SMITH BARNEY TRAVELERS SERIES FUND INC, 485BPOS, 1996-02-28

SMITH BARNEY TRAVELERS SERIES FUND INC
485BPOS, 1996-02-28

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FILE NO.33-75644
811-8372

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________

FORM N-1A
__________

POST-EFFECTIVE AMENDMENT NO. 4

TO THE

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

THE INVESTMENT COMPANY ACT OF 1940

__________

SMITH BARNEY/TRAVELERS 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) 816-6474
(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 filed its Rule 24f-2 Notice on December 26, 1995 for
its most recent fiscal year ended October 31, 1995.

It is proposed that this Post-Effective Amendment will become
effective February 28, 1996 pursuant to paragraph (b) (iii) (vii)
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 cover page
"The Fund's Investment Program"
"Special Investment Techniques and Risk Considerations"
"Shares of the Fund

5. Management of the Fund "Management"

5A. Management Discussion of Fund
Performance not applicable

6. Capital Stock and Other Securities cover page
"Dividends, Distributions and
Taxes"
"Redemption of Shares"
"Shares of the Fund"

7. Purchase of Securities Being Offered cover page
"The Fund's Investment Program"
"Management"
"Determination of Net Asset Value"

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"

Part C of
Form N-1A

Information required to be included in Part C is set forth under
the appropriate item, so numbered in Part C of this Registration
Statement.

This Registration Statement contains twelve Portfolios of Smith
Barney/Travelers Series Fund Inc. (the "Fund"). Two other
versions of Prospectuses will be created from this Registration
Statement. The distribution system for each version of the
Prospectus is different. One version of the Prospectus will
contain four Portfolios of the Fund (Version I). The other
version of the Prospectus will contain two Portfolios of the Fund
(Version II). These Prospectuses will be filed with the
Commission pursuant to Rule 497.

<PAGE>

PROSPECTUS

[GRAPHIC APPEARS HERE]

VINTAGE

SMITH BARNEY / TRAVELERS SERIES FUND INC.

UNDERLYING FUND PROSPECTUS

FEBRUARY TWENTY-EIGHTH

1996

<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 TBC Managed Income Portfolio
Alliance Growth Portfolio Putnam Diversified Income Portfolio
AIM Capital Appreciation Portfolio GT Global Strategic Income Portfolio
Van Kampen American Capital Enterprise Smith Barney High Income Portfolio
Portfolio
Smith Barney International Equity MFS Total Return Portfolio
Portfolio
Smith Barney Pacific Basin 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 FEBRUARY 28, 1996 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 FEBRUARY 28, 1996
<PAGE>

TABLE OF CONTENTS
===============================================================================
FINANCIAL HIGHLIGHTS 1

THE FUND'S INVESTMENT PROGRAM 7
Smith Barney Income and Growth Portfolio 7
Alliance Growth Portfolio 8
AIM Capital Appreciation Portfolio 9

Van Kampen American Capital Enterprise Portfolio 10
Smith Barney International Equity Portfolio 11
Smith Barney Pacific Basin Portfolio 13
TBC Managed Income Portfolio 14
Putnam Diversified Income Portfolio 16

GT Global Strategic Income Portfolio 19
Smith Barney High Income Portfolio 22
MFS Total Return Portfolio 23
Smith Barney Money Market Portfolio 25

SPECIAL INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS 27

DIVIDENDS, DISTRIBUTIONS AND TAXES 42

REDEMPTION OF SHARES 42

PERFORMANCE 42

MANAGEMENT 43

SHARES OF THE FUND 51

DETERMINATION OF NET ASSET VALUE 52

APPENDIX A 54
<PAGE>

FINANCIAL HIGHLIGHTS

The following information for the year ended October 31, 1995 and the period
ended October 31, 1994 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 1995 financial statements and the independent
auditors' report thereon appear in the October 31, 1995 Annual Report to
Shareholders.

For a share of each capital stock outstanding throughout the period:
<TABLE>
<CAPTION>

Smith Barney Income & Growth Alliance Growth
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.14 $ 10.00 $ 10.65 $ 10.00
Income From Operations:
Net investment income (2) 0.28 0.11 0.14 0.06
Net realized and unrealized gain 1.76 0.03 2.61 0.59
Total Income from Operations 2.04 0.14 2.75 0.65
Less Distributions From:
Net investment income (0.06) -- (0.02) --
Net realized gains -- -- (0.10) --
Total Distributions (0.06) -- (0.12) --
Net Asset Value, End of Period $ 12.12 $ 10.14 $ 13.28 $ 10.65
Total Return 20.21% 1.40%++ 26.19% 6.50%++
Net Assets, End of Period (000's) $39,364 $ 6,377 $111,573 $ 17,086
Ratios to Average Net Assets:
Expenses (2) 0.73% 0.73%+ 0.90% 0.88%+
Net investment income 2.70 2.82%+ 1.24 1.47%+
Portfolio Turnover Rate 38.39% 2.17% 77.66% 36.66%
Average commissions paid
on equity security transactions(3) $ 0.07 -- $ 0.06 --
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) Smith Barney Mutual Funds Management Inc. (the "Manager") has waived all or
part of its fees for the year ended October 31, 1995 and the period ended
October 31, 1994. In addition, the Manager has reimbursed the Smith Barney
Income and Growth Portfolio for $13,120 in expenses and the Alliance Growth
Portfolio for $3,500 in expenses for the period ended October 31, 1994. If
such fees were not waived and expenses not reimbursed, the per share
decreases in net investment income and the ratios of expenses to average
net assets for the Smith Barney Income and Growth Portfolio would have been
as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.02 0.94%
1994 0.05 2.08+

If such fees were not waived and expenses not reimbursed, the per share
decreases in net investment income and the ratios of expenses to average net
assets for the Alliance Growth Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.01 0.97%
1994 0.03 1.76+

(3) Due to new SEC disclosure guidelines, average commissions per share are
calculated for the current year and not for the prior period.
(+) Annualized.
(++) Total return is not annualized, as it may not be representative of the
total return for the year.

1
<PAGE>

For a share of each capital stock outstanding throughout the period:
<TABLE>
<CAPTION>

Van Kampen American Capital Enterprise Smith Barney International Equity
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.38 $ 10.00 $ 10.55 $ 10.00
Income From Operations:
Net investment income (loss)(2) 0.03 0.03 0.03 (0.03)
Net realized and unrealized gain 2.53 0.35 (0.10) 0.58
Total Income from Operations 2.56 0.38 (0.07) 0.55
Less Distribution From:
Net investment income (0.02) -- -- --
Net realized gains (0.03) -- -- --
Total Distributions (0.05) -- -- --
Net Asset Value, End of Period $ 12.89 $ 10.38 $ 10.48 $ 10.55
Total Return 24.74% 3.80%++ (0.66)% 5.50%++
Net Assets, End of Period (000's) $32,447 $ 5,734 $53,538 $ 13,811
Ratios to Average Net Assets:
Expenses (2) 0.88% 0.84%+ 1.44% 1.20%+
Net investment income 0.65 0.79%+ 0.25 (0.73)+
Portfolio Turnover Rate 180.26% 54.74% 28.72% --
Average commissions paid
on equity security transactions(3) $ 0.05 -- $ 0.01 --
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.

(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994 for the Van Kampen American
Capital Enterprise Portfolio. In addition, the Manager has reimbursed the
Van Kampen American Capital Enterprise Portfolio for $19,007 in expenses
for the period ended October 31, 1994. If such fees were not waived and
expenses not reimbursed, the per share decreases in net investment income
and the ratios of expenses to average net assets for the Van Kampen
American Capital Enterprise Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------

1995 $0.06 1.26%
1994 0.07 2.66+

The Manager has waived a portion of its fees for the period ended October 31,
1994 for the International Equity Portfolio.

If such fees were not waived the effect of the per share decrease in net
investment income for the Smith Barney International Equity Portfolio would have
been $0.03 and the ratio of expenses to average net assets would have been
2.00%+.

In addition, during the year ended October 31, 1995, the Smith Barney
International Equity Portfolio has earned credits from the custodian, which
reduces service fees incurred when the credits are taken into consideration the
ratio of expenses to average net assets is 1.21%; prior year numbers have not
been restated to reflect these adjustments.

(3) Due to new SEC disclosure guidelines, average commissions per share are
calculated for the current year and not for the prior period.
(+) Annualized.

(++) Total return is 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 Pacific Basin TBC Managed Income
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.10 $ 10.00 $ 10.04 $ 10.00
Income (Loss) From Operations:
Net investment income (loss)(2) (0.04) (0.04) 0.61 0.21
Net realized and unrealized gain (loss) (1.11) 0.14 0.64 (0.17)
Total Income from Operations (1.15) 0.10 1.25 0.04
Less Distributions From:
Net investment income -- -- (0.13) --
Total Distributions -- -- (0.13) --
Net Asset Value, End of Period $ 8.95 $ 10.10 $ 11.16 $ 10.04
Total Return (11.58)% 1.00%++ 12.68% 0.40%++
Net Assets, End of Period (000's) $ 7,122 $ 4,238 $11,279 $ 3,840
Ratios to Average Net Assets:
Expenses (2) 1.83% 1.26%+ 0.92% 0.87%+
Net investment income (0.27) (0.93)+ 6.13 5.67%+
Portfolio Turnover Rate 27.70% -- 169.51% 41.54%
Average commissions paid
on equity security transactions(3) $ 0.01 -- -- --
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.

(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the Manager
has reimbursed the Smith Barney Pacific Basin Portfolio for $9,778 in
expenses and the TBC Managed Income Portfolio for $15,557 in expenses for
the period ended October 31, 1994. If such fees were not waived and
expenses not reimbursed, the per share increases in net investment loss and
the ratios of expenses to average net assets for the Smith Barney Pacific
Basin Portfolio would have been as follows:

Expense Ratios
Per Share Increases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.03 2.23%
1994 0.06 2.82+

If such fees were not waived and expenses not reimbursed, the per share
decreases in net investment income and the ratios of expenses to average net
assets for the TBC Managed Income Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.04 1.29%
1994 0.07 2.91+

(3) Due to new SEC disclosure guidelines, average commissions per share are
calculated for the current year and not for the prior period.
(+) Annualized.

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

3
<PAGE>

For a share of each capital stock outstanding throughout the period:
<TABLE>
<CAPTION>

Putnam Diversified Income GT Global Strategic Income
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.18 $ 10.00 $ 9.95 $ 10.00
Income From Operations:
Net investment income (2) 0.79 0.23 0.64 0.17
Net realized and
unrealized gain (loss) 0.58 (0.05) 0.28 (0.22)
Total Income from
Operations 1.37 0.18 0.92 (0.05)
Less Distributions From:
Net investment income (0.09) -- (0.10) --
Total Distributions (0.09) -- (0.10) --
Net Asset Value, End of
Period $ 11.46 $ 10.18 $ 10.77 $ 9.95
Total Return 13.55% 1.80%++ 9.37% (0.50)%++
Net Assets, End of Period
(000's) $31,514 $ 6,763 $ 8,397 $ 2,624
Ratios to Average Net
Assets:
Expenses (2) 0.97% 0.98%+ 1.47% 1.07%+
Net investment income 7.53 6.14%+ 6.44 4.58%+
Portfolio Turnover Rate 275.71% 20.02% 295.47% 56.34%
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the manager
has reimbursed the Putnam Diversified Income Portfolio for $19,028 in
expenses and the GT Global Strategic Income Portfolio for $18,556 in
expenses for the period ended October 31, 1994. If such fees were not
waived and expenses not reimbursed, the per share decreases in net
investment income and the ratios of expenses to average net assets of the
Putnam Diversified Income Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $ 0.04 1.31%
1994 0.07 2.92+

If such fees were not waived and expenses not reimbursed, the per share
decreases in net investment income and the ratios of expenses
to average net assets of the GT Global Strategic Income Portfolio would
have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $ 0.04 1.93%
1994 0.13 4.53+

In addition, during the year ended October 31, 1995 the Portfolio has
earned credits from the custodian which reduces service fees
incurred. If the credits are taken into consideration the ratio
of expenses to average net assets is 1.11%; prior year numbers have not
been restated to reflect these adjustments.
(+) Annualized.

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

4
<PAGE>

For a share of each capital stock outstanding throughout the period:
Smith Barney High Income MFS Total Return
1995 1994(1) 1995 1994(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.07 $ 10.00 $ 9.98 $ 10.00
Income From Operations:
Net investment income (2) 0.93 0.29 0.45 0.13
Net realized and
unrealized gain (loss) 0.48 (0.22) 1.15 (0.15)
Total Income from
Operations 1.41 0.07 1.60 (0.02)
Less Distributions From:
Net investment income (0.22) -- (0.05) --
Total Distributions (0.22) -- (0.05) --
Net Asset Value, End of
Period $ 11.26 $ 10.07 $ 11.53 $ 9.98
Total Return 14.30% 0.70%++ 16.12% (0.20)%++
Net Assets, End of Period
(000's) $20,450 $ 3,395 $49,363 $ 8,504
Ratios to Average Net
Assets:
Expenses (2) 0.70% 0.69%+ 0.95% 0.93%+
Net investment income 9.54 7.55 + 4.40 3.51 +
Portfolio Turnover Rate 56.94% 14.74% 103.72% 17.67%
Average commissions paid
on equity security
transactions(3) -- -- $ 0.04 --
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.

(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the Manager
has reimbursed the Smith Barney High Income Portfolio for $17,664 in
expenses and the MFS Total Return Portfolio for $13,857 in expenses for the
period ended October 31, 1994. If such fees were not waived and expenses
not reimbursed, the per share decreases in net investment income and the
ratios of expenses to average net assets of the Smith Barney High Income
Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.04 1.07%
1994 0.07 2.60+

If such fees were not waived and expenses not reimbursed, the per share
decreases in net investment income and the ratios of expenses to average net
assets of the MFS Total Return Portfolio would have been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.01 1.06%
1994 0.06 2.51+
(3) Due to new SEC disclosure guidelines, average commissions per share are
calculated for the current year and not for the prior period.
(+) Annualized.

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

5
<PAGE>

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

<TABLE>
<CAPTION>
AIM Capital Appreciation Smith Barney Money Market
------------------------ -------------------------
1995(3) 1995 1994(1)
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 10.00 $ 1.00 $ 1.00
Income From Operations:
Net investment income (2) 0.02 0.052 0.014
Net realized and
unrealized (loss) (0.02) -- --
Total Income from
Operations -- 0.052 0.014
Less Distributions From:
Net investment income -- (0.052) (0.014)
Total Distributions -- (0.052) (0.014)
Net Asset Value, End of
Period $ 10.00 $ 1.00 $ 1.00
Total Return 0.00% 5.35% 1.46%++

Net Assets, End of Period
(000's) $ 8,083 $37,487 $ 5,278
Ratios to Average Net
Assets:
Expenses (2) 1.00%+ 0.65% 0.66%+
Net investment income 4.07%+ 5.26 3.83%+
Portfolio Turnover Rate 5.91% -- --
Average commissions paid
on equity security
transactions(4) $ 0.06 -- --
</TABLE>
(1) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.

(2) The Manager has waived all or part of its fees for the year ended October
31, 1995 and the period ended October 31, 1994. In addition, the Manager
has reimbursed the Smith Barney Money Market Portfolio for $15,423 in
expenses for the period ended October 31, 1994 and the AIM Capital
Appreciation Portfolio for $13,456 in expenses for the period ended October
31, 1995. If such fees were not waived and expenses not reimbursed, the per
share decreases in net investment income and the ratios of expenses to
average net assets of the Smith Barney Money Market Portfolio would have
been as follows:

Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -------------------
1995 $0.003 0.94%
1994 0.005 2.11+

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 for the AIM Capital Appreciation Portfolio would have been $0.03 and
5.95%+, respectively.
(3) For the period from October 10, 1995 (commencement of operations) to
October 31, 1995.
(4) Due to new SEC disclosure guidelines, average commissions per share are
calculated for the current year and not for the prior period.
(+) Annualized.

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

6
<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.

7
<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 fixed-income 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 fixed-income 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

8
<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 above-
average 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.

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<PAGE>

Van Kampen American Capital Enterprise Portfolio

Investment Objective

The investment objective of the Van Kampen 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; Van Kampen American Capital,
Inc., serves as the Portfolio's Sub-Adviser.

Investment Policies

The Van Kampen 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 issuers.

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 Sub-Adviser 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

10
<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, Van Kampen 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
Sub-Adviser 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 Sub-
Adviser 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

11
<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.

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<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.

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.

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.

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<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.

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 unrated

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<PAGE>

obligations of comparable quality; and (2) at least 65% of the Portfolio's total
assets will be invested in debt obligations having durations 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 durations 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, short-
term 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.

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<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, lower-rated,
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

16
<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 fixed-
income 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 Sub-Adviser
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.

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<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

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<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 short-term 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.

GT Global Strategic Income Portfolio

Investment Objectives

The investment objectives of the GT Global Strategic Income Portfolio are
primarily to seek high current income and secondarily to seek capital
appreciation. The Portfolio is managed by SBMFM; LGT Asset Management, Inc.
("LGT Asset Management") (formerly known as "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 GT 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 "Lower-
Quality 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 LGT Asset Management to have developing or emerging
economies and markets. These countries generally

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<PAGE>

are expected to include every country in the world except the United States,
Canada, Japan, Australia, New Zealand and most countries located 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, Colombia, Costa Rica, Cyprus, Czech Republic, Ecuador, Egypt,
Finland, Greece, Ghana, Hong Kong, Hungary, India, Indonesia, Israel, Ivory
Coast, Jamaica, Jordan, Kenya, Malaysia, Mauritius, Mexico, Morocco, Nicaragua,
Nigeria, Pakistan, Panama, Peru, Philippines, Poland, Portugal, Russia,
Singapore, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Swaziland,
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, or 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". The Fund may also use instruments (including forward
currency contracts) often referred to as "derivatives." See "Futures, Options
and Currency Transactions."

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.

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<PAGE>

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 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 zero-
coupon 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.

At a Special Meeting of the Shareholders of the Portfolio held on November 10,
1995, the shareholders approved changing the Portfolio's subclassification from
a diversified to a non-diversified company under the Investment Company Act of
1940, as amended (the "1940 Act").

As a "non-diversified" company under the 1940 Act, the Portfolio will have the
ability to invest more than 5% of its assets in the securities of any issuer.
However, the Portfolio intends to comply with Subchapter M

21
<PAGE>

of the Internal Revenue Code of 1986, as amended (the "Code"), that limits the
aggregate value of all holdings (except U.S. Government and cash items, as
defined in the Code) that exceed 5% of the Portfolio's total assets to an
aggregate amount of 50% of such assets. Also, holdings of a single issuer (with
the same exceptions) may not exceed 25% of the Portfolio's total assets. These
limits are measured at the end of each quarter. Under the Subchapter M limits,
"non-diversification" allows up to 50% of a Portfolio's total assets to be
invested in as few as two single issuers. In the event of decline of
creditworthiness or default upon the obligations of one or more such issuers
exceeding 5%, an investment in the Portfolio will entail greater risk than in
a portfolio having a policy of "diversification" because a high percentage of
the Portfolio's assets may be invested in securities of one or two issuers.
Furthermore, a high percentage of investments among few issuers may result in
a greater degree of fluctuation in the market value of the assets of the
Portfolio, and consequently a greater degree of fluctuation of the Portfolio's
net asset value, because the Portfolio will be more susceptible to economic,
political or regulatory developments affecting these securities than would be
the case with a portfolio composed of varied obligations of more issuers.

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.

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

22
<PAGE>

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.

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. Under normal market conditions, at least 25%
of the Portfolio's assets will be invested in fixed income securities and at
least 40% and no more than 75% of the Portfolio's assets will be 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 depositary receipts for those securities) may be held by the Portfolio. Some

23
<PAGE>

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 Sub-
Adviser'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 net 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.

AS NOTED ABOVE, THE PORTFOLIO INVESTS 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 up to 20% (and generally expects to invest between 5%
and 20%) of its total assets in foreign securities which are not traded on a
U.S. exchange (not including American Depositary Receipts). The Portfolio may
also invest in American Depository Receipts. The Portfolio may also invest in
emerging market securities, Brady Bonds, U.S. Government securities, 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 and other direct indebtedness. 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
indices 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.

The Portfolio will be managed actively with respect to the Portfolio's fixed
income securities and the asset allocations modified as the Sub-adviser deems
necessary. Although the Portfolio does not intend to seek short-term profits,
fixed income securities will be sold whenever the sub-adviser believes it is
appropriate to do so without regard to the length of time the particular asset
may have been held. With respect to its equity securities the Portfolio does not
intend to trade in securities for short-term profits and anticipates that
portfolio securities ordinarily will be held for one year or longer. However,
the Portfolio will effect trades whenever it believes that changes in its
portfolio securities are appropriate.

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.

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<PAGE>

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.

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.

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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 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.

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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.

Securities of Emerging Markets. Because of the special risks associated with
investing in emerging markets, an investment in the Putnam Diversified Income,
GT Global Strategic Income, Smith Barney High Income or MFS Total Return
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.

Emerging market countries include any country determined by the adviser or sub-
adviser to have an emerging market economy, taking into account a number of
factors, including whether the country's foreign currency debt rating, its
political and economic stability and the development of its financial and
capital markets. The adviser determines whether an issuer's principal trading
market for its securities and the source of its revenues and assets. The
issuer's principal activities generally are deemed to be located in a particular
country if: (a) the security is issued or guaranteed by the government of that
country or any of its agencies, authorities or instrumentalities; (b) the issuer
is organized under the laws of, and maintains a principle office in, that
country; (c) the issuer has its principal securities trading market in that
country; or (d) the issuer has 50% or more of its assets in that country.

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

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<PAGE>

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 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, the MFS
Total Return and the GT 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 obligations, and in turn a
Portfolio's net asset value, to a greater extent than the volatility inherent in
domestic fixed income securities.

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<PAGE>

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, Russia and Mexico 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.

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

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<PAGE>

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, the MFS Total Return and the GT
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, Bulgaria, Costa Rica, Dominican Republic, Ecuador, Jordan, Mexico,
Nigeria, Panama, the Philippines, Poland, Uruguay and Venezuela. In addition,
Peru has 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 GT
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 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 GT 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

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<PAGE>

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, GT 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.

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.

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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 Van Kampen 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 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 GT 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

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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 GT 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, GT 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 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

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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 Van Kampen American Capital Enterprise, the GT
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 GT 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 create interest or dividend
expenses 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

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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, GT 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,
Van Kampen American Capital Enterprise, Smith Barney International Equity, Smith
Barney Pacific Basin, Putnam Diversified Income, GT 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"); provided, however, that the AIM Capital Appreciation Portfolio may
only write covered call options. 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

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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, GT 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 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

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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 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

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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 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, GT 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,

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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 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

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<PAGE>

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 pass-
through certificates are solely the obligations of those entities but are
supported by the discretionary 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.

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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, asset-
backed 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.

Indexed Commercial Paper. The GT 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.

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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. 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 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.

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 third 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.

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

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<PAGE>

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.

Smith Barney Mutual Funds Management Inc. ("SBMFM") manages the investment
operations of each Portfolio pursuant to management agreements entered into by
the Fund on behalf of each Portfolio. 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.

The Fund and SBMFM have also entered into subadvisory agreements on behalf of
each of the Alliance Growth Portfolio, the AIM Capital Appreciation Portfolio,
the Van Kampen American Capital Enterprise Portfolio, the TBC Managed Income
Portfolio, the Putnam Diversified Income Portfolio, the GT 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 0.80%

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Van Kampen 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%
GT 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 Van Kampen American Capital Enterprise
Portfolio, the Smith Barney International Equity Portfolio, the Smith Barney
Pacific Basin Portfolio, the Putnam Diversified Income Portfolio, the GT 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.

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 Group Inc.
("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 in excess of $60 billion. 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

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<PAGE>

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.

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 125 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 $2.8 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 pays 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, 1995 totaling more than $144 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

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<PAGE>

offices and the overseas offices of five subsidiaries. The 50 registered
investment companies managed by Alliance Capital comprising 100 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 pays AIM Capital an
annual fee calculated at the rate of 0.375% of the Portfolio's average daily net
assets, paid monthly.

