TRAVELERS SERIES FUND INC, 485BPOS, 1998-02-27

TRAVELERS SERIES FUND INC
485BPOS, 1998-02-27

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As filed with the Securities and Exchange Commission on February
27, 1998
Securities Act Registration No. 33-75644
Investment Company Act Registration No. 811-8372

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 9 [ ]
Post-Effective Amendment No. [ ]

and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO.
__________________ [ ]

Travelers Series Fund Inc.
(a Maryland Corporation)
(Exact Name of Registrant as Specified in Charter)

388 Greenwich Street
New York, New York 10013
(Address of Principal Executive Offices)

(212) 816-6474
(Registrant's Telephone Number, including Area Code)

Christina T. Sydor, Secretary
Travelers Series Fund Inc.
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
__________________

Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check
appropriate box):

[X] Immediately upon filing pursuant to paragraph 485(b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2) of rule
485
[ ] On (date) pursuant to paragraph (a)(2)

If appropriate, check the following box:
[X] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.

Title of Securities Being Registered: Shares of Common Stock (MD)

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"

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 thirteen Portfolios of
Travelers Series Fund Inc. (the "Fund"). Numerous other versions
of Prospectuses will be created from this Registration Statement.
The distribution system for each version of the Prospectus is
different. These Prospectuses will be filed with the Commission
pursuant to Rule 497.

PART A
<PAGE>

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

[GRAPHIC]
PROSPECTUS

=============
VINTAGE
=============

TRAVELERS SERIES FUND INC.

UNDERLYING FUND PROSPECTUS

February Twenty-Seventh

1998

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

<PAGE>

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

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 thirteen different Portfolios.

<TABLE>
<S> <C>
Smith Barney Large Cap Value 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 Portfolio Smith Barney High Income Portfolio
Smith Barney International Equity Portfolio MFS Total Return Portfolio
Smith Barney Pacific Basin Portfolio Smith Barney Large Capitalization Growth Portfolio
Smith Barney Money Market Portfolio
</TABLE>

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 ("SAI"), ALSO
REFERRED TO AS "PART B", DATED FEBRUARY 27, 1998 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 27, 1998.
<PAGE>

TABLE OF CONTENTS
================================================================================

FINANCIAL HIGHLIGHTS ............................................... 1

THE FUND'S INVESTMENT PROGRAM ...................................... 7
Smith Barney Large Cap Value 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 Large Capitalization Growth Portfolio ............ 25
Smith Barney Money Market Portfolio ........................... 26

SPECIAL INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS .............. 28

DIVIDENDS, DISTRIBUTIONS AND TAXES ................................. 44

REDEMPTION OF SHARES ............................................... 45

PERFORMANCE ........................................................ 45

MANAGEMENT ......................................................... 45

SHARES OF THE FUND ................................................. 54

DETERMINATION OF NET ASSET VALUE ................................... 55

APPENDIX A ......................................................... 56

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

FINANCIAL HIGHLIGHTS
================================================================================

The following information for the three-year period ended October 31, 1997
and for the period from June 16, 1994 (commencement of operations) to October
31, 1994 has been audited in conjunction with the annual audits of the financial
statements of each of the portfolios within the Fund by KPMG Peat Marwick LLP,
independent auditors. The 1997 financial statements and the independent
auditors' reports thereon appear in the October 31, 1997 Annual Reports to
Shareholders. The information set out below should be read in conjunction with
the financial statements and related notes that also appear within each
portfolio's Annual Reports, which are available upon request and incorporated by
reference into the Statement of Additional Information.

For a share of capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith Barney Large Cap Value(1) Alliance Growth

1997 1996 1995 1994(2) 1997 1996 1995 1994(2)

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

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin. of Period
14.84 $12.12 $10.14 $10.00 $16.30 $13.28 $10.65 $10.00
- -----------------------------------------------------------------

Income From Operations:
Net investment income (3) 0.25 0.32 0.28 0.11 0.05 0.04 0.14 0.06
Net realized and unrealized gain 3.16 2.62 1.76 0.03 5.11 3.39 2.61 0.59
- ------------------------------------------------------------------------------------------------------------------------------------

Total Income from Operations 3.41 2.94 2.04 0.14 5.16 3.43 2.75 0.65
- ------------------------------------------------------------------------------------------------------------------------------------

Less Distributions From:
Net investment income (0.18) (0.17) (0.06) -- (0.02) (0.09) (0.02) --
Net realized gains (0.17) (0.05) -- -- (0.62) (0.32) (0.10) --
- ------------------------------------------------------------------------------------------------------------------------------------

Total Distributions (0.35) (0.22) (0.06) -- (0.64) (0.41) (0.12) --
- ------------------------------------------------------------------------------------------------------------------------------------

Net Asset Value, End of Period 17.90 $14.84 $12.12 $10.14 $20.82 $16.30 $13.28 $10.65
- ------------------------------------------------------------------------------------------------------------------------------------

Total Return 23.38% 24.55% 20.21% 1.40%++ 32.59% 26.55% 26.18% 6.50%++

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

Net Assets, End of Period (000's) $287,333 $138,712 $39,364 $6,377 $544,526 $294,596 $111,573 $17,086
- ------------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses (3) 0.69% 0.73% 0.73% 0.73%+ 0.82% 0.87% 0.90% 0.88%+
Net investment income 2.01 2.35 2.70 2.82%+ 0.32 0.39 1.24 1.47%+
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Turnover Rate 46% 32% 38% 2% 66% 88% 78% 37%
====================================================================================================================================

Average commissions paid
on equity security transactions (4) $0.06 $0.06 $0.07 -- $0.05 $0.05 $0.06 --
====================================================================================================================================

</TABLE>
(1) Formerly known as Smith Barney Income and Growth Portfolio.
(2) For the period from June 16, 1994 (commencement of operations) to October
31, 1994.
(3) Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc. and Travelers Investment Adviser, Inc. ("TIA") (each
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 Large Cap Value 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 Large Cap Value Portfolio would have been as follows:

<TABLE>
<CAPTION>
Expense Ratios
Per Share Decreases Without Fee Waivers
in Net Investment Income and Reimbursement
------------------------ -----------------
<S> <C> <C>
1995 $0.02 0.94%
1994 0.05 2.08+
</TABLE>

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:

(4) As of September 1995, the Securities and Exchange Commission ("SEC")
instituted new guidelines requiring the disclosure of average commissions
per share.
+ 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 capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Van Kampen American Capital Enterprise Smith Barney International Equity
----------------------------------------- ---------------------------------------

1997 1996 1995 1994(1) 1997 1996 1995 1994(1)

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

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.37 $12.89 $10.38 $10.00 $12.18 $10.48 $10.55 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------

Income (loss) From Operations:
Net investment income (loss) (2) 0.06 0.05 0.03 0.03 0.01 0.02 0.03* (0.03)
Net realized and unrealized gain (loss) 4.51 2.87 2.53 0.35 1.05 1.69 (0.10) 0.58
- ------------------------------------------------------------------------------------------------------------------------------------

Total Income (loss) from Operations 4.57 2.92 2.56 0.38 1.06 1.71 (0.07) 0.55
- ------------------------------------------------------------------------------------------------------------------------------------

Less Distributions From:
Net investment income (0.05) (0.04) (0.02) -- (0.01) (0.01) -- --
Net realized gains -- (0.40) (0.03) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------

Total Distributions (0.05) (0.44) (0.05) -- (0.01) (0.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------------

Net Asset Value, End of Period $19.89 $15.37 $12.89 $10.38 $13.23 $12.18 $10.48 $10.55
- ------------------------------------------------------------------------------------------------------------------------------------

Total Return 29.81% 23.35% 24.74% 3.80%++ 8.73% 16.36% (0.66)% 5.50%++

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

Net Assets, End of Period (000's) $196,583 $103,691 $32,447 $5,734 $219,037 $143,323 $53,538 $13,811
- ------------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses (2) 0.74% 0.83% 0.88% 0.84%+ 1.01% 1.10% 1.44% 1.20%+
Net investment income (loss) 0.41 0.53 0.65 0.79%+ 0.09 0.23 0.25 (0.73)+
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Turnover Rate 75% 112% 180% 55% 38% 41% 29% --
====================================================================================================================================

Average commissions paid
on equity security transactions (3)(4) $0.05 $0.06 $0.05 -- $0.02 $0.02 $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:

The Manager has waived a portion of its fees for the period ended October
31, 1994 for the Smith Barney International Equity Portfolio.
If such fees were not waived the effect of the per share increase in net
investment loss 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 years ended October 31, 1995 and 1996, 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% and
1.05%, respectively; prior year numbers have not been restated to reflect
these adjustments.
(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
(4) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.00%.
* Includes realized gains and losses from foreign currency transactions.
+ 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 capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith Barney Pacific Basin TBC Managed Income
----------------------------------------- ----------------------------------------

1997 1996 1995 1994(1) 1997(5) 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.75 $8.95 $10.10 $10.00 $11.06 $11.16 $10.04 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------

Income (loss) From Operations:
Net investment income (loss) (2) (0.01) 0.08 (0.04)* (0.04) 0.70 0.65 0.61 0.21
Net realized and unrealized gain (loss) (1.64) 0.75 (1.11) 0.14 0.28 (0.14) 0.64 (0.17)
- ------------------------------------------------------------------------------------------------------------------------------------

Total Income (loss) from Operations (1.65) 0.83 (1.15) 0.10 0.98 0.51 1.25 0.04
- ------------------------------------------------------------------------------------------------------------------------------------

Less Distributions From:
Net investment income (0.06) (0.03) -- -- (0.49) (0.46) (0.13) --
Net realized gains -- -- -- -- -- (0.15) -- --
- ------------------------------------------------------------------------------------------------------------------------------------

Total Distributions (0.06) (0.03) -- -- (0.49) (0.61) (0.13) --
- ------------------------------------------------------------------------------------------------------------------------------------

Net Asset Value, End of Period $8.04 $9.75 $8.95 $10.10 $11.55 $11.06 $11.16 $10.04
- ------------------------------------------------------------------------------------------------------------------------------------

Total Return (17.02)% 9.26% (11.39)% 1.00%++ 9.19% 4.61% 12.68% 0.40%++
- ------------------------------------------------------------------------------------------------------------------------------------

Net Assets, End of Period (000's) $18,225 $16,657 $7,122 $4,238 $31,799 $23,532 $11,279 $3,840
- ------------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses (2) 1.38% 1.34% 1.83% 1.26%+ 0.87% 0.92% 0.92% 0.87%+
Net investment income (loss) (0.08) 0.47 (0.51) (0.93)+ 6.48 6.19 6.13 5.67%+
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Turnover Rate 156% 59% 28% -- 259% 255% 170% 42%
====================================================================================================================================

Average commissions paid
on equity security transactions (3) $0.01 $0.02 $0.01 -- n/a n/a n/a n/a
====================================================================================================================================

</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, 1996, 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:

<TABLE>
<CAPTION>
Expense Ratios
Without Fee Waiver
Per Share Decreases Reimbursement and
in Net Investment Income Custody Credits
------------------------ ---------------
<S> <C> <C>
1996 $0.02 1.58%
1995 0.03 2.23
1994 0.06 2.82+
</TABLE>

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:

