohibit the Portfolio
from obtaining letters of credit
solely for purposes of participating in a captive
insurance company sponsored by the Investment Company
Institute to
provide fidelity and directors and officers liability
insurance.
2. Purchase securities on margin, except that the
Portfolio
may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities, and except
that the Portfolio may make margin payments in connection with
futures contracts,
options on futures contracts, options, forward
contracts or options on foreign currencies.

3. Make short sales of securities or maintain a
short
position for the account of the Portfolio unless at all
times when a short position is open it owns an equal amount
of such securities or
unless by virtue of its ownership of other
securities it has at all such times a right to obtain
securities
(without payment of further consideration) equivalent in kind
and amount to the
securities sold, provided that if such right is
conditional the sale is made upon equivalent conditions
and further provided that the Portfolio may not make such short
sales with respect to securities having a value in excess of 5%
of its total assets.

4. Write, purchase or sell any put or call option or
any
combination thereof, provided that this shall not prevent
the Portfolio from writing, purchasing and selling puts,
calls or combinations thereof with respect to securities,
indexes of securities or
foreign currencies, and with respect to futures
contracts.

5. Purchase voting securities of any issuer if
such
purchase, at the time thereof, would cause more than 10% of
the outstanding voting securities of such issuer to be held
by the Portfolio; or purchase securities of any issuer if such
purchase at the time thereof would cause more then 10% of any
class of securities of such issuer to be held by the
Portfolio. For this purpose all indebtedness of an issuer
shall be deemed a single class and all
preferred stock of an issuer shall be deemed a
single class.

6. Invest in securities of any issuer if, to the
knowledge
of the Portfolio, officers and Directors of the Portfolio
and officers and directors of the Portfolio's investment
advisers who beneficially own more than 0.5% of the shares of
securities of that issuer together own more than 5%.

7. Purchase securities issued by any other
registered
investment company or investment trust except (a) by purchase
in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than
the customary broker's commission, or (b) where no commission
or profit to a sponsor or dealer results from such purchase,
or (c) when such purchase, though not in the open market, is
part of a plan of merger or
consolidation; provided, however, that the Portfolio
will not purchase such securities if such purchase at the
time thereof would cause more than 5% of its total assets
(taken at market value) to be invested in the securities of
such issuers; and,
provided further, that the Portfolio's purchases of
securities issued by an open-end investment company will
be
consistent with the provisions of the 1940 Act.

8. Make investments for the purpose of exercising
control
or management.

9. Participate on a joint and several basis in any
trading
account in securities.

10. Invest in interests in oil, gas, or other
mineral
exploration or development programs, although the Portfolio
may purchase securities which are secured by such interests
and may purchase securities of issuers which invest in or
deal in oil, gas or other mineral exploration or development
programs.
11. Purchase warrants, if, as a result, the Portfolio
would have more than 5% of its total assets invested in
warrants or more than 2% of its total assets invested in
warrants which are not listed on the New York Stock Exchange
or the American Stock Exchange.
12. Purchase commodities or commodity contracts,
provided that this shall not prevent the Portfolio from
entering into interest rate futures contracts, securities
index futures contracts, foreign currency futures contracts,
forward foreign currency exchange contracts and options
(including options on any of the foregoing) to the extent
such action is consistent with its investment objective and
policies.
13. Purchase additional securities in excess of 5% of
the value of its total assets until all of the
Portfolio's outstanding borrowings (as permitted and described
in Restriction No. 1 above) have been repaid.

The Aim Capital Appreciation Portfolio may not:

1. Invest for the purpose of exercising control over
or management of any company.

2. Engage in the underwriting of securities of
other issuers.

3. Purchase and sell real estate or commodities or
commodity contracts.

4. Make loans, except by the purchase of a portion of
an issue of publicly distributed bonds, debentures or
other obligations, provided that the Fund may lend its
portfolio securities provided the value of such loaned
securities does not exceed 33_% of its total assets.

5. Invest in interests in oil, gas or other
mineral exploration or development programs.

6. Invest in securities of other investment companies.

7. Invest more than 25% of the value of its total assets
in securities of issuers all of which conduct their
principal business activities in the same industry.

In addition, the Aim Capital Appreciation Portfolio
treats as fundamental its policy concerning borrowing. In
accordance with this policy, the Portfolio may borrow funds
from a bank (including its custodian bank) to purchase or
carry securities only if, immediately after such borrowing,
the value of the Portfolio's assets, including the amount
borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. For
the purpose of determining this 300% asset coverage
requirement, the Portfolio's liabilities will not include the
amount borrowed but will include the market value, at the time
of computation, of all securities borrowed by the Portfolio
in connection with short sales. The amount of borrowing
will also be limited by the applicable margin
limitations imposed by the Federal Reserve Board. If at any
time the value of the Portfolio's assets should fail to meet
the 300% asset coverage requirement, the Portfolio will,
within three
days, reduce its borrowings to the extent necessary.
The
Portfolio may be required to eliminate partially or totally
its outstanding borrowings at times when it may not be desirable
for it to do so.

In addition, the following policies have also been
adopted by the AIM Capital Appreciation Portfolio, but
are not
fundamental and accordingly may be changed by approval of
the Board of Directors. The Portfolio may not:

1. Purchase or retain the securities of any issuer, if
those officers and directors of the Company, its
advisors or
distributor owning individually more than 1/2 of 1% of
the securities of such issuer, together own more than 5% of
the securities of such issuer.

2. Purchase warrants, valued at the lower of cost or
market, in excess of 5% of the value of the Fund's net assets,
and no more than 2% of such value may be warrants which are
not listed on the New York or American Stock Exchanges.

Except for the borrowing policy, if a percentage
restriction is adhered to at the time of investment, a later
change in the percentage of such investment held by a Fund
resulting solely from changes in values or assets, will not be
considered to be a violation of the restriction.

The American Capital Enterprise Portfolio may not:

1. Make loans except that the Portfolio may invest up to
25% of the Portfolio's total assets in Repurchase Agreements.

2. Primarily engage in the underwriting or distribution
of securities, except in so far as the Portfolio may be deemed
an underwriter under the 1933 Act in selling a portfolio
security.

3. Make any investment in real estate, commodities
or commodities contracts; however, the Portfolio is not
prohibited from investing in securities issued by a real estate
investment trust, provided that such trust is not permitted to
invest in real estate or interests in real estate other than
mortgages or other
security interests, and the Portfolio is not prohibited
from entering into transactions in futures contracts and
related options.

4. Invest more than 5% of the value of its assets in
the securities of any one issuer with the exception of
U.S. Government
securities or purchase more than 10% of the
outstanding voting securities of any one issuer.
Neither
limitation shall apply to the acquisition of shares of other
openend investment companies to the extent permitted by rule or
order of the SEC exempting the Portfolio from the
limitations imposed by Section 12(d)(1) of the 1940 Act.

5. Invest more than 25% of the value of its assets
in securities issued by companies in any one industry,
provided, however, that this limitation excludes shares of
other open-end investment companies owned by the Portfolio
but includes the Portfolio's pro rata portion of the
securities and other assets owned by any such company.

6. Borrow more than 10% of the value of its net
assets valued at the lower of cost or market at the time of
borrowing; and then only from banks and undertaken as a
temporary measure for extraordinary or emergency purposes; or
pledge, transfer,
assign or otherwise encumber its assets except to secure
such borrowing and in an amount not exceeding the amount
of the borrowing. Notwithstanding the foregoing, the
Portfolio may engage in transactions in options, futures
contracts and related options, segregate or deposit assets to
cover or secure options written, and make margin deposits
or payments for futures contracts and related options.
7. Issue senior securities, except as permitted under
the 1940 Act or any rule, order or interpretation thereunder,
except that this restriction shall not be deemed to
prohibit the Portfolio from (i) making and collateralizing
any permitted borrowings, (ii) making any permitted loans
of its portfolio securities, or (iii) entering into
repurchase agreements, utilizing options, futures
contracts, options on
futures
contracts and other investment strategies and instruments
that would be considered "senior securities" but for the
maintenance by the Portfolio of a segregated account with its
custodian or some other form of "cover".

Notwithstanding any other investment restriction of
the American Capital Enterprise Portfolio, the Portfolio may
invest all of its investable assets in an open-end management
investment company having the same investment objective and
restrictions as the Portfolio.

In addition, the following policies have also been
adopted by the American Capital Enterprise Portfolio, but
are not fundamental and accordingly may be changed by
approval of the Board of Directors. The Portfolio may not:

1. Invest more than 5% of the value of its total assets
in securities of companies which (including predecessor
companies or operations) have been in business less than
three years, provided, however, that this limitation excludes
shares of other open-end investment companies owned by the
Portfolio but includes the Portfolio's pro rata portion of
the securities and other assets owned by any such company.

2. Acquire any private placement if it would cause more
than
2% of the net assets of the Portfolio, as determined at the
time the Portfolio agrees to any such acquisition, to be
invested in private placements and other assets not having
readily available market quotations, provided, however,
that this limitation excludes shares of other open-end
investment companies owned by the Portfolio but includes the
Portfolio's pro rata portion of the securities and other
assets owned by any such company; and, provided further, that
this limitation excludes securities that have been issued
pursuant to Rule 144A under the 1933 Act ("Rule 144A
securities").