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 and its affiliates act as manager or
adviser to 37 investment company portfolios. As of December 31, 1995, the total
assets of the investment company portfolios advised or managed by AIM or its
affiliates were approximately $41 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 87 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.

Van Kampen American Capital Asset Management, Inc. Van Kampen American Capital
Asset Management, Inc. ("VKAC") 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 pays VKAC an annual fee calculated at the rate of .325% of the
Portfolios's average daily net assets, paid monthly.

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<PAGE>

VKAC is located at 2800 Post Oak Boulevard, Houston, Texas 77056. VKAC is a
wholly-owned subsidiary of Van Kampen American Capital, Inc. ("Van Kampen
American Capital"). Van Kampen American Capital is a diversified asset
management company with more than two million retail investor accounts,
extensive capabilities for managing institutional portfolios, and over $55
billion under management or supervision. Van Kampen American Capital's 67 open-
end and 38 closed-end funds and more than 3,000 unit investment trusts are
professionally distributed by leading financial advisers nationwide.

Van Kampen American Capital is a wholly-owned subsidiary of VK/AC Holding, Inc.
VK/AC Holding, Inc. is controlled through the ownership of a substantial
majority of its common stock, by The Clayton & Dubilier Private Equity Fund IV
Limited Partnership (the "C&D L.P."), a Connecticut limited partnership. C&D
L.P. is managed by Clayton, Dubilier & Rice, Inc., a New York private investment
firm. The general partners of C&D Associates L.P. are Joseph L. Rice, III, B.
Charles Ames, William A. Barbe, Alberto Cribiore, Donald J. Gogel, Leon J.
Hendrix, Jr., Hubbard C. Howe and Andrall E. Pearson, each of whom is a
principal of Clayton, Dubilier & Rice, Inc. In addition certain officers,
directors and employees of Van Kampen American Capital own, in the aggregate,
not more than seven percent of the common stock of VK/AC Holding, Inc. and have
the right to acquire, upon the exercise of options, approximately an additional
11% of the common stock of VK/AC Holding, Inc. VKAC, together with its
predecessors, has been in the investment advisory business since 1926.

Jeff New is responsible for the day-to-day management of the Portfolio. Mr. New
has been a portfolio manager with VKAC since April, 1994. Since 1991, Mr. New
was an associate portfolio manager. Prior to that he was a securities analyst
with Texas Commerce Investment Management Company.

LGT Asset Management, Inc. LGT Asset Management, Inc. ("LGT Asset Management")
serves as Sub-Adviser to the GT Global Strategic Income Portfolio pursuant to a
subadvisory agreement. Pursuant to the subadvisory agreement, SBMFM pays LGT
Asset Management an annual fee calculated at the rate of 0.375% of the
Portfolio's average daily net assets, paid monthly.

LGT Asset Management provides investment management and/or administration
services to the GT Global Mutual Funds. LGT Asset Management and its worldwide
asset management affiliates have provided investment management and/or
administration services to institutional, corporate and individual clients
around the world since 1969. The U.S. offices of LGT Asset Management are
located at 50 California Street, 27th Floor, San Francisco, California
94111.

LGT Asset Management and its worldwide affiliates, including LGT Bank in
Liechtenstein, formerly Bank in Liechtenstein, comprises Liechtenstein Global
Trust, formerly BIL GT Group Limited. On January 1, 1996, G.T. Capital
Management, Inc. was renamed LGT Asset Management, Bank in Liechtenstein was
renamed LGT Bank in Liechtenstein and BIL GT Group Limited was renamed
Liechtenstein Global Trust. Liechtenstein Global Trust is a provider of global
asset management and private banking products and services to individual and
institutional investors. Liechtenstein Global Trust 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. The
principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.

As of November 30, 1995, LGT Asset Management and its worldwide asset management
affiliates managed or administered approximately $22 billion, of which
approximately $20 billion consisted of GT Global retail funds worldwide. In the
U.S., as of November 30, 1995, LGT Asset Management managed or administered
approximately $9.6 billion in GT Global Mutual Funds. As of November 30, 1995,
assets under

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<PAGE>

advice by the LGT Bank in Liechtenstein exceeded approximately $23
billion. As of November 30, 1995, assets entrusted to Liechtenstein Global Trust
totaled approximately $45 billion.

In addition to the resources of its San Francisco office, LGT Asset Management
uses the expertise, personnel, data and systems of other offices of the
Liechtenstein Global Trust, including investment offices in London, Hong Kong,
Tokyo, Singapore, Sydney and Frankfurt. In managing the GT Global Mutual Funds,
LGT Asset Management employs a team approach, taking advantage of the resources
of these various investment offices around the world in seeking to achieve each
Fund's investment objective. Many of the investment managers who manage the GT
Global Mutual Funds' portfolios are natives of the countries in which they
invest, speak local languages and/or live or work in the markets they
follow.

In managing the GT Global Strategic Income Portfolio, LGT Asset Management
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 LGT Asset Management's
investment staff. Simon Nocera and Donald Mattersdorff are responsible for the
day-to-day management of the Portfolio. Mr. Nocera has been a Portfolio Manager
and Economist at LGT Asset Management 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 LGT Asset Management 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 Variable
Insurance Trust, MFS Union Standard Trust, MFS Municipal Income 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 Fund, 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
various fixed/variable annuity contracts. MFS and its wholly owned subsidiary,
MFS Asset Management, Inc., also provide investment advice to substantial
private clients.

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 $42.2
billion on behalf of approximately 1.8 million investors accounts as of December
31, 1995. As of such date, the MFS organization managed approximately $20.6
billion of assets in fixed income securities. MFS is a wholly owned subsidiary
of Sun Life of Canada (U.S.) which in turn is a wholly owned 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.

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<PAGE>

David M. Calabro, a Vice President of MFS, Geoffrey L. Kurinsky, a Senior Vice
President of MFS, Judith N. Lamb, a Vice President of MFS, Lisa B. Nurme, a Vice
President of MFS, and Maura A. Shaughnessy, a Vice President of MFS, are the
Fund's portfolio managers. Mr. Calabro is the head of this portfolio management
team and a manager of the common stock portion of the Fund's portfolio. Mr.
Calabro has been employed by MFS since 1992 and served as an analyst and sector
portfolio manager with Fidelity Investments prior to that time. Mr. Kurinsky,
the manager of the Fund's fixed income securities, has been employed by MFS
since 1987. Ms. Lamb, the manager of the Fund's convertible securities, has been
employed by MFS since 1992, and served as an analyst with Fidelity Investments
prior to that time. Ms. Nurme, a manager of the common stock portion of the
Fund's portfolio, has been employed by MFS since 1987. Ms. Shaughnessy, also a
manager of the common stock portion of the Fund's portfolio, has been employed
by MFS since 1991 and served as an analyst with Harvard Management Company prior
to that time.

MFS has established a strategic alliance with Foreign & Colonial Management Ltd.
("Foreign & Colonial"). Foreign & Colonial is a subsidiary of two of the world's
oldest financial services institutions, the London-based Foreign & Colonial
Investment Trust PLC, which pioneered the idea of investment management in 1868,
and HYPO-BANK (Bayerische Hypotheken-und Weschsel-Bank AG), the oldest publicly
listed bank in Germany, founded in 1835. As part of this alliance, the portfolio
managers and investment analysts of MFS and Foreign & Colonial will share their
views on a variety of investment related issues, such as the economy, securities
markets, portfolio securities and their issuers, investment recommendations,
strategies and techniques, risk analysis, trading strategies and other portfolio
management matters. MFS will have access to the extensive international equity
investment expertise of Foreign & Colonial, and Foreign & Colonial will have
access to the extensive U.S. equity investment expertise of MFS. One or more MFS
investment analysts are expected to work for an extended period with Foreign &
Colonial's portfolio managers and investment analysts at their offices in
London. In return, one or more Foreign & Colonial employees are expected to work
in a similar manner at MFS' Boston offices.

In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for portfolios of other clients of MFS or clients of
Foreign & Colonial. Some simultaneous transactions are inevitable when several
clients receive investment advice from MFS and Foreign & Colonial, particularly
when the same security is suitable for more than one client. While in some cases
this arrangement could have a detrimental effect on the price or availability of
the security as far as the Fund is concerned, in other cases, however, it may
produce increased investment opportunities for the Fund.

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 $93
billion in assets in over three million shareholder accounts as of December 31,
1995. The Putnam Advisory Company, Inc., an affiliate, manages domestic and
foreign institutional accounts and foreign mutual funds. Another affiliate,
Putnam Fiduciary Trust Company, provides

49
<PAGE>

investment advice to institutional clients under its banking and fiduciary
powers. Putnam and its affiliates managed over $125 billion in assets as of
December 31, 1995.

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. Thomsen and Mr. Powers have been employed by
Putnam Management since 1986. 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 December 31, 1995 of $14.7
billion.

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 December 31,
1995 of $40.6 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 led by Almond G.
Goduti, Jr., 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.

Prior to joining The Boston Company in 1988, Mr. MacBride, a Senior Vice
President and Director of Fixed Income Securities 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 of 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

50
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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 broker-
dealers, management may consider research and brokerage services furnished to it
and its affiliates.

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 judgement 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 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 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 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 Van Kampen
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 GT 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

51
<PAGE>

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 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

52
<PAGE>

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.

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<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.

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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

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.

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<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.

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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

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.

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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.

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VINTAGE TIFFANY LAMP

[GRAPHIC APPEARS HERE]

PROSPECTUS

12410 SMITH BARNEY / TRAVELERS SERIES FUND INC. SB Ed 2-96

Part B

February 28, 1996

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 Van Kampen 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 GT Global Strategic Income Portfolio primarily 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. While current
income is the primary objective, the Portfolio believes that
there should be a reasonable opportunity for growth of capital
and income.

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 February 28, 1996 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 41

Determination of Net Asset Value 41

Redemption of Shares 41

Custodians 42

Independent Auditors 42

The Fund 42

Management Agreements 43

Voting Rights 47

Financial Statements 48

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.

*JESSICA M. BIBLIOWICZ, Director and President
Executive Vice President of Smith Barney; President of thirty-
nine 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 Barony; 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 February 2, 1996 Directors and officers owned in the
aggregate less than 1% of the outstanding securities of the Fund.

The following table shows the compensation paid by the Fund
to each director during the Fund's last fiscal year. None of the
officers of the Fund received any compensation from the Fund for
such period. Officers and interested directors of the Fund are
compensated by Smith Barney.

COMPENSATION TABLE
Total
Pension or Compensation Number of
Retirement from Fund Funds for
Aggregate Benefits Accrued and Fund Which Director
Compensation as part of Complex Serves Within
Name of Person from Fund Fund ExpensesPaid to Directors
Fund Complex
Victor K. Atkins $6,228 $0 $26,400 2
Jessica M. Bibliowicz 0 0 0 12
Alger B. Chapman 6,228 0 69,850 7
Robert A. Frankel 6,228 0 65,100 7
Ranier Greeven 5,128 0 24,800 2
Susan M. Heilbron 6,228 0 26,400 2
Heath B. McLendon 0 0 0 42
James M. Shuart 6,228 0 26,400 2

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 GT 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 Van Kampen
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 GT 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 than 20% of its total assets in foreign securities,
includes 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 GT Global Strategic Income Portfolio, the MFS Total Return
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.

Settlement mechanisms in emerging market securities may be
less efficient and reliable than in more developed markets. In
such emerging securities markets there may be share registration
and delivery delays and failures.

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 GT 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 GT 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 GT 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 Van Kampen 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 GT 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 fixed-income 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 non-
convertible 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 GT Global Strategic
Income Portfolio, the Smith Barney High Income Portfolio and the
MFS Total Return Portfolio may purchase securities on a when-
issued 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 Van Kampen American
Capital Enterprise Portfolio, the GT 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 Van Kampen American Capital
Enterprise Portfolio, the Smith Barney International Equity
Portfolio, the Smith Barney Pacific Basin Portfolio, the Putnam
Diversified Income Portfolio, the GT 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 Van Kampen American
Capital Enterprise Portfolio, the Smith Barney International
Equity Portfolio, the Smith Barney Pacific Basin Portfolio, the
Putnam Diversified Income Portfolio, the GT 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 Van Kampen
American Capital Enterprise Portfolio, the Smith Barney
International Equity Portfolio, the Smith Barney Pacific Basin
Portfolio, the Putnam Diversified Income Portfolio, the GT 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 GT 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 GT Global Strategic Income Portfolio, the Smith Barney High
Income Portfolio and the MFS Total Return Portfolio may enter
into interest rate, securities index, financial futures and
currency futures contracts ("Futures" or "Futures Contracts").
The AIM Capital Appreciation Portfolio may enter into stock index
futures contracts and the Van Kampen 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.

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 Van Kampen American Capital Enterprise Portfolio,
the Smith Barney International Equity Portfolio, the Smith Barney
Pacific Basin Portfolio, the Putnam Diversified Income Portfolio,
the GT 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 GT 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 cross-
hedges, 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-the-
counter ("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 Van Kampen American Capital Enterprise Portfolio,
the Smith Barney International Equity Portfolio, the Smith Barney
Pacific Basin Portfolio, the Putnam Diversified Income Portfolio,
the GT 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 in-
the-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 non-
primary 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 judgment 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 GT
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 (GT 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 (GT 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 (GT Global Strategic Income
Portfolio and Putnam Diversified Income Portfolio). Subject to
their fundamental investment restrictions, these Portfolios 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 Portfolios 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 (GT 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 33-1/3% 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.

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 Van Kampen 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
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.

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 Van
Kampen 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 Van Kampen 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:

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 for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.

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 GT 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 331/3% 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 GT 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 investment policies are not
fundamental investment policies and may be changed by the
approval of the Fund's Board of Directors without shareholder
approval. 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:

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.

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 AIM Capital Appreciation
Portfolio, the Van Kampen 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 GT Global
Strategic Income Portfolio are held in the custody of The
Bank of New York, 48 Wall Street, New York, New York 10005.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, 345 Park Avenue, New York, New
York 10154, has been selected as the Fund's independent
auditors for its fiscal year ending October 31, 1996, 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 Van Kampen 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 GT 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 with respect to each Portfolio
except the AIM Capital Appreciation Portfolio, whose
Management Agreement is dated October 10, 1995. 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) 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 Travelers Group Inc.
("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 Van Kampen
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 GT 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
two-year 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 periods shown, each Portfolio paid the
following management fee:
Period Ended* Year Ended
10-31-94 10-31-95
Smith Barney Income and Growth Portfolio
$11,567 116,605
Alliance Growth Portfolio 27,111 421,756
AIM Capital Appreciation Portfolio N/A 595**
Van Kampen American Capital Enterprise Portfolio 11,354 93,346
Smith Barney International Equity Portfolio 24,422 263,820
Smith Barney Pacific Basin Portfolio 12,450 47,987+
TBC Managed Income Portfolio 7,369 47,986
Putnam Diversified Income Portfolio 11,520 122,559
GT Global Strategic Income Portfolio 5,389 40,549++
Smith Barney High Income Portfolio 7,951 53,173
MFS Total Return Portfolio 13,651 187,388
Smith Barney Money Market Portfolio 9,916 100,040

*From June 16, 1994 (commencement of operations)
through October 31, 1994.
**From October 10, 1995 (commencement of
operations) through October 31, 1995.
+The Manager waived $21,803 of the management fees
shown.
++The Manager waived $23,349 of the management
fees shown.

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 Van Kampen American Capital Enterprise
Portfolio, the TBC Managed Income Portfolio, the Putnam
Diversified Income Portfolio, the GT Global Strategic Income
Portfolio and the MFS Total Return Portfolio. The Fund has
entered into a Subadvisory Agreement dated October 10, 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 59%
of the issued and outstanding units representing assignments
of beneficial ownership of limited partnership interests in
the Alliance Capital ("Units"). As of June 30, 1995,
approximately 33% and 8% of the Units were owned by the
public and employees of Alliance Capital and its
subsidiaries, respectively.

AXA owns 60% 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 January 1, 1995, 42.6% of
the voting shares (representing 54.7% 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
January 1, 1995, 62.1% of the voting shares (representing
75.7% 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 31.8% of
the voting shares (representing 39% of the voting power),
and 26.5% of the voting shares (representing 16.6% 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 51.3% of the
voting shares (representing 65.8% 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, 1995 totaling more than $144 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 50 registered investment companies
comprising 93 separate investment portfolios managed by
Alliance Capital currently have over 1.6 million
shareholders. As of October 31, 1995, Alliance Capital was
retained as an investment manager of employee benefit fund
assets for 29 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 wholly-owned 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 Van Kampen American Capital Enterprise Portfolio is
advised by American Capital Asset Management ("VKAC").
VKAC is located at 2800 Post Oak Boulevard, Houston, Texas
77056 and is a wholly-owned subsidiary of Van Kampen
American Capital, Inc., which is a wholly-owned subsidiary
of VK/AC Holding, Inc. For the services provided by VKAC,
the Manager pays to VKAC 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 wholly-owned 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 GT Global Strategic Income Portfolio is advised by
LGT Asset Management, Inc. ("LGT Asset Management"). LGT
Asset Management is located at 50 California Street, San
Francisco, California 94111 and is a member of Liechtenstein
Global Trust, formerly BIL GT Group. Other worldwide
affiliates of Liechtenstein Global Trust include LGT Bank in
Liechtenstein formerly Bank in Liechtenstein, an
international financial services institution founded in
1920. LGT Bank in Liechtenstein has principal offices in
Vaduz, Liechtenstein. Its subsidiaries currently include
LGT Bank in Liechtenstein (Deutschland) GmbH, formerly Bank
in Liechtenstein (Frankfurt) GmbH, and LGT Asset Management
AG, formerly Bilfinanz and Verwaltung AG, located in Zurich,
Switzerland.

Worldwide asset management affiliates also currently
include LGT Asset Management PLC, formerly G.T. Management
PLC in London, England; LGT Asset Management Ltd., formerly
G.T. Management (Asia) Ltd. in Hong Kong; LGT Investment
Trust Management Ltd., formerly G.T. Management (Japan) in
Tokyo; LGT Asset Management Pte. Ltd., formerly G.T.
Management (Singapore) PTE Ltd. located in Singapore; LGT
Asset Management Ltd., formerly G.T. Management (Australia)
Ltd., located in Sydney; and LGT Asset Management GmbH,
formerly BIL Asset Management GmbH, located in Frankfurt,
Germany.

For the services provided by LGT Asset Management, the
Manager pays to LGT Asset Management 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 wholly owned subsidiary of Sun Life of Canada
(U.S.), which is a wholly owned 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 and for the fiscal year
ended October 31, 1995 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 the period
from June 16, 1994 through October 31, 1994 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. During the fiscal year ended October 31, 1995 the
total amount of commissionable transactions was
$340,500,090; $21,792,006 (6.4%) of which was directed to
Smith Barney and executed by unaffiliated brokers and
$318,708,084 (93.6%) of which was directed to other brokers.

Commissions
To
Others For
Execution and
Research and
Statistical
Total To Smith Barney To Others Services

6/16/94 - $171,937 $28,574 $143,363 0
10/31/94

Year ended 684,356 43,728 640,628 0
10/31/95

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 with comparable
transactions involving similar securities during a
comparable period of time." The Rule and the policy and
procedures also contain review requirements and require
management to furnish reports to the Board of Directors and
to maintain records in connection with such reviews.

VOTING RIGHTS

The Directors themselves have the power to alter the
number and the terms of office of the directors, and they
may at any time lengthen their own terms or make their terms
of unlimited duration (subject to certain removal
procedures) and appoint their own successors, provided that
in accordance with the 1940 Act always at least a majority,
but in most instances, at least two-thirds of the Directors
have been elected by the shareowners of the Fund. Shares do
not have cumulative voting rights and therefore the owners
of more than 50% of the outstanding shares of the Fund may
elect all of the Directors irrespective of the votes of
other shareowners.

The Fund offers its shares only for purchase by
insurance company separate accounts. With respect to any
Fund shareholder meeting, the insurance company will solicit
and accept timely voting instructions from its contract
owners 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 section
entitled "Voting Rights" in the accompanying prospectus for
the applicable contract 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 the insurance company in proportion to the shares for
which voting instructions are received.

Shares of the Fund entitle their owners to one vote
per share; however, on any matter submitted to a vote of the
shareowners, all shares then entitled to vote will be voted
by individual Portfolio unless otherwise required by the
1940 Act (in which case all shares will be voted in the
aggregate). For example, a change in investment policy for
a Portfolio would be voted upon only by shareowners of the
Portfolio involved. Additionally, approval of an amendment
to a Portfolio's advisory or subadvisory agreement is a
matter to be determined separately by that Portfolio.
Approval of a proposal by the shareowners of one Portfolio
is effective as to that Portfolio whether or not enough
votes are received from the shareowners of the other
Portfolios to approve the proposal as to that Portfolio. As
of February 1, 1996, Travelers Group Inc. owned 145,700
shares (13.53%) of the outstanding shares of the Smith
Barney Pacific Basin Portfolio and 13,200 shares (.34%) of
the outstanding shares of the AIM Capital Appreciation
Portfolio.

FINANCIAL STATEMENTS

The financial information contained under the
following headings is hereby incorporated by reference to
the Fund's 1995 Annual Reports to Shareholders:

Annual Report of: Pages(s) in:

Smith Barney Income & Growth Portfolio
Alliance Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Schedule of Investments 9-21
Statements of Assets and Liabilities 22
Statements of Operations 25
Statements of Changes in Net Assets 24-26
Notes to Financial Statements 27-29
Financial Highlights (for a share 30-32
of capital stock of each series
outstanding through each year)
Independent Auditors' Report 33

MFS Total Return Portfolio
TBC Managed Income Portfolio
Smith Barney Money Market Portfolio
Schedule of Investments 8-21
Statements of Assets and Liabilities 22
Statements of Operations 23
Statements of Changes in Net Assets 24-26
Notes to Financial Statements 27-30
Financial Highlights (for a share 31-33
of capital stock of each series
outstanding through each year)
Independent Auditors' Report 34

Smith Barney High Income Portfolio
Putnam Diversified Income Portfolio
Schedule of Investments 8-26
Statements of Assets and Liabilities 27
Statements of Operations 28
Statements of Changes in Net Assets 29
Notes to Financial Statements 30-37
Financial Highlights (for a share 38-39
of capital stock of each series
outstanding through each year)
Independent Auditors' Report 40

Annual Report of : Pages(s) in:

Smith Barney International Equity Portfolio
Smith Barney Pacific Basin Portfolio
GT Global Strategic Income Portfolio
Schedule of Investments 11-19
Statements of Assets and Liabilities 20
Statements of Operations 21
Statements of Changes in Net Assets 22-24
Notes to Financial Statements 25-29
Financial Highlights (for a share 30-32
of capital stock of each series
outstanding through each year)
Independent Auditors' Report 33

Annual Report of : Pages(s) in:

AIM Capital Appreciation Portfolio
Schedule of Investments 3-6
Statements of Assets and Liabilities 7
Statements of Operations 8
Statements of Changes in Net Assets 9
Notes to Financial Statements 10-12
Financial Highlights (for a share 13
of capital stock of each series
outstanding through each year)
Independent Auditors' Report 14

PART C. Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements

Location In:
Part A Part B

Statements of Assets and Liabilities
dated October 31, 1995 *

Statements of Operations for the *
period ended October 31, 1995

Statements Changes in Net Assets for
the period ended October 31, 1995 and 1994 *

Notes to Financial Statements *

Independent Auditors' Report *

* The Registrant's Annual Reports for the fiscal year ended October 31, 1995
and the Reports of Independent Accountants dated December 12, 1995
are incorporated by reference to the N-30D filed on January 11, 1996
as Accession # 0000091155-96-19.

All other statements and schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.

(b) Exhibits

(1) (a) Articles of Incorporation dated as of February
18, 1994 is incorporated by reference to Exhibit
1(a) to the Registration Statement on February 23,
1994.