In addition, during the year ended October 31, 1996 and 1995, the Smith
Barney Pacific Basin Portfolio has earned credits from the custodian which
reduce service fees incurred. If the credits are taken into consideration
the expense ratios are 1.17% and 1.30%, respectively; prior year numbers
have not been restated to reflect these adjustments. (3) As of September
1995, the SEC instituted new guidelines requiring the disclosure of average
commissions per share.
(4) Trades executed in the United States and Canada have an average commission
rate of $0.06 per share. Commission on trades executed outside these
countries are generally executed as a percentage of cost or proceeds
ranging from 0.5% to 1.00%.
(5) Per share amounts have been calculated using the monthly average shares
method rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
* Includes realized gains and losses from foreign currency transactions.
+ 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 capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Putnam Diversified Income GT Global Strategic Income
---------------------------------------- -----------------------------------------

1997 1996(3) 1995 1994(1) 1997(3) 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.99 $11.46 $10.18 $10.00 $12.45 $10.77 $9.95 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------

Income (loss) From Operations:
Net investment income (2) 0.67 0.78 0.79 0.23 0.75 0.74 0.64* 0.17
Net realized and unrealized gain (loss) 0.30 0.27 0.58 (0.05) 0.36 1.36 0.28 (0.22)
- ------------------------------------------------------------------------------------------------------------------------------------

Total Income (loss) from Operations 0.97 1.05 1.37 0.18 1.11 2.10 0.92 (0.05)
- ------------------------------------------------------------------------------------------------------------------------------------

Less Distributions From:
Net investment income (0.56) (0.39) (0.09) -- (0.46) (0.42) (0.10) --
Net realized gains (0.09) (0.13) -- -- (0.58) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------

Total Distributions (0.65) (0.52) (0.09) -- (1.04) (0.42) (0.10) --
- ------------------------------------------------------------------------------------------------------------------------------------

Net Asset Value, End of Period $12.31 $11.99 $11.46 $10.18 $12.52 $12.45 $10.77 $9.95
- ------------------------------------------------------------------------------------------------------------------------------------

Total Return 8.44% 9.43% 13.55% 1.80%++ 9.32% 20.07% 9.37% (0.50)%++

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

Net Assets, End of Period (000's) $121,601 $81,076 $31,514 $6,763 $29,232 $19,152 $8,397 $2,624
- ------------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses (2) 0.88% 0.96% 0.97% 0.98%+ 1.07% 1.23% 1.47% 1.07%+
Net investment income 6.99 7.57 7.53 6.14%+ 6.05 6.87 6.44 4.58%+
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Turnover Rate 253% 255% 276% 20% 161% 192% 295% 56%
====================================================================================================================================

</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 years ended October
31, 1996, 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:

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:

In addition, during the years ended October 31, 1996 and 1995, the GT
Global Strategic Income Portfolio has earned credits from the custodian
which reduce service fees incurred. If the credits are taken into
consideration the expense ratios are 1.11% and 1.11%, respectively; prior
year numbers have not been restated to reflect these adjustments.
(3) Per share amounts have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the period
since the use of the undistributed net investment income method does not
accord with results of operations.
* Includes realized gains and losses from foreign currency transactions.
+ 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 capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
Smith Barney High Income MFS Total Return
----------------------------------------- ------------------------------------------

1997 1996 1995 1994(1) 1997 1996 1995 1994(1)
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.09 $11.26 $10.07 $10.00 $13.13 $11.53 $9.98 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------

Income (loss) From Operations:
Net investment income (2) 0.88 1.14 0.93 0.29 0.38 0.33 0.45 0.13
Net realized and unrealized gain (loss) 1.00 0.19 0.48 (0.22) 2.27 1.62 1.15 (0.15)
- ------------------------------------------------------------------------------------------------------------------------------------

Total Income (loss) from Operations 1.88 1.33 1.41 0.07 2.65 1.95 1.60 (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------

Less Distributions From:
Net investment income (0.66) (0.50) (0.22) -- (0.29) (0.27) (0.05) --
Net realized gains (0.06) -- -- -- (0.18) (0.08) -- --
- ------------------------------------------------------------------------------------------------------------------------------------

Total Distributions (0.72) (0.50) (0.22) -- (0.47) (0.35) (0.05) --
- ------------------------------------------------------------------------------------------------------------------------------------

Net Asset Value, End of Period $13.25 $12.09 $11.26 $10.07 $15.31 $13.13 $11.53 $9.98
- ------------------------------------------------------------------------------------------------------------------------------------

Total Return 16.24% 12.17% 14.30% 0.70%++ 20.64% 17.16% 16.12% (0.20)%++

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

Net Assets, End of Period (000's) $123,726 $65,955 $20,450 $3,395 $263,585 $134,529 $49,363 $8,504
- ------------------------------------------------------------------------------------------------------------------------------------

Ratios to Average Net Assets:
Expenses (2) 0.70% 0.84% 0.70% 0.69%+ 0.86% 0.91% 0.95% 0.93%+
Net investment income 9.36 9.79 9.54 7.55%+ 3.54 3.82 4.40 3.51%+
- ------------------------------------------------------------------------------------------------------------------------------------

Portfolio Turnover Rate 89% 104% 57% 15% 99% 139% 104% 18%
====================================================================================================================================

Average commissions paid
on equity security transactions (3) n/a n/a n/a n/a $0.06 $0.06 $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:

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:

(3) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
+ 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 capital stock outstanding throughout the period:

<TABLE>
<CAPTION>
AIM Capital Appreciation Smith Barney Money Market
--------------------------------- ----------------------------------------------
1997 1996(4) 1995(3)(4) 1997 1996 1995 1994(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.76 $10.10 $10.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (2) 0.02 0.02 0.02 0.049 0.049 0.052 0.014
Net realized and unrealized gain (loss) 1.91 0.75 (0.02) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total Income from Operations 1.93 0.77 -- 0.049 0.049 0.052 0.014
- --------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.01) (0.01) -- (0.049) (0.049) (0.052) (0.014)
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.01) (0.01) -- (0.049) (0.049) (0.052) (0.014)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.68 $10.76 $10.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 17.96% 7.71% 0.00% 5.05% 5.05% 5.35% 1.46%++
- --------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (000's) $202,846 $112,905 $8,083 $111,168 $99,150 $37,487 $5,278
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses (2) 0.85% 0.96% 1.00%+ 0.65% 0.65% 0.65% 0.66%+
Net investment income 0.20 0.22 4.07%+ 4.94 4.86 5.26 3.83%+
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 56% 44% 6% n/a n/a n/a n/a
================================================================================================================================
Average commissions paid
on equity security transactions $0.06 $0.06 $0.06 n/a n/a n/a n/a
================================================================================================================================
</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 with respect to the AIM
Capital Appreciation Portfolio for the years ended October 31, 1996,
October 31, 1995 and the period ended October 31, 1994. In addition, the
Manager has reimbursed the AIM Capital Appreciation Portfolio for $13,456
in expenses for the period ended October 13, 1995 and the Smith Barney
Money Market Portfolio for $15,423 in expenses for the period ended October
31, 1994. 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. 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:

(3) For the period from October 10, 1995 (commencement of operations) to
October 31, 1995.
(4) Per share amounts have been calculated using the monthly average shares
method, rather than the undistributed net investment income method, because
it more accurately reflects the per share data for the period.
+ Annualized.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
* Amount represents less than $0.001.

- --------------------------------------------------------------------------------
6
<PAGE>

THE FUND'S INVESTMENT PROGRAM
================================================================================

The Fund consists of thirteen 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 SAI.

The investment objectives and certain investment restrictions designated as
such in the SAI 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 Large Cap Value Portfolio

Investment Objectives

The investment objectives of the Smith Barney Large Cap Value Portfolio
(formerly known as 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 Mutual Management Corp. ("MMC" or
the "Manager") (formerly known as Smith Barney Mutual Funds Management Inc.)(See
"Management").

Investment Policies

The Smith Barney Large Cap Value 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). Under normal market
conditions at least 65% of the Portfolio's assets will be invested in equity
securities. 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 ("ADRs"), 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 Travelers Investment Adviser, Inc. ("TIA" or the "Manager" and
together with MMC, the "Managers"); 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, payment-in-kind bonds
and real estate investment trusts. It may also buy and sell stock index futures
contracts ("index futures") and may buy options on index

- --------------------------------------------------------------------------------
8
<PAGE>

futures and on stock indices for 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. In addition, the
Portfolio may invest in real estate investment trusts. 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 TIA; 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.

- --------------------------------------------------------------------------------
9
<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 TIA; Van Kampen American Capital Asset
Management, 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 to provide a 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 MMC.

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 asses 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. Allocation of the Portfolio's investments will depend upon the relative
attractiveness of the international markets and particular issuers.
Concentration of the Portfolio assets in one or a few countries or currencies
will subject the Portfolio to greater risks than if the Portfolio's assets were
not geographically concentrated.

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,

- --------------------------------------------------------------------------------
12
<PAGE>

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. However, the
Portfolio may invest up to 5% of its assets in such "unseasoned" issuers.

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 and Thailand and other
such countries as the Manager may determine from time to time ("Asian Pacific
Countries"). The Portfolio is managed by MMC.

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 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. However, the Portfolio has no predetermined policy on
the allocation of funds for investment among such countries or securities and
allocation of the Portfolio's investments will depend upon the relative
attractiveness of the Asian Pacific markets and particular issuers.
Concentration of the Portfolio's assets in one or a few of the Asian Pacific
countries and Asian Pacific currencies will subject the Portfolio to greater
risks than if the Portfolio's assets were not geographically concentrated.

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13
<PAGE>

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.

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. Debt
securities rated Baa or BBB may have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity of their issuers to pay interest and repay principal than is the case
with higher rated securities. 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

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

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 TIA; The Boston Company Asset Management, LLC 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
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."

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<PAGE>

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.

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 TIA; 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 primarily of high yielding,
lower-rated, higher risk U.S. and foreign corporate fixed-income
securities; and

* an International Sector, consisting primarily of obligations of
foreign governments, their agencies and instrumentalities, 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,

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<PAGE>

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 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 may 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 Baa by Moody's, or BBB by S&P or the equivalent by any other
nationally recognized statistical rating agency, or in unrated securities that
the Sub-Adviser determines are of comparable quality. Securities rated Baa or
BBB are considered to have some speculative characteristics. 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 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.

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<PAGE>

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.

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, the equivalent by another, nationally recognized statistical rating
agency) 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
(whether they are allocated to the High Yield Sector or the International
Sector) may 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 any currency including the U.S. dollar.
These securities include:

* debt obligations issued or guaranteed by foreign (including emerging
markets), 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.

In the past, yields available from securities denominated in foreign
currencies have often been higher than those of securities denominated in U.S.
dollars. The Sub-Adviser will consider expected changes in foreign currency
exchange rates in determining the anticipated returns of securities denominated
in foreign currencies.

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

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18
<PAGE>

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 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 SAI.

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 TIA; Chancellor LGT Asset Management,
Inc. ("Chancellor LGT") 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 area 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 net assets in
U.S. and foreign debt and other fixed income securities that, at the time of
purchase, are rated at least investment grade by Moody's or S&P or, if unrated,
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. Such securities involve a high degree of risk and are

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19
<PAGE>

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 the Sub-Adviser to have developing or emerging
economies and markets. These countries generally 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, Bulgaria, Chile, China, Colombia, Costa Rica, Cyprus,
Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, Finland,
Greece, Ghana, Hong Kong, Hungary, India, Indonesia, Israel, Ivory Coast,
Jamaica, Jordan, Kazakhstan, Kenya, Lebanon, Malaysia, Mauritius, Mexico,
Morocco, Nicaragua, Nigeria, Oman, Pakistan, Panama, Paraguay, Peru,
Philippines, Poland, Portugal, Republic of Slovakia, Russia, Singapore,
Slovenia, South Africa, South Korea, Sri Lanka, Swaziland, Taiwan, Thailand,
Turkey, Ukraine, Uruguay, Venezuela, Zambia and Zimbabwe.