3. Purchase or retain securities of a company which has
an officer or director who is an officer or director of
the Portfolio or its investment adviser if, to the knowledge
of the Portfolio, one or more such persons own beneficially
more than 1/2 of 1% of the shares of the company, and all
such persons own more than 5%.
4. Invest more than 5% of its net assets in warrants
or rights valued at the lower of cost or market, not more than
2% of its net assets in warrants or rights (valued on such
basis) which are not listed on the New York or American
Stock Exchanges. Warrants or rights acquired in units or
attached to other securities are not subject to the foregoing
limitations.
5. Invest more than 15% of its net assets (determined at
the
time of investment) in illiquid securities (excluding Rule
144A securities) and repurchase agreements that have a
maturity of longer than seven days.
6. Invest in interests in oil, gas, or other
mineral
exploration or developmental programs.

7. Sell short or buy on margin, but the Portfolio may
engage in transactions in options, futures contracts and
related options and make margin deposits and payments in
connection therewith. Short sales against the box are not
subject to this restriction.

8. Make any investment in any security about
which information is not available with respect to history,
management, assets, earnings, and income of the issuer
except to acquire shares of other open-end investment
companies to the extent permitted by rule or order of the
SEC exempting the Portfolio from the limitations imposed by
Section 12(d)(1) of the 1940 Act.
9. Make any investment which involves promotion or
business
management by the Portfolio or which would subject the
Portfolio to unlimited liability.

10. Invest in companies for the purpose of
exercising control.

11. Acquire securities of any other domestic or
foreign investment company or investment fund except in
connection with a plan of merger or consolidation with
or acquisition of substantially all the assets of such other
investment company or to acquire shares of other open-end
investment companies to the extent permitted by rule or
order of the SEC exempting the Portfolio from the
limitations imposed by Section 12(d)(1) of the 1940 Act.

The TBC Managed Income Portfolio may not:

1. Concentrate the portfolio investments in any industry
by
investing more than 25% of its gross assets in any one
industry. There shall be no limitation on the purchase of U.S.
Government securities by the Portfolio when it adopts a
defensive position.

2. Make investments in real estate or commodities
or
commodity contracts, although the Portfolio may
purchase securities of issuers which deal in real estate and
may purchase securities which are secured by interests in real
estate.

3. Act as securities underwriter.

4. Make loans, except that the Portfolio may (i)
purchase
bonds, debentures and other securities of a like nature,
(ii) make loans in the form of call loans or loans maturing
in not more than one year which are secured by marketable
collateral and are in amounts and on terms similar to those
currently in effect in the case of loans made by national
banks, (iii) enter into repurchase agreements to the extent
set forth in the Prospectus and (iv) lend its portfolio
securities.

5. Borrow money, except that (a) the Portfolio may
borrow
money for temporary administrative purposes provided that
the aggregate of such borrowing does not exceed 5%.

6. Lend its portfolio securities in an amount in excess
of
1/3 of the total assets taken at value. Any loans of
portfolio securities will be made according to guidelines
established by
the SEC and the Directors, including the borrower's
maintaining collateral equal at all times to the value of
the securities loaned.
7. Purchase "illiquid" securities, including
repurchase agreements maturing in more then seven days,
securities lacking readily available market quotations and
securities which cannot be sold without registration or the
filing of a notification under Federal or state securities
laws, if as a result, such investment would exceed 15 % of
the value of the Portfolio's net assets.
8. Purchase securities of companies for the purpose
of exercising control.
9. Purchase securities on margin, except short-term
credits as are necessary for the purchase and sale of
securities, or effect short sales.
10. As to 75% of the total assets of the Portfolio,
purchase securities of any issuer, if immediately thereafter
(a) more than 5% of total assets (taken at market value) would
be invested in the securities of such issuer, or (b) more
than 10% of the outstanding securities of any class of such
issuer would be held by the Portfolio, provided that this
limitation does not apply to U.S. Government securities.
11. Purchase securities of any other investment
company except as part of a plan of merger or consolidation.
12. Purchase securities of companies which together
with predecessors have a record of less than three years'
continuous operation, if, as a result, more than 5% of the
Portfolio's net assets would then be invested in such
securities.
13. Invest in puts, calls, straddles, spreads and
any combination thereof.
14. Invest in oil, gas or other mineral exploration
or development programs, provided, however, this shall not
prohibit the Portfolio from purchasing publicly traded
securities of companies engaging in whole or in part in such
activities.
15. Purchase securities from or sell securities to any
of its officers or Directors, except with respect to its own
shares and as is permissible under applicable statues,
rules and regulations.

Notwithstanding any other investment restriction of the
TBC Managed Income Portfolio, the Portfolio may invest all
of its investable assets in an open-end management
investment company having the same investment objective and
restrictions as the Portfolio.

The Putnam Diversified Income Portfolio may not:

2. Pledge, hypothecate, mortgage or otherwise encumber
its
assets in excess of 15% its total assets (taken at current
value) and then only to secure borrowings permitted by
restriction 1 above. (The deposit of underlying securities
and other assets in escrow and other collateral arrangements
in connection with the writing of put or call options and
collateral arrangements with respect to margin for futures
contracts and related options or letters of credit obtained
solely for purposes of participating in a captive insurance
company sponsored by the Investment Company Institute to
provide fidelity and directors and officers liability
insurance, are not considered to be pledges or other
encumbrances.)

3. Purchase securities on margin, except such short-
term
credits as may be necessary for the clearance of purchases
and sales of securities, and except that it may make margin
payments in connection with transactions in futures contracts
and related options.

4. Make short sales of securities or maintain a short position for
the account of the Portfolio unless at all times when a short
position is open the Portfolio owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the
securities sold short.

5. Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.

6. Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which
are secured by interests in real estate and
securities representing interests in real estate.

7. Purchase or sell commodities or commodity
contracts,
except that it may purchase or sell futures contracts, options
on futures, forward contracts and options on foreign
currencies.

8. Make loans, except by purchase of debt obligations
in
which the Portfolio may invest consistent with its
investment policies, by entering into repurchase agreements
with respect to not more than 25% of its total assets (taken
at current value), or through the lending of its portfolio
securities with respect to not more than 25% of its assets.

9. Invest in securities of any issuer if, to the
knowledge
of the Putnam Management, officers and Directors of
Putnam Management who beneficially own more than 0.5% of the
securities of that issuer together beneficially own more than
5%.

10. Invest in securities of any issuer if,
immediately after such investment, more than 5% of the total
assets of the Portfolio (taken at current value) would be
invested in the securities of such issuer; provided that this
limitation does not apply to U.S. Government securities, or,
with respect to 25% of the Portfolio's total assets,
securities of any
foreign
government, its agencies or instrumentalities, securities
of supranational entities, and securities backed by the credit
of a governmental entity.

11. Acquire more than 10% of the voting securities of
any issuer.

12. Invest more than 25% of the value of its total
assets
in any one industry. (U.S. Government securities and
securities of any foreign government, its agencies or
instrumentalities, securities of supranational entities, and
securities backed by the credit of a governmental entity
are not considered to represent an industry).

13. Purchase securities the disposition of which is
restricted under federal securities laws, if, as a result, such
investments would exceed 15% of the value of the Portfolio's net
assets, excluding restricted securities that have been determined by
the Directors of the Fund (or the person designated by them to
make such determinations) to be readily marketable.

14. Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.

15. Make investments for the purpose of gaining control of
a company's management.

16. Issue any senior securities except as permitted by the
1940 Act or any rule, order or interpretation thereunder.

In addition, the following policy has also been adopted by
the Putnam Diversified Income Portfolio, but is not fundamental
and accordingly may be changed by approval of the Board of
Directors. The Portfolio may not:

1. Invest in securities of other registered open-end
investment companies except as they may be acquired as part of a
merger or consolidation or acquisition of assets.

Notwithstanding any other investment restriction of the
Putnam Diversified Income Portfolio, the Portfolio may invest all
of its investable assets in an open-end management
investment company having the same investment objective and
restrictions as the Portfolio.

The G.T. Global Strategic Income Portfolio may not:

1. Invest 25% or more of the value of its total assets
in the securities of issuers conducting their principal
business activities in the same industry, (provided, however,
that the Portfolio may invest all of its investable assets in
an open-end management investment company with
substantially the same investment objectives, policies and
limitations as the Portfolio) except that this limitation
shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its
agencies or instrumentalities.

2. Invest in companies for the purpose of exercising
control or management (provided, however, that the Portfolio
may invest all of its investable assets in an open-end
management investment company with substantially the same
investment objectives, policies and limitations as the
Portfolio).

3. Buy or sell real estate (including real estate
limited partnerships) or commodities or commodity contracts;
however, the Portfolio may invest in debt securities secured by
real estate or interests therein or issued by companies which
invest in real estate or interests therein, including real
estate investment trusts, and may purchase or sell
currencies (including forward currency exchange contracts),
futures contracts and related options generally as described
in the Prospectus and Statement of
Additional Information and subject to (13) below.
4. Engage in the business of underwriting securities
of
other issuers, except to the extent that the disposal of
an investment position may technically cause it to be
considered an underwriter as that term is defined under the
1933 Act.

5. Make loans, except that the Portfolio may invest in
loans and participations, purchase debt securities and
enter into repurchase agreements and make loans of portfolio
securities.

6. Sell securities short, except to the extent that
the
Portfolio contemporaneously owns or has the right to acquire
at no additional cost securities identical to those sold short.