(b) Amendment to Articles of Incorporation dated as
of May 26, 1994 is incorporated by reference to
Exhibit 1(b) to Pre-Effective Amendment No. 1 on
June 10, 1994.

(c) Amendment to Articles of Incorporation dated as
of June 7, 1994 is incorporated by reference to
Exhibit 1(c) to Pre-Effective Amendment No. 1 on
June 10, 1994.

(2) Bylaws of the Fund are incorporated by reference to
Exhibit 2 to Pre-Effective Amendment No. 1 on June
10, 1994.

(3) Not applicable.

(4) Not applicable.

(5) (a) Management Agreement between Registrant on
behalf of the Smith Barney Income and Growth
Portfolio and Mutual Management Corp. is
incorporated by reference to Exhibit 5(a) to
Pre-Effective Amendment No. 1 on June 10, 1994.
Transfer and Assumption of Management
Agreement**

(b) Management Agreement between
Registrant on behalf of the Alliance
Growth Portfolio and Mutual
Management Corp. is incorporated by
reference to Exhibit 5(b) to Pre-
Effective Amendment No. 1 on June
10, 1994. Transfer and Assumption
of Management Agreement**

(c) Management Agreement between
Registrant on behalf of the American
Capital Enterprise Portfolio and
Mutual Management Corp. is
incorporated by reference to Exhibit
5(c) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(d) Management Agreement between
Registrant on behalf of the Smith
Barney International Equity
Portfolio and Mutual Management
Corp. is incorporated by reference
to Exhibit 5(d) to Pre-Effective
Amendment No. 1 on June 10, 1994.
Transfer and Assumption of
Management Agreement **

(e) Management Agreement between
Registrant on behalf of the Smith
Barney Pacific Basin Portfolio and
Mutual Management Corp. is
incorporated by reference to Exhibit
5(e) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(f) Management Agreement between
Registrant on behalf of the TBC
Managed Income Portfolio and Mutual
Management Corp. is incorporated by
reference to Exhibit 5(f) to Pre-
Effective Amendment No. 1 on June
10, 1994. Transfer and Assumption of
Management Agreement **

(g) Management Agreement between
Registrant on behalf of the Putnam
Diversified Income Portfolio and
Mutual Management Corp. is
incorporated by reference to Exhibit
5(g) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(h) Management Agreement between
Registrant on behalf of the GT
Global Strategic Income Portfolio
and Mutual Management Corp. is
incorporated by reference to Exhibit
5(h) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(i) Management Agreement between
Registrant on behalf of the Smith
Barney High Income Portfolio and
Mutual Management Corp. is
incorporated by reference to Exhibit
5(i) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(j) Management Agreement between Registrant on
behalf of the MFS Total Return Portfolio and
Mutual Management Corp. is incorporated by
reference to Exhibit 5(j) to Pre-Effective
Amendment No. 1 on June 10, 1994. Transfer
and Assumption of Management Agreement**

(k) Management Agreement between
Registrant on behalf of the Smith
Barney Money Market Portfolio and
Mutual Management Corp. is
incorporated by reference to Exhibit
5(k) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Management Agreement
**

(l) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and Alliance Capital Management L.P.
is incorporated by reference to
Exhibit 5(l) to Pre-Effective
Amendment No. 1 on June 10, 1994.
Transfer and Assumption of
Subadvisory Agreement **

(m) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and American Capital Asset
Management, Inc. is incorporated by
reference to Exhibit 5(m) to Pre-
Effective Amendment No. 1 on June
10, 1994. Transfer and Assumption
of Subadvisory Agreement **

(n) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and The Boston Company Asset
Management, Inc. is incorporated by
reference to Exhibit 5(n) to Pre-
Effective Amendment No. 1 on June
10, 1994. Transfer and Assumption
of Subadvisory Agreement **

(o) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and Putnam Investment Management,
Inc. is incorporated by reference to
Exhibit 5(o) to Pre-Effective
Amendment No. 1 on June 10, 1994.
Transfer and Assumption of
Subadvisory Agreement **

(p) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and G.T. Capital Management, Inc. is
incorporated by reference to Exhibit
5(p) to Pre-Effective Amendment No.
1 on June 10, 1994. Transfer and
Assumption of Subadvisory Agreement
**

(q) Subadvisory Agreement among
Registrant, Mutual Management Corp.
and Massachusetts Financial Services
Company is incorporated by reference
to Exhibit 5(q) to Pre-Effective
Amendment No. 1 on June 10, 1994.
Transfer and Assumption of
Subadvisory Agreement **

(r) Subadvisory Agreement between Mutual
Management Corp. and Smith Barney
Inc. is incorporated by reference to
Exhibit 5(r) to Pre-Effective
Amendment No. 1 on June 10, 1994.
Transfer and Assumption of
Subadvisory Agreement **

(s) Management Agreement among Registrant, Smith
Barney Mutual Funds Management Inc.
and AIM Capital Management, Inc.(filed herewith)

(t) Subadvisory Agreement among Registrant, Smith
Barney Mutual Funds Management Inc.
and AIM Capital Management, Inc. (filed herewith)

(6) Distribution Agreement between Registrant and Smith
Barney Inc. is incorporated by reference to Exhibit
6 to Pre-Effective Amendment No. 1.

(7) Not applicable.

(8) (a) Custodian Agreement between Registrant and
PNC Bank, National Association **

(b) Global Custody Agreement between Barclays Bank
PLC and PNC Bank**

(9) Transfer Agency Agreement between Registrant and
The Shareholder Services Group Inc. (filed
herewith)

(10) Opinion and Consent of Sullivan &
Cromwell is incorporated by reference to
Exhibit 10 to Pre-Effective Amendment No. 1
on June 10, 1994.

(11) (a) Auditors' Report (incorporated by referenced
into Part B).
(b) Auditors' Consent (filed herewith)

(12) Not applicable.

(13) Subscription Agreement between Registrant and
The Travelers, Inc. **.

(14) Not applicable.

(15) Not applicable.

(16) Schedule for Computation of Performance
Quotations **.

(17) Financial Data Schedule. (filed herewith)

(18) Not Applicable.
__________________________
** Filed with Post-Effective Amendment No. 1 on December 29,
1994.

Item 25. Persons Controlled by or under Common Control with
Registrant

The Registrant is not controlled directly or
indirectly by any person. Information with respect to
the Registrant's investment manager and each sub-
adviser is set forth under the caption "Management" in
the prospectus included in Part A of this Amendment to
the Registration Statement on Form N-1A.

Item 26. Number of Holders of Securities

Number of Recordholders
Title of Class on February 26, 1996

SB Income and Growth Portfolio 2
Alliance Growth Portfolio 1
American Capital Enterprise Portfolio 1
SB International Equity Portfolio 3
SB Pacific Basin Portfolio 2
TBC Managed Income Portfolio 1
Putnam Diversified Income Portfolio 1
GT Global Strategic Income Portfolio 1
SB High Income Portfolio 2
MFS Total Return Portfolio 1
SB Money Market Portfolio 3
AIM Capital Appreciaiton Portfolio 2

Item 27. Indemnification

Reference is made to ARTICLE IX of Registrant's
Charter for a complete statement of its terms.

Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue."

Item 28. Business and other Connections of the Manager and
each Sub-Adviser

See the material under the caption "Management"
included in Part A (Prospectus) of this
Registration Statement and the material appearing
under the caption "Management Agreements"
included in Part B (Statement of Additional
Information) of this Registration Statement.

Information as to the Directors and Officers of
Smith Barney Mutual Funds Management Inc. is
included in its Form ADV (File No. 801-8314),
filed with the Commission, which is incorporated
herein by reference thereto.

Information as to the Directors and Officers of
Alliance Capital Management L.P. is included in
its Form ADV (File No. 801-32361), filed with the
Commission, which is incorporated herein by
reference thereto.

Information as to the Directors and Officers of
The Boston Company Asset Management Inc. is
included in its Form ADV (File No. 801-6829),
filed with the Commission, which is incorporated
herein by reference thereto.

Information as to the Directors and Officers of
Putnam Investment Management, Inc. is included in
its Form ADV (File No. 801-07974), filed with the
Commission, which is incorporated herein by
reference thereto.

Information as to the Directors and Officers of
LGT Capital Management, Inc. is included in its
Form ADV (File No. 801-10254), filed with the
Commission, which is incorporated herein by
reference thereto.

Information as to the Directors and Officers of
Van Kampen American Capital Asset Management,
Inc. is included in its Form ADV (File No. 801-
01669), filed with the Commission, which is
incorporated herein by reference thereto.

Information as to the Directors and Officers of
Massachusetts Financial Services Company is
included in its Form ADV (File No. 801-07352 and
801-17352), filed with the Commission, which is
incorporated herein by reference thereto.

Information as to the Directors and Officers of AIM
Capital Management, Inc. is included in its Form ADV
(File No.801-15211), with the Commission, which is
incorporated herein by reference thereto.

Item 29. Principal Underwriters

(a) Smith Barney Inc. ("Smith Barney ") also acts as
principal underwriter for Smith Barney Money Funds,
Inc.; Smith Barney Muni Funds; Smith Barney Funds,
Inc., Smith Barney Variable Account Funds; Smith
Barney Intermediate Municipal Fund, Inc., Smith Barney
Municipal Fund, Inc., High Income Opportunity Fund
Inc., Smith Barney World Funds, Inc., Greenwich Street
California Municipal Fund Inc., The Inefficient-Market
Fund, Inc., Smith Barney Adjustable Rate Government
Income Fund, Smith Barney Equity Funds, Smith Barney
Income Funds, Smith Barney Massachusetts Municipals
Fund, Zenix Income Fund Inc., Smith Barney Arizona
Municipals Fund Inc., Smith Barney Principal Return
Fund, Municipal High Income Fund Inc., The Trust for
TRAK Investments, Smith Barney Series Fund, Smith
Barney Income Trust, Smith Barney Oregon Municipals
Fund Inc., Smith Barney Municipal Money Market
Fund,Inc., Smith Barney Aggressive Growth Fund Inc.,
Smith Barney Appreciation Fund Inc., Smith Barney
California Municipals Fund Inc., Smith Barney
Fundamental Value Fund Inc., Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals
Fund Inc., Smith Barney New Jersey Municipals Fund
Inc., Smith Barney Natural Resources Fund Inc., Smith
Barney Investment Funds Inc., Smith Barney FMA (R)
Trust, The Italy Fund Inc., Smith Barney
Telecommunications Trust, Managed Municipals Portfolio
Inc., Managed Municipals Portfolio II Inc., Smith
Barney Conscert Series Inc.,Managed High Income
Portfolio Inc. and Greenwich Street Municipal fund
Inc.

(b) The information required by this Item 29 with
respect to each director and officer of Smith Barney
is incorporated by reference to Schedule A of Form
BD filed by Smith Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-8177)

Item 30. Location of Accounts and Records

PNC Bank, National Association,17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, will
maintain the custodian records for the Smith
Barney Income and Growth Portfolio, Alliance
Growth Portfolio, AIM Capital Appreciation
Portfolio, Van Kampen American Capital Enterprise
Portfolio, TBC Managed Income Portfolio, Putnam
Diversified Income Portfolio, Smith Barney High
Income Portfolio, MFS Total Return Portfolio and
Smith Barney Money Market Portfolio and The Bank
of New York, 48 Wall Street, New York, New York
10005 will maintain the custodian records for the
Smith Barney International Equity Portfolio,
Smith Barney Pacific Basin Portfolio and GT
Global Strategic Income Portfolio, each as
required by Section 31 (a) of the Investment
Company Act of 1940, as amended (the "1940 Act").

First Data Investor Services Group, Inc., (formerly
The Shareholder Services Group Inc.) 53 State Street,
Boston, Massachusetts 02109-2873, will maintain the
shareholder servicing agent records, required by
Section 31 (a) of the 1940 Act.

All other records required by Section 31 (a) of
the 1940 Act are maintained at the offices of the
Registrant at 388 Greenwich Street, New York, New
York 10013 (and preserved for the periods
specified by Rule 31a-2 of the 1940 Act).

Item 31. Management Services

Not Applicable

Item 32. Undertakings

(a) Not Applicable

(b) Not Applicable

(c) Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
Registrant's latest report to shareholders, upon
request and without charge.

EXHIBIT INDEX

Exhibit No. Exhibit Page Number

5(s) Management Agreement among Registrant,
Smith Barney Mutual Funds Management Inc.
and AIM Capital Management, Inc.

5(t) Subadvisory Agreement among Registrant,
Smith Barney Mutual Funds Management Inc.
and AIM Capital Management, Inc.

8(a) Custodian Agreement between Registrant and
Morgan Guaranty Trust Company of New Yorkl

(9) Form of Transfer Agency Agreement

(11) (ii) Auditor's Consent

(17) Financial Data Schedule

SIGNATURES

Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485 (b) under the
Securities Act of 1933 and has duly caused this Post-
Effective Amendment to its Registration Statement to be
signed on its behalf by the undersigned and where
applicable, the true and lawful attorney-in-fact, thereto
duly authorized, in the City of New York, and State of New
York on the 27th day of February, 1996.

SMITH BARNEY/TRAVELERS SERIES FUND
INC.

By /s/Heath B. McLendon
(Heath B. McLendon, Chairman of
the Board and Chief Executive Officer)

Pursuant to the requirements of the Securities Act of
1933, this Post-Effective Amendment to the Registration
Statement has been signed below by the following persons in
the capacities and on the date indicated.

Signature Title Date

/s/Heath B. McLendon President February 27, 1996
(Heath B. McLendon) (Chief Executive Officer)

/s/ Victor K. Atkins* Director February 27, 1996
(Victor K. Atkins)

/s/ Jessica Bibliowicz Director and February 27, 1996
(Jessica Bibliowicz) President

/s/ Alger B. Chapman* Director February 27, 1996
(Alger B. Chapman)

/s/ Robert A. Frankel* Director February 27, 1996
(Robert A. Frankel)

/s/ Rainer Greeven* Director February 27, 1996
(Rainer Greeven)

Signature Title Date

/s/ Susan M. Heilbron* Director February 27, 1996
(Susan M. Heilbron)

/s/ James Shuart* Director February 27, 1996
(James Shuart)

/s/Lewis E. Daidone Treasurer February 27, 1996
(Lewis E. Daidone) (Principal Financial
and Accounting Officer)

*By:/s/Lewis E. Daidone February 27, 1996
Lewis E. Daidone
Pursuant to Power of Attorney

MANAGEMENT AGREEMENT

SMITH BARNEY/TRAVELERS SERIES FUND INC.

(AIM Capital Appreciation Portfolio)

October 10, 1995

SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
388 Greenwich Street
New York, New York 10013

Dear Sirs:

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"), confirms its agreement with
Smith Barney Mutual Funds Management Inc. (the "Manager"), as follows:

1. Investment Description; Appointment

2. Services as Investment Manager

Subject to the supervision, direction and approval of the Board of the
Company the Manager shall 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, and, subject to the provisions of the Subadvisory Agreement (as
hereinafter defined), the Manager will manage the investment operations of the
Portfolio and will furnish or cause to be furnished to the Portfolio advice
and assistance with respect to the acquisition, holding or disposal of the
Portfolio's investments, in accordance with the Portfolio's investment
objective, policies and restrictions as stated in the Prospectus and
Statement. It is expressly understood and the Company hereby agrees that the
Manager will enter into an agreement, dated the date hereof (the "Subadvisory
Agreement") with AIM Capital Management, Inc. ("AIM Capital") pursuant to
which AIM Capital is authorized, in its sole discretion and without prior
consultation with the Manager to provide to the Portfolio the investment
advisory services specified therein and that so long as such agreement remains
in effect the Manager shall have no obligation hereunder to render to the
Portfolio the services specified therein.

3. Information Provided to the Company

The Manager shall keep the Company informed of developments materially
affecting the Portfolio, and shall, on its own initiative, furnish the Company
from time to time with whatever information the Manager believes is
appropriate for this purpose.

4. Standard of Care

The Manager shall exercise its best judgment and shall act in good faith
in rendering the services listed in paragraph 2 above. The Manager shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Company 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 Manager against any liability to the Company or the
shareholders of the Portfolio to which the Manager 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 Manager's reckless disregard
of its obligations and duties under this Agreement.

5. Compensation

In consideration of the services rendered pursuant to this Agreement,
the Portfolio will pay the Manager an annual fee calculated at the rate of
0.80% of the Portfolio's average daily net assets; the fee is calculated daily
and paid monthly. 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 Manager, 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 Manager shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expenses to be borne by the Portfolio
or the Company) in connection with the performance of its services under this
Agreement and shall pay (a) AIM Capital, as sub-investment adviser to the
Portfolio under the Subadvisory Agreement, and (b) to any additional or
substitute sub-investment adviser or advisers retained by the Manager to
provide advisory services to the Portfolio (together with AIM Capital, each a
"Sub-Adviser"), the fees required to be paid to each Sub-Adviser. The
Portfolio will bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory, sub-advisory and
administration fees, other than those payable to a Sub-Adviser or any
additional or substitute investment adviser; fees for necessary professional
and brokerage services; 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 Manager hereunder on behalf of the Portfolio are borne by the
Company.

7. Reduction of Fee

If in any fiscal year the aggregate expenses of the Portfolio (including
fees pursuant to this Agreement and the Portfolio's administration agreement,
if any, but excluding interest, taxes, brokerage and extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over the
Portfolio, the Manager shall reduce its fee to the Portfolio by the proportion
of such excess expense equal to the proportion that its fee hereunder bears to
the aggregate of fees paid by the Portfolio for investment management, advice
and administration in that year, to the extent required by state law. A fee
reduction pursuant to this paragraph 7, if any, shall be estimated, reconciled
and paid on a monthly basis. The Company confirms that, as of the date of
this Agreement, no such expense limitation is applicable to the Portfolio.

8. Services to Other Companies or Accounts

The Company understands that the Manager 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, and the Company has no objection to the Manager's so
acting, provided that whenever the Portfolio and one or more other investment
companies or accounts managed or advised by the Manager 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 Portfolio recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Portfolio understands that the persons employed
by the Manager to assist in the performance of the Manager'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 Manager or any affiliate of the Manager to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.

9. Term of Agreement

This Agreement shall become effective October 10, 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 Investment Company Act of 1940, as amended (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 Manager. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).

10. Representation by the Company

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

If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.

Very truly yours,

SMITH BARNEY/TRAVELERS SERIES FUND INC.

By:
Name: Heath B. McLendon
Title: Chairman and Chief Executive Officer

Accepted:

SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.

By:
Name: Lewis E. Daidone
Title: Senior Vice President

g:\funds\$sts\agreemts\mngt

Securities, Trust & Information Services

US Domestic Custody Agreement

Agreement dated as of ____________ between Morgan Guaranty Trust Company of
New York (the "Custodian"), and Smith Barney ___________________________ (the
"Client").

Whereas, the Client desires to arrange for the custody of certain of its
assets by the Custodian;

Now, Therefore, in consideration of the mutual agreements contained herein,
the Custodian and the Client agree as follows:

1. Definitions. The following terms, as used herein, shall have the following
meanings:

"Authorized Instruction" means (i) a written, oral or electronic communication
accepted by the Custodian in good faith that has been transmitted subject to
the Security Procedures agreed upon in writing by the Custodian and the Client
or (ii) any other written, oral or electronic communication that the Custodian
believes in good faith to have been given by an Authorized Person.

"Authorized Persons" means those persons who have been designated by or duly
authorized by the Client pursuant to all necessary corporate or other action
(which shall be evidenced by appropriate documentation delivered to the
Custodian) to act on behalf of the Client in connection with this Agreement.
Such persons shall continue to be Authorized Persons until such time as the
Client has delivered to the Custodian appropriate documents revoking the
authority of such persons.

"Cash" has the meaning set forth in Section 5.

"Cash Account" has the meaning set forth in Section 5.

"Morgan Affiliate" means any office or branch of Morgan Guaranty Trust Company
of New York ("Morgan") other than the Custodian and any other entity that
directly, or indirectly through one or more intermediaries, controls Morgan or
any other entity that is controlled by or is under common control with Morgan.

"Securities Account" has the meaning set forth in Section 3.

"Security Procedure" means, for any specified method of communication, a
procedure agreed upon in writing by the Custodian and the Client for the
purpose of verifying that an Authorized Instruction given pursuant to such
method of communication is that of the Client or detecting error in the
transmission or the content of such Authorized Instruction. A Security
Procedure may require the use of algorithms or other codes, identifying words
or numbers, encryption, callback procedures, or similar security devices.

"Securities Depository" means any securities depository or clearing system set
forth on Appendix A hereto, as amended from time to time in accordance with
Section 17 hereof.

"Security" means any share, stock, bond, debenture, note, certificate of
indebtedness, warrant, option or other security (whether represented by a
certificate or by a book-entry on the records of the issuer or other entity
responsible for recording such book-entries) that is from time to time held
for the account of the Client directly, or indirectly through a Securities
Depository, by the Custodian pursuant to this Agreement.

2. Representations, Warranties and Covenants of the Client. The Client
represents and warrants, as of the date of this Agreement and each day
thereafter until this Agreement is terminated, the following:

(a) The execution, delivery and performance by the Client of this Agreement
(i) are within the Client's corporate, trust or other constitutive powers;
(ii) have been duly authorized by all necessary corporate, trust or
appropriate action under its constitutive documents; (iii) require no action
by or in respect of, or filing with, any governmental body, agency or
official; and (iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the organic documents of the
Client or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Client.

(b) The Custodian shall be entitled to deal with all Securities free of any
proprietary or equitable interest of any person or entity (other than
interests of the Client, the Custodian and Security Depositories).

(c) The Client agrees that it will not incur any credit, advance or overdraft
with respect to the Cash Account to purchase or carry any margin stock, as
defined in Regulation U of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Chapter II, as amended.

3. Securities Account. The Client hereby establishes with the Custodian a
securities account (the "Securities Account") which shall contain, in the
manner and on the terms specified herein, Securities.

4. Terms of Custody.

(b) Fungibility. The Client agrees that any issue held by the Custodian
directly, or indirectly through any Securities Depository, may be treated as
fungible with all other securities of the same issue pursuant to the
provisions of the Uniform Commercial Code of the State of New York (or other
applicable laws). The Client shall have no right to any specific securities
but instead shall be entitled, subject to applicable laws and regulations and
to the terms of this Agreement, to transfer, deliver or repossess from the
Custodian an amount of securities of any issue that is equivalent to the
amount of such securities credited to the Securities Account, without regard
to the certificate numbers (or other identifying information) of the
securities originally deposited, and the Custodian's obligation to the Client
with respect to the securities shall be limited to effecting such transfer,
delivery or repossession.

(c) Identification of Client's Interests; Nominees. The Custodian shall cause
the Client's interest in any Securities held directly or indirectly by the
Custodian to be evidenced by a credit to the Securities Account on the books
of the Custodian. The Custodian shall require each Securities Depository to
identify Securities held by the Securities Depository as being held for the
account of the Custodian for its customers to the extent permitted by the
rules and procedures of the Securities Depository. The Custodian shall
segregate on its books and records any securities which are held by it for the
Custodian's own account from those securities (including the Securities) held
by it for the accounts of others. Securities may be registered in the name of
the Custodian's nominee or, as to any Securities in the possession of a
Securities Depository, in the name of the Securities Depository's nominee.
The Client agrees to hold any nominee harmless from any liability as a holder
of record of any Securities.

(d) Liens of Securities Depositories. The Custodian shall authorize or permit
the holding of any Securities by a Securities Depository only as long as (i)
the Securities are not subject to any right, charge, security interest, lien
or claim of any kind in favor of the Securities Depository or its creditors,
including a receiver or trustee in bankruptcy or similar authority, except for
a claim of payment for the safe custody or administration of the Securities
and (ii) beneficial ownership of the Securities is freely transferable without
the payment of money or value other than for safe custody or administration.

5. Cash Account. The Client hereby establishes and shall maintain with the
Custodian a deposit account to be used in connection with transactions
relating to Securities (the "Cash Account"). The collected balance from time
to time in the Cash Account shall constitute "Cash". Any credit made to the
Cash Account shall be provisional and may be reversed if such payment is not
actually collected or received.