The Portfolio will not be invested in all such markets at all times.
Moreover, investing in some of those markets currently may not be desirable or
feasible, due to the lack of adequate custody arrangements, overly burdensome
repatriation requirements and similar restrictions, the lack of organized and
liquid securities markets, unacceptable political risks or for other reasons.

As used in this Prospectus and the SAI, 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 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.

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 331/3% 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, political 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

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<PAGE>

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 may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest its
assets in high quality foreign or domestic money market instruments.

Asset Allocation. The Portfolio invests in debt obligations allocated among
diverse markets and denominated in various currencies, including U.S. dollars,
or in multinational currency units such as European Currency Units. The
Portfolio may purchase securities that are issued by the government or a company
or 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 selects securities of particular issuers on the basis its
views as to the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.

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 sophisticated investment techniques that include currency, options and
futures transactions. See "Futures, Options and Currency Transactions" and "Swap
and Swap-Related Products."

According to the Sub-Adviser, as of the date of this Prospectus, more than
50% of the value of all outstanding government debt obligations throughout the
world is represented by obligations denominated in currencies other than the
U.S. dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Sub-Adviser believes that the Portfolio's
policy of investing in debt securities throughout the world may enable the
achievement of results superior to those produced by mutual funds with similar
objectives to those of the Portfolio that invest solely in debt securities of
U.S. issuers. 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

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<PAGE>

assets in illiquid securities and is authorized to borrow money from banks in an
amount up to 331/3% 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.

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 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 MMC.

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

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22
<PAGE>

in the lower rating categories of nationally recognized securities rating
organizations, as low as C by Moody's or D by S&P, or in non-rated income
securities that the Manager determines to be of comparable quality. The
Portfolio will not purchase securities rated lower than B by both Moody's and
S&P, if, immediately after such purchase, more than 10% of the Portfolio's total
assets are invested in such securities.

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

The Portfolio may invest in securities rated higher than Ba by Moody's and
BB by S&P without limitation when the difference in yields between quality
classifications is relatively narrow.

For temporary defensive purposes when the Manager anticipates adverse
market conditions, the Portfolio may invest all or a major portion of its assets
in securities rated higher than Ba by Moody's and BB by S&P. Investments in
higher rated issues may serve to lessen a decline in net asset value but may
also affect the amount of current income produced by the Portfolio, since the
yields from such issues are usually lower than those from lower rated issues. A
general description of Moody's and S&P's ratings of corporate bonds is set forth
in Appendix A. The Portfolio may also invest without limitation in money market
instruments, including commercial paper of domestic and foreign corporations,
certificates of deposit, bankers' acceptances and other obligations of banks,
repurchase agreements and short-term obligations issued or guaranteed by the
United States government or its agencies. The yield on these securities will
tend to be lower than the yield on other securities to be purchased by the
Portfolio. To the extent the Portfolio's assets are invested for temporary
defensive purposes, they will not be invested in a manner designed to achieve
the Portfolio's investment objective.

The Portfolio may lend portfolio securities equal in value to not more than
20% of its total assets and purchase or sell securities on a when-issued or
delayed-delivery basis. The Portfolio 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, mortgage-backed and asset-backed 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.

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<PAGE>

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 TIA; 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
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
invest in American Depositary 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.

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<PAGE>

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.

Smith Barney Large Capitalization Growth Portfolio

Investment Objectives

Smith Barney Large Capitalization Growth Portfolio seeks long-term growth
of capital by investing, under normal market conditions, 65% of its assets in
equity securities of companies with large market capitalizations.
The Portfolio will be managed by MMC.

Investment Policies

The Portfolio attempts to achieve its investment objective by investing
primarily in equity securities consisting of common stocks that are believed to
afford attractive opportunities for investment growth. The core holdings of the
Portfolio will be large capitalization companies that are dominant in their
industries, global in scope and have a long term history of performance. The
Portfolio normally invests at least 65% of its total assets in these securities.
The Portfolio has the flexibility, however, to invest the balance in companies
with other market capitalizations. The Manager defines large market
capitalization companies as those having $5 billion or more at the time of the
Portfolio's investment. Companies whose capitalization falls below this level
after purchase will continue to be considered large capitalization companies for
purposes of the 65% policy.

Companies with large market capitalizations typically have a large number
of publicly held shares and a high trading volume resulting in a high degree of
liquidity. When choosing the Portfolio's investments, the Portfolio seeks
companies that it expects will demonstrate consistent and sustainable long-term
growth in earnings per share, strong cash flow, a high return on equity and a
quality balance sheet. This method of selecting stocks is based on the belief
that a company's earnings growth will eventually translate into growth in the
price of its stock. In analyzing securities for investment, MMC considers many
different factors, including past growth records, management capability, future
earnings prospects and technological innovation, as well as general market and
economic factors that can influence the price of securities. The value of the
Portfolio's investments, and thus the net asset value of the Portfolio's shares,
will fluctuate in response to changes in market and economic conditions, as well
as the financial condition and prospects of issuers in which the Portfolio
invests.

The Smith Barney Large Capitalization Growth Portfolio may invest in
securities of non-U.S. issuers in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") or similar securities
representing interests in the common stock of foreign issuers. Management
intends to limit the

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25
<PAGE>

Portfolio's investment in these types of securities, to 10% of the Portfolio's
net assets. ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for use
in the U.S. securities markets and EDRs are designed for use in European
securities markets. The underlying securities are not always denominated in the
same currency as the ADRs or EDRs. Although investment in the form of ADRs or
EDRs facilitates in foreign securities, it does not mitigate the risks
associated with investing in foreign securities.

The Portfolio may also invest in when-issued, delayed-delivery, forward
commitment and convertible securities.

Under normal market conditions, at least 65% of the Portfolio's portfolio
will consist of common stocks, but it also may contain money market instruments
for cash management purposes, including U.S. government securities; certificates
of deposit, time deposits and bankers' acceptances issued by domestic banks
(including their branches located outside the United States and subsidiaries
located in Canada), domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade commercial paper; and
repurchase agreements with respect to such instruments. The Portfolio reserves
the right as a defensive measure to hold money market securities, including
repurchase agreements or cash, in such proportions as, in the opinion of
management, prevailing market or economic conditions warrant.

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
MMC.

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 IBCA, Inc. (formerly
Fitch Investors Service, Inc.) ("Fitch"), Duff and Phelps Inc., and Thomson
BankWatch. See Appendix A for a discussion of the ratings categories of the
NRSROs.

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26
<PAGE>

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

The following are also permitted investments for the Portfolio:

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

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

Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances and fixed time deposits) and securities backed by letters of credit
of U.S. banks or other U.S. financial institutions that are members of the
Federal Reserve System or the Federal Deposit Insurance Corporation ("FDIC")
(including obligations of foreign branches of such members) if either: (a) the
principal amount of the obligation is insured in full by the FDIC, or (b) the
issuer of such obligation has capital, surplus and undivided profits in excess
of $100 million or total assets of $1 billion (as reported in its most recently
published financial statements prior to the date of investment). Under current
FDIC regulations, the maximum insurance payable as to any one certificate of
deposit is $100,000; therefore, certificates of deposit in denominations greater
than $100,000 that are purchased by the Smith Barney Money Market Portfolio will
not be fully insured. The Portfolio currently intends to limit its investment in
fixed time deposits with an ultimate maturity of from two business days to six
months 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, London,
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

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27
<PAGE>

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

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

As a matter of fundamental policy, the Portfolio may borrow money from
banks for temporary purposes but only in an amount up to 10% of the value of its
total assets and may pledge its assets in an amount up to 10% of the value of
its total assets only to secure such borrowings. The Portfolio will borrow money
only to accommodate requests for the redemption of shares while effecting an
orderly liquidation of portfolio securities or to clear securities transactions
and not for leveraging purposes. The Portfolio may also lend its portfolio
securities to brokers, dealers and other financial organizations. Such loans, if
and when made, may not exceed 20% of the Portfolio's total assets, taken at
value.

Notwithstanding any of the foregoing investment restrictions, the Smith
Barney Money Market Portfolio may invest up to 100% of its assets in U.S.
Government securities.

SPECIAL INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS
================================================================================

Foreign Securities. Each of the Portfolios may purchase securities issued
by foreign governments, corporations or banks. The Smith Barney Money Market
Portfolio may also purchase securities of foreign branches of U.S. banks and of
domestic and foreign branches of foreign banks.

Investments in foreign securities involve risks that are different in some
respects from investments in securities of U.S. issuers, such as the risk of
fluctuations in the value of the currencies in which they are denominated, the
risk of adverse political, social, economic and diplomatic developments, the
possible imposition of exchange controls or other foreign governmental laws or
restrictions and, with respect to certain countries, the possibility of
expropriation of assets, nationalization or confiscatory taxation or limitations
on the removal of funds or other assets of the Portfolios. Securities of some
foreign companies and banks are less liquid and more volatile than securities of
comparable domestic companies and banks. Non-U.S. securities markets, while
growing in volume have, for the most part, substantially less volume than U.S.
markets, and there is generally less government supervision and regulation of
exchanges, brokers and issuers than there is in the U.S. Dividend and interest
income from non-U.S. securities will generally be subject to withholding taxes
by the country in which the issuer is located and may not be recoverable by the
Portfolio or the investors. There also may be less publicly available
information about foreign issuers than domestic issuers, and foreign issuers
generally are not subject to the uniform accounting, auditing and financial
reporting standards, practices and requirements applicable to domestic issuers.
Delays may be encountered in settling securities transactions in certain foreign
markets, and the Portfolios will incur costs in converting foreign currencies
into U.S. dollars. Custody and transaction charges are generally higher for
foreign securities. There is also a risk of the adoption of government
regulations that might adversely affect the payment of principal and interest on
securities held by a Portfolio. In addition, a Portfolio may encounter greater
difficulties in invoking legal processes abroad than would be the case in the
U.S. Finally, changes in foreign currency exchange rates will, to the extent a
Portfolio does not adequately hedge against such fluctuations, affect the value
of securities in its portfolio and the unrealized appreciation or depreciation
of investments so far as U.S. investors are concerned.

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<PAGE>

Securities of Emerging Markets. Because of the special risks associated
with investing in emerging markets, an investment in the Smith Barney
International Equity, Smith Barney Pacific Basin, Putnam Diversified Income, GT
Global Strategic Income, Smith Barney High Income or MFS Total Return
Portfolios, may 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 investment
adviser or sub-adviser, as the case may be, to have an emerging market economy,
taking into account a number of factors, including the country's foreign
currency debt rating, its political and economic stability and the development
of its financial and capital markets. The investment adviser (or sub-adviser)
determines 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 principal 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 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

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<PAGE>

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.

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

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<PAGE>

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 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 Albania,
Argentina, Brazil, Bulgaria, Costa Rica, Croatia, Dominican Republic, Ecuador,
Ivory Coast, Jordan, Mexico, Morocco, Nigeria, Panama, Peru, Philippines,
Poland, Slovenia, Uruguay, Venezuela and Vietnam and are expected to be issued
by other emerging market countries. 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 do not have a long
payment history. In addition, Brady Bonds are often rated below investment
grade. 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.

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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 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.