7. Purchase securities on margin, provided that
the Portfolio obtain such short-term credits as may be
necessary for the clearance of purchases and sales of
securities; except that it may make margin deposits in
connection with futures contracts subject to (13) below.
8. Borrow money in excess of 33 1/3% of its total
assets
(including the amount borrowed), less all liabilities
and
indebtedness (other than borrowing). This restriction shall
not prevent the Portfolio from entering into reverse
repurchase agreements and engaging in "roll" transactions,
provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting
borrowing by the Portfolio may not exceed 1/3 of its
total assets. In the event that the asset coverage for the
Portfolio's borrowings falls below 300%, the Portfolio will
reduce, within three days (excluding Sundays and holidays),
the amount of its borrowings in order to provide for 300%
asset coverage. Transactions involving options, futures
contracts, options on futures contracts and forward
currency contracts, and collateral arrangements relating
thereto will not be deemed to be borrowings.

9. Mortgage, pledge, or hypothecate any of its
assets,
provided that this restriction shall not apply to the transfer
of securities in connection with any permissible borrowing
or to letters of credit obtained solely for purposes of
participating in a captive insurance company sponsored by
the Investment Company Institute to provide fidelity and
directors and officers liability insurance.

10. Invest in interests in oil, gas, or other
mineral exploration or development programs.

11. Invest more than 5% of its total assets in securities
of
companies having, together with their predecessors, a record
of less than three years of continuous operation (provided,
however, that the Portfolio may invest all of its investable
assets in an open-end management investment company with
substantially the same investment objectives, policies, and
limitations as the Portfolio).

12. Purchase or retain the securities of any issuer,
if those individual officers and Directors of the Company,
the Portfolio's investment adviser, or distributor, each
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.

13. Enter into a futures contract, if, as a result
thereof, more than 5% of the Portfolio's total assets (taken
at market value at the time of entering into the
contract) would be
committed to margin on such futures contracts.
For purposes of the G.T. Global Strategic Income
Portfolio's concentration policy contained in limitation
(1) above, the Portfolio intends to comply with the SEC
staff positions that securities issued or guaranteed as to
principal and interest by any single foreign government or
any supranational organizations in the aggregate are
considered to be securities of issuers in the same industry.
In addition, the following policies have also been
adopted by the G.T. Global Strategic Income Portfolio, but
are not fundamental and accordingly may be changed by the
approval of the Board of Directors. The Portfolio may not:
1. Invest more than 15% of its net assets in
illiquid securities.
2. Borrow money to purchase securities and will not
invest in securities of an issuer if the investment would
cause the Portfolio to own more than 10% of any class of
securities of any one issuer (provided, however, that the
Portfolio may invest all of its investable assets in an open-
end management investment company
with substantially the same investment objectives,
policies, and limitations as the Portfolio).

3. Invest more than 10% of its total assets in shares
of other
investment companies and invest more than 5% of its total
assets in any one investment company or acquire more than 3%
of the outstanding voting securities of any one investment
company (provided, however, that the Portfolio may invest
all of its investable assets in an open-end management
investment company with substantially the same investment
objectives, policies, and limitations as the Portfolio).

The Smith Barney High Income Portfolio may not:

1. Purchase the securities of any issuer (other than
U.S.
Government securities) if as a result more than 5% of the
value of the Portfolio's total assets would be invested
in the securities of the issuer, except that up to 25% of the
value of the Portfolio's total assets may be invested without
regard to this 5% limitation.

2. Purchase more than 10% of the voting securities of any
one
issuer (other than U.S. Government securities), except that up to
25% of the value of the Portfolio's total assets may be invested
without regard to this 10% limitation.

3. Make short sales of securities, except that the Portfolio
may engage in short sales "against the box."

4. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes
in an amount not exceeding 10% of the value of the Portfolio's
total assets (including the amount borrowed) valued at market
less liabilities (not including the amount borrowed) at the time
the borrowing is made and (b) the Portfolio may enter into
futures contracts. Whenever borrowings described in (a) exceed
5% of the value of the Portfolio's total assets, the Portfolio
will not make any additional investments.

5. Underwrite the securities of other issuers, except
insofar as the Portfolio may be deemed an underwriter in the
course of disposing of portfolio securities.

6. Issue any senior securities, except as permitted
under the 1940 Act or any rule, order or interpretation
thereunder, except that this restriction shall not be deemed to
prohibit the Portfolio from (i) making and collateralizing
any permitted borrowings, (ii) making any permitted loans
of its portfolio securities, or (iii) entering into
repurchase agreements, utilizing options, futures
contracts, options on futures contracts and other
investment strategies and instruments that would be
considered "senior securities" but for the maintenance by the
Portfolio of a segregated account with its custodian or some
other form of "cover".
7. Purchase or sell real estate or interests in real
estate,
except that the Portfolio may purchase and sell securities
that are secured by real estate or interests in real estate
and may purchase securities issued by companies that invest
or deal in real estate.

8. Invest in commodities, except that the Portfolio
may invest in futures contracts, options on futures
contracts and options on currencies.
9. Make loans to others, except through the purchase
of qualified debt obligations, the entry into repurchase
agreements and loans of portfolio securities consistent with
the Portfolio's investment objectives and policies.
10. Invest in securities of other investment
companies registered or required to be registered under the
1940 Act, except as they may be acquired as part of
a merger, consolidation, reorganization, acquisition of
assets or an offer of exchange, or to the extent permitted by
the 1940 Act.
11. Purchase any securities which would cause more than
25% of the value of the Portfolio's total assets at the
time of purchase to be invested in the securities of issuers
conducting their principal business activities in the
same industry; provided that there shall be no limit on the
purchase of U.S. Government securities.
Notwithstanding any other investment restriction of
the Smith Barney High Income Portfolio, the Portfolio may
invest all of its investable assets in an open-end
management investment company having the same investment
objective and restrictions as the Portfolio.
In addition, the following policies have also been
adopted by the Smith Barney High Income Portfolio, but
are not
fundamental and accordingly may be changed by the approval of
the Board of Directors. The Portfolio may not:

1. Purchase securities on margin, except that the
Portfolio may obtain any short-term credits
necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit
or payment of initial or variation margin in connection with
futures contracts or related options will not be deemed to
be a purchase of securities on margin.

2. Pledge, hypothecate, mortgage or otherwise encumber
the Portfolio's assets except to secure borrowings, to
obtain a letter of credit solely for purposes of
participating in a captive insurance company sponsored by
the Investment Company Institute to provide fidelity and
directors and officers liability insurance and as margin for
commodities transactions.

The MFS Total Return Portfolio may not:
1. Borrow amounts in excess of 33-1/3% of its
assets, including amounts borrowed, and then only as a
temporary measure for extraordinary or emergency purposes.
2. Underwrite securities issued by other persons
except insofar as the Portfolio may technically be deemed an
underwriter under the 1933 Act in selling a portfolio security.
3. Issue any senior securities except as permitted by
the
1940 Act. For purposes of this restriction,
collateral
arrangements with respect to any type of option, any type
of forward contract, any type of futures contract and any
type of swap and collateral arrangements with respect to
initial and variation margin are not deemed to be the
issuance of a senior security.

4. Purchase or sell real estate (including
limited partnership interests but excluding securities secured
by real estate or interests therein and securities of
companies, such as real estate investment trusts, which deal
in real estate or interests therein), interests in oil,
gas or mineral leases, commodities or commodity contracts
(excluding currencies and any type of option, any type of
futures contract and any type of forward contract) in the
ordinary course of its business. The Portfolio reserves the
freedom of action to hold and to sell real estate,
mineral leases, commodities or commodity contracts
(including currencies and any type of option, any type of
futures contract and any type of forward contract) acquired as
a result of the ownership of securities.

5. Make loans to other persons. For these purposes,
the purchase of commercial paper or a portion or all of an
issue of debt securities, the lending of portfolio
securities, or the investment of the Portfolio's assets in
repurchase agreements, shall not be considered the making of a
loan.

6. Purchase any securities of an issuer of a
particular
industry, if as a result, more than 25% of its gross assets
would be invested in securities of issuers whose principal
business activities are in the same industry (except (i)
there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements collateralized by
such obligations.

Notwithstanding any other investment restriction of the
MFS Total Return Portfolio, the Portfolio may invest all
of its
investable assets in an open-end management investment
company having the same investment objective and
restrictions as the Portfolio.

In addition, the following policies have also been
adopted by the MFS Total Return Portfolio, but are not
fundamental and accordingly may be changed by approval of the
Board of Directors. The Portfolio may not:

1. Invest in illiquid investments, including
securities
subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g. trading
in the
security is suspended, or in the case of unlisted
securities, where no market exists) if more than 15% of the
Portfolio's net assets (taken at market value) would be
invested in such securities. Repurchase agreements maturing
in more than seven
days will be deemed illiquid for purposes of the
Portfolio's limitation on investment in illiquid securities.
Securities that are not registered under the 1933 Act and
sold in reliance on Rule 144A thereunder, but are
determined to be liquid by the Board of Directors (or its
delegate), will not be subject to this 15% limitation;
2. Purchase securities issued by any other
investment company in excess of the amount permitted by the
1940 Act, except when such purchase is part of a plan of merger
or consolidation.
3. Purchase any securities or evidences of interest
therein on margin except that the Portfolio may obtain such
short-term credit as may be necessary for the clearance of
any transaction and except that the Portfolio may make
margin deposits in connection with any type of swap, any type
of option, any type of futures contract and any type of forward
contract.
4. Sell any security which the Portfolio does not own
unless by virtue of its ownership of other securities the
Portfolio has at the time of sale a right to obtain securities
without payment of further consideration equivalent in kind
and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same
conditions.
5. Pledge, mortgage or hypothecate in excess of 33 1/3%
of its gross assets. For the purpose of
this restriction,
collateral arrangements with respect to any type of swap,
any type of options, any type of futures contract and any
type of forward contract and payments of initial and variation
margin in connection therewith, are not considered a pledge of
assets.