6. Instructions by the Client.

(a) Generally. The Client shall give an Authorized Instruction with respect
to Cash and Securities only to the Custodian. The Client agrees to be bound
by all Authorized Instructions, whether or not the instructions were duly
authorized in accordance with the Client's own procedures. The Custodian
shall not be required to follow any Authorized Instruction that would violate
any applicable law, decree, regulation or order of any government or
governmental body (including any court or tribunal) or that would be contrary
to any provision of this Agreement.

(b) Payments. The Custodian shall make payments only to the extent that
sufficient Cash is available in the Cash Account or otherwise available
therefor and only (i) as specified in an Authorized Instruction, (ii) as
permitted by Section 13 hereof or (iii) upon the termination of this Agreement
as set forth in Section 15 hereof. The Custodian may make payments from time
to time on behalf of the Client when sufficient Cash is not available in the
Cash Account, but the Custodian shall have no obligation to make such
payments. Any credit, advance or overdraft shall be paid by the close of each
business day or otherwise upon the Custodian's demand.

(c) Delivery of Securities. Any Securities held by a Securities Depository
shall be subject only to the instructions of the Custodian. Securities shall
be transferred, exchanged or delivered by the Custodian to the extent
sufficient Securities are actually in the Securities Account and available for
delivery and only:

(i) as specified by an Authorized Instruction;

(ii) in exchange for or upon conversion into other Securities or Cash pursuant
to a plan of merger, consolidation, reorganization, recapitalization or
readjustment;

(iii) upon the conversion of Securities pursuant to their terms into other
Securities;

(iv) as permitted by Section 13 hereof; or

(v) upon the termination of this Agreement as set forth in Section 15 hereof.

7. Corporate Actions. Until the Custodian receives an Authorized Instruction
to the contrary, the Custodian shall:

(i) collect dividends, interest and other payments made and stock dividends,
rights and similar distributions made or issued with respect to Securities, in
each case net of any applicable taxes or other charges withheld by the payor
of such payment or distribution;

(ii) promptly after the Custodian becomes aware thereof, notify the Client of
any rights offering by any issuer of Securities held for the Securities
Account and, to the extent permitted by law applicable to the Custodian, sell
the rights in the principal market for such rights and deposit the proceeds of
the sale in the Cash Account if the Client does not instruct the Custodian as
to whether or not to purchase securities under the rights offering by the
deadline for such purchase;

(iii) promptly after receipt thereof, forward to the Client those
communications relating to any Securities which call for voting or the
exercise of rights or other specific action (including materials relating to
legal proceedings intended to be transmitted to holders of the Securities);

(iv) present for payment maturing Securities and those called for redemption;

(v) execute in the name of the Client such ownership and other certificates as
may be required to obtain payment or exercise any rights in respect of any
Securities;

(vi) accept and open all mail directed to the Client in care of the Custodian;
(vii) disclose the Client's name, address and Securities position to the
issuers of Securities when requested to do so by them; and

(viii) dispose of fractional interests received by the Custodian as a result
of stock dividends by selling any fractional interest received in accordance
with local law and practice.

With respect to any corporate actions not listed above, the Custodian shall
(in the absence of an Authorized Instruction from the Client within any
prescribed deadline) take any action that it considers appropriate in the
circumstances; provided the Custodian shall not be liable for the consequences
of any such action. If the Custodian holds Securities belonging to the Client
as part of a fungible mass with securities of its other clients, the Custodian
shall select the securities to participate in partial redemptions, partial
payments or other actions affecting less than all securities of the relevant
class in any non-discriminatory manner that it customarily uses to make a
selection. If any Securities held by a Securities Depository become subject
to a partial redemption, partial payment or other action, the Client agrees
that any manner used by the Securities Depository shall be acceptable to
select the securities to participate in a partial redemption, partial payment
or other action.

8. Reporting.

(a) Statements. The Custodian shall mail, or cause to be mailed, or transmit
electronically to the Client (or, with prior consent of the Client, make
available electronically) monthly statements of the Securities Account and
Cash Account. The statements shall list all Securities and specify the amount
of Cash. The Client agrees that each statement shall be binding on the Client
30 days after (a) in the case of any statement sent by mail, it has been
mailed by first class mail, postage prepaid or (b) in the case of any
statement transmitted or made available electronically, it has been
transmitted or made available electronically to the Client, unless the Client
has theretofore notified the Custodian in writing of any inaccuracy in the
statement.

(c) Other Information. From time to time, the Custodian may provide
additional reporting information to the Client on terms and conditions agreed
upon by the parties hereto in writing. The additional information may include
data obtained from third parties, such as pricing valuation information
relating to Securities. The Client agrees that it shall not redistribute or
resell data obtained from third parties, except that it may provide such data
to the beneficial owners of Securities as recorded on the Client's books and
records.

9. Responsibilities; Indemnification by the Custodian.

(a) Standard of Care. The Custodian shall use reasonable care in the
performance of its duties hereunder and shall exercise the same degree of care
with respect to the Securities as it would with respect to its own securities
and property. The Custodian's responsibility with respect to any Securities
held by any Securities Depository is limited to the failure on the part of the
Custodian to exercise reasonable care in the selection or retention of the
Securities Depository; it being understood that the Client has approved
Securities Depositories included on Appendix A.

(b) Insurance. The Custodian shall maintain insurance coverage with respect
to the Securities covering such risks and in such amounts as the Custodian
maintains with respect to securities which the Custodian holds for its own
account and for the account of other customers.

(c) Indemnification by the Custodian. The Custodian shall indemnify the
Client against, and hold the Client harmless from, any loss or liability
(including, without limitation, the reasonable fees and disbursements of
counsel and other legal advisors, but excluding all losses and liabilities of
the types described in Section 10 hereof) incurred by the Client by reason of
the negligence (whether through action or inaction) or willful misconduct of
the Custodian (or by an officer, other employee or agent of the Custodian) in
connection with the services provided pursuant to this Agreement.

10. Limitations on Responsibilities and Liabilities.

(a) Generally. The Custodian shall be responsible for the performance of only
those duties as are set forth herein or contained in an Authorized Instruction
that is not contrary to the provisions of this Agreement.

(b) Consequential Damages. Under no circumstances shall the Custodian or any
Securities Depository be liable to the Client or any other person for
indirect, special or consequential damages, even if the Custodian or
Securities Depository is apprised of the likelihood of such damages.

(c) Corporate Actions. The Custodian shall not be liable for any loss
occasioned by the failure of the Custodian to notify the Client of any payment
of dividends or interest or any redemption, rights offering or other
distribution made with respect to any Security or any other corporate action
taken or to be taken with respect to any Security if the Custodian has not
received notice of such transaction directly from the issuer of the Security
or if such distribution or action was not included in the reports of a
recognized investment data service selected by the Custodian.

(d) Authorized Instruction. The Custodian shall not be liable for any action
taken in good faith upon an Authorized Instruction.

(e) Payment and Delivery Instructions. In some securities markets, securities
deliveries and payments therefor may not be or are not customarily made
simultaneously. Accordingly, the Client agrees that, notwithstanding the
"Authorized Instructions" to deliver any Securities against payment or to pay
for the Securities against delivery, the Custodian or a Securities Depository
may make or accept payment for or delivery of the Securities in such form and
manner as may be satisfactory to it and at such time and in such manner as
shall be in accordance with the customs prevailing in the relevant market or
among securities dealers. The Client shall bear the risk that (i) the
recipient of the Securities may fail to make payment, return the Securities or
hold the Securities or the proceeds of their sale in trust for the Client, and
(ii) that the recipient of payment for the Securities may fail to deliver the
Securities (failure to include, without limitation, delivery of forged or
stolen Securities) or to return payment, in each case whether failure is total
or partial or merely a failure to perform on a timely basis. The Custodian
shall not be liable to the Client for any loss resulting from any of the
foregoing events.

(f) Reversals. In some securities markets and cash clearing systems
deliveries of securities and cash may be reversed under certain circumstances.
Accordingly, credits of securities to the Securities Account and cash to the
Cash Account are provisional and subject to reversal if, in accordance with
relevant local law and practice, the delivery of the security or cash giving
rise to the credit is reversed.

(g) Force Majeure. Notwithstanding any other provision contained herein, the
Custodian shall not be liable for any action taken, or any failure to take any
action required to be taken hereunder or otherwise to fulfill its obligations
hereunder (including without limitation the failure to receive or deliver
securities or the failure to receive or make any payment) in the event and to
the extent that the taking of such action or such failure arises out of or is
caused by war, insurrection, riot, civil commotion, act of God, accident,
fire, water damage, explosion, mechanical breakdown, computer or system
failure or other failure of equipment, or malfunction or failures caused by
computer virus, failure or malfunctioning of any communications media for
whatever reason, interruption (whether partial or total) of power supplies or
other utility or service, strike or other stoppage (whether partial or total)
of labor, any law, decree, regulation or order of any government or
governmental body (including any court or tribunal), or any other cause
(whether similar or dissimilar to any of the foregoing) whatsoever beyond its
reasonable control.

(h) Delays. Except in the case of a failure by the Custodian to exercise the
standard of care required by Section 9(a) hereof, the Custodian shall not be
liable for delays in carrying out payment instructions given by the Client.
In the event that a delay in the carrying out of a payment instruction is
caused by a failure of the Custodian, the liability of the Custodian shall not
exceed an interest equivalent for the period from the day when the payment
would have been carried out, but for the negligence of the Custodian, until
the day when it is actually carried out (excluding any portion of such period
during which the Custodian cannot carry out such instructions as a result of
any event referred to in Section 10(g)); provided if the Client shall fail to
report the delay to the Custodian within 10 days from the date when the
payment would, but for such failure of the Custodian, have been made, the
Custodian shall not be liable for an interest equivalent for more than a total
of 10 days.

(i) Client's Reporting Obligations. The Client shall be solely responsible
for compliance with any notification or other requirement of any jurisdiction
relating to or affecting the Client's beneficial ownership of the Securities,
and the Custodian assumes no liability for noncompliance with such
requirements.

(j) No Investment Advice. The Custodian is under no duty to provide the
Client with investment advice or to supervise its investments.

(k) Fraudulent Securities. The Custodian shall have no liability for losses
incurred by the Client or any other person as a result of the receipt or
acceptance of fraudulent, forged or invalid Securities (or Securities which
are otherwise not freely transferable or deliverable without encumbrance in
any relevant market).

(l) Third Party Information. The Custodian shall have no responsibility for
the accuracy of any information provided by the Custodian to the Client that
has been obtained from third parties pursuant to Sections 7 and 8(c) of this
Agreement.

11. Use of Morgan Affiliates.

(a) Executing Orders. The Custodian shall, in its sole discretion and if
permitted by applicable law, accept orders from an Authorized Person for the
purchase or sale of any Securities and either execute such orders itself or by
means of Morgan Affiliates or brokers or other financial organizations of its
choice, subject to the fees and commissions in effect from time to time. The
Custodian shall not be responsible for any act or omission, or for the
solvency, of any broker or other financial organization so selected to effect
any transaction for the account of the Client. When instructed to buy or sell
any Securities for which the Custodian or a Morgan Affiliate acts as a dealer,
the Custodian may buy or sell the Securities from or to either itself, as
principal, or a Morgan Affiliate.

(b) Disclosure to Morgan Affiliates. Notwithstanding the provisions of
Section 24 hereof, the Custodian may disclose to any Morgan Affiliate details
with respect to the Securities and the transactions effected hereunder. Such
disclosure shall be for the purpose of identifying banking and securities
services that the Morgan Affiliates may be able to provide to the Client.

(c) Sub-Contracting. The Client hereby agrees that the Custodian may arrange
with any Morgan Affiliate to act as a subcustodian and/or to perform on behalf
of the Custodian any act required to be performed by the Custodian hereunder.
The Custodian shall be responsible for the performance of the Morgan Affiliate
to the same extent the Custodian would have been if it directly performed or
failed to perform such acts.

12. Fees. The Client agrees to pay the Custodian as compensation for the
services provided hereunder a fee computed at rates determined by the
Custodian from time to time and communicated to the Client in advance, as well
as all assessments, charges and expenses (including, without limitation, legal
expenses and attorney's fees) incurred by the Custodian in connection with
this Agreement. The Custodian is authorized to charge the Cash Account for
such items.

13. Pledge; Right of Set-off. To the extent permitted by applicable law, the
Client hereby pledges to the Custodian as security for the payment of the
fees and other amounts referred to in Section 12 as well as any other
obligation or liability of any kind which the Client may have to the Custodian
in connection with this Agreement, all Cash from time to time in the Cash
Account and all of the Securities from time to time in the Securities Account
and hereby grants to the Custodian a lien and security interest in the Cash
and the Securities. Upon any breach by the Client of its obligations
hereunder, the Custodian shall be entitled to exercise all of the remedies
available to a secured creditor under applicable law. Further, the Client
hereby grants to the Custodian a right to debit the Cash Account for any
amount payable by the Client and/or set off the Custodian's obligations to
deliver Cash to the Client against any obligation or liability of any kind
which the Client may have to the Custodian, whether or not relating to or
arising under this Agreement.

14. Indemnification by the Client. The Client agrees to indemnify the
Custodian and to hold the Custodian harmless from any loss or liability
(including, without limitation, the reasonable fees and disbursements of
counsel and other legal advisers) incurred by the Custodian in rendering
services hereunder or in connection with any breach of the terms of this
Agreement by the Client, except such loss or liability which results from the
Custodian's failure to exercise the standard of care required by Section 9(a)
hereof.

15. Termination. This Agreement may be terminated by the Custodian or the
Client following receipt by the other party of not less than 60 days' prior
written notice thereof; provided termination may be immediate if the other
party shall be in breach of its obligations hereunder or shall become the
subject of bankruptcy, insolvency, reorganization, receivership or other
similar proceedings. If notice of termination is given by the Custodian, then
the Client shall, within 60 days following receipt of such notice, specify in
an Authorized Instruction the names of the persons to whom all Securities and
Cash shall be delivered or paid. In such case, the Custodian, subject to the
satisfaction of all obligations owed to it pursuant to this Agreement, shall
deliver all Securities and Cash to the persons so specified. If within 60
days following the receipt of a notice of termination by the Custodian, the
Custodian does not receive from the Client the names of the persons to whom
the Securities and Cash shall be delivered, the Custodian, at its election,
may deliver the Securities and Cash to a bank or a trust company doing
business in the state where the Securities and Cash were held. Securities or
Cash so delivered shall be held and disposed of pursuant to the provisions of
this Agreement or an Authorized Instruction or may be continued to be held
until the names are delivered to the Custodian. If notice of termination is
given by the Client, the Custodian, subject to the payment of all obligations
owed to it pursuant to this Agreement, shall deliver all Securities and Cash
to the persons specified in the Authorized Instruction. The provisions of
Sections 18, 22, 24 hereof and the indemnity provisions of this Agreement and
the provisions limiting the liabilities of the Custodian shall survive the
termination of this Agreement.

16. Notices. Except as otherwise specified herein, any notice or other
communication to the Custodian is to be addressed to it at 60 Wall Street, New
York, N.Y. 10260-0060 or to such other address as may be specified by the
Custodian to the Client in writing from time to time. Any notice or other
communication to the Client is to be addressed to the Client address specified
herein or to such other address as may be specified by the Client to the
Custodian in an Authorized Instruction from time to time. Unless otherwise
specified herein, notices shall be effective when received. If any Authorized
Instruction is given to the Custodian orally, then the Custodian's record of
the instruction shall constitute prima facie evidence of the contents of the
instruction, notwithstanding any conflicting written confirmation or record of
the instruction provided by the Client.

17. Amendments and Waivers. Any provision of this Agreement (including the
Appendices hereto) may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Client and the Custodian; provided
(i) the Custodian may from time to time delete the name of any Securities
Depository from Appendix A without notice to or consent by the Client and (ii)
the Custodian may from time to time add the name of any Securities Depository
or clearing system to Appendix A if it notifies the Client by first class mail
of such addition and does not receive in writing an objection to the addition
within 30 days after the date the notice is mailed.

18. Claims. Any claim arising out of or related to this Agreement must be
brought no later than one year after the claim has accrued.

19. Successors and Assigns; Governing Law; Jurisdiction. This Agreement
shall bind the successors and assigns of the Custodian and the Client. Except
as otherwise provided by the terms of this Agreement, neither the Custodian
nor the Client may assign any of its rights or obligations under this
Agreement without the prior written consent of the other party. This
Agreement shall be governed by and construed in accordance with the law of the
State of New York, without regard to any conflicts of laws. The Client hereby
submits to the non-exclusive jurisdiction of any federal or state court in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. The Client hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Client
and the Custodian each hereby irrevocably waives any and all rights to trial
by jury in any legal proceeding arising out of or relating to this Agreement.

20. Counterparts. This Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument.

21. Headings. The section headings used herein are for information only and
shall not affect the interpretation of any provision of this Agreement.

22. Evidence. The Custodian's books and records (whether on paper,
microfilm, microfiche, by electronic or magnetic recording, or any other
mechanically reproducible form or otherwise) shall be deemed to constitute, in
the absence of manifest error, sufficient evidence of the facts stated therein
and of any obligations of the Client to the Custodian.

23. Integration. This Agreement constitutes the entire agreement between the
parties hereto as it pertains to the provision of US custody services and
supersedes any and all prior agreements and understanding, oral or written,
relating to the subject matter hereof.

24. Confidentiality. Notwithstanding any other provision in this Agreement,
the Custodian may disclose the Client's name, address and securities position
and other information to any persons and to such an extent as required by law,
the rules of any stock exchange or regulatory or self-regulatory organization
or any order or decree of any court or administrative body that is binding on
the Custodian or any Securities Depository.

25. Security Procedures. The Client acknowledges that it has been fully
informed of the protections and risks associated with the various methods of
communication for transmitting Authorized Instructions to the Custodian. The
Custodian has recommended that the Client transmit Authorized Instructions to
the Custodian using one or more specified methods of communication and has
recommended a type of Security Procedure for each such method. The Client
hereby agrees that the Security Procedure actually agreed between the Client
and the Custodian shall be deemed commercially reasonable even if such
Security Procedure offers less protection than the Security Procedure
recommended by the Custodian. If the Client elects to transmit Authorized
Instructions to the Custodian by a method of communication for which no
Security Procedure has been agreed, the Client agrees to be bound by any such
Authorized Instruction that the Custodian believes in good faith to have been
given by an Authorized Person. The Client shall (i) not disclose, or permit
any Authorized Person to disclose, except on a "need to know" basis, any
aspects of any Security Procedure, (ii) notify the Custodian immediately if
the confidentiality of any Security Procedure is compromised and (iii) act to
prevent the Security Procedures from being further compromised. The Client
shall designate one or more persons, as identified in Appendix B, to receive
Security Procedure materials from the Custodian. The Client may amend
Appendix B from time to time upon not less than seven days' prior written
notice to the Custodian in accordance with Section 16 of this Agreement.

26. Severability. In the event any of the terms or provisions of this
Agreement shall be held to be unenforceable, the remaining terms and
provisions shall be unimpaired and the unenforceable term or provision shall
be replaced by such enforceable term or provision as comes closest to the
intention underlying the unenforceable term or provision.

In Witness Whereof, the parties have caused this Agreement to be duly executed
by their respective authorized representatives as of the day and year first
above written.

Morgan Guaranty Trust Company of New York Smith Barney Precious Metals
and Minerals Fund Inc.

By:_________________________________
By:__________________________________

Title:________________________________
Title:_________________________________

Client's Address for Notices:

388 Greenwich Street
New York, New York 10013

Attention Lewis Daidone

Appendix A

Depository

The Depository Trust Company

Participants Trust Company

Appendix B

Persons Authorized by the Client to Receive Security Procedure Materials

Securities, Trust & Information Services

Funds Transfer Services Agreement

US Funds Transfer

Funds Transfer Services Agreement
U.S. Funds Transfer
Morgan Guaranty Trust Company of New York

Agreement dated as of _____________ between Morgan Guaranty Trust Company of
New York (the "Bank") and Smith Barney ____________________________ (the
"Client").

1. Scope of Agreement; Definition of Terms. This Agreement applies to
electronic, telephone, or other Payment Orders to Bank to pay money to a
beneficiary. Payments may be on the books of Bank or to other banks, for
credit to Client's accounts or for credit or payment to third parties. This
Agreement does not apply to Automated Clearing House payments, which are
subject to a separate agreement. This Agreement shall be construed in
accordance with Article 4A of New York's Uniform Commercial Code: Funds
Transfers, as amended from time to time during the term of this Agreement
("Article 4A"). All terms used herein, unless otherwise defined, shall have
the meanings ascribed to them in Article 4A.

2. Operational Procedures. Bank shall from time to time provide Client with
operational procedures and written instructions regarding Bank's funds
transfer services, including methods of accessing Client's account with Bank
or otherwise communicating with Bank, and Client agrees to adhere to such
procedures and instructions.

3. Funds Transfer Authorization. Client authorizes Bank to charge its
Authorized Account with Bank in accordance with the terms of any Payment Order
received by Bank that has been verified pursuant to Security Procedures agreed
upon by Bank and Client, whether or not such Payment Order has been otherwise
authorized by Client.

4. Security Procedures. The Security Procedures offered by Bank to verify
the authenticity of a Payment Order are set forth in Schedule A to this
Agreement. All Payment Orders, as well as communications requesting
cancellation or amendment of Payment Orders, shall be subject to Security
Procedure verification by Bank. Client shall prevent any disclosure, except
on a "need to know" basis, of any aspects of the Security Procedures agreed to
by it with the Bank, shall notify the Bank immediately if the confidentiality
of these Security Procedures is compromised, and shall act to prevent the
Security Procedures from being further compromised. Client shall designate
one or more persons, as identified in Schedule B, to receive any confidential
Security Procedure materials from Bank and complete, as required by Bank, all
Security Procedure documentation. Client may amend Schedule B from time to
time upon seven days prior written notice to Bank.

5. Receipt and Acceptance of Payment Orders. Bank shall receive and process
Payment Orders only on Bank's Funds-transfer business days and within Bank's
established cut-off hours, which Bank may revise from time to time upon prior
notice to Client. Payment Orders received after Bank's cut-off hours shall be
considered received on Bank's next Funds-transfer business day. Client shall
be responsible for identifying the routing of all funds transfers made
pursuant to any Payment Order, or shall be deemed to have appointed Bank to do
so on its behalf. Bank reserves the right to refuse or delay acceptance of
any Payment Order in the event Client does not have sufficient balances
available for withdrawal in its designated account, in the event the Payment
Order is unclear, incomplete, or received in a manner other than that agreed
upon by Bank, or for other reasons satisfactory to Bank. Bank may record all
telephonic communications received.

6. Execution of Payment Orders. Bank shall execute or pay each accepted
Payment Order by the Payment Date of the order. Bank shall debit Client's
account for the amount of each payment on the date such order is executed by
Bank, and Client shall be responsible to remit the amount of such order to
Bank upon execution thereof. Bank may execute or pay verified Payment Orders
issued in the name of Client, without inquiry, even though this may bring
about or increase an overdraft in any of Client's accounts and even though
such Payment Orders may be for the benefit of any officer, agent or employee
of Client. Bank may use any appropriate Funds-transfer system or
communications system in executing, paying or transmitting Payment Orders,
including CHIPS, Fedwire and S.W.I.F.T. Client and Bank agree to comply with
and be bound by the rules of any such Funds-transfer system through which a
Payment Order may be executed, paid or transmitted.

7. Cancellation or Modification of Payment Orders. Bank shall have no duty
to cancel or modify any Payment Order, but it shall make reasonable efforts to
do so if such request complies with the Security Procedures agreed upon by
Bank and Client for cancellation and modification of Payment Orders, and is
received by such time and in such manner as to afford Bank a reasonable
opportunity to act on it. Client agrees to bear all costs associated with the
cancellation or modification by Client of a Payment Order that has been
released to the Bank.