Synthetic Security Positions. The GT Global Strategic Income Portfolio and
the Putnam Diversified Income Portfolio may utilize combinations of futures on
bonds and forward currency contracts to create investment positions that have
substantially the same characteristics as bonds of the same type on which the
futures contracts are written. Investment positions of this type are generally
referred to as "synthetic securities."

For example, in order to establish a synthetic security position for the
Portfolio that is comparable to owning a Japanese government bond, the relevant
Sub-Adviser might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.

The Sub-Adviser might roll over the futures and forward currency contract
positions before taking delivery in order to continue the Portfolio's investment
position, or the Sub-Adviser might close out those positions, thus effectively
selling the synthetic security. Further, the amount of each contract might be
adjusted in response to market conditions and the forward currency contract
might be changed in amount or eliminated in order to hedge against currency
fluctuations.

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Further, while these futures and currency contracts remain open, a
Portfolio will comply with applicable SEC guidelines to set aside cash, debt
securities of any grade or equity securities, in a segregated account with its
custodian in an amount sufficient to cover its potential obligations under such
contracts; provided such securities have been determined by the Sub-Adviser to
be liquid and unencumbered pursuant to guidelines established by the Directors.

A Sub-Adviser would create synthetic security positions for a Portfolio
when it believes that it can obtain a better yield or achieve cost savings in
comparison to purchasing actual bonds or when comparable bonds are not readily
available in the market. Synthetic security positions are subject to the risk
that changes in the value of purchased futures contracts may differ from changes
in the value of the bonds that might otherwise have been purchased in the cash
market. Also, while a Sub-Adviser believes that the cost of creating synthetic
security positions generally will be materially lower than the cost of acquiring
comparable bonds in the cash market, the Sub-Adviser will incur transaction
costs in connection with each purchase of a futures or a forward currency
contract. The use of futures contracts and forward currency contracts to create
synthetic security positions also is subject to substantially the same risks as
those that exist when these instruments are used in connection with hedging
strategies. See "Futures, Options and Currency Transactions" in the Prospectus
and "Options, Futures Contracts and Related Options," "Interest Rate, Securities
Index, Financial Futures and Currency Futures Contracts," "Options on Futures
Contracts" and "Forward Currency Contracts and Options on Currency" in the SAI.

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

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financing available to them so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default by such issuers
is significantly greater because lower-quality securities and comparable
non-rated securities generally are unsecured and frequently are subordinated to
the prior payment of senior indebtedness. A Portfolio may incur additional
expenses to the extent that it is required to seek recovery upon a default in
the payment of principal or interest on its portfolio holdings.

Fixed-income securities, including lower-quality securities and comparable
non-rated securities, frequently have call and buy-back features that permit
their issuers to call or repurchase the securities from their holders, such as
the Portfolios. If an issuer exercises these rights during periods of declining
interest rates, a Portfolio may have to replace the security with a lower
yielding security, resulting in a decreased return to the Portfolio.

In general, the ratings of nationally recognized statistical rating
organizations represent the opinions of these agencies as to the quality of
securities that they rate. Such ratings, however, are relative and subjective,
and are not absolute standards of quality and do not evaluate the market value
risk of the securities. It is possible that an agency might not change its
rating of a particular issue to reflect subsequent events. These ratings will be
used by each Portfolio as initial criteria for the selection of portfolio
securities, but each Portfolio also will rely upon the independent advice of the
Manager or the Sub-Adviser, as the case may be, to evaluate potential
investments.

In light of these risks, management will take various factors into
consideration in evaluating the creditworthiness of an issue, whether rated or
non-rated. These factors may include, among others, the issuer's financial
resources, its sensitivity to economic conditions and trends, the operating
history of and the community support for the facility financed by the issue, the
ability of the issuer's management and regulatory matters.

Securities Lending. Each Portfolio except the 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 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.

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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 securities that have a value no
less than the repurchase price, including accrued interest. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale by the Portfolio may decline below the price of the securities the
Portfolio has sold but is obliged to repurchase. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, such buyer or its trustee or receiver may receive an extension of
time to determine whether to enforce the Portfolio's obligation to repurchase
the securities, and the Portfolio's use of the proceeds of the reverse
repurchase agreements may effectively be restricted pending such decision.
Reverse repurchase agreements will be treated as borrowings and will be
considered in the Portfolio's overall borrowing limitation. The Portfolio may
enter into reverse repurchase agreements, although it does not currently intend
to do so with respect to more than 5% of its total assets.

Dollar Roll Transactions. The TBC Managed Income, the Putnam Diversified
Income and the 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 Large Cap Value, Smith Barney International Equity, Alliance Growth, TBC
Managed Income, Putnam Diversified Income, GT Global Strategic Income, Smith
Barney High Income, Smith Barney Large Capitalization Growth 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 securities 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

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characteristics similar to both fixed-income and equity securities. Although to
a lesser extent than with fixed-income securities, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stocks and,
therefore, also will react to variations in the general market for equity
securities.

Convertible securities are investments which provide for a stable stream of
income with generally higher yields than common stocks. There can be no
assurance of current income because the issuers of the convertible securities
may default on their obligations. Synthetic convertible securities differ from
convertible securities in certain respects, including that each component of a
synthetic convertible security has a separate market value and responds
differently to market fluctuations. Investing in synthetic convertible
securities involves the risk normally involved in holding the securities
comprising the synthetic convertible security.

Short Sales Against the Box. The 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 may 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 any 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. By leveraging the Portfolio, changes in
net asset values, higher or lower, may be greater in degree than if leverage was
not employed. 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.

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

Zero-Coupon Bonds, Deferred Interest Bonds and Payment-in-Kind Bonds. The
Alliance Growth, the TBC Managed Income, Putnam Diversified Income, Smith Barney
High Income Portfolio, 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

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the underlying instrument's closing price and the price at which the contract
was entered into) at a specified price on a specified date. An option on a
futures contract gives a Portfolio the right (but not the obligation) to buy or
sell a futures contract at a specified price on or before a specified date.

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

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

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

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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 and Putnam Diversified Income
Portfolio may also enter into forward currency contracts for non-hedging
purposes, subject to applicable law.

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

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a call option may be closed out by means of a purchase of an identical option.
Any gain or loss from such transaction will depend on whether the amount paid is
more or less than the premium received for the option plus related transaction
costs. A Portfolio also may write a covered call option to cross-hedge if the
Portfolio does not own the underlying security. The option is designed to
provide a hedge against a decline in value in another security which the
Portfolio owns or has the right to acquire.

In purchasing an option, the Portfolio would be in a position to realize a
gain if, during the option period, the price of the underlying security
increased (in the case of a call) or decreased (in the case of a put) by an
amount in excess of the premium paid and would realize a loss if the price of
the underlying security did not increase (in the case of a call) or decrease (in
the case of a put) during the period by more than the amount of the premium. If
a put or call option bought by the Portfolio were permitted to expire without
being sold or exercised, the Portfolio would lose the amount of the premium.

Although they entitle the holder to buy equity securities, warrants on and
options to purchase equity securities do not entitle the holder to dividends or
voting rights with respect to the underlying securities, nor do they represent
any rights in the assets of the issuer of those securities.

If a put or call option written by a Portfolio were exercised, the
Portfolio would be obligated to buy or sell the underlying security at the
exercise price. Writing a put option involves the risk of a decrease in the
market value of the underlying security, in which case the option could be
exercised and the underlying security would then be sold by the option holder to
the Portfolio at a higher price than its current market value. Writing a call
option involves the risk of an increase in the market value of the underlying
security, in which case the option could be exercised and the underlying
security would then be sold by the Portfolio to the option holder at a lower
price than its current market value. Those risks could be reduced by entering
into an offsetting transaction. The Portfolio retains the premium received from
writing a put or call option whether or not the option is exercised.

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

A Portfolio may buy or write options in privately negotiated transactions
on the types of securities and indices based on the types of securities in which
the Portfolio is permitted to invest directly. The Portfolio will 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
SAI for a further discussion of the use, risks and costs of option trading.

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40
<PAGE>

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, 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.

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41
<PAGE>

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

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

Real Estate Investment Trusts. The Alliance Growth Portfolio may invest in
real estate investment trusts ("REITs"). REITs are entities which either own
properties or make construction or mortgage loans. Equity trusts own real estate
directly and the value of, and income earned by, the trust depends upon the
income of the underlying properties and the rental income they earn. Equity
trusts may also include operating or finance companies. Equity trusts can also
realize capital gains by selling properties that have appreciated in value. A
mortgage trust can make construction, development or long-term mortgage loans,
and are sensitive to the credit quality of the borrower. Mortgage trusts derive
their income from interest payments. Hybrid trusts combine the characteristics
of both equity and mortgage trusts, generally by holding both ownership
interests and mortgage interests in real estate. The value of securities issued
by REITs are affected by tax and regulatory requirements and by perceptions of
management skill. They are also subject to heavy cash flow dependency, defaults
by borrowers or tenants, self-liquidation, the possibility of failing to qualify
for tax-free status under the Internal Revenue Code of 1986, as amended, and
failing to maintain exemption from the 1940 Act.

Mortgage-Backed Securities. The Smith Barney High Income, 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

- --------------------------------------------------------------------------------
42
<PAGE>

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.

Other Asset-Backed Securities. The Smith Barney High Income, 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

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43
<PAGE>

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.

Portfolio Turnover. Although it is anticipated that most investments of
each Portfolio (except the Smith Barney Money Market 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. The historical portfolio turnover rates
for each Portfolio (except the Smith Barney Money Market Portfolio) are included
in the Financial Highlights tables above. A higher rate of portfolio turnover
may result in higher transaction costs, including brokerage commissions.
Portfolio turnover rates for the Smith Barney Money Market Portfolio are not
shown because of the short-term nature of the investments owned by the
Portfolio.

Year 2000. The investment management services provided to the Fund by the
Managers and the services provided to shareholders by Smith Barney, the Fund's
Distributor, depend on the smooth functioning of their computer systems. Many
computer software systems in use today cannot recognize the year 2000, but
revert to 1900 or some other date, due to the manner in which dates were encoded
and calculated. That failure could have a negative impact of the Fund's
operations, including the handling of securities trades, pricing and account
services. The Managers and Smith Barney have advised the Fund that they have
been reviewing all of their computer systems and actively working on
necessary changes to their systems to prepare for the year 2000 and
expect that their systems will be compliant before that date.
In addition, the Managers have been advised by the Fund's custodian, transfer
agent and accounting service agent that they are also in the process of
modifying their systems with the same goal. There can,
however, be no assurance that the Managers, Smith Barney or any other service
provider will be successful, or that interaction with other non-complying
computer
systems will not impair Fund services at that time.

DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================

Each Portfolio of the Fund intends to qualify and be taxed as a "regulated
investment company" under Subchapter M of the Code. In order to qualify as a
regulated investment company, each Portfolio must meet certain income and
diversification tests. As a regulated investment company and provided certain
distribution requirements are met, a Portfolio will not be subject to federal
income tax on its investment income and net capital gains that it distributes to
its shareholders. 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.

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44
<PAGE>

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 ("NYSE") 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 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
================================================================================

The Investment Managers:

MMC manages the investment operations of the Smith Barney Large Cap Value,
the Smith Barney International Equity, the Smith Barney Pacific Basin, the Smith
Barney High Income, Smith Barney Large

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45
<PAGE>

Capitalization Growth and the Smith Barney Money Market Portfolios, pursuant to
management agreements entered into by the Fund on behalf of each such Portfolio.

By written agreement the research and other departments and staff of Smith
Barney Inc. ("Smith Barney") furnish MMC 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 MMC 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.