6. Purchase or sell any put or call options or
any combination thereof, provided, that this shall not
prevent (a) the purchase, ownership, holding or sale of (i)
warrants where the grantor of the warrants is the issuer
of the underlying securities or (ii) put or call options or
combinations thereof with respect to securities, foreign
currencies, indexes of securities, any type of swap or any
type of futures contract or (b) the purchase, ownership,
holding or sale of contracts for the future delivery of
securities or currencies.

PERFORMANCE INFORMATION

From time to time the Fund may advertise a Portfolio's
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 a Contract
by an insurance company 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.

Each 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.
The Fund calculates current distribution return for
each Portfolio by dividing the distributions from investment
income declared during the most recent period by the net asset
value on the last day of the period for which current
distribution return is presented. From time to time, a
Portfolio 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 a Contracts by a 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 Certificates of
Deposit ("CDs"), it should be noted that CDs are insured (up to
$100,000) and offer a fixed rate of return.
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.

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, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.

REDEMPTION OF SHARES

Redemption payments shall be made wholly in cash unless
the Directors believe that economic conditions exist that would
make such a practice detrimental to the best interests of a
Portfolio and its remaining shareowners. If a redemption
is paid in portfolio securities, such securities will
be valued in accordance with the procedures described under
"Determination of Net Asset Value" in the Prospectus and a
shareholder would incur brokerage expenses if these securities
were then converted to cash.

CUSTODIANS

Portfolio securities and cash owned by the Fund on behalf
of the Smith Barney Income and Growth Portfolio, the Alliance
Growth Portfolio, the American Capital Enterprise Portfolio,
the TBC Managed Income Portfolio, the Putnam
Diversified Income Portfolio, the Smith Barney High Income
Portfolio, the MFS Total Return Portfolio and the Smith Barney
Money Market Portfolio are
held in the custody of PNC Bank, National Association, 17th
and Chestnut Streets, Philadelphia, Pennsylvania 19103
(foreign securities, if any, will be held in the custody of
The Barclays Bank, PLC).
Portfolio securities and cash owned by the Fund on behalf
of the Smith Barney International Equity Portfolio, the Smith
Barney Pacific Basin Portfolio and the G.T. Global
Strategic Income Portfolio are held in the custody of
Morgan Guaranty Trust Company of New York, 60 Wall Street,
New York, New York 10260.
INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New
York 10154, has been selected as independent auditors for the
Fund for its fiscal year ending October 31, 1995 to examine and
report on
the financial statements and financial highlights of the Fund.

THE FUND

Pursuant to the Articles of Incorporation, the
Directors
have authorized the issuance of twelve series of shares,
each representing shares in one of twelve separate Portfolios
- - the Smith Barney Income and Growth Portfolio, the
Alliance Growth Portfolio, the AIM Capital Appreciation
Portfolio, the American Capital Enterprise Portfolio, the
Smith Barney International Equity Portfolio, the Smith
Barney Pacific Basin Portfolio, the TBC Managed Income
Portfolio, the Putnam Diversified Income Portfolio, the G.T.
Global Strategic Income Portfolio, the Smith Barney High
Income Portfolio, the MFS Total Return Portfolio and the
Smith Barney Money Market Portfolio. Pursuant to such
authority, the Directors 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 Directors at the time such Portfolios
were established and may differ from those set forth in the
Prospectus and this Statement of Additional Information. 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 Articles of Incorporation may be amended only upon
the vote of a majority of the shares of capital stock of the
Fund outstanding and entitled to vote, and in accordance
with
applicable law, except for certain amendments that may be made
by the Directors.

The Articles of Incorporation further provide that the
Fund shall indemnify its directors, officers and employees
against any liability 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. With the exceptions stated, the Articles
of
Incorporation provide that a Director, 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 Articles of Incorporation
concerning termination of the corporation or any of the
series of the corporation by action of the shareowners or
by action of the Directors upon notice to the shareowners.
MANAGEMENT AGREEMENTS

The Directors are responsible for the direction
and supervision of the Fund's business and operations.
Each Portfolio is managed by Smith Barney Mutual Funds
Management Inc. ("SBMFM" or the "Manager") pursuant to a
Management Agreement dated June 2, 1994. The Smith Barney
High Income Portfolio is managed by the Greenwich Street
Advisors Division of SBMFM. Each Portfolio receives
discretionary advisory services provided by the Manager or
by a Sub-Adviser (pursuant to a Subadvisory Agreement
dated June 2, 1994) who is identified, retained,
supervised and compensated by the Manager. The Manager
is located at 388 Greenwich Street, New York, New York 10013
and is a wholly-owned subsidiary of Smith Barney Holdings
Inc. Smith Barney Holdings Inc., which is a wholly-owned
subsidiary of The Travelers, Inc. ("The Travelers"), is also
the parent company of Smith Barney Inc. ("Smith Barney"), the
Fund's distributor.
Each Management Agreement provides that the Manager
will administer the Portfolio's corporate affairs and, in
connection therewith, shall furnish the Portfolio with office
facilities and with clerical, bookkeeping and recordkeeping
services at such office facilities. Subject to the
provisions of any applicable Subadvisory Agreement, the
Manager will also manage
the
investment operations of each Portfolio and will be
responsible for furnishing or causing to be furnished to
each Portfolio advice and assistance with respect to the
purchase, retention and disposition of investments, in
accordance with each Portfolio's investment objectives,
policies and restrictions as stated in the Prospectus and
Statement of Additional Information.

By written agreement, research and other departments
and staff of Smith Barney will furnish the Manager with
information, advice and assistance and will be available for
consultation on the Fund's Portfolios. Thus, Smith Barney may
also be considered an investment adviser to the Fund. Smith
Barney's services are paid for by the Manager; there is no
charge to the Fund for such services.

The Manager has agreed to waive its fee to the extent
that
the aggregate expenses of any of the Smith Barney Income
and Growth Portfolio, the Alliance Growth Portfolio, the AIM
Capital Appreciation Portfolio, the American Capital
Enterprise Portfolio, the TBC Managed Income Portfolio,
the Putnam Diversified Income Portfolio, the Smith
Barney High Income Portfolio, the MFS Total Return Portfolio
and the Smith Barney Money Market Portfolio, exclusive of
taxes, brokerage, interest and
extraordinary expenses, such as litigation
and
indemnification expenses, exceed 1.25% of the average daily
net assets for any fiscal year of each such Portfolio. The
Manager has agreed to waive its fee to the extent that the
aggregate expenses of each of the Smith Barney
International Equity Portfolio, the Smith Barney Pacific Basin
Portfolio and the G.T. Global Strategic Income Portfolio
exclusive of taxes, brokerage, interest and extraordinary
expenses, exceed 1.50% of the average daily net assets for
any fiscal year of each such Portfolio. Each of these
voluntary expense limitations shall be in effect until it is
terminated by notice to shareowners and by supplement
to the then current Statement of Additional Information.
Each Management and Subadvisory Agreement (collectively,
the "Investment Agreements") provides further that if in any
fiscal year the aggregate expenses of a Portfolio
(including fees pursuant to such agreements, but excluding
interest, taxes, brokerage and extraordinary expenses)
exceed the expense limitation of any state having
jurisdiction over such Portfolio, the Manager or Sub-Adviser,
as the case may be, will reduce its fee by the proportion
of such excess expenses equal to the proportion that its fee
thereunder bears to the aggregate of fees paid by the Portfolio
for investment advice or management and any administration in
that year, to the extent required by state law. Each
Management Agreement also provides that the Manager shall not
be liable to the Fund for any error of judgment or mistake of
law or for any loss suffered by the Fund so long as it acted
in good faith without willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason
of its reckless disregard of its obligations and duties
under the Management Agreement. Each Subadvisory Agreement
also provides that the Sub-Advisor shall not be liable to the
Manager or the Portfolio for any error of judgment or mistake
of law or for any loss suffered by the Manager or the
Portfolio so long as it acted in good faith without willful
misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of
its obligations and duties under the Subadvisory Agreement.
Each Investment Agreement shall continue for an initial
twoyear
term and shall be continued from year to year if
specifically approved at least annually as required by the
1940 Act.
Each Investment Agreement further provides that it shall
terminate automatically in the event of its assignment
(as defined in the 1940 Act) and that it may be terminated
without penalty by either party on not less than 60 days'
written notice.