8. Name/Identifying Number Inconsistencies. In executing or paying a
Payment Order, Bank, as well as all other originating and receiving banks
(including the beneficiary's bank) are authorized to and may rely on the
identifying or bank account number of an intermediary bank, beneficiary's bank
or beneficiary as proper identification of the intermediary bank,
beneficiary's bank or beneficiary, even if the number, no matter where located
in the Payment Order, identifies a person different from the bank or
beneficiary identified by name. Client shall be responsible therefor and
shall be liable to Bank for any loss, liability, expense or damage Bank may
incur, including attorneys' fees and expenses of litigation.

9. Unauthorized, Duplicate or Erroneous Payment Orders. Client shall be
responsible for determining if a debit to Client's account is the result of an
unauthorized, duplicate, or otherwise erroneous Payment Order. Bank shall not
be responsible for making such a determination. Bank shall pay interest to
Client on any amount to be refunded, provided Client notifies Bank of the
relevant facts, in writing, within a reasonable time not to exceed 30 days
after the date Client received notice from Bank that the order was accepted or
executed or that Client's account was debited with respect to the order.

10. Evidence. Bank's books and records (whether on paper, microfilm,
microfiche, by electronic or magnetic recording, or any other mechanically
reproducible form or otherwise) shall be deemed to constitute sufficient
evidence of any obligations of Client to Bank and of any facts and events
relied upon by Bank.

11. Limitation of Liability. To the maximum extent permitted by law, Bank
shall not be liable for events or circumstances beyond the reasonable control
of Bank. Unless otherwise specifically agreed upon in writing, Bank shall not
be liable for indirect, special or consequential damages, even if the Bank is
advised as to the possibility of such damages.

12. Fees. Client agrees to pay to Bank as compensation for the services
provided hereunder a fee computed at rates determined by Bank from time to
time and communicated to Client in advance, as well as all assessments,
charges and expenses including, without limitation, legal expenses and
attorney's fees, incurred by Bank in connection with this Agreement. Bank is
authorized to charge Client's Authorized Account for such items.

13. Incoming Payment Orders. Payment Orders received by Bank for credit to
Client's accounts shall be deemed accepted upon electronic or other
notification to Client, or when funds with respect to the order are made
available to Client. Certain Funds-transfer systems, such as CHIPS or the
Automated Clearing House, may provide that payments be made to beneficiaries
of funds transfers through such systems are provisional until receipt of final
payment. In the event Bank does not receive final payment of a Payment Order
that Bank has accepted on Client's behalf and that has been sent by way of
such a Funds-transfer system, Bank shall be entitled to reverse any credit
given to or to obtain refund of such Payment Order from Client.

14. Drawdowns. Requests by Client to Bank to drawdown funds from an account
maintained at another bank shall be subject to the requirements set forth in
Schedule C to this Agreement. Upon Client's and any necessary third party's
execution and return to Bank of all required Schedule C documentation,
drawdown requests shall be considered Payment Orders subject to all applicable
provisions and requirements of this Agreement.

15. Termination/Amendment. Either party may terminate this Agreement upon
the sending of written notice to the other party; provided, however, that Bank
may continue to receive and act upon Payment Orders issued in the name of
Client as provided herein until Bank actually receives such notice and has a
reasonable opportunity to act on it. Sections 11 and 13 of this Agreement
shall survive termination. Bank may amend the terms and conditions of this
Agreement from time to time upon thirty days' written notice to Client.

16. Notices. All notices permitted or required hereunder shall be in
writing. Except as otherwise specified herein, notices to Bank shall be sent
to: Morgan Guaranty Trust Company of New York, 60 Wall Street, New York,
New York 10260-0060, Attn: STIS Client Service, or to such other address as
may be specified by Bank from time to time. Notices to Client shall be sent
to Client's address as reflected in Bank's records. Unless otherwise
specified herein, notices shall be effective when received.

17. Restrictions on Types of Payment Orders. Unless Bank expressly agrees in
writing, there shall be no restrictions upon the types of Payment Orders Bank
may receive from Client.

18. Waiver. A waiver by either Bank or Client of any of the terms and
conditions of this Agreement shall not be effective unless in writing, shall
pertain only to the circumstances for which it is given and shall not
constitute a waiver of such party's rights or a waiver of any other term or
condition of this Agreement.

19. Litigation. In the event of any litigation arising out of or relating to
the matters contemplated by this Agreement, the parties agree to the exclusive
jurisdiction and venue of the courts of competent jurisdiction in the State of
New York, County of New York. In addition, the parties each waive trial by
jury and, except as otherwise specifically provided herein, any right to seek
or enforce payment of attorneys' fees.

20. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.

21. Miscellaneous. This Agreement (including Schedules and Operational
Procedures) constitutes the entire understanding of the parties with respect
to the provision of US Funds Transfer Services and may not be changed orally.
The section headings used herein are for information only and shall not affect
the interpretation of any provision of this Agreement. This Agreement may be
signed in any number of counterparts with the same effect as if the signatures
thereto and hereto were upon the same instrument.

22. Severability. In the event any of the terms or provisions of this
Agreement shall be held to be unenforceable, the remaining terms and
provisions shall be unimpaired and the unenforceable term or provision shall
be replaced by such enforceable term or provision as comes closest to the
intention underlying the unenforceable term or provision.

In Witness Whereof, the parties have caused this Agreement to be duly executed
by their respective authorized representatives as of the day and year first
above written.

Morgan Guaranty Trust Company of New York Smith Barney Precious Metals
and Minerals Fund Inc.

By:____________________________________
By:__________________________________

Title:__________________________________
Title:_________________________________

Schedule A-1

Security Procedures:

MORCOM Cash P.C.
MORCOM Cash P.C. (MPCC)

(with Line Coded Authentication)

General

Prior to initiating funds transfers on MORCOM Cash, Client shall complete and
file with Bank a Security Profile Form identifying the specific types of
Payment Order instructions which are to be assigned, the names of Client's
individual MORCOM Cash operators, and any applicable limitations. The
Security Profile Form must be signed by a person or persons authorized to
enter into such arrangements with Bank in accordance with this Agreement and
Client's Corporate Resolutions, as furnished to Bank (an "Authorized
Representative"). Modifications to the information contained in the Security
Profile Form may be made, with Bank's approval, only upon the written request
of an Authorized Representative.

Bank shall notify Client by letter upon completion of the profile on the
MORCOM System.

Freeform/Freetype Payment Orders

Bank shall provide an Authentication Chart and Initial Password to Client's
Authorized Representative. Client shall change the Initial Password after its
first use, and thereafter from time to time to protect its integrity. Bank
shall be authorized to act on any and all Freeform or Freetype Payment Orders
received through MORCOM Cash, within the limits set forth in the Security
Profile Form, that are authenticated in accordance with the Authentication
Chart and contain the correct Client ID, Operator ID, and Password.

Client shall be responsible to safeguard the Authentication Chart and
Password, and for all use made thereof.

Line Coded Payment Orders

Bank shall provide an Authentication Chart and Initial Password to Client's
Authorized Representative. Client shall change the Initial Password after its
first use, and thereafter from time to time to protect its integrity. Client
shall file a request in a writing signed by an Authorized Representative, or
Client shall file a request by electronic means using the Password, specifying
each of Client's accounts to and from which funds may be transferred and, with
respect to each such account, a listing of banks, account names and account
numbers to which funds may be transferred, any limitations thereon, and any
other data requested by Bank. Bank shall be authorized to act on any and all
Line Coded Payment Orders received through MORCOM Cash, within the established
Line Code parameters [and the limits set forth in the Security Profile Form],
that are authenticated in accordance with the Authentication Chart and contain
the correct Client ID, Operator ID, and Password.

Client shall be responsible to safeguard the Authentication Chart and
Password, and for all use made thereof.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-1 be modified or deleted only by following the security procedures
set forth in this Schedule A-1.

MPCC Workstation

If Client is utilizing an MPCC workstation, Client shall take appropriate
steps to safeguard the workstation against unauthorized use. Client shall
utilize the list, modify and delete functions on the Money Transfer Functions
menu of MPCC to confirm that all funds transfer requests to be sent to Bank
are valid and authorized by Client prior to uploading them to MORCOM Cash
through MPCC.

Schedule A-2

Security Procedures:

MORCOM Cash P.C.
MORCOM Cash P.C. (MPCC)

(without Line Coded Authentication)

General

Bank shall notify Client by letter upon completion of the profile on the
MORCOM System.

Freeform/Freetype Payment Orders

Bank shall provide an Authentication Chart and Initial Password to Client's
Authorized Representative. Client shall change the Initial Password after its
first use, and thereafter from time to time to protect its integrity. Bank
shall be authorized to act on any and all Freeform or Freetype Payment Orders
received through MORCOM Cash, within the limits set forth in the Security
Profile Form, that are authenticated in accordance with the Authentication
Chart and contain the correct Client ID, Operator ID, and Password.

Client shall be responsible to safeguard the Authentication Chart and
Password, and for all use made thereof.

Line Coded Payment Orders

Bank shall provide an Initial Password to Client's Authorized Representative.
Client shall change the Initial Password after its first use, and thereafter
from time to time to protect its integrity. Client shall file a request in a
writing signed by an Authorized Representative, or Client shall file a request
by electronic means using the Password, specifying each of Client's accounts
to and from which funds may be transferred and, with respect to each such
account, a listing of banks, account names and account numbers to which funds
may be transferred, any limitations thereon, and any other data requested by
Bank. Bank shall be authorized to act on any and all Line Coded Payment
Orders received through MORCOM Cash within the established Line Code
parameters [and the limits set forth in the Security Profile Form] and that
contain the correct Client ID, Operator ID, and Password.

Client shall be responsible to safeguard the Password, and for all use made
thereof.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-2 be modified or deleted only by following the security procedures
set forth in this Schedule A-2.

MPCC Workstation

Schedule A-3

Security Procedure:

Telephone (Freeform/Freetype;
Line Coded)

General

Prior to initiating funds transfers over the telephone, Client shall supply
Bank with a list of names of Authorized Callers. The list must be signed by a
person or persons authorized to complete Security Procedure documentation in
accordance with this Agreement and Client's Corporate Resolutions, as
furnished to Bank (an "Authorized Representative"). Modifications to the list
may be made, with Bank's approval, only upon the written request of an
Authorized Representative. Bank shall provide to Client one or more telephone
numbers to be used in connection with telephone funds transfers.

Freeform/Freetype Payment Orders

Bank shall provide an Authentication Chart to Client's Authorized
Representative. Bank shall be authorized to act on any and all Freeform or
Freetype Payment Orders received over the telephone from a caller who
represents himself/herself to be a person on the Authorized Caller list and
who provides authentication in accordance with the Authentication Chart.

Client shall be responsible to safeguard the Authentication Chart, and for all
use made thereof.

Line Coded Payment Orders

Client shall file a request in a writing signed by an Authorized
Representative, specifying each of Client's accounts to and from which funds
may be transferred and, with respect to each such account, a listing of banks,
account names and account numbers to which funds may be transferred, any
limitations thereon, and any other data requested by Bank. Bank shall be
authorized to act on any and all Line Coded Payment Orders received over the
telephone, within the established Line Code parameters, from a caller who
represents himself/herself to be a person on the Authorized Caller list.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-3 be modified or deleted only by following the security procedures
set forth in this Schedule A-3.

Schedule A-4

Security Procedure:

Telex

General

Bank shall provide to Client one or more telex addresses to be used in
connection with telex funds transfers.

Freeform/Freetype Payment Orders

Bank shall provide an Authentication Chart to Client's Authorized
Representative. Bank shall be authorized to act on any and all Freeform or
Freetype Payment Orders received by telex that are authenticated in accordance
with the Authentication Chart. Bank shall acknowledge authenticated Payment
Orders.

Client shall be responsible to safeguard the Authentication Chart, and for all
use made thereof.

Line Coded Payment Orders

Bank shall provide an Authentication Chart to Client's Authorized
Representative. Client shall file a request in a writing signed by an
Authorized Representative, specifying each of Client's accounts to and from
which funds may be transferred and, with respect to each such account, a
listing of banks, account names and account numbers to which funds may be
transferred, any limitations thereon, and any other data requested by Bank.
Bank shall be authorized to act on any and all Line Coded Payment Orders
received by telex, within the established Line Code parameters, that are
authenticated in accordance with the Authentication Chart. Bank shall
acknowledge authenticated Payment Orders.

Client shall be responsible to safeguard the Authentication Chart, and for all
use made thereof.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-4 be modified or deleted only by following the security procedures
set forth in this Schedule A-4.

Schedule A-5

Security Procedures:

S.W.I.F.T.

General

Bank shall provide cryptographic keys to the person or persons designated by
Client in Schedule B to receive any confidential Security Procedure materials
from Bank (an "Authorized Representative"), for use with Client's approved
encryption/authentication security device. Bank shall provide the Authorized
Representative (or his designee) with replacement keys from time to time.
Bank shall be authorized to act on any and all Payment Orders received through
S.W.I.F.T. that are authenticated in accordance with the cryptographic keys.

Client shall be responsible to safeguard the cryptographic keys, and for all
use made thereof.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-5 be modified or deleted only by following these security
procedures.

Schedule A-6

Security Procedure:

Telephone (without Authentication)*

* Client's choice of this Security Procedure A-6 shall constitute a rejection
of the on-line and/or authenticated Security Procedures which have been
offered to Client by Bank, and an affirmation that this Security Procedure is
a commercially reasonable security procedure for Client's purposes pursuant to
UCC 4A-202. Client agrees to be bound by any Payment Order, whether or not
authorized, issued in its name and accepted by Bank in compliance with this
Security Procedure.

General

Freeform/Freetype Payment Orders

Bank shall be authorized to act on any and all Freeform or Freetype Payment
Orders received over the telephone from a caller who represents
himself/herself to be a person on the Authorized Caller list.

Line Coded Payment Orders

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-6 be modified or deleted only by following the security procedures
set forth in this Schedule A-6.

Schedule A-7

Security Procedures:

EDI

MORCOM Batch File Transfer

General

Prior to initiating Batch File Transfers ("BFTs") and/or Electronic Data
Interchange ("EDI") funds transfers and associated transaction sets, Client
shall complete and file with Bank an EDI/BFT Security Profile Form identifying
any applicable limitations on authorized transactions. The EDI/BFT Security
Profile Form must be signed by a person or persons authorized to enter into
such arrangements with Bank in accordance with this Agreement and Client's
Corporate Resolutions, as furnished to Bank (an "Authorized Representative").
Modifications to the information contained in the EDI/BFT Security Profile
Form may be made, with Bank's approval, only upon the written request of an
Authorized Representative.

Bank shall notify Client by letter upon completion of the profile on Bank's
system.

Bank shall provide a list of Client Identifiers and Passwords to Client's
Authorized Representative. Client shall change the Passwords from time to
time to protect their integrity. Bank shall be authorized to act on any and
all BFT and EDI Payment Orders and transaction sets received by Bank, within
the limits set forth in the Security Profile Form, that contain the correct
Client Identifiers and Passwords.

Client shall be responsible to safeguard the Client Identifiers and Passwords,
and for all use made thereof.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders and transaction sets initiated in
accordance with this Schedule A-7 be modified or deleted only by following
these security procedures.

Schedule A-8

Security Procedure:

Contingency Backup Procedures

Schedule A-9

Security Procedures:

MORCOM Access

General

Prior to initiating funds transfers on MORCOM Access, CLIENT shall:

Designate a Security Administrator who will be responsible for the
creation and maintenance of all client user profiles on the MORCOM
Access workstation. These profiles will contain the funds transfer
actions that Client chooses for each workstation user.

Designate a Systems Administrator who will be responsible to upload all
funds transfer instructions from Client's workstation to Bank and
download all reports from Bank to Client's workstation.

Complete and file with Bank a Security and Systems Administrator Profile
form identifying these designees. The Security and Systems
Administrator Profile form must be signed by a person or persons
authorized to enter into such arrangements with Bank in accordance with
this Agreement and Client's Corporate Resolutions, as furnished to Bank
(an "Authorized Representative").

Complete and file with Bank an Account Set-up Profile form identifying
the accounts that Client will access via the workstation. The Account
Set-up Profile form must be signed by an Authorized Representative.

Execute a MORCOM Access License Agreement for encryption key data and/or
equipment.

Modifications to the information contained in the Security and Systems
Administrator Profile form and the Account Set-up Profile form may be made,
with Bank's approval, only upon the written request of an Authorized
Representative.

Bank shall provide an Initial Password to Client's Authorized Representative.
Client shall change the Initial Password after its first use, and thereafter
from time to time to protect its integrity. Bank shall be authorized to act
on any and all Payment Orders received through Client's identified MORCOM
Access workstation that contain the correct profile information, ID's and
Password, and that is encrypted in accordance with Client's designated
encryption key.

Cancellation / Modification of Payment Orders

Client may request that Payment Orders initiated in accordance with this
Schedule A-9 be modified or deleted only by following the security procedures
set forth in this Schedule A-9.

Schedule B

Persons Authorized by Client to Receive Security Procedure Materials

Schedule C

Drawdown Documentation

Securities, Trust & Information Services

(GCIC - Brussels)

Global Custody Agreement

Agreement dated as of _____________ between Morgan Guaranty Trust Company of
New York (the "Custodian"), acting through its office at 35 avenue des Arts,
Brussels, Belgium, and Smith Barney __________________________ (the "Client").

Whereas, the Client desires to arrange for the custody of certain of its
assets and the provision of related services by the Custodian;

Now, Therefore, in consideration of the mutual agreements contained herein,
the Custodian and the Client agree as follows:

1. Definitions. The following terms, as used herein, shall have the
following meanings:

"Authorized Persons" means those individuals who have been designated by or
duly authorized by the Client pursuant to necessary corporate or other action
(which shall be evidenced by appropriate documentation delivered to the
Custodian) to act on behalf of the Client in connection with this Agreement.
Such persons shall continue to be Authorized Persons until such time as the
Client has delivered to the Custodian appropriate documents revoking the
authority of such persons.

"Cash" has the meaning set forth in Section 5.

"Cash Account" means a current account (which may be divided into a number of
subaccounts, denominated in U.S. dollars, Belgian francs or any other currency
or Composite Currency Unit acceptable to the Custodian) opened by the
Custodian on its books in the name of the Client.

"Communication Products" has the meaning set forth in Section 28.

"Composite Currency Units" means the European Currency Unit ("ECU"), the
Special Drawing Right ("SDR") or another composite unit consisting of the
aggregate of specified amounts of specified currencies, as such ECU, SDR or
other unit may be constituted from time to time.

"Morgan Affiliate" means any office or branch of Morgan Guaranty Trust Company
of New York ("Morgan") and any other entity that directly, or indirectly
through one or more intermediaries, controls Morgan or that is controlled by
or is under common control with Morgan.

"Securities Account" means any securities account opened by the Custodian on
its books in the name of the Client.

"Securities Depository" means any securities depository, book-entry system or
clearing system used by the Custodian from time to time in accordance with
Section 4(e) hereof.

"Security" means any share, stock, bond, debenture, note, certificate of
indebtedness, warrant or other security or financial instrument acceptable to
the Custodian (whether represented by a certificate or by a book-entry on the
records of the issuer or other entity responsible for recording such book-
entries) that is from time to time held for the account of the Client
directly, or indirectly through a Subcustodian or Securities Depository, by
the Custodian pursuant to this Agreement.

"Subcustodian" means any bank or other institution (other than a Securities
Depository) used by the Custodian to hold Securities from time to time in
accordance with Section 4(e) hereof.

2. Representations, Warranties and Covenants of the Client. The Client
represents and warrants that the execution, delivery and performance by the
Client of this Agreement (i) are within the Client's corporate, trust or other
constitutive powers; (ii) have been duly authorized by all necessary
corporate, trust or other appropriate action under its organizational
documents; (iii) require no action by or in respect of, or filing with, any
governmental body, agency or official (including without limitation any
exchange control approvals) other than those set forth in Appendix B under
"Consents and Filings", which have been duly taken or made or will be duly
taken or made as and when required; and (iv) do not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
organizational documents of the Client or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Client. In
addition, the Client represents and warrants that each of the statements set
forth in Appendix B under "Additional Information" is true and correct. The
Client represents, warrants and covenants that the Custodian shall be entitled
to deal with all Securities free of any proprietary or equitable interest of
any person or entity (other than interests of the Client and interests of the
Custodian, Subcustodians and Securities Depositories that are created by this
Agreement). The Client agrees to inform the Custodian immediately if any
statement set forth in this Section 2 or in Appendix B ceases to be true and
correct as of any date after the date hereof.

3. Securities Accounts. The Client hereby establishes with the Custodian one
or more Securities Accounts, which shall contain, in the manner and on the
terms specified herein, the Client's Securities.

4. Terms of Custody.

(a) Authority to Hold Securities. Subject to the terms and conditions of
this Agreement, the Client hereby authorizes the Custodian to hold any
Securities received from time to time for the account of the Client. The
Custodian may, at its sole discretion, hold the Securities directly or
indirectly through one or more Subcustodians or Securities Depositories.
Securities held indirectly through any Subcustodian shall be held subject to
the terms and conditions of the Custodian's agreement with such Subcustodian.
Securities held indirectly through any Securities Depository shall be held
subject to the terms of any agreement between the Custodian or Subcustodian
and such Securities Depository and to the rules and terms and conditions of
such Securities Depository.

(b) Fungibility. The Client agrees that all Securities held by the Custodian
directly, or indirectly through any Subcustodian or Securities Depository,
shall be subject to the provisions of the Belgian Royal Decree No. 62 of
November 10, 1967, as amended. In accordance with the Royal Decree, all
Securities of any issue shall be treated as fungible with all other securities
of the same issue held by the Custodian directly, or indirectly through any
Subcustodian or Securities Depository. Therefore, the Client shall have no
right to any specific securities of an issue but shall instead be entitled,
subject to applicable laws and regulations and to the terms of this Agreement,
to transfer, deliver or repossess from the Custodian an amount of securities
of such issue that is equivalent to the amount of such securities credited to
a Securities Account, without regard to the certificate numbers (or other
identifying information) of the securities originally deposited, and the
Custodian's obligation to the Client with respect to such Securities shall be
limited to effecting such transfer, delivery or repossession.

(c) Identification of Client's Interests. The Custodian shall cause the
Client's interest in any Securities held by the Custodian directly, or
indirectly through any Subcustodian or Securities Depository, to be evidenced
by a credit to a Securities Account on the books of the Custodian. The
Custodian shall instruct each Subcustodian to credit all Securities held by
such Subcustodian directly, or indirectly through a Securities Depository, to
an account of the Custodian on the books of such Subcustodian. The Custodian
shall instruct, or direct the relevant Subcustodian to instruct, each
Securities Depository to credit all Securities held by such Securities
Depository to an account of the Custodian or the relevant Subcustodian on the
books of such Securities Depository. Securities may be registered in the name
of the Custodian's nominee or, as to any Securities held by an entity other
than the Custodian, in the name of such entity's nominee. The Client agrees
to hold any such nominee harmless from any liability as a holder of record of
such Securities.

(d) Liens of Subcustodians and Securities Depositories. Unless the Custodian
has received Authorized Instructions to the contrary, the Custodian shall hold
Securities indirectly through a Subcustodian or Securities Depository only if
(i) the Securities are not subject to any right, charge, security interest,
lien or claim of any kind in favor of such Subcustodian or Securities
Depository or the creditors or operators of any of them, including a receiver
or trustee in bankruptcy or similar authority, except for a claim of payment
for the safe custody or administration of the Securities or for funds advanced
on behalf of the Client by such Subcustodian or Securities Depository and (ii)
beneficial ownership of the Securities is freely transferable without the
payment of money or value other than for safe custody or administration.

(e) Selection of Subcustodians and Securities Depositories. The list of
Subcustodians and Securities Depositories used by the Custodian as of the date
hereof is listed on Appendix A hereto. The Custodian reserves the right to
add and delete subcustodians and securities depositories to and from such list
from time to time by notice to the Client. The Custodian agrees that, if it
replaces the subcustodian or securities depository used in any country with
another subcustodian or securities depository, it will not transfer any of the
Client's securities from the former subcustodian or securities depository for
such country to the replacement subcustodian or securities depository for such
country without giving the Client at least 30 days' prior written notice,
during which time the Client may make arrangements to have the Securities
transferred to another Custodian if it does not approve of the replacement.