Travelers Investment Adviser Inc. ("TIA"), an affiliate of MMC, manages the
investment operations of the Alliance Growth, the AIM Capital Appreciation, the
Putnam Diversified Income, the MFS Total Return, the GT Global Strategic Income,
the Van Kampen American Capital Enterprise and the TBC Managed Income Portfolios
(each, a "TIA Portfolio") pursuant to management agreements entered into by the
Fund on behalf of each such Portfolio.

Under each management agreement MMC or TIA, as the case may be, is
responsible for furnishing or causing to be furnished to each applicable
Portfolio advice and assistance with respect to the acquisition, holding or
disposal of investments and recommendations with respect to other aspects and
affairs of the Portfolio, bookkeeping, accounting and administrative services,
office space and equipment, and the services of the officers and employees of
the Fund.

TIA and each TIA Portfolio are also subject to a subadvisory agreement (see
"The Sub-Advisers" below). Pursuant to each subadvisory agreement, each
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 TIA, 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 SAI; (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.

TIA has also entered into a Sub-Administrative Services Agreement with MMC
pursuant to which MMC will: (a) assist TIA in supervising all aspects of each
TIA Portfolio's operations; (b) supply each TIA Portfolio with office
facilities, statistical and research services, data processing services,
clerical, accounting and bookkeeping services; and (c) prepare reports to each
TIA Portfolio's shareholders and prepare reports to and filings with the SEC and
state blue sky authorities, if applicable. TIA pays MMC, as Sub-Administrator, a
fee in an amount equal to an annual rate of 0.10% of each TIA Portfolio's
average daily net assets.

For the services provided by MMC or TIA, as the case may be, each Portfolio
pays MMC or TIA an annual management fee calculated at a rate equal to the
following percentage of its average daily net assets, paid monthly.

<TABLE>
<S> <C>
Smith Barney Large Cap Value Portfolio 0.65%
Alliance Growth Portfolio 0.80%
AIM Capital Appreciation Portfolio 0.80%
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%
</TABLE>

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<PAGE>

<TABLE>
<S> <C>
GT Global Strategic Income Portfolio 0.80%
Smith Barney High Income Portfolio 0.60%
MFS Total Return Portfolio 0.80%
Smith Barney Large Capitalization Growth Portfolio 0.75%
Smith Barney Money Market Portfolio 0.60%
</TABLE>

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, the MFS Total Return Portfolio and the Smith
Barney Large Capitalization Growth 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 MMC or TIA 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.

MMC was incorporated in 1968 under the laws of the State of Delaware. It is
a wholly owned subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"), the
parent company of Smith Barney. SSBH 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 including Asset Management, Consumer Finance Services, Life Insurance
Services and Property & Casualty Insurance Services. TIA was incorporated in
1996 under the laws of the State of Delaware. It is a wholly owned subsidiary of
The Plaza Corporation ("Plaza"), which is an indirect wholly owned subsidiary of
Travelers. MMC, TIA, Smith Barney and SSBH are each located at 388 Greenwich
Street, New York, New York 10013. MMC also acts as investment manager to
numerous other investment companies having aggregate assets as of the date of
this Prospectus of approximately $94 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 MMC. MMC serves as the investment adviser to Smith
Barney Large Cap Value Portfolio, Smith Barney International Equity Portfolio,
Smith Barney Pacific Basin Portfolio, Smith Barney High Income Portfolio, Smith
Barney Large Capitalization Growth Portfolio and Smith Barney Money Market
Portfolio. MMC manages 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, MMC will (a) manage the Portfolio's assets in
accordance with the Portfolio's investment objective(s) and policies

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47
<PAGE>

as stated in the Prospectus and the SAI; (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; (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; and (f) prepare reports to
shareholders and reports to and filings with the SEC and state blue sky
authorities if applicable. In providing these services, MMC 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 Large Cap Value Portfolio. Mr. Sargent manages the day to day
operations of the Smith Barney Large Cap Value Portfolio and has been involved
in equity investing for over 27 years. He currently manages over $20 billion of
institutional and mutual fund 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 129
years of experience. 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,
and are responsible for the day-to-day operations of the Smith Barney
International Equity Portfolio, making all of the investment decisions for the
Portfolio since its inception. Together, Mr. Conheady and Mr. Russell currently
manage in excess of $4 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. David S. Ishibashi, a Vice President of Smith Barney, and
Mr. Scott Kalb, a Managing Director of Smith Barney, are responsible for the
day-to-day operations of the Smith Barney Pacific Basin Portfolio, making all of
the investment decisions since October, 1996. Mr. Ishibashi joined Smith Barney
in 1993 and Mr. Kalb joined Smith Barney in 1990, as members of the
international equity team. Prior to joining Smith Barney, Mr. Ishibashi was
responsible for Japanese equities and headed the Japan desk at SG Warburg, and
Mr. Kalb served as Vice President of Equity Research at Drexel Burnham.

Mr. John C. Bianchi, a Managing Director of Smith Barney, is the portfolio
manager and manages the day-to-day operations 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.

Mr. Alan Blake, a Managing Director of Smith Barney, is the portfolio
manager and manages the day-to-day operations of the Smith Barney Large
Capitalization Growth Portfolio, including making all investment decisions.
Prior to joining Smith Barney in 1993, Mr. Blake was a Managing Director of
Shearson Lehman Advisors.

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 TIA pays Alliance
Capital an annual fee calculated at the rate of 0.375% of the Portfolio's
average daily net assets, paid monthly.

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<PAGE>

Alliance is a global investment adviser providing diversified services to
institutions and individuals through a broad line of investments including more
than 100 mutual funds. Since 1971, Alliance has earned a reputation as a leader
in the investment world, with over $218.7 billion in assets under management as
of December 31, 1997. Alliance provides investment management services to 31 of
the FORTUNE 100 companies.

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 TIA 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 100, 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 and is an indirect wholly owned
subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent
investment management group engaged in institutional investment managment and
retail mutual fund businesses in the United States, Europe and the Pacific
Region. AIM and its subsidiaries act as manager or adviser to over 50 investment
company portfolios.

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 125 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, Charles D. Scavone, 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 of AIM Capital and Vice President of AIM and has been
associated with AIM and/or its affiliates since 1986 and has been an investment
professional since 1984. Mr. Scavone is a Vice President of AIM Capital and has
been associated with and/or its subsidiaries since 1996 and has been an
investment professional since 1991. Prior to 1996, he was an Associate Portfolio
Manager for Van Kampen American Capital Asset Management, Inc. from 1994 to
1996. From 1991 to 1994, he worked in the investments department at Texas
Commerce Investment Management Company, with his last position being Equity
Research Analyst/Assistant Portfolio Manager. Mr. Barnard is Vice President of
AIM Capital and has been associated with AIM and/or its affiliates since 1982
and has been an investment professional since 1975. Mr. Kippes is Vice President
of AIM Capital. Mr. Kippes has been associated with AIM and/or its affiliates
since 1989 and has been an investment professional since 1988.

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<PAGE>

Van Kampen American Capital Asset Management, Inc. Van Kampen American
Capital Asset Management, Inc. ("VKAC") will serve as Sub-Adviser to the Van
Kampen 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, TIA pays VKAC an annual fee calculated at the rate of
0.325% of the Portfolio's average daily net assets, paid monthly.

VKAC is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
VKAC is a wholly owned subsidiary of Van Kampen American Capital, Inc. ("Van
Kampen American Capital"), which, in turn, is a wholly owned subsidiary of VK/AC
Holding, Inc. VK/AC Holding, Inc. is a wholly owned subsidiary of MSAM Holdings
II, Inc. which, in turn, is a wholly owned subsidiary of Morgan Stanley, Dean
Witter Discover & Co.

Van Kampen American Capital is a diversified asset management company with
more than $2 million retail investor accounts, extensive capabilities for
managing institutional portfolios, and more than $62 billion under management or
supervision. Van Kampen American Capital's more that 60 open-end and 38
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisers nationwide.

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.

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

Chancellor LGT provides investment management and/or administration
services to the GT Global Funds. Chancellor LGT 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 Chancellor LGT are located at 50 California
Street, 27th Floor, San Francisco, California 94111 and 1166 Avenue of the
Americas, New York, New York 10036.

Chancellor LGT and its worldwide affiliates, including LGT Bank in
Liechtenstein, formerly Bank in Liechtenstein, comprise Liechtenstein Global
Trust, formerly BIL GT Group Limited. 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 a 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 December 31, 1997, Chancellor LGT and its worldwide affiliates manage
approximately $54 billion of assets. In the United States, as of December 31,
1997, Chancellor LGT manages or administers approximately $8 billion of GT
Global Mutual Funds. As of December 31, 1997, assets entrusted to Liechtenstein
Global Trust totaled approximately $79 billion.

In addition to the investment resources of its San Francisco and New York
offices, Chancellor LGT draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Funds, Chancellor LGT employs a team approach, taking advantage of
its investment resources

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50
<PAGE>

around the world in seeking to achieve each fund's investment objective. Many of
the GT Global Funds' portfolio managers are natives of the countries on which
they invest, speak local languages and/or live or work in the markets they
follow.

Michael Mabbutt and Cheng-Hock Lau are responsible for the day-to-day
management of the Portfolio. Mr. Mabbutt has been Head of Emerging Market Debt
for Chancellor LGT and LGT Asset Management PLC (London), an affiliate of
Chancellor LGT, since April, 1997, and Portfolio Manager since December 1996.
Prior thereto, Mr. Mabbutt was a Senior Portfolio Manager for global fixed
income at Baring Asset Management (London) from 1992 to December 1996. Mr. Lau
has been Chief Investment Officer for global fixed income for Chancellor LGT
since November 1996, and was a Senior Portfolio Manager for global/international
fixed income for Chancellor LGT from July 1995 to November 1996. Prior thereto,
Mr. Lau was a Senior Vice President and Senior Portfolio Manager for Fiduciary
Trust Company International from 1993 to 1995, and Vice President at Bankers
Trust Company from 1991 to 1993. On October 31, 1996, Chancellor Capital
Management, Inc. ("Chancellor Capital") merged with LGT Asset Management, Inc.,
and the resulting entity was renamed Chancellor LGT Asset Management, Inc. Prior
to October 31, 1996, Mr. Lau was an employee only of Chancellor Capital.

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 TIA 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 Institutional Trust, MFS Variable Insurance 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, MFS/Sun Life Series Trust and seven variable accounts, each
of which is a registered investment company established by Sun Life Assurance
Company of Canada (U.S.), a subsidiary of Sun Life Assurance Company of Canada
("Sun Life"), in connection with the sale of various fixed/variable annuity
contracts. MFS and its wholly owned subsidiary, MFS Institutional Advisors,
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 $69.4
billion on behalf of approximately 2.7 million investors accounts as of November
28, 1997. As of such date, the MFS organization managed approximately $20.1
billion of assets in fixed income securities. MFS is a subsidiary of Sun Life of
Canada (U.S.) Financial Services Holdings, Inc. which in turn is an indirect
wholly owned subsidiary of 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.

David M. Calabro, a Senior 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 Senior Vice President of MFS, and Maura A. Shaughnessy, a Senior 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

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51
<PAGE>

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
HarvardManagement Company prior to that time.

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. Some
simultaneous transactions are inevitable when several clients receive investment
advice from MFS, 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 TIA 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, except for shares held by employees,
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 $182
billion in assets in over nine million shareholder accounts as of December 31,
1997. The Putnam Advisory Company, Inc., an affiliate, manages domestic and
foreign institutional accounts and foreign mutual funds. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to institutional
clients under its banking and fiduciary powers. Putnam and its affiliates
managed over $235 billion in assets as of December 31, 1997.