For the period from June 16, 1994 (commencement
of operations) through October 31, 1994, each Portfolio paid
the following management fee:

Smith Barney Income and Growth Portfolio $11,567
Alliance Growth Portfolio 27,111
American Capital Enterprise Portfolio 11,354
Smith Barney International Equity Portfolio 24,422
Smith Barney Pacific Basin Portfolio 12,450
TBC Managed Income Portfolio 7,369
Putnam Diversified Income Portfolio 11,520
G.T. Global Strategic Income Portfolio 5,389
Smith Barney High Income Portfolio 7,951 MFS
Total Return Portfolio 13,651
Smith Barney Money Market Portfolio 9,916

The Management Agreement for each Portfolio that does
not have a Sub-Adviser provides that SBMFM will (a)
manage the Portfolio's assets in accordance with the
Portfolio's investment objectives and policies as stated in
the Prospectus and the Statement of Additional
Information, (b) make
investment
decisions for the Portfolio; (c) place purchase and sale
orders for portfolio transactions on behalf of the Portfolio;
(d) employ professional portfolio managers and securities
analysts who provide research services to the Portfolio; and
(e) administer the Portfolio's corporate affairs and, in
connection therewith, furnish the Portfolio with office
facilities and with clerical, bookkeeping and recordkeeping
services at such office facilities.

The Fund has entered into a Subadvisory Agreement dated
June
2, 1994 on behalf of each of the Alliance Growth Portfolio,
the American Capital Enterprise Portfolio, the TBC Managed
Income
Portfolio, the Putnam Diversified Income Portfolio, the
G.T. Global Strategic Income Portfolio and the MFS Total
Return
Portfolio. The Fund has entered into a Subadvisory
Agreement dated August ___, 1995 on behalf of the AIM Capital
Appreciation Portfolio. Pursuant to each Subadvisory
Agreement among the Manager, the Fund on behalf of the
applicable Portfolio and the applicable Sub-Adviser, the Sub-
Adviser is authorized, in its discretion and without prior
consultation with Manager to: (a) manage the Portfolio's
assets in accordance with the Portfolio's investment
objectives and policies as stated in the Prospectus and the
Statement of Additional Information, (b) make investment
decisions for the Portfolio; (c) place purchase and sale
orders
for portfolio transactions on behalf of the Portfolio; and
(d) employ professional portfolio managers and securities
analysts who provide research services to the Portfolio.

The Alliance Growth Portfolio is advised by Alliance
Capital Management L.P. ("Alliance Capital"). Alliance
Capital is a Delaware limited partnership with principal
offices at 1345 Avenue of the Americas, New York, New
York 10105. For
the
services provided by Alliance Capital, the Manager pays
Alliance Capital an annual fee calculated at a rate of
0.375% of the Portfolio's average daily net assets, paid
monthly.

Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in, Alliance Capital, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society
of the United
States ("Equitable"), one of the largest life insurance
companies in the United States, which is itself a wholly-
owned subsidiary of The Equitable Companies Incorporated
("ECI"), a holding company controlled by AXA, a French
insurance holding company. (For purposes of this Statement
of Additional Information, ACMC refers to Alliance Capital
Management Corporation, the general partner of Alliance
Capital, and to the predecessor general partner of the
Alliance Capital of the same name.) ACMC, Inc., a wholly-owned
subsidiary of Equitable, owns approximately 62% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in
the Alliance Capital ("Units"). As of October 31,
1994,
approximately 28% and 10% of the Units were owned by the
public
and employees of Alliance Capital and its
subsidiaries,
respectively.

AXA owns 49% of the outstanding voting shares of
common
stock of ECI. AXA is a member of a group of companies (the
"AXA Group") that is the second largest insurance group in
France and one of the largest insurance groups in Europe.
Principally engaged in property and casualty insurance and life
insurance in Europe and elsewhere in the world, the AXA Group
is also involved in real estate operations and certain other
financial services, including mutual fund management, lease
financing services and brokerage services. Based on
information provided by AXA, as of June 30, 1994, 42.7% of the
voting shares (representing 54.8% of the voting power) of
AXA were owned by Midi Participations, a French corporation
that is a holding company. The voting shares of Midi
Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries
of Assicurazioni Generali S.P.A., an Italian
corporation ("Generali") (one of which, Belgica Insurance
Holding S.A., a Belgian corporation, owned 34.15%). As of
June 30, 1994, 61.5%
of the voting shares (representing 70.4% of the voting power)
of Finaxa were owned by five French mutual insurance companies
(the "Mutuelles AXA"), one of which, AXA Assurances I.A.R.D.
Mutuelle,
owned 31.1% of the voting shares (representing 44.7% of
the
voting power), and 26.3% of the voting shares (representing
19.1%
of the voting power) of Finaxa were owned by Compagnie
Financiere de Paribas, a French Financial institution engaged
in banking and related activities ("Paribas"). Including the
shares owned by Midi Participations, as of June 30, 1994,
the Mutuelles AXA directly or
indirectly owned 51.7% of the voting shares
(representing 64.5% of the voting power) of AXA. Acting as
a group, the Mutuelles AXA control AXA, Midi
Participations and
Finaxa. The Mutuelles AXA have approximately 1.5
million
policyholders.

The address of each AXA, Midi Participations, Belgica
and Finaxa is 23 Avenue Matigon, Paris, France. The address
of AXA
Assurances I.A.R.D. Mutuelle is La Grande Arche, Paroi
Nord, Paris La Defense, France. The address of Generali is
Paizza Duca Degli
Abruzzzi 2, Trieste, Italy. The address of Paribas is 5
Rue d'Antin, Paris, France.

Alliance Capital is a major international
investment manager, supervising client accounts with assets,
as of October 31, 1994 totaling more than $124 billion.
Alliance Capital serves its
clients, who primarily are major corporate employee
benefit funds, public employee retirement systems,
investment companies, foundations and endowment funds, with a
staff of more than 1,400 employees operating out of five
domestic offices and the overseas offices of five
subsidiaries. The 49 registered investment companies
comprising 93 separate investment portfolios managed by
Alliance Capital currently have over 1.3
million
shareholders. As of October 31, 1994, Alliance Capital
was retained as an investment manager of employee benefit fund
assets for 21 of the "Fortune 100" Companies.

The AIM Capital Appreciation Portfolio is advised by
AIM
Capital Management, Inc. ("AIM Capital"). AIM Capital is
located at 11 Greenway Plaza, Suite 1919, Houston, Texas 77046
and is a wholly-owned subsidiary of AIM Advisors, Inc., which
is a whollyowned
subsidiary of AIM Management Group, Inc. For services
provided by AIM Capital, the Manager pays to AIM Capital
an annual fee calculated at the rate of 0.375% of the
Portfolio's
average daily net assets, paid monthly.

The American Capital Enterprise Portfolio is advised
by American Capital Asset Management ("ACAM"). ACAM is
located at 2800 Post Oak Boulevard, Houston, Texas 77056 and
is a whollyowned subsidiary of American Capital Management &
Research, Inc., which is an indirect wholly-owned subsidiary of
VKM Holding, Inc. For the services provided by ACAM, the
Manager pays to ACAM an annual fee
calculated at the rate of 0.325% of the Portfolio's
average daily net assets, paid monthly.

The TBC Managed Income Portfolio is advised by The
Boston Company Asset Management, Inc. ("TBCAM"). TBCAM is
located at One Boston Place, Boston, Massachusetts 02108, and
is a whollyowned
subsidiary of The Boston Company, Inc., which is an
indirect wholly-owned subsidiary of Mellon Bank Corporation.
For the services provided by TBCAM, the Manager pays to
TBCAM an annual fee
calculated at the rate of 0.30% of the Portfolio's
average daily net assets, paid monthly.

The Putnam Diversified Income Portfolio is advised by
Putnam Investment Management, Inc. ("Putnam Management").
Putnam
Management is located at One Post Office Square,
Boston,
Massachusetts 02109. Putnam Management is a subsidiary
of Putnam Investments, Inc., which is a wholly-owned
subsidiary of
Marsh & McLennan Companies, Inc. For the services provided
by
Putnam Management, the Manager pays Putnam Management an
annual fee calculated at the rate of 0.35% of the Portfolio's
average daily net assets, paid monthly.
The G.T. Global Strategic Income Portfolio is advised
by G.T. Capital Management, Inc. ("G.T. Capital"). G.T.
Capital is located at 50 California Street, San Francisco,
California 94111 and is an indirect wholly-owned subsidiary
of BIL GT Group
Limited, a financial services holding company. BIL GT
Group
Limited in turn is controlled by the Prince of
Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of
the Princely Family of
Liechtenstein. For the services provided by G.T. Capital,
the Manager pays to G.T. Capital an annual fee calculated at
the rate of 0.375% of the Portfolio's average daily net
assets, paid monthly.

The MFS Total Return Portfolio is advised by
Massachusetts Financial Services Company ("MFS"). MFS is
located at 500 Boylston Street, Boston, Massachusetts 02116
and is a subsidiary of Sun Life of Canada (U.S.), which is a
subsidiary of Sun Life Assurance Company of Canada. For
services provided by MFS, the Manager pays MFS an annual fee
calculated a rate equal to 0.375%
of the Portfolio's average daily net assets, paid monthly.

Portfolio Transactions and Distribution

Smith Barney distributes shares of the Fund as
principal
underwriter. In addition, the Fund's Board of Directors
has determined that transactions for the Fund may be executed
through Smith Barney or any broker-dealer affiliate of
Smith Barney (each, an "Affiliated Broker") if, in the
judgment of management, the use of an Affiliated Broker is
likely to result in price and execution at least as favorable
to the Fund as those obtainable through other qualified
broker-dealers, and if, in the
transaction, the Affiliated Broker charges the Fund a fair
and
reasonable rate consistent with that charged to
comparable unaffiliated customers in similar transactions.
The Fund will not deal with Smith Barney in any
transactions in which Smith Barney acts as principal. In
addition, the Alliance Growth Portfolio will not deal with
Donaldson, Lufkin & Jenrette ("DLJ") (an affiliate of Alliance
Capital) in any transactions in which DLJ acts as principal.