5. Cash Account.

(a) The Client hereby establishes and shall maintain with the Custodian a
Cash Account to be used in connection with transactions relating to the
Securities. The collected balance from time to time in the Cash Account shall
constitute "Cash". Any credit made to the Cash Account shall be provisional
and may be reversed if such payment is not actually collected or received.

(b) Except as otherwise provided by law, the Cash Account (including
subdivisions maintained in different currencies, including Composite Currency
Units) shall constitute one single and indivisible current account.
Consequently, the Custodian has the right, among others, of transferring the
balance of any subaccount of the Cash Account to any other subaccount at any
time and without prior notice.

(c) The Custodian may in accordance with customary practice hold any currency
(other than Belgian Francs) or Composite Currency Unit in which any
subdivision of the Cash Account is denominated on deposit in, and effect
transactions relating thereto through, an account (a "Foreign Account") with a
Morgan Affiliate or another bank in the country where such currency is the
lawful currency or in other countries where such currency or Composite
Currency Unit may be lawfully held on deposit.

(d) The Custodian shall have no liability for any loss or damage arising from
the applicability of any law or regulation now or hereafter in effect, or from
the occurrence of any event, which may affect the transferability,
convertibility, or availability of any currency (other than Belgian Francs) or
Composite Currency Unit in the countries where such Foreign Accounts are
maintained and in no event shall the Custodian be obligated to substitute
another currency for a currency (including a currency that is a component of a
Composite Currency Unit) whose transferability, convertibility or availability
has been affected by such law, regulation or event. To the extent that any
such law, regulation or event imposes a cost or charge upon the Custodian in
relation to the transferability, convertibility, or availability of any such
currency or Composite Currency Unit, such cost or charge shall be for the
account of the Client. If pursuant to any such law or regulation, or as a
result of any such event, the Custodian cannot deal in any component currency
of a Composite Currency Unit or effect a particular transaction in a Composite
Currency Unit on behalf of the Client, the Custodian may thereafter treat any
account denominated in an affected Composite Currency Unit as a group of
separate accounts denominated in the relevant component currencies.

(e) Transactions in a currency or Composite Currency Unit shall be subject to
the regulations laid down by the exchange control authorities of Belgium and
of the country where such currency (or component currency) is the lawful
currency or where such currency or Composite Currency Unit is held on deposit.

6. Instructions by the Client.

(a) Generally. The Client shall give an Authorized Instruction with respect
to Cash and Securities only to the Custodian or to the Custodian's designee.
The Client agrees to be bound by all Authorized Instructions, whether or not
such instructions were duly authorized in accordance with the Client's own
procedures. The Custodian shall not be required to follow any Authorized
Instruction that would violate any applicable law, decree, regulation or order
of any government or governmental body (including any court or tribunal) or
that would be contrary to any provision of this Agreement.

(b) Payments. Payments shall be made by the Custodian, or a Subcustodian at
the direction of the Custodian, only to the extent that sufficient Cash in the
applicable currency is available in the Cash Account or otherwise available
therefor and only (i) as specified by an Authorized Instruction, (ii) as
permitted by Sections 14 and 15 or (iii) upon the termination of this
Agreement as set forth in Section 17 hereof. The Custodian may make payments,
or direct a Subcustodian to make payments, from time to time on behalf of the
Client when sufficient Cash in the applicable currency is not available in the
Cash Account or otherwise available therefor, but neither the Custodian nor
any Subcustodian shall have any obligation to make such payments. If any
payments are made that result in an overdraft in a particular currency, then
such overdraft shall be payable on demand by the Custodian and shall bear
interest for each day outstanding at the rate customarily charged by the
Custodian for overdrafts in such currency.

(c) Delivery of Securities. Any Securities held by a Subcustodian shall be
subject only to the instructions of the Custodian and any Securities held by a
Securities Depository shall be subject only to the instructions of the
Custodian or the Subcustodian for which such Securities Depository is acting.
Securities shall be transferred, exchanged, or delivered by the Custodian, or
a Subcustodian at the direction of the Custodian, only to the extent that
sufficient Securities are actually in the Securities Account and available for
delivery and only:

(i) as specified by an Authorized Instruction;

(ii) in exchange for or upon conversion into other Securities or Cash
pursuant to a plan of merger, consolidation, reorganization, recapitalization
or readjustment;

(iii) upon the conversion of Securities pursuant to their terms into other
Securities;

(iv) as permitted by Sections 14 and 15; or

(v) upon the termination of this Agreement as set forth in Section 17 hereof.

7. Corporate Events.

(a) Collections. Unless the Custodian has received an Authorized Instruction
to the contrary, the Custodian shall, or shall instruct the appropriate
Subcustodian to, collect dividends, interest and other payments made and stock
dividends, rights and similar distributions made or issued with respect to
Securities and present for payment maturing Securities and those called for
redemption, in each case net of any applicable taxes or other charges withheld
by the maker of such payment or distribution. Neither the Custodian nor any
Subcustodian shall have any obligation to commence legal proceedings or to
take other extraordinary actions to collect any of the foregoing payments or
distributions.

(b) Rights Offerings. Promptly after the Custodian becomes aware thereof,
the Custodian shall notify the Client of any rights offering by an issuer of
Securities. If the Client does not send an Authorized Instruction to the
Custodian regarding the exercise of rights under such offering by the deadline
set by the Custodian in such notice, then to the extent permitted by
applicable law and consistent with local market practice, the Custodian or the
applicable Subcustodian shall sell such rights in the principal market for
such rights and deposit the proceeds of such sale in the Cash Account.

(c) Partial Redemptions. Promptly after the Custodian becomes aware thereof,
the Custodian shall notify the Client of the partial redemption of any
Securities. If the Custodian or any Subcustodian or Securities Depository
holds any Securities in which the Client has an interest as part of a fungible
mass, the Custodian or such Subcustodian or Securities Depository may select
the securities to participate in partial redemptions, partial payments or
other actions affecting less than all securities of the relevant class in any
non-discriminatory manner that it customarily uses to make such selection.

(d) Authority of Custodian. Unless the Custodian has received an Authorized
Instruction to the contrary, the Custodian shall, or shall instruct the
appropriate Subcustodian to: (i) execute in the name of the Client such
ownership and other certificates as may be required to obtain payment or
exercise any rights in respect of any Securities; (ii) accept and open all
mail directed to the Client in care of the Custodian or such Subcustodian; and
(iii) retain or dispose of fractional interests received by the Custodian or
such Subcustodian as a result of stock dividends in accordance with local law
and practice. With respect to any corporate events not listed above, the
Custodian shall (in the absence of an Authorized Instruction from the Client
within any prescribed deadline) take any action that it considers appropriate
in the circumstances; provided that the Custodian shall not be liable for the
consequences of any such action.

8. Reporting.

(a) Statements. The Custodian shall mail, or cause to be mailed, or transmit
electronically to the Client (or, with prior written consent of the Client,
make available electronically) monthly statements of the Securities Accounts
and Cash Account. Such statements shall list all Securities and Cash and
specify (i) whether the Securities are held directly by the Custodian or
indirectly through a Subcustodian or Securities Depository and (ii) the amount
of Cash held on deposit in each currency. The Client agrees that each such
statement shall be binding on the Client 60 days after (a) in the case of any
statement sent by mail, it has been mailed by first class mail, postage
prepaid or (b) in the case of any statement transmitted or made available
electronically, it has been transmitted or made available electronically to
the Client, unless the Client has theretofore notified the Custodian in
writing of any inaccuracy in such statement.

(b) Access to Records. The Custodian shall allow the Client and its
independent public accountants reasonable access to the records of the
Custodian relating to the Securities and Cash as is required by the Client or
its accountants in connection with their examination of the books and records
pertaining to the affairs of the Client and shall require each Subcustodian
and Securities Depository to grant such access to the Client and its
independent public accountants to the extent consistent with applicable law
and regulations. The Custodian has no obligation to maintain any records for
a period of more than 10 years. The Custodian shall have no obligation to
require any Subcustodian or Securities Depository to maintain records for any
specified period of time.

(c) Other Information. From time to time the Custodian may provide
additional reporting information to the Client on terms and conditions agreed
upon by the parties hereto in writing. The additional information may include
data obtained from third parties, such as pricing valuation information
relating to the Securities. The Client agrees that it shall not redistribute
or resell data obtained by the Custodian from third parties, except that it
may provide such data to the beneficial owners of the Securities as recorded
on the Client's books and records.

9. Taxes. The respective responsibilities of the Client and the Custodian
with respect to tax matters are set forth in Appendix C hereto and
incorporated by reference herein.

10. Responsibilities; Indemnification by the Custodian.

(a) Standard of Care. The Custodian shall use reasonable care in the
performance of its duties hereunder and shall exercise the same degree of care
with respect to the Securities as it would with respect to its own securities.
The Custodian shall require each Subcustodian to use reasonable care in the
performance of its duties and to exercise the same degree of care with respect
to the Securities as it would with respect to its own securities. The
Custodian shall be responsible to ensure that each Subcustodian that is a
Morgan Affiliate performs in accordance with the foregoing standard. The
Custodian's responsibility with respect to any Securities held by a
Subcustodian (other than a Morgan Affiliate) or any carrier of Securities
acting for the Custodian or any Subcustodian is limited to the failure on the
part of the Custodian (or a Subcustodian that is a Morgan Affiliate) to
exercise reasonable care in the selection or retention of such Subcustodian or
carrier. The Custodian shall have no responsibility for the selection or
retention of any Securities Depository or for the performance of any
Securities Depository.

(b) Insurance. The Custodian shall, and shall require each Subcustodian to,
maintain insurance coverage with respect to the Securities covering such risks
and in such amounts as the Custodian or such Subcustodian maintains with
respect to securities which the Custodian or such Subcustodian holds for its
own account and for the account of other customers.

(c) Indemnification by the Custodian and Subcustodians. The Custodian shall
indemnify the Client against, and hold the Client harmless from, any loss or
liability (including, without limitation, the reasonable fees and
disbursements of counsel and other legal advisors, but excluding all losses
and liabilities of the types described in Section 11 hereof) incurred by the
Client by reason of the negligence (whether through action or inaction) or
willful misconduct of the Custodian or any Subcustodian that is a Morgan
Affiliate in connection with the services provided pursuant to this Agreement
or the applicable subcustodian agreement. The Custodian shall require each
Subcustodian that is not a Morgan Affiliate to indemnify the Custodian and the
Client against, and hold the Custodian and the Client harmless from, any loss
or liability (including, without limitation, the reasonable fees and
disbursements of counsel, but excluding all losses and liabilities of the
types specified in Section 11) incurred by the Custodian or the Client by
reason of the negligence (whether through action or inaction) or willful
misconduct of such Subcustodian in connection with the services provided by
such Subcustodian pursuant to the applicable subcustodian agreement.

11. Limitations on Responsibilities and Liabilities.

(a) Generally. The Custodian shall be responsible for the performance of
only those duties as are set forth herein or contained in an Authorized
Instruction that is not contrary to the provisions of this Agreement.

(b) Consequential Damages. Under no circumstances shall the Custodian or any
Subcustodian be liable to the Client or any other person for indirect, special
or consequential damages, even if the Custodian or such Subcustodian is
apprised of the likelihood of such damages.

(c) Corporate Actions. The Custodian shall not be liable for any loss
occasioned by the failure of the Custodian to notify the Client of any payment
of dividends or interest or any redemption, rights offering or other
distribution made with respect to any Security or any other corporate action
taken or to be taken with respect to any Security if the Custodian or a
Subcustodian has not received notice of such transaction directly from or on
behalf of the issuer of such Security or if such distribution or action was
not included in the reports of an internationally-recognized investment data
service selected by the Custodian.
(d) Authorized Instructions. Neither the Custodian nor any Subcustodian
shall be liable for any action taken upon an Authorized Instruction.

(e) Payment and Delivery Instructions. In some securities markets,
securities deliveries and payments therefor may not be or are not customarily
made simultaneously. Accordingly, the Client agrees that, notwithstanding the
Client's instruction to deliver Securities against payment or to pay for
Securities against delivery, the Custodian or a Subcustodian may make or
accept payment for or delivery of Securities at such time and in such form and
manner as shall be in accordance with relevant local law and practice or with
the customs prevailing in the relevant market among securities dealers. The
Client shall bear the risk that (i) the recipient of Securities may fail to
make payment, return such Securities or hold such Securities or the proceeds
of their sale in trust for the Client and (ii) the recipient of payment for
Securities may fail to deliver the Securities (such failure to include,
without limitation, delivery of forged or stolen Securities) or to return such
payment, in each case whether such failure is total or partial or merely a
failure to perform on a timely basis. Neither the Custodian nor any
Subcustodian shall be liable to the Client for any loss resulting from any of
the foregoing events.

(f) Reversals. In some securities markets and cash clearing systems,
deliveries of securities and cash may be reversed under certain circumstances.
Accordingly, credits of securities to a Securities Account and cash to the
Cash Account are provisional and subject to reversal if, in accordance with
relevant local law and practice, the delivery of the security or cash giving
rise to the credit is reversed.

(g) Foreign Currency Risks. The Client shall bear all risks of investing in
Securities or holding Cash denominated in a currency other than that of the
Client's home jurisdiction. Without limiting the foregoing, the Client shall
bear the risks that rules or procedures imposed by Securities Depositories,
exchange controls, asset freezes or other laws or regulations shall prohibit
or impose burdens or costs on the transfer to, by or for the account of the
Client of Securities or Cash held outside the Client's jurisdiction or
denominated in a currency other than the currency of the Client's home
jurisdiction or the conversion of Cash from one currency into another
currency. The Custodian shall not be obligated to substitute another currency
for a currency (including a currency that is a component of a Composite
Currency Unit) whose transferability, convertibility or availability has been
affected by such law, regulation, rule or procedure. Neither the Custodian
nor any Subcustodian shall be liable to the Client for any loss resulting from
any of the foregoing events.

(h) Force Majeure. Notwithstanding any other provision contained herein,
neither the Custodian nor any Subcustodian shall be liable for any action
taken, or any failure to take any action required to be taken, hereunder or
otherwise to fulfill its obligations hereunder (including without limitation
the failure to receive or deliver securities or the failure to receive or make
any payment) in the event and to the extent that the taking of such action or
such failure arises out of or is caused by war, insurrection, riot, civil
commotion, act of God, accident, fire, water damage, explosion, mechanical
breakdown, computer or system failure or other failure of equipment, or
malfunction or failures caused by computer virus, failure or malfunctioning of
any communications media for whatever reason, interruption (whether partial or
total) of power supplies or other utility of service, strike or other stoppage
(whether partial or total) of labor, any law, decree, regulation or order of
any government or governmental body (including any court or tribunal), or any
other cause (whether similar or dissimilar to any of the foregoing) whatsoever
beyond its reasonable control.

(i) Delays. Except in the case of a failure by the Custodian or a Morgan
Affiliate to exercise the standard of care required by Section 10(a), the
Custodian shall not be liable for delays in carrying out payment instructions
given by the Client. In the event that a delay in the carrying out of a
payment instruction is caused by such a failure of the Custodian or a Morgan
Affiliate, the liability of the Custodian shall not exceed an interest
equivalent for the period from the day when the payment would have been
carried out, but for the negligence of the Custodian or such Morgan Affiliate,
until the day when it is actually carried out (excluding any portion of such
period during which the Custodian cannot carry out such instructions as a
result of any event referred to in Section 11(h)); provided that if the Client
shall fail to report the delay to the Custodian within 10 days from the date
when the payment would, but for the negligence of the Custodian or a Morgan
Affiliate, have been made, then the Custodian shall not be liable for an
interest equivalent for more than a total of 10 days.
(j) Client's Reporting Obligations. The Client shall be solely responsible
for compliance with any notification, license or other requirement of any
jurisdiction relating to or affecting the Client's beneficial ownership of the
Securities, and neither the Custodian nor any Subcustodian assumes liability
for noncompliance with such requirements.

(k) No Investment Advice. Neither the Custodian nor any Subcustodian or
Morgan Affiliate is under any duty to provide the Client with investment
advice or to supervise its investments.

(l) Fraudulent Securities. Neither the Custodian nor any Subcustodian shall
have any liability for losses incurred by the Client or any other person as a
result of the receipt or acceptance of fraudulent, forged or invalid
Securities (or Securities which are otherwise not freely transferable or
deliverable without encumbrance in any relevant market).

(m) Third Party Information. The Custodian shall have no responsibility for
the accuracy of any information provided by the Custodian to the Client that
has been obtained from third parties pursuant to Section 7 or 8(c) of this
Agreement.

12. Use of Morgan Affiliates.

(a) Executing Orders. The Custodian shall, in its sole discretion and if
permitted by applicable law, accept orders from the Client for the purchase or
sale of Securities and either execute such orders itself or by means of Morgan
Affiliates or brokers or other financial organizations of its choice, subject
to the fees and commissions in effect from time to time. The Custodian shall
not be responsible for any act or omission, or for the solvency, of any broker
or other financial organization so selected to effect any transaction for the
account of the Client. When instructed to buy or sell Securities for which
the Custodian or a Morgan Affiliate acts as a dealer, the Custodian may buy or
sell such Securities from or to either itself, as principal, or such Morgan
Affiliate.

(b) Disclosure to Morgan Affiliates. Notwithstanding the provisions of
Section 26 hereof, the Custodian may disclose to any Morgan Affiliate details
with respect to the Securities and the transactions effected hereunder. Such
disclosure shall be for the purpose of identifying banking, securities and
financial services that Morgan Affiliates may be able to provide to the
Client.

(c) Sub-Contracting. The Client hereby agrees that the Custodian may arrange
with any Morgan Affiliate to perform on behalf of the Custodian any act
required to be performed by the Custodian hereunder.

13. Fees. The Client agrees to pay the Custodian as compensation for the
services provided hereunder a fee computed at rates determined by the
Custodian from time to time and communicated to the Client in advance, as well
as all assessments, charges and expenses (including legal expenses and
attorney's fees associated with enforcing the Custodian's rights hereunder)
incurred by the Custodian in connection with this Agreement.

14. Right to Debit and Set-Off. The Custodian has the right to debit any
subaccount of the Cash Account for any amount payable by the Client in
connection with any and all obligations of the Client to the Custodian,
whether or not relating to or arising under this Agreement. In addition to
the rights of the Custodian under applicable law and other agreements, at any
time when the Client shall not have honored any and all of its obligations to
the Custodian, whether or not relating to or arising under this Agreement, the
Custodian shall have the right without notice to the Client to retain or set-
off, against such obligations of the Client, any assets the Custodian or any
Morgan Affiliate may directly or indirectly hold for the account of the
Client, and any obligations (whether matured or unmatured) that the Custodian
or any Morgan Affiliate may have to the Client in any currency or Composite
Currency Unit, including time deposits and all assets credited to any
Securities Account. Any such asset of, or obligation to, the Client may be
transferred among the Custodian and any Morgan Affiliates in order to effect
the above rights.

15. Security Interests. In order to secure the prompt and complete payment
when due of any and all obligations of the Client to the Custodian, now
outstanding or which may be outstanding at any time in the future, whether or
not relating to or arising out of this Agreement, the Client hereby pledges
and grants to the Custodian a security interest in (i) all of the Client's
right, title and interest in and to all Cash Accounts, including any credit or
debit balance which now appears or may at any time in the future appear in any
currency or Composite Currency Unit subaccount of a Cash Account, (ii) all of
the Client's right, title and interest in and to all time deposit accounts and
notice accounts that the Client may open from time to time with the Custodian,
(iii) all of the Client's right, title and interest in and to all Securities
Accounts and the amount of all securities which are now or at any time in the
future shall be standing to the credit of a Securities Account (clauses (i),
(ii) and (iii) of this Section 15 being referred to collectively herein as the
"Collateral"), (iv) all amounts of cash, securities or other property or
countervalue received or to be received with respect to or in exchange for any
and all of the then existing Collateral which are, or are intended, to be
credited to a Cash Account or a Securities Account and (v) to the extent not
covered by the foregoing, all proceeds, product, offspring, rents or profits
of any or all of the foregoing (whether acquired before or after the
commencement of any bankruptcy or liquidation proceeding by or in respect of
the Client) which are, or are intended to be credited to a Cash Account or a
Securities Account. All time deposit accounts and notice accounts shall be
deemed constituted for an indefinite period, even though the Client and the
Custodian may agree from time to time that interest thereon will be paid on
specified dates rather than only at final maturity. The foregoing security
interests are granted as security only and shall not subject the Custodian to,
or transfer or in any way affect or modify, any obligation or liability of the
Client with respect to any of the Collateral or any transaction in connection
therewith. The Client authorizes the Custodian to perform all acts which the
Custodian, in its sole discretion, deems necessary or desirable to perfect and
preserve its security interests and rights under this Section 15. Upon any
breach by the Client of its obligations hereunder, the Custodian shall be
entitled to exercise all of the remedies available to a secured creditor under
applicable law.

16. Indemnification by the Client. The Client agrees to indemnify the
Custodian and each Subcustodian and to hold the Custodian and each such
Subcustodian harmless from any loss or liability (including, without
limitation, the reasonable fees and disbursements of counsel and other legal
advisors) incurred by the Custodian or such Subcustodian in rendering services
hereunder or in connection with any breach of the terms of this Agreement by
the Client, except such loss or liability which results from the Custodian's
or such Subcustodian's failure to exercise the standard of care required by
Section 10(a) hereof.

17. Termination. This Agreement may be terminated by the Custodian or the
Client following receipt by the other party of not less than 60 days' prior
written notice thereof; provided that such termination may be immediate if the
other party shall be in breach of its obligations hereunder or shall become
the subject of bankruptcy, insolvency, reorganization, receivership or other
similar proceedings. If notice of termination is given by the Custodian, then
the Client shall, within 60 days following receipt of such notice, specify in
an Authorized Instruction the names of the persons to whom all Securities and
Cash shall be delivered or paid. In such case, the Custodian shall, subject
to the payment of amounts owed to it pursuant to Sections 6(b) and 13 hereof,
deliver such Securities and Cash, and instruct each Subcustodian to deliver
any Securities or Cash held by such Subcustodian, to the persons so specified.
If within 60 days following the receipt of a notice of termination by the
Custodian, the Custodian does not receive from the Client the names of the
persons to whom such Securities and Cash shall be delivered, the Custodian, at
its election, may deliver such Securities and Cash, and instruct each
Subcustodian holding any Securities or Cash to deliver such Securities and
Cash, to a bank or a trust company doing business in the state or country
where such Securities and Cash were held. Securities or Cash so delivered
shall be held and disposed of pursuant to the provisions of this Agreement or
an Authorized Instruction or may be continued to be held until the names of
such persons are delivered to the Custodian. If notice of termination is
given by the Client, the Custodian shall, subject to the payment of all
amounts owed to it pursuant to Sections 6(b) and 13 hereof, deliver such
Securities and Cash, and instruct each Subcustodian holding any Securities or
Cash to deliver such Securities or Cash, to the persons specified in an
Authorized Instruction. If this Agreement is terminated by the Custodian or
the Client, but the Custodian or a Morgan Affiliate continues to provide other
services to the Client in connection with which the Client uses Communication
Products, then the provisions of Sections 27 and 28 hereof shall survive the
termination of this Agreement until the time that no such other services
continue to be provided by the Custodian or a Morgan Affiliate to the Client
or until otherwise terminated in writing by the Client or the Custodian. The
provisions of Sections 20, 24, 26 and Appendix G hereof and the indemnity
provisions of this Agreement and the provisions limiting the liabilities of
the Custodian and the Subcustodians shall survive the termination of this
Agreement (including any subsequent termination of Sections 27 and 28 hereof).