Robert M. Paine, D. William Kohli, Gail S. Attridge and Kenneth J. Taubes
(each a Senior Vice President of Putnam Management) are primarily responsible
for the day-to-day management of the Portfolio. Messers. Paine, Kohli, and
Taubes and Ms. Attridge have been employed by Putnam Management since 1987,
1994, 1991 and 1993, respectively. 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. Prior to 1991, Mr. Taubes was Senior Vice President, Finance Division,
at United States Trust Company of Boston. Prior to 1993, Ms. Attridge was an
International Fixed Income Analyst for Keystone Custodian Funds, Inc.

The Boston Company Asset Management, Inc. The Boston Company Asset
Management, LLC ("TBCAM") will serve as Sub-Adviser to the TBC Managed Income
Portfolio pursuant to a subadvisory agreement. Pursuant to the subadvisory
agreement TIA 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, 1997 of
approximately $21.5 billion.

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<PAGE>

Mellon is a publicly-owned multibank holding company registered under the
Federal Bank Holding Company Act of 1956, based on total assets as of December
31, 1997 in excess of $303 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 Arthur J.
MacBride, III. 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.

Board of Directors

Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all significant
agreements between the Fund and the companies that furnish services to the Fund
and each Portfolio, including agreements with the Fund's distributor, investment
managers, investment sub-advisers, custodian and transfer agent. The SAI
contains background information regarding each
Director and executive officer of the Fund.

Portfolio Transactions and Distribution

MMC, TIA and each Sub-Adviser are subject to the supervision and direction
of the Fund's Board of Directors and manage the applicable Portfolio in
accordance with its investment objective and policies, make investment decisions
for the Portfolio, place orders to purchase and sell securities and employ
professionals who provide research services. All orders for transactions in
securities on behalf of a Portfolio are made by management, with broker-dealers
selected by management, including affiliated brokers. In placing orders
management will seek to obtain the most favorable price and execution available.
In selecting 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. In addition, the Van Kampen American Capital Enterprise
Portfolio may not deal with Morgan Stanley & Co., Inc. ("Morgan Stanley") (an
affiliate of VK/AC Holding, Inc.) in any transaction in which Morgan Stanley
acts as principal.

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<PAGE>

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 thirteen series of shares, each
representing shares in one of thirteen separate Portfolios - the Smith Barney
Large Cap Value 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, the Smith Barney Large
Capitalization Growth Portfolio and the Smith Barney Money Market Portfolio. The
Directors also have the power to create additional series of shares. The assets
of each Portfolio will be segregated and separately managed and a shareowner's
interest is in the assets of the Portfolio in which he or she holds shares.

Voting Rights

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

Each share of a Portfolio represents an equal proportionate interest in
that Portfolio with each other share of the same Portfolio and is entitled to
such dividends and distributions out of the net income of that Portfolio as are
declared in the discretion of the Directors. Shareowners are entitled to one
vote for each share held and will vote by individual Portfolio except to the
extent required by the 1940 Act. The Fund is not required to hold annual
shareowner meetings, although special meetings may be called for the Fund as a
whole, or a specific Portfolio, for purposes such as electing or removing
Directors, changing fundamental policies or approving a management contract.
Shareowners may cause a meeting of shareowners to be held upon a vote of 10% of
the Fund's outstanding shares for the purpose of voting on the removal of
Directors.

Availability of the Fund

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

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<PAGE>

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 NYSE, which is currently 4:00 P.M. New York City
time on each day that the NYSE is open, by dividing the Portfolio's net assets
by the number of its shares outstanding. Securities owned by a Portfolio for
which market quotations are readily available are valued at current market value
or, in their absence, at fair value. Securities traded on an exchange are valued
at last sales price on the principal exchange on which each such security is
traded, or if there were no sales on that exchange on the valuation date, the
last quoted sale, up to the time of valuation, on the other exchanges. If
instead there were no sales on the valuation date with respect to these
securities, such securities are valued at the mean of the latest published
closing bid and asked prices. Over-the-counter securities are valued at last
sales price or, if there were no sales that day, at the mean between the bid and
asked prices. Options, futures contracts and options thereon that are traded on
exchanges are also valued at last sales prices as of the close of the principal
exchange on which each is listed or if there were no such sales on the valuation
date, the last quoted sale, up to the time of valuation, on other exchanges. In
the absence of any sales on the valuation date, valuation shall be the mean of
the latest closing bid and asked prices. Fixed income obligations are valued at
the mean of bid and asked prices based on market quotations for those securities
or if no quotations are available, then for securities of similar type, yield
and maturity. Securities with a remaining maturity of 60 days or less are valued
at amortized cost where the Board of Directors has determined that amortized
cost is fair value. Premiums received on the sale of call options will be
included in the Portfolio's net assets, and current market value of such options
sold by a Portfolio will be subtracted from that Portfolio's net assets. Any
other investments of a Portfolio, including restricted securities and listed
securities for which there is a thin market or that trade infrequently (i.e.,
securities for which prices are not readily available), are valued at a fair
value determined by the Board of Directors in good faith. This value generally
is determined as the amount that a Portfolio could reasonably expect to receive
from an orderly disposition of these assets over a reasonable period of time but
in no event more than seven days. The value of any security or commodity
denominated in a currency other than U.S. dollars will be converted into U.S.
dollars at the prevailing market rate as determined by management.

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

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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.

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.

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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.

Fitch IBCA, Inc.

AAA - Bonds rated AAA by Fitch have the lowest expectation of credit risk.
The obligor has an exceptionally strong capacity for timely payment of financial
commitments which is highly unlikely to be adversely affected by foreseeable
events.

AA - Bonds rated AA by Fitch have a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial commitment.
This capacity is not significantly vulnerable to foreseeable events.

- --------------------------------------------------------------------------------
57
<PAGE>

A - Bonds rated A by Fitch are considered to have a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered to be strong, but may be more vulnerable to changes in economic
conditions and circumstances than bonds with higher ratings.

BBB - Bonds rated BBB by Fitch currently have a low expectation of credit
risk. The capacity for timely payment of financial commitments is considered to
be adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to impair this capacity. This is the lowest investment grade
category assigned by Fitch.

BB - Bonds rated BB by Fitch carry the possibility of credit risk
developing, particularly as the result of adverse economic change over time.
Business or financial alternatives may, however, be available to allow financial
commitments to be met. Securities rated in this category are not considered by
Fitch to be investment grade.

B - Bonds rated B by Fitch carry significant credit risk, however, a
limited margin of safety remains. Although financial commitments are currently
being met, capacity for continued payment depends upon a sustained, favorable
business and economic environment.

CCC, CC, C - Default on bonds rated CCC,CC, and C by Fitch is a real
possibility. The capacity to meet financial commitments depends solely on a
sustained, favorable business and economic environment. Default of some kind on
bonds rated CC appears probable, a C rating indicates imminent default.

Plus and minus signs are used by Fitch to indicate the relative position of
a credit within a rating category. Plus and minus signs however, are not used in
the AAA category.

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.

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58
<PAGE>

Fitch IBCA, Inc.

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet financial commitment in a timely
manner.

Fitch's short-term ratings are as follows:

F1+ - Issues assigned this rating are regarded as having the strongest
capacity for timely payments of financial commitments. The "+" denotes an
exceptionally strong credit feature.

F1 - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments.

F2 - Issues assigned this rating have a satisfactory capacity for timely
payment of financial commitments, but the margin of safety is not as great as in
the case of the higher ratings.

F3 - The capacity for the timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to non
investment grade.

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.

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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59
<PAGE>

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

VINTAGE TIFFANY LAMP

[GRAPHIC]

PROSPECTUS

L 12410 Travelers Series Fund Inc. SB Ed. 2-98

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

PART B

February 27, 1998

TRAVELERS SERIES FUND INC.
388 Greenwich Street
New York, New York 10013

STATEMENT OF ADDITIONAL INFORMATION

Shares of the Travelers Series Fund Inc. (the "Fund") are offered
with a choice of thirteen Portfolios:

The Smith Barney Large Cap Value Portfolio (formerly known as 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 Large Capitalization Growth Portfolio seeks long-
term growth of capital by investing in equity securities of
companies with large market capitalizations.

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

This Statement of Additional Information (the "SAI") is not
a Prospectus. It is intended to provide more detailed information
about Travelers Series Fund Inc. as well as matters already
discussed in the Prospectus and therefore should be read in
conjunction with the February 27, 1998 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 2
Investment Policies 5
Investment Restrictions 26
Performance Information 43
Determination of Net Asset Value 44
Redemption of Shares 44
Custodians 44
Independent Auditors 45
The Fund 45
Management Agreements 46
Voting Rights 52
Financial Statements 53

DIRECTORS AND OFFICERS

VICTOR K. ATKINS, Director (Age 75)
Retired; Former President of Lips Propellers, Inc. Director of
two investment companies associated with Smith Barney Inc. ("Smith
Barney"); His address is 120 Montgomery Street, Suite 1880, San
Francisco, California, 94104.

ABRAHAM E. COHEN, Director (Age 61)
Consultant to MeesPierson, Inc., a Dutch investment bank;
Consultant to and Board Member, Chugai Pharmaceutical Co. Ltd.;
Director of Agouron Pharmaceuticals, Inc., Akzo Nobel NV,
Vasomedical, Inc., Teva Pharmaceutical Ind., Ltd., Neurobiological
Technologies Inc., Vion Pharmaceuticals, Inc., BlueStone Capital
Partners, LP. and The Population Council, an international public
interest organization. His address is c/o Chugai Pharma USA, 444
Madison Ave., 12th Floor, New York, New York, 10022.

ROBERT A. FRANKEL, Director (Age 70)
Managing Partner of Robert A. Frankel Management Consultants;
former Corporate Vice President of The Reader's Digest
Association, Inc. Director of eight investment companies
associated with Smith Barney; His address is 102 Grand Street,
Croton-on-Hudson, New York, 10520.

RAINER GREEVEN, Director (Age 60)
Attorney, Greeven & Ercklentz; Director of two investment
companies associated with Smith Barney. His address is 630 Fifth
Avenue, Suite 1905, New York, New York, 10111.

SUSAN M. HEILBRON, Director (Age 52)
Attorney; Director of two investment companies associated with
Smith Barney. Her address is c/o Lacey & Heilbron, 3 East 54th
Street, 9th Floor, New York, New York, 10022.
*HEATH B. McLENDON, Chairman of the Board and Chief Executive
Officer (Age 64)
Managing Director of Smith Barney; President and Director of
Mutual Management Corp. ("MMC"), formerly known as Smith Barney
Mutual Funds Management Inc. and Travelers Investment Adviser,
Inc. ("TIA"); 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.
Director of forty-two investment companies associated with Smith
Barney.

JAMES M. SHUART, Director (Age 66)
President, Hofstra University; 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 associated with
Smith Barney. His address is c/o Hofstra University, 101 Hofstra
University, Hempstead, New York, 11550.

*BRUCE D. SARGENT, Vice President (Age 53)
Managing Director of Smith Barney and Vice President of MMC; Vice
President of three investment companies associated with Smith
Barney.

*LEWIS E. DAIDONE, Senior Vice President and Treasurer (Age 40)
Managing Director of Smith Barney and Director and Senior Vice
President of MMC and TIA; Senior Vice President and Treasurer of
forty-two investment companies associated with Smith Barney.