Shown below are the total brokerage fees paid by the
Fund for the period June 16, 1994 (commencement of operations)
through October 31, 1994 on behalf of the Portfolios, 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. During this period
the total amount of commissionable transactions was $
52,150,191.44; $8,792,558.77(16.86%) of which was directed to
Smith Barney and executed by unaffiliated brokers and
$43,357,632.67(83.14%) of which was directed to
other
brokers.

Commissio
ns To
Others
For

Execution and
For Execution
Only
Research and

Statistical
Total To Smith Barney To Others
Services

6/16/94 - 171,937 28,574 143,363
10/31/94

The Board of Directors 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
1940 Act which requires that the commissions paid to any
Affiliated Broker must be "reasonable and fair compared to
the commission, fee or other remuneration received or to be
received by other brokers in connection

SUBADVISORY AGREEMENT

SMITH BARNEY/TRAVELERS SERIES FUND INC.

(AIM Capital Appreciation Portfolio)

THIS AGREEMENT is made this day of August,
1995, by and between Smith Barney/Travelers Series Fund Inc.
(the "Company"), a corporation organized under the laws of
the State of Maryland, on behalf of the AIM Capital
Appreciation Portfolio (the "Portfolio"), Smith Barney
Mutual Funds Management Inc. (the "Manager") and A I M
Capital Management, Inc. (the "Sub-Adviser").

REPRESENTATION

NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, the receipt whereof is hereby acknowledged,
the parties hereto agree as follows:

WHEREAS, the Company represents that it is registered
under the Investment Company Act of 1940, as amended (the
"1940 Act") as an open-end, diversified management
investment company, consisting of multiple series of
investment portfolios;

WHEREAS, the Manager represents that it is registered
under the Investment Advisers Act of 1940 (the "Advisers
Act"), as amended, as an investment advisor and engages in
the business of acting as an investment adviser;

WHEREAS, the Sub-Advisor represents that it is
registered under the Advisers Act, as amended, as an
investment advisor and engages in the business of acting as
an investment advisor.;

WHEREAS, the Company represents that its charter
authorizes the Board of Directors of the Company to classify
or reclassify authorized but unissued shares of the Company,
and as of the date of this Agreement the Company's Board of
Directors has authorized the issuance of series of shares
representing interests in investment portfolios:
(collectively referred to herein as the "Portfolios");

WHEREAS, the Manager represents that it has entered
into an Investment Advisory Agreement as of
, 1995 with the Company (the "Investment Advisory
Agreement"), pursuant to which the Manager shall act as
investment advisor with respect to the Portfolios; and

1. Investment Description; Appointment
The Company desires to employ its capital relating to
the Portfolio by investing and reinvesting in investments of
the kind and in accordance with the investment objective(s),
policies and limitations specified in the prospectus (the
"Prospectus") and the statement of additional information
(the "Statement") filed with the Securities and Exchange
Commission as part of the Company's Registration Statement
on Form N-1A, as amended or supplemented from time to time,
and in the manner and to the extent as may from time to time
be approved by the Board of Directors of the Company (the
"Board"). Copies of the Registration Statement, Prospectus
and the Statement have been or will be provided to the Sub
Adviser. The Company agrees promptly to provide copies of
all amendments and supplements to the current Registration
Statement, Prospectus and the Statement to the Sub-Adviser
on or before the effective date thereof on an on-going
basis. Until the Company delivers any such amendment or
supplement to the Sub-Adviser, the Sub-Adviser shall be
fully protected in relying on the Prospectus and Statement
as previously furnished to the Sub-Adviser. The Company
employs the Manager as the manager to the Portfolio pursuant
to a management agreement dated August ___, 1995 (the
"Management Agreement"), and the Company and the Manager
desire to employ and hereby appoint the Sub-Adviser to act
as the sub-investment adviser to the Portfolio. The Sub
Adviser accepts the appointment and agrees to furnish the
services for the compensation set forth below.

2. Services as Sub-Adviser
Subject to the supervision, direction and approval of
the Board and the Manager, the Sub-Adviser shall conduct a
continual program of investment, evaluation and, if
appropriate in the view of the Sub-Adviser, sale and
reinvestment of the Portfolio's assets. The Sub-Adviser is
authorized, in its sole discretion and without prior
consultation with the Manager, to: (a) manage the
Portfolio's assets in accordance with the Portfolio's
investment objective(s) and policies as stated in the
Prospectus and the Statement; (b) make investment decisions
for the Portfolio; (c) place purchase and sale orders for
portfolio transactions on behalf of the Portfolio; and (d)
employ professional portfolio managers and securities
analysts who provide research services to the Portfolio.

In addition, (i) the Sub-Adviser shall furnish the
Manager daily information concerning portfolio transactions
and quarterly and annual reports concerning transactions and
performance of the Portfolio in such form as may be mutually
agreed by the Manager and the Sub-Adviser, and the Sub
Adviser agrees to review the Portfolio and discuss the
management thereof with the Manager and the Board.

(ii) Unless the Manager gives the Sub-Adviser written
instructions to the contrary, the Sub-Adviser shall use its
good faith judgment in a manner which it reasonably believes
best serves the interests of the Portfolio's shareholders to
vote or abstain from voting all proxies solicited by or with
respect to the issuers of securities in which assets of the
Portfolio may be invested.
(iii) The Sub-Adviser shall maintain and preserve such
records related to the Portfolio's transactions as required
under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Manager shall maintain and preserve all
books and other records not related to the Portfolio's
transactions as required under the 1940 Act. The Sub-
Adviser shall timely furnish to the Manager all information
relating to the Sub-Adviser's services hereunder reasonably
requested by the Manager to keep and preserve the books and
records of the Portfolio. The Sub-Adviser agrees that all
records which it maintains for the Portfolio are the
property of the Company and the Sub-Adviser will surrender
promptly to the Company copies of any of such records.

(iv) The Sub-Adviser shall maintain compliance
procedures for the Portfolio that it reasonably believes are
adequate to ensure the Portfolio's compliance with (A) the
1940 Act and the rules and regulations promulgated
thereunder and (B) the Portfolio's investment objective(s)
and policies as stated in the Prospectus and Statement. The
Sub-Adviser shall maintain compliance procedures that it
reasonably believes are adequate to ensure its compliance
with the Investment Advisers Act of 1940.
(v) The Sub-Adviser has adopted a written code of
ethics that it reasonably believes complies with the
requirements of Rule 17j-1 under the 1940 Act, which it will
provide to the Company. The Sub-Adviser has policies and
procedures regarding the detection and prevention and the
misuse of material, nonpublic information by the Sub-Adviser
and its employees as required by the Insider Trading and
Securities Fraud Enforcement Act of 1988.]

3. Brokerage

The Sub-Advisor is responsible for decisions to buy and
sell securities for the Portfolio, broker-dealer selection,
and negotiation of brokerage commission rates. The Sub
Advisor's primary consideration in effecting a security
transaction will be executed at the most favorable price. In
selecting a broker-dealer to execute each particular
transaction, the Sub-Advisor will take the following into
consideration: the best net price available; the
reliability, integrity and financial condition of the broker
dealer, the size of and difficulty in executing the order;
and the value of he expected contribution of the broker
dealer to the investment performance of the portfolio on a
continuing basis. Accordingly, the price to the Portfolio in
any transaction may be less favorable than that available
from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution
services offered. Subject to such policies as the Board may
from time to time determine, the Sub-Advisor shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of
its having caused the Portfolio to pay a broker or dealer
that provides brokerage and research services to the Sub
Advisor an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission
another broker or dealer would have charged for effecting
that transaction, if the Sub-Advisor determines in good
faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either
that particular transaction of the Sub-Advisor's overall
responsibilities with respect to the Portfolio, and to the
other clients of the Sub-Advisor as to which the Sub-Advisor
exercises investment discretion. The Sub-Advisor is further
authorized to allocate the orders placed by it on behalf of
the Portfolio to such brokers and dealers who also provide
research or statistical material, or other services to the
Portfolio or to the Sub-Advisor. Such allocation shall be in
such amounts and proportions as the Sub-Advisor shall
determine and the Sub-Advisor will report on said
allocations regularly to the Board indicating the brokers to
whom such allocations have been made and the basis therefor.
4. Information Provided to the Company and the
Manager
The Sub-Adviser shall keep the Company and the Manager
informed of developments materially affecting the
Portfolio's holdings, and shall, on its own initiative,
furnish the Company and the Manager from time to time with
whatever information the Sub-Adviser believes is appropriate
for this purpose.
5. Compensation
In consideration of the services rendered pursuant to
this Agreement, the Manager will pay the Sub-Adviser an
annual fee calculated at the rate of 0.375% of the
Portfolio's average daily net assets; the fee is calculated
daily and paid monthly. The Sub-Adviser shall have no right
to obtain compensation directly from the Company for
services provided hereunder and agrees to look solely to the
Manager for payment of fees due. The fee for the period from
the Effective Date (defined below) of the Agreement to the
end of the month during which the Effective Date occurs
shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according
to the proportion that such period bears to the full monthly
period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable
to the Sub-Adviser, the value of the Portfolio's net assets
shall be computed at the times and in the manner specified
in the Prospectus and/or the Statement.