18. Notices. Except as otherwise specified herein, any notice or other
communication to the Custodian or Client is to be addressed to the respective
party as set forth in Appendix D hereto or in such other manner as may be
specified by the one party to the other in writing from time to time. Unless
otherwise specified herein, notices shall be effective when received. If any
Authorized Instruction is given to the Custodian orally, then the Custodian's
record of such instruction shall constitute conclusive evidence of the
contents of such instruction, notwithstanding any conflicting written
confirmation or record of such instruction provided by the Client.

19. Amendments and Waivers. Any provision of this Agreement (including
Appendices B through G hereto) may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Client and the
Custodian.

20. Claims. Any claim arising out of or related to this Agreement must be
brought no later than one year after such claim has accrued.

21. Successors and Assigns; Governing Law; Jurisdiction. This Agreement
shall bind the successors and assigns of the Custodian and the Client. Except
as otherwise provided by the terms of this Agreement, neither the Custodian
nor the Client may assign any of its rights or obligations under this
Agreement without the prior written consent of the other party. This
Agreement shall be governed by and construed in accordance with the law of
State of New York except that the provisions set forth in Sections 4(b) and 15
shall be governed by the law of Belgium. The Client hereby submits to the
non-exclusive jurisdiction of any any federal or state court in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Client hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Client
and the Custodian each hereby irrevocably waives any and all rights to trial
by jury in any legal proceeding arising out of or relating to this Agreement.

22. Counterparts. This Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument.

23. Headings. The section headings used herein are for information only and
shall not affect the interpretation of any provision of this Agreement.

24. Evidence. The Custodian's books and records (whether on paper,
microfilm, microfiche, by electronic or magnetic recording, or any other
mechanically reproducible form or otherwise) shall be deemed to constitute, in
the absence of manifest error, sufficient evidence of the facts stated therein
and of any obligations of the Client to the Custodian.

25. Integration. This Agreement constitutes the entire agreement between the
parties hereto as it pertains to the provision of global custody services and
supersedes any and all prior agreements and understanding, oral or written,
relating to the subject matter hereof.

26. Confidentiality. Notwithstanding any other provision herein, the
Custodian may disclose the Client's name, address and securities position and
other information to such persons and to such an extent as required by law
(including, but not limited to, article 28 of the Belgian Law of December 4,
1990 relating to securities transactions suspected of constituting market
manipulation, insider trading and other breaches of financial regulations),
the rules of any stock exchange or regulatory or self-regulatory organization
or any order or decree of any court or administrative body that is binding on
the Custodian or any Subcustodian or Securities Depository or the terms of the
organizational documents of the issuer of any Security or the term of any
Security itself.

27. Security Procedures. The Client acknowledges that it has been fully
informed of the protections and risks associated with the various methods of
communication for transmitting Authorized Instructions to the Custodian. The
Custodian has recommended that the Client transmit Authorized Instructions to
the Custodian using one or more specified methods of communication and has
recommended a type of Security Procedure for each such method. The Client
hereby agrees that the Security Procedure actually agreed between the Client
and the Custodian shall be deemed commercially reasonable even if such
Security Procedure offers less protection than the Security Procedure
recommended by the Custodian. If the Client elects to transmit Authorized
Instructions to the Custodian by a method of communication for which no
Security Procedure has been agreed, the Client agrees to be bound by any such
Authorized Instruction that the Custodian believes in good faith to have been
given by an Authorized Person. The Client shall (i) not disclose, or permit
any Authorized Person to disclose, except on a "need to know" basis, any
aspects of any Security Procedure, (ii) notify the Custodian immediately if
the confidentiality of any Security Procedure is compromised and (iii) act to
prevent the Security Procedures from being further compromised. The Client
shall designate one or more persons, as identified in Appendix E, to receive
Security Procedure materials from the Custodian. The Client may amend
Appendix E from time to time upon seven days' prior written notice to the
Custodian in accordance with Section 18 of this Agreement.

28. License. The Custodian hereby grants to the Client a personal,
nontransferable and nonexclusive license to use, for its internal purposes
only, the respective number of copies of any hardware, firmware, microcode and
software set forth in Appendix F or hereafter identified by the Custodian in
writing as communication products (the "Communication Products"), for the
respective terms set forth in Appendix F and at the respective locations set
forth in Appendix F, solely in connection with transmitting and receiving
electronic communications to and from the Custodian in connection with this
Agreement. The Client hereby acknowledges and agrees that this license is
subject to the terms and conditions set forth in Appendix G.

29. Severability. In the event any of the terms or provisions of this
Agreement shall be held to be unenforceable, the remaining terms and
provisions shall be unimpaired and the unenforceable term or provision shall
be replaced by such enforceable term or provision as comes closest to the
intention underlying the unenforceable term or provision.

In Witness Whereof, the parties have caused this Agreement to be duly executed
by their respective authorized representatives as of the day and year first
above written.

Morgan Guaranty Trust Company of Smith Barney Precious Metals
and Minerals New York Fund Inc.

By: ______________________________ By:
______________________________
Title: ______________________________ Title:
______________________________

Appendix A

Global Custody Network

Country Subcustodian Depository

Argentina Morgan Guaranty Trust Co. Caja de Valores
of New York - Buenos Aires Office

Australia ANZ
Banking Group Austraclear

Austria Creditanstalt-Bankverein OeKB-WSB
(Wertpapiersammelbank
bei der
Oesterreichischen
Kontrollbank AG)

Belgium Morgan Guaranty Trust Co. CIK (Caisse
Interprofessionnelle
of New York - Brussels Office de Depots et
de Virements de Titres)
Euroclear Clearance
System Limited

Brazil Morgan Guaranty Trust Co. BOVESPA
(Bolsa de Valores de Sao Paulo;
of New York - Sao Paulo Office equities)

BVRJ (Bolsa de Valores
de Rio de Janeiro;
equities)

CETIP (Central de
Custodia e Liquidacao
Financiera de Titulos;
corporate bonds)

SELIC (Sistema Especial
de Liquidacao e
Custodia; government
securities)

Canada Canadian Imperial Bank CDS (Canadian Depository
for
of Commerce Securities)

Chile Citibank, N.A.

People's Republic of China - Hongkong and Shanghai Banking
Shanghai and Shenzhen Corporation

Denmark Den Danske Bank VP
(Vaerdipapircentralen;
Danish Securities
Centre)

Finland Union Bank of Finland

France Morgan Guaranty Trust Co. SICOVAM
(Societe Interprofessionnelle
of New York - Paris Office Pour La
Compensation des Valeurs Mobilieres)

Germany J.P. Morgan GmbH DKV (Deutscher
Kassenverein)

Greece National Bank of Greece S.A.

Hong Kong Hongkong and Shanghai Banking CCASS (Central Clearing
and Settlement
Corporation System)

Hungary Citibank Budapest Rt

India Hong Kong and Shanghai Banking
Corporation

Indonesia Hongkong and Shanghai Banking
Corporation

Ireland Allied Irish Banks PLC

Italy Morgan Guaranty Trust Co. Monte Titoli
S.p.A.
of New York - Milan Office

Japan The Fuji Bank, Ltd. JASDEC (Japanese
Securities
Depository Center)

JSA (Japan Securities
Agency)

Korea Bank of Seoul KSSC (Korea
Securities Settlement
Corporation)

Luxembourg Banque Internationale a CEDEL (Central de
Livraison
Luxembourg, S.A. des Valeurs Mobilieres)

Malaysia Hongkong and Shanghai Banking SCANS (Securities
Clearing Automated
Corporation Network Services)

Mexico Citibank, N.A. Indeval

Netherlands Bank Van Haften Labouchere NECIGEF
(Nederlands Centraal Instituut Voor Giraal Effectenverkeer BV)

New Zealand ANZ Banking Group Ltd. Austraclear

Norway Den Norske Bank VPS
(Verdipapirsentralen;
Norwegian Registry of
Securities)
Philippines Hongkong and Shanghai Banking
Corporation

Portugal Banco Espirito Santo
e Comercial de Lisboa

Singapore Development Bank of Singapore (CDP) Central Depository
Pte

Spain Morgan Guaranty Trust Co.
of New York - Madrid Office

Banco de Santander

Sri Lanka Hongkong and Shanghai Banking
Corporation

Sweden Skandinaviska Enskilda Banken VPC
(Vaerdepappercentralen;
Securities Register
Centre)

Switzerland Morgan Guaranty Trust Co. SEGA (Schweizerische
of New York - Zurich Office Effekten - Giro
AG)

Taiwan Hongkong and Shanghai Banking
Corporation

Thailand Hongkong and Shanghai Banking
Corporation

Turkey Citibank, N.A.
Ottoman Bank

United Kingdom Morgan Guaranty Trust Co. TALISMAN
(Transfer, Accounting and
of New York - London Office Lodgement for
Investors Stock Management
for Jobbers) - Sepon
Limited

CGO (Central Gilts
Office)

CMO (Central Money
Markets Office)

ESO (European
Settlements Office)

United States Morgan Guaranty Trust Co. The
Depository Trust Co.
of New York
The Participants Trust
Co.

Venezuela Citibank, N.A.

Appendix B

Consents and Filings

Additional Information

Appendix C

Tax Matters

The provisions of this Appendix C shall govern the rights, responsibilities,
duties and liabilities of the Client and the Custodian with respect to the
payment or withholding of all taxes, assessments, duties or other governmental
charges (including any interest or penalty thereon or with respect thereto)
imposed by any governmental authority upon or with respect to (i) any Cash,
(ii) any Securities, and any distributions with respect thereto, and (iii) the
purchase, sale, loan or other transfer of any Security by the Custodian, any
Subcustodian or any Securities Depository on behalf of the Client and any
proceeds or other income from such a sale, loan or other transfer (any such
tax, assessment, duty or other governmental charge being referred to herein as
a "Tax"). All capitalized terms not defined herein shall have the meanings
assigned to them in the Global Custody Agreement.

1. As further provided in this Appendix C, the Client shall be liable for all
Taxes and shall indemnify and hold harmless the Custodian, each Subcustodian
and each Securities Depository for the amount of any Tax that the Custodian or
such Subcustodian or Securities Depository is required under applicable laws
(whether by assessment or otherwise) to pay on behalf of, or in respect of
income earned by or payments or distributions made to or for the account of,
the Client (including any payment of Tax required by reason of an earlier
failure to withhold).

2. The Custodian shall, and shall instruct each Subcustodian and Securities
Depository to, withhold the amount of any Tax which the Custodian or such
Subcustodian or Securities Depository is required to withhold under applicable
law upon collection (on behalf of the Client pursuant to an Authorized
Instruction) of (i) any dividend, interest or other cash distribution made
with respect to any Security, (ii) any stock dividend or distribution of
rights, warrants or other property with respect to any Security and (iii) any
proceeds or income from the sale, loan or other transfer of any Security. The
Custodian shall, and shall instruct each Subcustodian and Securities
Depository to, timely remit the amount of any such tax withheld to the
appropriate governmental authority in the manner required by applicable law.
The Custodian has, and is authorized to grant to each Subcustodian and
Securities Depository, complete discretion to determine the amount of any Tax
which the Custodian or such Subcustodian or Securities Depository is required
to withhold from any distribution, proceeds or income under any applicable
law.

3. In the event that (A) the Custodian or any Subcustodian or Securities
Depository is required under applicable law to pay any Tax on behalf of the
Client (including a payment due by reason of an earlier failure to withhold
such Tax) or (B) the Custodian or any Subcustodian or Securities Depository is
required under applicable law to withhold or otherwise pay any Tax from or
with respect to any distribution or payment in property other than cash which
is collected by the Custodian or such Subcustodian or Securities Depository
(on behalf of the Client pursuant to an Authorized Instruction), the Custodian
shall be authorized to withdraw Cash from any subaccount of the Cash Account
in the amount and currency required to pay such Tax and to use such Cash, or
to remit such Cash to the appropriate Subcustodian or Securities Depository
for the timely payment of such Tax in the manner required by applicable law.
If the Cash Account does not contain sufficient Cash in the appropriate
currency to pay such Tax, the Custodian shall be authorized to withdraw Cash
of any other currency from any subaccount of the Cash Account in an amount
which, when converted to the appropriate currency at the exchange rate
prevailing on the date of withdrawal, is sufficient to enable the Custodian or
such Subcustodian or Securities Depository to pay such Tax. If the aggregate
amount of Cash in all subaccounts of the Cash Account is not sufficient to pay
such Tax, the Custodian shall promptly notify the Client of the additional
amount of Cash (in the appropriate currency) required, and the Client shall
deposit such additional amount in the Cash Account promptly after receipt of
such notice for use by the Custodian as specified herein. In the event that
the Custodian or any Subcustodian or Securities Depository is required to pay
any such Tax prior to the deposit by the Client of an additional amount as
required hereunder, the Custodian shall be authorized to withdraw such
additional amount (following deposit thereof) from any subaccount of the Cash
Account for payment to its own account or the account of such Subcustodian or
Securities Depository in satisfaction of the Client's indemnification
obligation hereunder.

4. The information delivered to the Client each month pursuant to Section
8(a) of the Global Custody Agreement shall include the amount of each Tax (i)
withheld by the Custodian or any Subcustodian or Securities Depository from
any payment collected on behalf of the Client, (ii) withheld by the payor of
any payment collected by the Custodian or any Subcustodian or Securities
Depository on behalf of the Client or (iii) paid by the Custodian or any
Subcustodian or Securities Depository on behalf of the Client with Cash
withdrawn from the Cash Account or otherwise obtained pursuant to paragraph 3
of this Appendix C, in each case during the period since the date of the
immediately preceding monthly report.

5. In the event that the Client is eligible, pursuant to the provisions of
any tax treaty, for a reduced rate of, or exemption from, any Tax which the
Custodian or any Subcustodian or Securities Depository is otherwise required
to withhold or pay on behalf of the Client under any applicable law, the
Custodian shall, or shall instruct such Subcustodian or Securities Depository
to, either withhold or pay such Tax at such reduced rate or refrain from
withholding or paying such Tax, as appropriate; provided that the Custodian
has received from the Client all documentary evidence of residence or other
qualification for such reduced rate or exemption required to be received under
such applicable law. As soon as practicable following the execution of the
Global Custody Agreement, the Client shall notify the Custodian of the
Client's eligibility for the benefits of any tax treaty between the Client's
country of residence and the countries listed in Appendix A to the Global
Custody Agreement and to the extent possible, furnish to the Custodian all
forms or other documentary evidence required under applicable law to establish
such eligibility. The Custodian shall, and shall instruct each Subcustodian
and Securities Depository to, withhold or pay any Tax at a reduced rate
hereunder, or refrain from withholding or paying any Tax, only in reliance
upon documentation furnished to the Custodian pursuant to this paragraph 5.
The Custodian and each Subcustodian and Securities Depository shall have no
responsibility for the accuracy or validity of any forms or documentation
provided by the Client to the Custodian hereunder, and the Client hereby
indemnifies and agrees to hold harmless the Custodian and each Subcustodian
and Securities Depository in respect of any liability arising from any
underwithholding or underpayment of any Tax which results from the inaccuracy
or invalidity of any such forms or other documentation.

6. In the event that the Custodian becomes aware that any person is required
under applicable law of any country to withhold any Tax from any payment
collected by the Custodian or any Subcustodian or Securities Depository on
behalf of the Client, and the Client has previously provided to the Custodian
pursuant to paragraph 5 of this Appendix C all forms or other documentary
evidence required under applicable law to establish eligibility for an
exemption from or reduced rate of such withholding pursuant to any tax treaty
between such country and the Client's country of residence, then the Custodian
shall furnish, or shall instruct such Subcustodian or Securities Depository to
furnish, to the extent permissible and effective to establish such eligibility
under applicable law, such forms or other documentary evidence on behalf of
the Client to the person required to withhold such Tax. In the event that the
Custodian or such Subcustodian or Securities Depository is not permitted under
applicable law to furnish the necessary forms or other documentary evidence on
behalf of the Client, the Custodian shall make reasonable efforts to notify
the Client, reasonably promptly after it becomes aware of such requirement,
that the Client is required under such law to furnish such items to the person
required to withhold such Tax. In the event that (i) the Tax which any such
person is required to withhold is imposed under an applicable law of a country
other than those listed in Appendix A to the Global Custody Agreement or (ii)
the Custodian or an appropriate governmental authority or withholding agent
has determined that any forms or other documentation previously provided to
the Custodian pursuant to paragraph 5 of this Appendix C are insufficient to
establish the eligibility of the Client for a reduced rate of, or exemption
from, withholding of any Tax imposed under the applicable law of a country
listed in Appendix A to the Global Custody Agreement, the Custodian shall make
reasonable efforts to so notify the Client reasonably promptly after the
Custodian becomes aware that such Tax is required to be withheld.

7. In the event that (i) the Client is eligible pursuant to the provisions of
any tax treaty for a reduced rate of, or exemption from, withholding of any
Tax, which reduced rate or exemption is obtainable only by means of
application to the appropriate governmental authority for a refund of tax paid
or withheld, or (ii) the Custodian or any Subcustodian or Securities
Depository withholds from any distribution, proceeds or income collected on
behalf of the Client an amount which is subsequently determined to be greater
than the amount required under applicable law to have been withheld, the
Custodian shall, or shall instruct the appropriate Subcustodian or Securities
Depository to, assist the Client, to the extent permissible under applicable
law, to obtain a refund of such Tax from the appropriate governmental
authority in the amount for which the Client is eligible.

Appendix D

Notices to the Custodian

Morgan Guaranty Trust Company of New York, Brussels Office
35 avenue des Arts
Brussels 1040, Belgium

Attention: Securities Trust and Information
Services, Global Custody

Facsimile No. 322-512-4977
Telephone No. 322-508-8365

Notices to the Client

388 Greenwich Street
New York, NY 10013

Attention Lewis Daidone

Appendix E

Persons Authorized by the Client to Receive Security Procedure Materials

[To be provided by Client]

Appendix F

Communication Products

COMMUNICATION
PRODUCT
TERM
(check one)
NU
MBER
OF
COPIES
LOCATION(S)

Morcom Access
As long as this
Agreement remains in
effect
One year with
automatic
renewal for
successive one
year terms thereafter
Fixed term until
________
One

As long as this
Agreement remains in
effect
One year with
automatic
renewal for
successive one
year terms thereafter
Fixed term until
________

Appendix G

Communication Products - Terms and Conditions

1. Misuse; Confidentiality; Copies. The Client shall not transfer,
sublicense, rent, lease, convey, translate, convert to another programming
language, decompile, disassemble, modify or change any Communication Product
for any purpose. The Client shall not use any Communication Product in a
manner which would violate this license or infringe the proprietary rights of
the Custodian or others or violate the laws, tariffs or regulations of any
country. The Client agrees not to disclose to any other party and to keep
confidential all of the Communication Products and all information contained
in or related to the Communication Products and related documentation. The
Client may make only one copy of each licensed software Communication Product
for backup purposes in support of its authorized use of the software. The
Client shall include any applicable copyright notice on any such software
backup. The Client is permitted to use each licensed copy of any
Communication Product on only one computer or local area network at a time.

2. Compatible Products. The Client shall be responsible for obtaining and
maintaining hardware, software and other equipment and products that are
compatible with the Communication Products, as compatibility is defined by the
Custodian from time to time. The Custodian shall give the Client reasonable
advance notice of any changes in such compatibility requirements.

3. Documentation. If available, the Custodian shall give the Client one copy
of a user manual and related documentation (the "Documentation") for each
licensed Communication Product. The Documentation is intended to be used for
training and informational purposes. The Documentation describes Security
Procedures that the Client must comply with in using the Communication
Products. The Client shall immediately notify the Custodian in writing if it
believes any Security Procedure has been compromised or if any Communication
Product fails to perform as described in the Documentation.

4. Installation. At its option, the Custodian shall either install the
Communication Products at the locations specified by the Client or shall
furnish the Client with installation instructions. From time to time, at its
option, the Custodian shall either install new releases of the Communication
Products or furnish the Client with installation instructions and direct the
Client to install such new releases by itself. The Client agrees to allow the
Custodian to install such new releases or to install such new releases by
itself if directed to do so by the Custodian.

5. Returns, Repairs and Replacements. Upon the termination of this License
with respect to any Communication Product, the Client agrees to return all
copies of such Communication Product and related documentation to the
Custodian. The Client agrees to pay any shipping charges incurred in
connection with the return of any Communication Product to the Custodian for
replacement, update or upon termination of this License with respect to such
Communication Product. Communication Products that are lost, damaged or
otherwise rendered inoperable due to the Client's negligent, reckless or
intentional misuse, or due to reasons beyond the Custodian's control, shall be
repaired or replaced at the Client's expense. Communication Product repairs
shall only be performed by the Custodian or a party authorized by the
Custodian to perform such repairs.

6. Fees; Taxes. The Client agrees to pay the Custodian license fees and such
other fees as the parties hereto may agree upon in writing from time to time
in connection with obtaining the Communication Products. The Client agrees to
reimburse the Custodian for, or shall pay directly to the relevant taxing
authorities, any sales, use, value-added, excise or other taxes, other than
taxes based on the Custodian's net income, incurred by the Custodian or which
may in the future be incurred by the Custodian as a result of this License or
on or measured by the prices and other charges of the Communication Products
furnished for the Client's use, however designated, levied or based, whenever
the Custodian has paid or shall be liable to pay or collect any such tax from
the Client pursuant to applicable law, as interpreted by the departmental
authorities of the taxing unit.

7. Warranty. The Custodian warrants that, for a period of 30 days after
delivery of a Communication Product to the Client such Communication Product
will perform substantially in accordance with the then current specifications
therefor as set forth in the Documentation. If a Communication Product fails
to meet the foregoing warranty and the Client gives the Custodian written
notice thereof during the applicable warranty period, the Custodian's sole
obligation shall be to provide technical services to attempt to correct the
failure, provided that (i) the Client gives the Custodian detailed information
regarding such failure and the Custodian is able to duplicate same and (ii)
the Communication Product has not been used in an unauthorized manner or
otherwise misused or abused. The Client acknowledges that the Communication
Products are complex, may not be error free, and that all errors, if any, may
not be correctable or avoidable. Except and to the extent expressly provided
above, and in lieu of all other warranties, the Communication Products are
provided "as is", all warranties and representations of any kind with regard
to the Communication Products are hereby disclaimed, including any implied
warranties of merchantability or fitness for a particular purpose.

8. Infringement. The Custodian shall defend or settle, at its own expense,
any cause of action or proceeding brought against the Client which is based on
a claim that the use of a Communication Product infringes any patent,
copyright, trade secret or other proprietary right. The Custodian shall
indemnify and hold the Client harmless against any final judgment that may be
awarded by a court of competent jurisdiction against the Client as a result of
the foregoing. The Custodian's obligations hereunder are conditioned upon its
receiving from the Client (i) prompt written notice of each such claim,
(ii) reasonable cooperation and information in Client's possession and (iii)
the right to control and direct the investigation, defense and settlement of
each such claim. If a claim is made that a Communication Product infringes
any patent, copyright, trade secret or other proprietary right, the Custodian
may, in the Custodian's sole discretion, either procure for the Client the
right to continue using such Communication Product, modify it to make its use
noninfringing, or replace it with a noninfringing product; provided that if
none of the foregoing is reasonably available to the Custodian, the Custodian
may terminate the license granted herein and require the Client to return all
copies of the relevant Communication Product. Notwithstanding the foregoing,
the Custodian shall not be liable to the Client pursuant to this Section if a
claim is based on (i) a combination of a Communication Product with data or
other software or devices not supplied by the Custodian, (ii) modifications to
a Communication Product not made by the Custodian or (iii) use of a
Communication Product in an unauthorized manner.

9. Related Services. These terms and conditions and the Documentation are
intended to define the rights and obligations of the Client with respect to
Communication Products used by the Client in connection with all services
(e.g., custody, funds transfers, foreign exchange etc.) offered by Morgan
Guaranty Trust Company of New York and its affiliates to the Client. The
provisions of this Agreement and any documents relating to other services
offered by Morgan Guaranty Trust Company of New York and its affiliates may
supplement these terms and conditions but in the event of any inconsistency
between this Agreement or such other documents and these terms and conditions,
these terms and conditions shall prevail.