*JAMES B. CONHEADY, Vice President (Age 61)
Managing Director of Smith Barney; Vice President of Smith Barney
World Funds, Inc.

*JEFFREY RUSSELL, Vice President (Age 39)
Managing Director of Smith Barney; Vice President of Smith Barney
World Funds, Inc.

*JOHN C. BIANCHI, Vice President (Age 42)
Managing Director of Smith Barney; prior to July 1993, Managing
Director of Shearson Lehman Advisors ("SLA"); Vice President of
certain other investment companies associated with Smith Barney;

*MARTIN HANLEY, Vice President (Age 31)
Vice President of Smith Barney; Vice President of certain other
investment companies associated with Smith Barney.

*DAVID ISHIBASHI, Vice President (Age 42)
Vice President of Smith Barney; prior to 1993, Vice President of
S.G. Warburg.

*SCOTT KALB, Vice President (Age 41)
Managing Director of Smith Barney; prior to 1993, Managing
Director of SLA.

*PHYLLIS M. ZAHORODNY, Vice President (Age 39)
Managing Director of Smith Barney; prior to July 1993, Managing
Director of SLA; Vice President of certain other investment
companies associated with Smith Barney.

*IRVING DAVID, Controller and Assistant Secretary (Age 37)
Director of Smith Barney. Controller and Assistant Secretary of
certain other investment companies associated with Smith Barney.
Formerly Assistant of First Investment Management Company.

*THOMAS M. REYNOLDS, Controller and Assistant Secretary (Age 37)
Director of Smith Barney; Controller and Assistant Secretary.
Controller and Assistant Secretary of certain other investment
companies associated with Smith Barney.

*CHRISTINA T. SYDOR, Secretary (Age 45)
Managing Director of Smith Barney, General Counsel and Secretary
of MMC and TIA and Secretary of forty-two investment companies
associated with Smith Barney.

___________________
* 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.

Thomas M. Reynolds is the Controller and Assistant Secretary
for each of the following Portfolios: the Smith Barney Large Cap
Value Portfolio, the AIM Capital Appreciation Portfolio, the
Alliance Growth Portfolio, the MFS Total Return Portfolio, the
Putnam Diversified Income Portfolio, the Smith Barney High Income
Portfolio, the Smith Barney Large Capitalization Growth Portfolio,
the TBC Managed Income Portfolio and the Van Kampen American
Enterprise Portfolio.

Irving P. David is the Controller and Assistant Secretary
for each of the following Portfolios: the GT Global Strategic
Income Portfolio, the Smith Barney International Equity Portfolio,
the Smith Barney Pacific Basin Portfolio and the Smith Barney
Money Market Portfolio.

On February 12, 1998 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.

Pension Number
or Re of Funds
tirement Total for Which
Aggregate Benefits Compen Director
Compen Accrued sation Serves
sation as Part from Fund within
from of Fund's and Fund Fund
Director the Fund Expenses Complex Complex
<S> <C> <C> <C> <C>
Victor K. Atkins $15,454 $0 $27,400 2
Abraham E. Cohen 13,700 0 13,700 1
Robert A. Frankel 15,454 0 65,900 8
Rainer Greeven 15,454 0 25,600 2
Susan M. Heilbron 15,454 0 27,400 2
Heath B. McLendon 0 0 0 42
James M. Shuart 15,454 0 25,600 2
</TABLE>

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 Large Cap Value 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 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. Although investment in the form of ADRs or
EDRs (see definition below) facilitates trading in foreign
securities, it does not mitigate the risks associated with
investing in foreign securities. 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 Depositary 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.

The Smith Barney Large Capitalization Growth Portfolio may
invest in securities of non-U.S. issuers in the form of ADRs,
EDRs, CDRs or similar securities representing interests in the
common stock of foreign issuers. Management intends to limit the
Portfolio's investment in these types of securities to 10% of the
Portfolio's net assets.

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, the Smith
Barney High 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 ("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, the Smith
Barney High 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 obligors 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.

Real Estate Investment Trusts ("REITs"). The Alliance
Growth Portfolio may invest without limitations in shares of
REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related
loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage
REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection
or rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest
the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. REITs are not
taxed on income distributed to shareholders provided they comply
with several requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). Also, the Portfolio will indirectly bear
its proportionate share of expenses incurred by REITs in which the
Portfolio invests. REITs are sensitive to factors such as changes
in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, overbuilding, and the
management skill and credit worthiness of the issuer. REITs may
also be affected by tax and regulatory requirements.

"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 Large Cap Value 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 Large Capitalization Growth
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 Large Cap Value 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, the MFS
Total Return Portfolio and the Smith Barney Large Capitalization
Growth 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
securities, 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 Smith
Barney 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
(such as certificates of deposit ("CDs"), time deposits ("TDs")
and bankers' acceptances), 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 Large Cap
Value 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
Smith Barney 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 Large Cap Value
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 Large Cap Value
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 obligors 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 Large Cap Value Portfolio). Although
the Smith Barney Large Cap Value 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 CDs,
TDs, 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,
AIM Capital Appreciation Portfolio and the Smith Barney Large
Capitalization Growth 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 Large Cap Value, Smith Barney
International Equity and Smith Barney Pacific Basin Portfolios may
not:

1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

2. Invest more than 25% of its total assets in securities,
the issuers of which conduct their principal business activities
in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state or municipal
governments and their political subdivisions are not considered to
be issued by members of any industry.

3. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the Portfolio from (a) investing in securities of
issuers engaged in the real estate business or the business of
investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate
business or the business of investing in real estate) and
securities which are secured by real estate or interests therein;
(b) holding or selling real estate received in connection with
securities it holds or held; (c) trading in futures contracts
and options on futures contracts (including options on currencies
to the extent consistent with the Portfolios' investment objective
and policies); or (d) investing in real estate investment trust
securities.

4. With respect to the Smith Barney Large Cap Value, borrow
money, except that (a) the Portfolio may borrow from banks for
temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise require the
untimely disposition of securities, and (b) the Portfolio may,
to the extent consistent with its investment policies, enter into
reverse repurchase agreements, forward roll transactions and
similar investment strategies and techniques. To the extent that
it engages in transactions described in (a) and (b), the
Portfolio will be limited so that no more than 33 1/3% of the
value of its total assets (including the amount borrowed), valued
at the lesser of cost or market, less liabilities (not including
the amount borrowed) valued at the time the borrowing is made,
is derived from such transactions.

5. With respect to both the Smith Barney International
Equity and Smith Barney Pacific Basin Portfolios, borrow money,
except that (a) the Portfolio may borrow from banks under certain
circumstances where the Portfolio's Manager reasonably believes
that (i) the cost of borrowing and related expenses will be
exceeded by the Portfolio's return from investments of the
proceeds of the borrowing in portfolio securities, or (ii) the
meeting of redemption requests might otherwise require the
untimely disposition of securities, in an amount not exceeding 33
1/3% of the value of the Portfolio's total assets (including the
amount borrowed), valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) valued at the time
the borrowing is made and (b) the Portfolio may, to the extent
consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and similar
investment strategies and techniques.

6. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the Portfolio may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.

7. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Portfolio may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

8. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

Notwithstanding any other investment restriction of the
Smith Barney Large Cap Value 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 Large Cap Value 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 (except for such
short-term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities short
(except "against the box"). For purposes of this restriction,
the deposit or payment by the Portfolio of underlying securities
and other assets in escrow and collateral agreements with respect
to initial or maintenance margin in connection with futures
contracts and related options and options on securities, indexes
or similar items is not considered to be the purchase of a
security on margin.

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

3. 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.

4. 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.

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

6. 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 net 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.

7. 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.

8. Invest in securities of another investment company
except as permitted by Section 12(d)(1)(a) of the 1940 Act, or as
part of a merger, consolidation, or acquisition.

The Smith Barney Money Market Portfolio may not:

1. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3%
of the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

2. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

4. 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.

5. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the Portfolio may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.

6. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Portfolio may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

7. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
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 Portfolio'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. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities short
(except "against the box"). For purposes of this restriction,
the deposit or payment by the Portfolio of underlying securities
and other assets in escrow and collateral agreements with respect
to initial or maintenance margin in connection with futures
contracts and related options and options on securities, indexes
or similar items is not considered to be the purchase of a
security on margin.

3. Write or purchase put or call options.

4. Purchase or otherwise acquire any security if, as a
result, more than 10% of its net assets would be invested in
securities that are illiquid.

5. Purchase or sell oil and gas interests.

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

7. 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.

The Alliance Growth Portfolio may not:

2. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Portfolio may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

4. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the Portfolio may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.

5. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

6. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

7. Invest more than 25% of its total assets in 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.

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:

2. 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.

3. 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.

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

5. 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.

6. 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.

The AIM Capital Appreciation Portfolio may not:

1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

2. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

3. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Portfolio may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

4. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall not
prevent the Portfolio from (a) investing in securities of issuers
engaged in the real estate business or the business of investing
in real estate (including interests in limited partnerships owning
or otherwise engaging in the real estate business or the business
of investing in real estate) and securities which are secured by
real estate or interests therein; (b) holding or selling real
estate received in connection with securities it holds or held;
(c) trading in futures contracts and options on futures contracts
(including options on currencies to the extent consistent with the
Portfolios' investment objective and policies); or (d) investing
in real estate investment trust securities.

6. Invest more than 25% of its total assets in securities,
the issuers of which conduct their principal business activities
in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state or municipal
governments and their political subdivisions are not considered to
be issued by members of any 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 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.

2. Invest for the purpose of exercising control over or
management of any company, except to the extent that in Portfolio
may purchase securities of other investment companies.

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

The Van Kampen American Capital Enterprise Portfolio may
not:

1. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the Portfolio may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio securities,
to the fullest extent permitted under the 1940 Act.

4. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder taking into account any rule or
order of the SEC exempting the Portfolio from the limitation
imposed by Section 12(d)(1) of the 1940 Act.

5. Invest more than 25% of its total 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 money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3%
of the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

7. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

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. 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. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.

6. Invest in interests in oil, gas, or other mineral
exploration or developmental programs.

7. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities short
(except "against the box"). For purposes of this restriction,
the deposit or payment by the Portfolio of underlying securities
and other assets in escrow and collateral agreements with respect
to initial or maintenance margin in connection with futures
contracts and related options and options on securities, indexes
or similar items is not considered to be the purchase of a
security on margin.

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. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the Portfolio from (a) investing in securities of
issuers engaged in the real estate business or the business of
investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate
business or the business of investing in real estate) and
securities which are secured by real estate or interests therein;
(b) holding or selling real estate received in connection with
securities it holds or held; (c) trading in futures contracts
and options on futures contracts (including options on currencies
to the extent consistent with the Portfolios' investment objective
and policies); or (d) investing in real estate investment trust
securities.

5. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

6. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3% of
the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

7. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

8. 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.

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

1. Purchase securities of any other investment company
except as part of a plan of merger or consolidation.

2. 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.

3. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities short
(except "against the box"). For purposes of this restriction,
the deposit or payment by the Portfolio of underlying securities
and other assets in escrow and collateral agreements with respect
to initial or maintenance margin in connection with futures
contracts and related options and options on securities, indexes
or similar items is not considered to be the purchase of a
security on margin.

4. Invest in puts, calls, straddles, spreads and any
combination thereof.

5. 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.

6. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.