6. Expenses
The Sub-Adviser shall bear all expenses incurred by it
in connection with the performance of its services under
this Agreement. The Portfolio will bear certain other
expenses to be incurred in its operation, including, but not
limited to, investment advisory fees, sub-advisory fees
(other than sub-advisory fees paid pursuant to this
Agreement) and administration fees; fees for necessary
professional and brokerage services; costs relating to local
administration of securities; fees for any pricing service;
the costs of regulatory compliance; and pro rata costs
associated with maintaining the Company's legal existence
and shareholder relations. All other expenses not
specifically assumed by the Sub-Adviser hereunder or by the
Manager under the Management Agreement are borne by the
Portfolio or the Company.

7. Standard of Care

The Sub-Adviser shall exercise its best judgment and
shall act in good faith in rendering the services listed in
paragraphs 2 and 3 above. The Sub-Adviser, its officers,
directors and employees shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the
Portfolio, any shareholder of the Portfolio or the Manager
in connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Sub-Adviser
against any liability to the Manager, the Company or to the
shareholders of the Portfolio to which the Sub-Adviser would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of
its duties or by reason of the Sub-Adviser's reckless
disregard of its obligations and duties under this
Agreement.

8. Term of Agreement
This Agreement shall become effective August ___, 1995
(the "Effective Date") and shall continue for an initial two
year term and shall continue thereafter so long as such
continuance is specifically approved at least annually as
required by the 1940 Act. This Agreement is terminable,
without penalty, on 60 days' written notice, by the Board of
the Company or by vote of holders of a majority (as defined
in the 1940 Act and the rules thereunder) of the outstanding
voting securities of the Portfolio, or upon 60 days' written
notice, by the Sub-Adviser. This Agreement will also
terminate automatically in the event of its assignment (the
term "assignment" having the meaning defined in Section
2(a)(4) of the 1940 Act and the rules thereunder).
9. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts,
will continue to act and may act in the future as investment
manager or adviser to fiduciary and other managed accounts,
and as investment manager or adviser to other investment
companies, including any offshore entities, or accounts, and
the Company has no objection to the Sub-Adviser's so acting,
provided that whenever the Portfolio and one or more other
investment companies or accounts managed or advised by the
Sub-Adviser have available funds for investment, investments
suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each
company and account. The Company recognizes that in some
cases this procedure may adversely affect the size of the
position obtainable for the Portfolio. In addition, the
Company understands that the persons employed by the Sub
Adviser to assist in the performance of the Sub-Adviser's
duties under this Agreement will not devote their full time
to such service and nothing contained in this Agreement
shall be deemed to limit or restrict the right of the Sub
Adviser or any affiliate of the Sub-Adviser to engage in and
devote time and attention to other businesses or to render
services of whatever kind or nature.
10. Notices
Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other
parties at such address as such other parties may designate
for the receipt of such notice. Until further notice to the
other parties, it is agreed that the address of each party
is as follows:
(a) To the Company:
Smith Barney/Travelers Series Fund Inc.
388 Greenwich Street, 22nd Floor
New York, NY 10013

(b) To the Manager:

Smith Barney Mutual Funds Management Inc.
388 Greenwich Street, 22nd Floor
New York, NY 10013

A I M Capital Management, Inc.
President
11 Greenway Plaza, Suite 1919
Houston, TX 77046

cc General Counsel

11. Representations

The Company represents that a copy of the Articles of
Incorporation is on file with the Secretary of the State of
Maryland.

Each of the parties hereto represents that the
Agreement has been duly authorized, executed and delivered
by all required corporate action.

12. Use of Name

The Company may use the names "AIM Capital Management,
Inc.", "AIM Capital Management", "AIM Capital", "AIM Capital
Appreciation Portfolio", or "AIM" only for so long as this
Agreement or any extension, renewal, or amendment hereof
remains in effect. At such times as this Agreement shall no
longer be in effect, the Company shall cease to use such a
names or any other name indicating that it is advised by or
otherwise connected with the Sub-Adviser and shall promptly
change its name accordingly. The Company acknowledges that
it has adopted the name "AIM Capital Appreciation Portfolio"
through permission of the Sub-Adviser, and agrees that the
Sub-Adviser reserves to itself and any successor to its
business the right to grant the non-exclusive right to use
the aforementioned names or any similar names to any other
corporation or entity, including but not limited to any
investment company of which the Sub-Adviser or any
subsidiary or affiliate thereof or any successor to the
business of any thereof shall be the investment adviser.

13. Questions of Interpretation

Any question of interpretation of any term or provision
of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the
Advisers Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if
any, by the United States Courts or in the absence of any
controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange
Commission issued pursuant to said 1940 Act. In addition,
where the effect of a requirement of the Acts reflected in
any provision of the Agreement is revised by rule,
regulation or order of the Securities and Exchange
Commission, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in triplicate by their respective
officers on the day and year first written above.
SMITH BARNEY/TRAVELERS SERIES
FUND INC.
Attest:
By:

SMITH BARNEY MUTUAL FUNDS
MANAGEMENT INC.
Attest:
By:

A I M CAPITAL MANAGEMENT INC.

Attest: By:

Independent Auditors' Consent

To the Shareholders and Directors of the
Smith Barney/Travelers Series Fund Inc.:

We consent to the use of our reports dated December 28,
1994 with respect to the Portfolios listed below of the
Smith Barney/Travelers Series Fund Inc. incorporated
herein by reference and to the references to our Firm
under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of
Additional Information.

Portfolios

Smith Barney Income and Growth Portfolio

Alliance Growth Portfolio

American Capital Enterprise Portfolio

Smith Barney International Equity Portfolio

Smith Barney Pacific Basin Portfolio TBC

Managed Income Portfolio

Putnam Diversified Income Portfolio G.T.