10. Intraday Reports. The Client acknowledges that intraday reports received
by the Client by means of any Communication Product may contain information
that is subject to correction, and that corrections of such information will
routinely occur without notice to the Client. The Client understands that
intraday reports are provided for informational purposes only and are not to
be relied upon for purposes of final reconciliations or otherwise. Neither
Morgan Guaranty Trust Company of New York nor any affiliate or subsidiary of
Morgan Guaranty Trust Company of New York that provides data with respect to
intraday reports makes any representation or warranty that such reports are
accurate or complete.

In addition to the Federal Reserve Bank of New York
In addition to the central bank, if applicable.
JSA currently does not meet Rule 17-5 requirements.
Citibank meets the capital requirements of Rule 17f-5 and Ottoman bank
currently does not.
Rev. 4/93 6.CAS
183.PG

Rev. 2/94 3.CUS
184.PG

Rev. 2/94 2.CUS
181.PG

SUBADVISORY AGREEMENT

SMITH BARNEY/TRAVELERS SERIES FUND INC.

(AIM Capital Appreciation Portfolio)

THIS AGREEMENT is made this 10th day of October, 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").

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, as amended (the "Advisers Act") as an
investment adviser and engages in the business of acting as an investment
adviser;

WHEREAS, the Sub-Adviser represents that it is registered under the
Advisers Act as an investment adviser and engages in the business of acting as
an investment adviser;

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; and

WHEREAS, the Manager represents that it has entered into a management
agreement dated as of October 10, 1995 with the Company (the "Management
Agreement"), pursuant to which the Manager shall act as manager with respect
to the Portfolio;

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:

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 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 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 Advisers Act.

(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-Adviser is responsible for decisions to buy and sell securities
for the Portfolio, broker-dealer selection, and negotiation of brokerage
commission rates. The Sub-Adviser'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-
Adviser 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-Adviser 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 (as those terms
are defined in Section 28 (e) of the Securities Exchange Act of 1934) to the
Sub-Adviser 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-Adviser
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-Adviser's overall responsibilities with respect to the Portfolio, and to
the other clients of the Sub-Adviser as to which the Sub-Adviser exercises
investment discretion. The Sub-Adviser 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-Adviser. Such allocation shall be in such amounts and
proportions as the Sub-Adviser shall determine and the Sub-Adviser 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 October 10, 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. Severability

If any provision of this Agreement is found to be unenforceable, then
this Agreement shall be deemed to be amended by modifying such provision to
the extent necessary to make it legal and enforceable while preserving its
intent. The remainder of this Agreement shall not be affected by such
modification.

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:

g:\funds\$sts\agreemts\subad

FORM OF
TRANSFER AGENCY AND REGISTRAR AGREEMENT

AGREEMENT, dated as of ___________, 1995 between Smith Barney/Travelers Series
Fund
Inc.., (the "Fund"), a corporation organized under the laws
of Maryland and having its principal place of business at 388 Greenwich
Street
New York, NY 10013, and The Shareholder Services Group, Inc.Inc. (MA) (the
"Transfer Agent"), a Massachusetts corporation with principal offices at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109.

W I T N E S S E T H

That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:

1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:

(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement, or similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.

(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent pursuant
to Section 4(c) hereof as may be received by the Transfer Agent from time
to time.

(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.

(d) "Commission" shall mean the Securities and Exchange
Commission.

(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.

(f) "Fund" shall mean the entity executing this Agreement, and if
it is a series fund, as such term is used in the 1940 Act, such term shall
mean each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each
such series.

(g) "1940 Act" shall mean the Investment Company Act of 1940.

(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person;

(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of 1933
and the 1940 Act.

(j) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be, of
the Fund as may be issued from time to time and, if the Fund is a closed-end or
a
series fund, as such terms are used in the 1940 Act any other classes or
series of stock, shares of beneficial interest or limited partnership
interests that may be issued from time to time.

(k) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to partners
of limited partnerships.

(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions,
including telefacsimile of a manually executed original or other process.

2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent
for the Fund.
The Transfer Agent accepts such appointments and agrees to perform the duties
hereinafter set forth.

3. Compensation.

(a) The Fund will compensate or cause the Transfer Agent to
be compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written schedule of fees annexed hereto as
Schedule A and incorporated herein. The Transfer Agent will transmit an invoice
to the
Fund as soon as practicable after the end of each calendar month which will be
detailed in accordance with Schedule A, and the Fund will pay to the Transfer
Agent the amount of such invoice within thirty (30) days after the Fund's
receipt of the invoice.

In addition, the Fund agrees to pay, and will be billed separately for,
reasonable out-of-pocket expenses incurred by the Transfer Agent in the
performance of its duties hereunder. Out-of-pocket expenses shall include, but
shall not be limited to, the items specified in the written schedule of out-
of-pocket charges annexed hereto as Schedule B and incorporated herein.
Unspecified
out-of-pocket expenses shall be limited to those out-of-pocket expenses
reasonably incurred by the Transfer Agent in the performance of its
obligations hereunder. Reimbursement by the Fund for expenses incurred by the
Transfer Agent in any month shall be made as soon as practicable but no later
than 15 days after the receipt of an itemized bill from the Transfer Agent.

(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A, a revised fee schedule executed and
dated by the parties hereto.

4. Documents. In connection with the appointment of the Transfer Agent
the Fund shall deliver or caused to be delivered to the Transfer Agent the
following documents on or before the date this Agreement goes into effect, but
in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:

(a) If applicable, specimens of the certificates for Shares of
the Fund;

(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;

(c) A signature card bearing the signatures of any officer of the
Fund or other Authorized Person who will sign Written Instructions or is
authorized to give Oral Instructions.

(d) A certified copy of the Articles of Incorporation, as
amended;

(e) A certified copy of the By-laws of the Fund, as amended;

(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;

(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund; and

(h) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the Securities Act
of 1933, as amended.

5. Further Documentation. The Fund will also furnish the Transfer
Agent with copies of the following documents promptly after the same shall
become available:

(a) each resolution of the Board of Directors authorizing the
issuance of Shares;

(b) any registration statements filed on behalf of the Fund and
all pre-effective and post-effective amendments thereto filed with the
Commission;

(d) certified copies of each resolution of the Board of Directors
or other authorization designating Authorized Persons; and

(e) such other certificates, documents or opinions as the
TransferAgent may reasonably request in connection with the performance of its
duties hereunder.

6. Representations of the Fund. The Fund represents to the Transfer
Agent that all outstanding Shares are validly issued, fully paid and non-
assessable. When Shares are hereafter issued in accordance with the terms of
the Fund'sArticles of Incorporation and its Prospectus, such Shares shall be
validly issued, fully paid and non-assessable.

7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the Fund
shall deliver or cause to be delivered to the Transfer Agent written notice of
such
declaration signed on behalf of the Fund by an officer thereof, upon which the
Transfer Agent shall be entitled to rely for all purposes, certifying (i) the
identity of the Shares involved, (ii) the number of Shares involved, and (iii)
that all appropriate action has been taken.

8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible for administering and/or performing those functions typically
performed by a
transfer agent; for acting as service agent in connection with dividend and
distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer and
redemption or
repurchase (including coordination with the Custodian) of Shares in accordance
with the terms of the Prospectus and applicable law. The operating standards
and procedures to be followed shall be determined from time to time by
agreement between the Fund and the Transfer Agent and shall initially be as
described in
Schedule C attached hereto. In addition, the Fund shall deliver to the
Transfer Agent all notices issued by the Fund with respect to the Shares
in accordance with and pursuant to the Articles of Incorporation or By-laws
of the Fund or as required by law and shall perform such other specific
duties as are set forth
in the

9. Record Keeping and Other Information. The Transfer Agent shall
create and maintain all records required of it pursuant to its duties
hereunder and as set forth in Schedule C in accordance with all applicable laws
, rules and
regulations, including records required by Section 31(a) of the 1940 Act. All
records shall be available during regular business hours for inspection and
use by the Fund. Where applicable, such records shall be maintained by the
Transfer Agent for the periods and in the places required by Rule 31a-2
under the 1940 Act.

Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services performed
by the Transfer Agent pursuant hereto.

10. Other Duties. In addition to the duties set forth in Schedule C,
the Transfer Agent shall perform such other duties and functions, and shall be
paid such amounts therefor, as may from time to time be agreed upon in writing
between the Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an amendment to
Schedule C,both dated and signed by authorized persons of the parties hereto.

11. Reliance by Transfer Agent; Instructions

(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice
of any change of authority of any person until receipt of a Written
Instruction
thereof from the Fund pursuant to Section 4(c). The Transfer Agent will also
have no
liability when processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the officers of the Fund
and the proper countersignature of the Transfer Agent.

(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance with
such Written
Instructions or in accordance with the opinion of counsel for the Fund or for
the Transfer Agent. Written Instructions requested by the Transfer Agent will
be provided by the Fund within a reasonable period of time. In addition, the
Transfer Agent, its officers, agents or employees, shall accept Oral
Instructions or
Written Instructions given to them by any person representing or acting on
behalf of the Fund only if said representative is an Authorized Person. The
Fund agrees
that all Oral Instructions shall be followed within one business day by
confirming
Written Instructions, and that the Fund's failure to so confirm shall not
impair in any respect the Transfer Agent's right to rely on Oral
Instructions. The Transfer
Agent shall have no duty or obligation to inquire into, nor shall the
Transfer Agent be responsible for, the legality of any act done by it upon
the request or
direction of a person reasonably believed by the Transfer Agent to be an
Authorized Person.

(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor; (ii)
the
legality of the redemption of any Shares, or the propriety of the amount to be
paid
therefor; (iii) the legality of the declaration of any dividend by the Board
of
Directors, or the legality of the issuance of any Shares in payment of any
dividend; or (iv)
the legality of any recapitalization or readjustment of the Shares.

12. Acts of God, etc. The Transfer Agent will not be liable or
responsible for delays or errors by acts of God or by reason of circumstances
beyond its
control, including acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or
failure or
unavailability of transportation, communication or power supply, fire, flood
or other catastrophe.

13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party') will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel fees
and
expenses) resulting from any claim, demand, action or suit or other
proceeding (a
"Claim") unless such Claim has resulted from a negligent failure to act or
omission to
act or bad faith of the Indemnified Party in the performance of its duties
hereunder.
In addition, the Fund will indemnify the Transfer Agent against and hold it
harmless from any Claim, damages, liabilities or expenses (including
reasonable counsel
fees) that is a result of: (i) any action taken in accordance with Written or
Oral Instructions, or any other instructions, or share certificates reasonably
believed by the Transfer Agent to be genuine and to be signed, countersigned
or executed,
or orally communicated by an Authorized Person; (ii) any action taken in
accordance with written or oral advice reasonably believed by the Transfer
Agent to have
been given by counsel for the Fund or its own counsel; or (iii) any action
taken as a result of any error or omission in any record (including but not
limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
delivered, or caused to be delivered by the Fund to the Transfer Agent in
connection with this Agreement.

In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation
which it believes presents or appears likely to present a claim for
indemnification against the Indemnifying Party although the failure to do so
shall not prevent
recovery by the Indemnified Party. The Indemnifying Party shall have the
option to defend the Indemnified Party against any Claim which may be the
subject of this
indemnification, and, in the event that the Indemnifying Party so elects, such
defense shall be conducted by counsel chosen by the Indemnifying Party and
satisfactory to the Indemnified Party, and thereupon the Indemnifying Party
shall take over complete defense of the Claim and the Indemnified Party shall
sustain no further legal or other expenses in respect of such Claim. The
Indemnified Party will not confess any Claim or make any compromise in any
case in which
the Indemnifying Party will be asked to provide indemnification, except with
the Indemnifying Party's prior written consent. The obligations of the
parties
hereto under this Section shall survive the termination of this Agreement.

14. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other party for
indirect loss of profits, reputation or business or any other special
damages under any
provision of this Agreement or for any act or failure to act hereunder.

15. Term and Termination.

(a) This Agreement shall be effective on the date first written
above and shall continue until September 2, 1994, and thereafter shall
automatically continue for successive annual periods ending on the anniversary
of the date first written above, provided that it may be terminated by either
party upon written notice given at least 60 days prior to termination.

(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors, certified by
the Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, the Transfer
Agent will
deliver to such successor a certified list of shareholders of the Fund (with
names and addresses), and all other relevant books, records, correspondence
and
other Fund records or data in the possession of the Transfer Agent, and the
Transfer
Agent will cooperate with the Fund and any successor transfer agent or agents
in the substitution process.

16. Confidentiality. Both parties hereto agree that any non public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party,
except as may be required by applicable law or at the request of the
Commission or
other governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree that
each of
them is entitled, without bond or other security, to an injunction or
injunctions to prevent breaches of this provision.

17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.

18. Subcontracting. The Fund agrees that the Transfer Agent may, in
its discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
Transfer Agent shall not relieve the Transfer Agent of its responsibilities
hereunder.

19. Miscellaneous.

(a) Notices. Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or the Transfer
Agent,
shall be sufficiently given if addressed to that party and received by it at
its
office set forth below or at such other place as it may from time to time
designate in writing.

To the Fund:

Smith Barney/Travelers Series Fund Inc.
388 Greenwich Street, 22 Floor
New York, NY 10013
Attention:Heath B. McLendon

To the Transfer Agent:

The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109

(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the
assignor without the written consent of the other party, which consent shall
not be unreasonably withheld.

(c) Governing Law. This Agreement shall be governed
exclusively by the laws of the State of New York without reference to the
choice of law provisions thereof. Each party hereto hereby agrees that (i)
the
Supreme Court of New York sitting in New York County shall have exclusive
jurisdiction
over any and all disputes arising hereunder; (ii) hereby consents to the
personal jurisdiction of such court over the parties hereto, hereby waiving any
defense
of lack of personal jurisdiction; and (iii) appoints the person to whom
notices
hereunder are to be sent as agent for service of process.

(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.

(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hreof or otherwise affect their construction or effect.

(f) Use of Transfer Agent's Name. The Fund shall not use the
name of the Transfer Agent in any Prospectus, Statement of Additional
Information, shareholders' report, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing; provided, that
the Transfer Agent need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to its appointment hereunder or
which are required by any government agency or applicable law or rule.
Notwithstanding the foregoing, any reference to the Transfer Agent shall
include a statement to the effect that it is a wholly owned subsidiary of
First Data Corporation.

(g) Use of Fund's Name. The Transfer Agent shall not use the
name of the Fund or material relating to the Fund on any documents or forms
for other than internal use in a manner not approved prior thereto in
writing;
provided, that the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of the Transfer
Agent or which are required by any government agency or applicable law or
rule.

(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.

(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto relating to the matters covered hereby and supersede any previous
agreements.
If any provision is held to be illegal, unenforceable or invalid for any
reason,
the remaining provisions shall not be affected or impaired thereby.

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their duly authorized officers, as of the day
and year first above written.

SMITH BARNEY/ TRAVELERS SERIES FUND INC.

By: _______________
Heath B. McLendon
President

THE SHAREHOLDER SERVICES GROUP, INC.

By:__________________
Michael G. McCarthy
Vice President

A-1

Transfer Agent Fee

Schedule A

Class A shares

The Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.

The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.

Class B shares

The Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.

Class C shares

The Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by
the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the
annualized fee for all accounts that are open during such a month.

A-2

Class D shares

The Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by
the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the
annualized fee for all accounts that are open during such a month.

B-1

Schedule B

OUT-OF-POCKET EXPENSES

The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:

- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct
pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including
all lease, maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities under this
Agreement.

The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with the Transfer Agent. In addition,
the
Fund will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer Agent whenever the Fund and the Transfer
Agent
mutually agree that such expenses are not otherwise properly borne by the
Transfer Agent as part of its duties and obligations under the Agreement.

C-1

Schedule C

DUTIES OF THE TRANSFER AGENT

1. Shareholder Information. The Transfer Agent or its agent
shall maintain a record of the number of Shares held by each holder of record
which
shall include name, address, taxpayer identification and which shall indicate
whether such Shares are held in certificates or uncertificated form.

2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder accounts and will respond to all communications from Shareholders
and others
relating to its duties hereunder and such other correspondence as may from
time to time be mutually agreed upon between the Transfer Agent and the Fund.
The
Transfer Agent shall provide the Fund with reports concerning shareholder
inquires and the responses thereto by the Transfer Agent, in such form and at
such times as are agreed to by the Fund and the Transfer Agent.

3. Share Certificates.

(a) At the expense of the Fund, it shall supply the Transfer
Agent or its agent with an adequate supply of blank share certificates to meet
the Transfer Agent or its agent's requirements therefor. Such Share
certificates
shall be properly signed by facsimile. The Fund agrees that, notwithstanding
the
death, resignation, or removal of any officer of the Fund whose signature
appears on
such certificates, the Transfer Agent or its agent may continue to countersign
certificates which bear such signatures until otherwise directed by Written
Instructions.

(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and
lost certificate bonds, in form satisfactory to the Transfer Agent or its
agent,
with the Fund and the Transfer Agent or its agent as obligees under the bond.

(c) The Transfer Agent or its agent shall also maintain a record
of each certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form,
i.e., no certificate being issued with respect thereto, the Transfer Agent or
its
agent shall maintain comparable records of the record holders thereof,
including
their names, addresses and taxpayer identification. The Transfer Agent or its
agent shall further maintain a stop transfer record on lost and/or replaced
certificates.

C-2

4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail to
Shareholders of the Fund, all reports to Shareholders, dividend and
distribution notices and proxy material for the Fund's meetings of
Shareholders. In connection with meetings of Shareholders, the Transfer
Agent or its Agent will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted prior to
meetings,
act as inspector of election at meetings and certify Shares voted at
meetings.

5. Sales of Shares

(a) Suspension of Sale of Shares. The Transfer Agent or its
agent shall not be required to issue any Shares of the Fund where it has
received a Written Instruction from the Fund or official notice from any
appropriate
authority that the sale of the Shares of the Fund has been suspended or
discontinued. The existence of such Written Instructions or such official
notice shall be conclusive evidence of the right of the Transfer Agent or its
agent to rely on such Written Instructions or official notice.
(b) Returned Checks. In the event that any check or other order
for the payment of money is returned unpaid for any reason, the Transfer Agent
or its agent will: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued as a
result of such
check or order; and (iii) take such actions as the Transfer Agent may from
time to time deem appropriate.

6. Transfer and Repurchase

(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.

The Transfer Agent or its agent will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent or its agent
reasonably may deem necessary.

The Transfer Agent or its agent reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on
the instructions is valid and genuine. The Transfer Agent or its agent also
reserves the right to refuse to transfer or repurchase Shares until it is
satisfied
that the requested transfer or repurchase is legally authorized, and it shall
incur no
liability for the refusal, in good faith, to make transfers or repurchases
which the Transfer Agent or its agent, in
C-3

its good judgement, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse
to such transfer or repurchase.

(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent or its agent shall, upon receipt of the instructions and
documents in proper form, deliver to the Custodian and the Fund or its
designee a
notification setting forth the number of Shares to be repurchased. Such
repurchased shares shall be reflected on appropriate accounts maintained by
the Transfer Agent or
its agent reflecting outstanding Shares of the Fund and Shares attributed to
individual accounts.

(c) Payment of Repurchase Proceeds. The Transfer Agent or its
agent shall, upon receipt of the moneys paid to it by the Custodian for the
repurchase of Shares, pay such moneys as are received from the Custodian, all
in accordance with the procedures described in the written instruction
received by the Transfer Agent or its agent from the Fund.

The Transfer Agent or its agent shall not process or effect any
repurchase with respect to Shares of the Fund after receipt by the Transfer
Agent or its agent of notification of the suspension of the determination of
the net asset value of the Fund.
7. Dividends

(a) Notice to Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors of the
Fund with respect to Shares of the Fund, the Fund shall furnish or cause to
be
furnished to the Transfer Agent or its agent a copy of a resolution of the
Fund's Board
of Directors certified by the Secretary of the Fund setting forth the date of
the
declaration of such dividend or distribution, the ex-dividend date, the date
of payment thereof, the record date as of which shareholders entitled to
payment
shall be determined, the amount payable per Share to the shareholders of
record as of that date, the total amount payable to the Transfer Agent or its
agent on
the payment date and whether such dividend or distribution is to be paid in
Shares
of such class at net asset value.

On or before the payment date specified in such resolution of the
Board of Directors, the Custodian of the Fund will pay to the Transfer Agent
sufficient cash to make payment to the shareholders of record as of such
payment date.

(b) Insufficient Funds for Payments. If the Transfer Agent or
its agent does not receive sufficient cash from the Custodian to make total
dividend and/or distribution payments to all shareholders of the Fund as of
the record date, the Transfer
C-4

Agent or its agent will, upon notifying the Fund, withhold payment to all
Shareholders of record as of the record date until sufficient cash is provided
to the Transfer Agent or its agent.

C-5

Exhibit
1
to

Schedule C

Summary of Services

The services to be performed by the Transfer Agent or its agent shall be
as follows:

A. DAILY RECORDS

Maintain daily the following information with respect to each
Shareholder account as received:

o Name and Address (Zip Code)
o Class of Shares
o Taxpayer Identification Number
o Balance of Shares held by Agent
o Beneficial owner code: i.e., male, female, joint tenant,
etc.
o Dividend code (reinvestment)
o Number of Shares held in certificate form

B. OTHER DAILY ACTIVITY

o Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of
Shares and other management policy questions will be
referred to the Fund).

o Process additional payments into established Shareholder
accounts in accordance with Written Instruction from the
Agent.

o Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.

o Identify redemption requests made with respect to accounts
in which Shares have been purchased within an
agreed-upon period of time for determining whether good
funds have been collected with respect to such purchase
and process as agreed by the Agent in accordance with
written instructions set forth by the Fund.

o Examine and process all transfers of Shares, ensuring that
all transfer requirements and legal documents have been
supplied.

C-6

o Issue and mail replacement checks.

o Open new accounts and maintain records of exchanges
between accounts

C. DIVIDEND ACTIVITY

o Calculate and process Share dividends and distributions as
instructed by the Fund.

o Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the
Fund. Report to the Fund reinvestment plan share
purchases and determination of the reinvestment price.

D. MEETINGS OF SHAREHOLDERS

o Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies
(proxies must be adaptable to mechanical equipment of the
Agent or its agents) and supply daily reports when
sufficient proxies have been received.

o Prepare and submit to the Fund an Affidavit of Mailing.

o At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if
requested by the Fund, Inspection of Election.

E. PERIODIC ACTIVITIES

o Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (material must be adaptable to mechanical
equipment of Agent or its agents).

o Receive all notices issued by the Fund with respect to the
Preferred Shares in accordance with and pursuant to the Articles of
Incorporation and the Indenture and perform such other specific
duties as are set forth in the Articles of Incorporation including a
giving of notice of a special meeting and notice of redemption in
the circumstances and otherwise in accordance with all relevant
provisions of the Articles of Incorporation.

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 12, 1995 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
February 27, 1995

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

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[PAYABLE-FOR-SECURITIES] 923,766
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[OTHER-ITEMS-LIABILITIES] 92,618
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[ACCUM-APPREC-OR-DEPREC] 191,825
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[DIVIDEND-INCOME] 18,500
[INTEREST-INCOME] 8,793
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[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
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[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
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[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
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[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
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[OTHER-ITEMS-LIABILITIES] 25,924
[TOTAL-LIABILITIES] 582,292
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[PAID-IN-CAPITAL-COMMON] 2,641,156
[SHARES-COMMON-STOCK] 263,693
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[EXPENSES-NET] (7,410)
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[NUMBER-OF-SHARES-SOLD] 336,108
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[OVERDISTRIBUTION-GAINS] 0
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[REALIZED-GAINS-CURRENT] (6,715)
[APPREC-INCREASE-CURRENT] (68,023)
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[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
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[NUMBER-OF-SHARES-REDEEMED] (217,744)
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[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)
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[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
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<S> <C>
<PERIOD-TYPE> OTHER
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[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> <6>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCTOBER 31, 1994
<PERIOD-START> JUNE 16, 1994
<PERIOD-END> OCTOBER 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>