Global Strategic Income Portfolio Smith

Barney High Income Portfolio

MFS Total Return Portfolio

Smith Barney Money Market Portfolio

KPMG Peat Marwick
LLP
New York, New York
June 26, 1995

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS
SERIES FUND
INC.
<SERIES>
<NUMBER> 1
<NAME> ALLIANCE GROWTH PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JUN-16-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT COST> 17,183,273
<INVESTMENTS-AT VALUE> 17,700,693
<RECEIVABLES> 979,589
<ASSETS-OTHER> 57,111
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,737,393
<PAYABLE-FOR-SECURITIES> 1,623,391
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28,080
<TOTAL-LIABILITIES> 1,651,471
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,286,109
<SHARES-COMMON-STOCK> 1,604,491
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 50,869
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 231,524
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 517,420
<NET-ASSETS> 17,085,922
<DIVIDEND-INCOME> 58,013
<INTEREST-INCOME> 23,356
<OTHER-INCOME> 0
<EXPENSES-NET> 30,500
<NET-INVESTMENT-INCOME> 50,869
<REALIZED-GAINS-CURRENT> 231,524
<APPREC-INCREASE-CURRENT> 517,420
<NET-CHANGE-FROM-OPS> 799,813
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,675,745
<NUMBER-OF-SHARES-REDEEMED> (71,254)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 17,085,922
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 27,111
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 61,111
<AVERAGE-NET-ASSETS> 9,174,369
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.59
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES FUND INC.
<SERIES>
[NUMBER] 02
<NAME> AMERICAN CAPITAL ENTERPRISE PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JUN-16-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT COST> 5,485,559
<INVESTMENTS-AT VALUE> 5,677,384
[RECEIVABLES] 1,003,835
[ASSETS-OTHER] 69,073
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,750,292
[PAYABLE-FOR-SECURITIES] 923,766
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 92,618
[TOTAL-LIABILITIES] 1,016,384
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 5,512,169
[SHARES-COMMON-STOCK] 552,455
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 13,182
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 16,732
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 191,825
[NET-ASSETS] 5,733,908
[DIVIDEND-INCOME] 18,500
[INTEREST-INCOME] 8,793
[OTHER-INCOME] 0
[EXPENSES-NET] 14,111
[NET-INVESTMENT-INCOME] 13,182
[REALIZED-GAINS-CURRENT] 16,732
[APPREC-INCREASE-CURRENT] 191,825
[NET-CHANGE-FROM-OPS] 221,739
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 631,869
[NUMBER-OF-SHARES-REDEEMED] (79,414)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 5,733,908
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 11,354
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 44,472
[AVERAGE-NET-ASSETS] 4,417,928
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] 0.35
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.38
[EXPENSE-RATIO] 0.84
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 03
<NAME> G.T. GLOBAL STRATEGIC INCOME
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 1,990,165
<INVESTMENTS-AT VALUE> 1,974,612
[RECEIVABLES] 788,306
[ASSETS-OTHER] 443,223
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,206,141
[PAYABLE-FOR-SECURITIES] 556,368
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 25,924
[TOTAL-LIABILITIES] 582,292
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,641,156
[SHARES-COMMON-STOCK] 263,693
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 27,112
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (29,639)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (14,780)
[NET-ASSETS] 2,623,849
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 39,094
[OTHER-INCOME] 0
[EXPENSES-NET] (7,410)
[NET-INVESTMENT-INCOME] 31,684
[REALIZED-GAINS-CURRENT] (27,000)
[APPREC-INCREASE-CURRENT] (21,991)
[NET-CHANGE-FROM-OPS] (17,307)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 336,108
[NUMBER-OF-SHARES-REDEEMED] (72,415)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2,623,849
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5,389
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 31,355
[AVERAGE-NET-ASSETS] 1,829,394
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.17
[PER-SHARE-GAIN-APPREC] (0.22)
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 9.95
[EXPENSE-RATIO] 1.07
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 04
<NAME> SMITH BARNEY HIGH INCOME
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 3,319,719
<INVESTMENTS-AT VALUE> 3,251,696
[RECEIVABLES] 264,786
[ASSETS-OTHER] 92
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,516,574
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 121,253
[TOTAL-LIABILITIES] 121,253
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3,368,721
[SHARES-COMMON-STOCK] 337,155
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 101,338
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (6,715)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (68,023)
[NET-ASSETS] 3,395,321
[DIVIDEND-INCOME] 1,473
[INTEREST-INCOME] 109,141
[OTHER-INCOME] 0
[EXPENSES-NET] (9,276)
[NET-INVESTMENT-INCOME] 101,338
[REALIZED-GAINS-CURRENT] (6,715)
[APPREC-INCREASE-CURRENT] (68,023)
[NET-CHANGE-FROM-OPS] 26,600
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 554,899
[NUMBER-OF-SHARES-REDEEMED] (217,744)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3,395,321
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,951
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 34,891
[AVERAGE-NET-ASSETS] 3,551,468
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.29
[PER-SHARE-GAIN-APPREC] (0.22)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.07
[EXPENSE-RATIO] 0.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 05
<NAME> SMITH BARNEY INTERNATIONAL
EQUITY PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 11,747,703
<INVESTMENTS-AT VALUE> 12,128,970
[RECEIVABLES] 167,193
[ASSETS-OTHER] 2,579,799
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 14,875,962
[PAYABLE-FOR-SECURITIES] 1,308,917
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 25,614
[TOTAL-LIABILITIES] 1,064,531
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 13,425,117
[SHARES-COMMON-STOCK] 1,038,884
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 386,314
[NET-ASSETS] 13,811,431
[DIVIDEND-INCOME] 13,270
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] (33,920)
[NET-INVESTMENT-INCOME] (20,650)
[REALIZED-GAINS-CURRENT] (2,927)
[APPREC-INCREASE-CURRENT] 386,314
[NET-CHANGE-FROM-OPS] 362,737
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,629,110
[NUMBER-OF-SHARES-REDEEMED] (320,226)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 13,811,431
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 24,422
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 56,597
[AVERAGE-NET-ASSETS] 7,466,758
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] (0.030)
[PER-SHARE-GAIN-APPREC] 0.58
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.55
[EXPENSE-RATIO] 1.20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 06
<NAME> SMITH BARNEY INCOME AND GROWTH
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 6,258,995
<INVESTMENTS-AT VALUE> 6,272,312
[RECEIVABLES] 124,012
[ASSETS-OTHER] 745
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,397,069
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 20,320
[TOTAL-LIABILITIES] 20,320
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,320,165
[SHARES-COMMON-STOCK] 628,991
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 51,610
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8,343)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 13,317
[NET-ASSETS] 6,376,749
[DIVIDEND-INCOME] 40,152
[INTEREST-INCOME] 24,806
[OTHER-INCOME] 0
[EXPENSES-NET] 13,348
[NET-INVESTMENT-INCOME] 51,610
[REALIZED-GAINS-CURRENT] (8,343)
[APPREC-INCREASE-CURRENT] 13,317
[NET-CHANGE-FROM-OPS] 56,584
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 933,456
[NUMBER-OF-SHARES-REDEEMED] (304,465)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 6,376,749
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 11,567
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 38,035
[AVERAGE-NET-ASSETS] 4,839,267
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.11
[PER-SHARE-GAIN-APPREC] 0.03
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.14
[EXPENSE-RATIO] 0.73
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 07
<NAME> SMITH BARNEY MONEY MARKET
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 5,289,036
<INVESTMENTS-AT VALUE> 5,289,036
[RECEIVABLES] 15,473
[ASSETS-OTHER] 889
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 5,305,398
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 27,506
[TOTAL-LIABILITIES] 27,506
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 5,277,892
[SHARES-COMMON-STOCK] 5,277,892
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 5,277,892
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 78,491
[OTHER-INCOME] 0
[EXPENSES-NET] (11,569)
[NET-INVESTMENT-INCOME] 66,922
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 66,922
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 66,922
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10,261,033
[NUMBER-OF-SHARES-REDEEMED] (5,037,820)
[SHARES-REINVESTED] 54,679
[NET-CHANGE-IN-ASSETS] 5,277,892
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 9,916
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 36,908
[AVERAGE-NET-ASSETS] 4,620,015
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] 0.014
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0.014
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] 0.66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 08
<NAME> SMITH BARNEY PACIFIC BASIN
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 4,109,611
<INVESTMENTS-AT VALUE> 4,144,742
[RECEIVABLES] 46,450
[ASSETS-OTHER] 132,020
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4,323,212
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 84,893
[TOTAL-LIABILITIES] 84,893
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 4,203,212
[SHARES-COMMON-STOCK] 419,560
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 35,107
[NET-ASSETS] 4,238,319
[DIVIDEND-INCOME] 4,691
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] (17,983)
[NET-INVESTMENT-INCOME] (13,292)
[REALIZED-GAINS-CURRENT] (2,568)
[APPREC-INCREASE-CURRENT] 35,107
[NET-CHANGE-FROM-OPS] 19,247
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 493,056
[NUMBER-OF-SHARES-REDEEMED] (73,496)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 4,238,319
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 12,450
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 40,211
[AVERAGE-NET-ASSETS] 3,776,351
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] (0.04)
[PER-SHARE-GAIN-APPREC] 0.14
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 10.10
[EXPENSE-RATIO] 1.26
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES>
[NUMBER] 09
<NAME> PUTNAM DIVERSIFIED INCOME
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> JUN-16-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT COST> 7,318,840
<INVESTMENTS-AT VALUE> 7,310,609
[RECEIVABLES] 259,214
[ASSETS-OTHER] 678
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 7,570,501
[PAYABLE-FOR-SECURITIES] 760,912
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 46,138
[TOTAL-LIABILITIES] 807,050
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,695,702
[SHARES-COMMON-STOCK] 664,676
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 78,157
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2,525)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (7,883)
[NET-ASSETS] 6,763,451
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 112,353
[OTHER-INCOME] 0
[EXPENSES-NET] 15,504
[NET-INVESTMENT-INCOME] 96,849
[REALIZED-GAINS-CURRENT] (3,294)
[APPREC-INCREASE-CURRENT] (25,806)
[NET-CHANGE-FROM-OPS] 67,749
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 768,005
[NUMBER-OF-SHARES-REDEEMED] (103,329)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 6,763,451
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 11,520
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 46,052
[AVERAGE-NET-ASSETS] 4,169,781
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.23
[PER-SHARE-GAIN-APPREC] (0.05)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.18
[EXPENSE-RATIO] 0.98
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK>
0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES FUND INC.
<SERIES>
[NUMBER] 10
<NAME> TBC MANAGED INCOME
PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 3,577,467
<INVESTMENTS-AT VALUE> 3,517,761
[RECEIVABLES] 232,150
[ASSETS-OTHER] 176,067
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,925,978
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 85,565
[TOTAL-LIABILITIES] 85,565
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 3,834,120
[SHARES-COMMON-STOCK] 382,521
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 63,984
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2,015
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (59,706)
[NET-ASSETS] 3,840,413
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 73,847
[OTHER-INCOME] 0
[EXPENSES-NET] 9,863
[NET-INVESTMENT-INCOME] 63,984
[REALIZED-GAINS-CURRENT] 2,015
[APPREC-INCREASE-CURRENT] (59,706)
[NET-CHANGE-FROM-OPS] 6,293
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 427,408
[NUMBER-OF-SHARES-REDEEMED] (44,887)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3,840,413
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,369
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 32,789
[AVERAGE-NET-ASSETS] 2,984,847
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.21
[PER-SHARE-GAIN-APPREC] (0.17)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.04
[EXPENSE-RATIO] 0.87
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0

<ARTICLE> 6
<CIK> 0000919557
<NAME> SMITH BARNEY/TRAVELERS SERIES
FUND
INC.
<SERIES
[NUMBER] 11
<NAME> MFS TOTAL RETURN PORTFOLIO
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 31,
1994
<INVESTMENTS-AT COST> 8,839,633
<INVESTMENTS-AT VALUE> 8,798,669
[RECEIVABLES] 221,019
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 9,019,688
[PAYABLE-FOR-SECURITIES] 475,683
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 40,073
[TOTAL-LIABILITIES] 515,756
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 8,496,133
[SHARES-COMMON-STOCK] 852,341
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 61,057
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12,294)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (40,964)
[NET-ASSETS] 8,503,932
[DIVIDEND-INCOME] 29,684
[INTEREST-INCOME] 47,584
[OTHER-INCOME] 0
[EXPENSES-NET] 16,211
[NET-INVESTMENT-INCOME] 61,057
[REALIZED-GAINS-CURRENT] (12,294)
[APPREC-INCREASE-CURRENT] (40,964)
[NET-CHANGE-FROM-OPS] 7,799
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 862,510
[NUMBER-OF-SHARES-REDEEMED] (10,169)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 8,503,932
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 13,651
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 43,719
[AVERAGE-NET-ASSETS] 4,604,345
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.13
[PER-SHARE-GAIN-APPREC] (0.15)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.98
[EXPENSE-RATIO] 0.93
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE]
0

</TABLE>