7. Purchase securities of companies for the purpose of
exercising control.

The Putnam Diversified Income Portfolio may not:

1. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3% of
the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

2. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

5. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

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

7. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
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.

3. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.

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

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

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.

3. Engage in the business of underwriting securities issued
by other persons, except to the extent that the Fund may
technically be deemed to be an underwriter under the Securities
Act of 1933, as amended, in disposing of portfolio securities.

5. Borrow money in excess of 33 1/3% of its total assets
(including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not
prevent the Portfolio from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that
reverse repurchase agreements, "roll" transactions and any other
transactions constituting borrowing by the Portfolio may not
exceed 1/3 of its total assets. In the event that the asset
coverage for the Portfolio's borrowings falls below 300%, the
Portfolio will reduce, within three days (excluding Sundays and
holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures
contracts, options on futures contracts and forward currency
contracts, and collateral arrangements relating thereto will not
be deemed to be borrowings.

6. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

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. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.

2. 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. Purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities short
(except "against the box"). For purposes of this restriction,
the deposit or payment by the Fund of underlying securities and
other assets in escrow and collateral agreements with respect to
initial or maintenance margin in connection with futures contracts
and related options and options on securities, indexes or similar
items is not considered to be the purchase of a security on
margin.

4. 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).

5. 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).

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

7. 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).

The Smith Barney High Income Portfolio may not:

1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

2. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3% of
the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

4. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder.

5. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the Portfolio from (a) investing in securities of
issuers engaged in the real estate business or the business of
investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate
business or the business of investing in real estate) and
securities which are secured by real estate or interests therein;
(b) holding or selling real estate received in connection with
securities it holds or held; (c) trading in futures contracts
and options on futures contracts (including options on currencies
to the extent consistent with the Portfolios' investment objective
and policies); or (d) investing in real estate investment trust
securities.

7. Invest more than 25% of its total assets in securities,
the issuers of which conduct their principal business activities
in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies and
instrumentalities) and securities of state an municipal
governments and their political subdivisions are not considered to
be issued by members of any industry.

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:

2. 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.

The MFS Total Return Portfolio may not:

1. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3% of
the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

3. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder

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. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested in
securities that are illiquid.

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.

4. 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.

5. Purchase or sell interests in oil, gas or mineral
leases.

The Smith Barney Large Capitalization Growth Portfolio may
not:

1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.

3. Borrow money, except that (a) the Portfolio may borrow
from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
Portfolio may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward roll
transactions and similar investment strategies and techniques. To
the extent that it engages in transactions described in (a) and
(b), the Portfolio will be limited so that no more than 33 1/3%
of the value of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing
is made, is derived from such transactions.

5. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall not
prevent the Portfolio from (a) investing in securities of issuers
engaged in the real estate business or the business of investing
in real estate (including interests in limited partnerships owning
or otherwise engaging in the real estate business or the business
of investing in real estate) and securities which are secured by
real estate or interests therein; (b) holding or selling real
estate received in connection with securities it holds or held;
(c) trading in futures contracts and options on futures contracts
(including options on currencies to the extent consistent with the
Portfolios' investment objective and policies); or (d) investing
in real estate investment trust securities.

7. Issue "senior securities" as defined in the 1940 Act and
the rules, regulations and orders thereunder, except as permitted
under the 1940 Act and the rules, regulations and orders
thereunder

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

2. Invest in oil, gas or other mineral leases or
exploration or development programs.

3. Write or sell puts, calls, straddles, spreads or
combinations of those transactions, except as permitted under the
Portfolio's investment objective and policies.

4. Invest in securities of another investment company
except as permitted by Section 12(d)(1)(a) of the 1940 Act, or as
part of a merger, consolidation or acquisition

5. Purchase a security if, as a result, the Portfolio would
then have more than 5% of its total assets invested in securities
of issuers (including predecessors) that have been in continuous
operation for fewer than three years, except that this limitation
will be deemed to apply to the entity supplying the revenues from
which the issue is to be paid, in the case of private activity
bonds purchased.

6. Make investments for the purpose of exercising control
of management.

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, Martin Luther King, Jr., 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 Large Cap Value 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, the
Smith Barney Money Market Portfolio and the Smith Barney Large
Capitalization Growth 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 Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, New York 11245

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, 1998, 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 thirteen series of shares, each
representing shares in one of thirteen separate Portfolios - the
Smith Barney Large Cap Value 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, the Smith Barney Money Market Portfolio and the
Smith Barney Large Capitalization Growth 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. Mutual
Management Corp. ("MMC" or the "Manager") manages the investment
operations of the Smith Barney Large Cap Value Portfolio, the
Smith Barney International Equity Portfolio, the Smith Barney
Pacific Basin Portfolio, the Smith Barney High Income Portfolio,
Smith Barney Money Market Portfolio and the Smith Barney Large
Capitalization Growth Portfolio pursuant to Management Agreements
entered into by the Fund on behalf of each such Portfolio.
Travelers Investment Adviser, Inc. ("TIA" or the "Manager"), an
affiliate of MMC, manages the investment operations of the
Alliance Growth Portfolio, the AIM Capital Appreciation Portfolio,
the Putnam Diversified Income Portfolio, the MFS Total Return
Portfolio, the GT Global Strategic Income Portfolio, the Van
Kampen American Capital Enterprise Portfolio and the TBC Managed
Income Portfolios (each, a "TIA Portfolio") pursuant to management
agreements entered into by the Fund on behalf of each TIA
Portfolio. Under each management agreement MMC or TIA, as the
case may be, 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 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. 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. MMC and TIA are each located at 388
Greenwich Street, New York, New York 10013. MMC is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc. Salomon 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. TIA
is a wholly owned subsidiary of The Plaza Corporation, a wholly
owned subsidiary of the Travelers Insurance Company ("TIC"). TIC
is a wholly owned subsidiary of Travelers.

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 MMC 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 MMC; 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 Large Cap Value
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 SAI.

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,
MMC, TIA 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 MMC or TIA 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 MMC, TIA or the Portfolio for any
error of judgment or mistake of law or for any loss suffered by
MMC, TIA, 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:

<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year Year Year
Ended Ended Ended
October 31, October 31, October 31,
Fund 1995 1996 1997
<S> <C> <C> <C>
Smith Barney Large Cap Value Portfolio $116,605 $564,232 $1,399,650
Alliance Growth Portfolio 421,756 1,624,602 3,268,019
AIM Capital Appreciation Portfolio 2,595* 503,898 1,294,096
Van Kampen American Capital Enterprise Portfolio 93,346 482,803 1,045,925
Smith Barney International Equity Portfolio 263,820 887,397 1,692,179
Smith Barney Pacific Basin Portfolio+ 47,987 117,581 175,112
TBC Managed Income Portfolio 47,986 123,774 176,499
Putnam Diversified Income Portfolio 122,559 428,803 753,736
GT Global Strategic Income Portfolio++ 40,549 109,949 201,225
Smith Barney High Income Portfolio 53,173 262,657 558,996
MFS Total Return Portfolio 187,388 744,834 1,556,167
Smith Barney Money Market Portfolio+++ 100,040 425,361 650,916
Smith Barney Large Capitalization Growth Portfolio --- --- ---
</TABLE>
* From October 10, 1995 (commencement of operations) through
October 31, 1995.
+ The Manager waived $21,803 in 1995 and $30,849 in 1996 of the
management fees shown.
++ The Manager waived $23,349 in 1995 and $20,036 in 1996 of the
management fees shown.
+++ The Manager waived $60,833 in 1996 and $24,546 in 1997 of
the management fees shown.

The Management Agreement for each Portfolio that does not
have a Sub-Adviser provides that MMC will (a) manage the
Portfolio's assets in accordance with the Portfolio's investment
objectives and policies as stated in the Prospectus and the SAI,
(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 on behalf
of each of the AIM Capital Appreciation Portfolio, 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. Pursuant to each Subadvisory Agreement
among TIA, 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 TIA 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.

TIA has also entered into a Sub-Administrative Services
Agreement with MMC pursuant to which MMC will: (a) assist TIA in
supervising all aspects of each Portfolio's operations; (b) supply
each Portfolio with office facilities, statistical and research
services, data processing services, clerical, accounting and
bookkeeping services; and (c) prepare reports to each TIA
Portfolio's shareholders and prepare reports to and filings with
the SEC and state blue sky authorities, if applicable. TIA pays
MMC, as Sub-Administrator, a fee in an amount equal to an annual
rate of 0.10% of each TIA Portfolio's average daily net assets.

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.

The Alliance Capital is a leading international investment
manager supervising client accounts with assets as of December 31,
1997 of more than $218.7 billion (of which more than $80 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included employee benefit
plans, as of December 31, 1997, 31 of the Fortune 100 Companies.
As of that date, Alliance Capital and its subsidiaries employed
more than 1, 450 employees who operated out of domestic offices
and the overseas offices of subsidiaries in Boston, Chennai,
Istanbul, London, Mumbai, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore as well as affiliate offices in Vienna,
Warsaw, Hong Kong, Sao Paulo, Seoul and Moscow. The 58 registered
investment companies comprising more than 70 separate investment
portfolios managed by Alliance Capital currently having over more
than three million shareholders.

Alliance Capital Management Corporation ("ACMC"), sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, 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 and a wholly owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company which at September 30,
1997, beneficially owned approximately 59% of the outstanding
voting shares of ECI. As of June 30, 1997, ACMC and Equitable
Capital Management Corporation, each a wholly owned direct or
indirect subsidiary of Equitable, together with Equitable, owned
in the aggregate approximately 57% of the issued and outstanding
units representing assignments of beneficial ownership of limited
partnership interests in the Adviser ("Units").

AXA-UAP is a holding company for an international group of
insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities principally
in Western Europe, North America and the Asia/Pacific area. AXA-
UAP is also engaged in asset management, investment banking,
securities trading, brokerage, real estate and other financial
services activities principally in the United States, as well as
Western Europe and the Asia/Pacific area.

Based on information provided by AXA-UAP, as of September
30, 1997 more than 25% of the voting power of AXA-UAP was
controlled directly and indirectly by FINAXA, a French holding
company. As of September 30, 1997 more than 25% of the voting
power of FINAXA was controlled directly and indirectly by four
French Mutual insurance companies (the "Mutuelles AXA"), one of
which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, Mutuelles AXA control AXA-UAP and
FINAXA.

The AIM Capital Appreciation Portfolio is advised by A I M
Capital Management, Inc. ("AIM Capital"). AIM Capital is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 and is a
wholly owned subsidiary of A I M Advisors, Inc., which is a wholly
owned subsidiary of A I M Management Group Inc. A I M Management
Group Inc. is a holding company engaged in the financial serviced
business and is an indirect wholly owned subsidiary of AMVESCAP
PLC. 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 Van Kampen American Capital Asset Management, Inc.
("VKAC"). VKAC is located at One Parkview Plaza, Oakbrook Terrace,
IL 60181 and is a wholly owned subsidiary of Van Kampen American
Capital, Inc., which is a wholly owned subsidiary of VK/AC
Holding, Inc. VC/AC Holding, Inc., is a wholly owned subsidiary
of MSAM Holdings II, Inc. which in turn, is a wholly owned
subsidiary of Morgan Stanley, Dean Witter Discover & Co. 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, other than shares held by employees, 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
Chancellor LGT Asset Management, Inc. ("Chancellor LGT"). The
U.S. offices of Chancellor LGT are located at 50 California
Street, San Francisco, California 94111 and 1166 Avenue of the
Americas, New York, New York 11036. Chancellor LGT 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
Chancellor LGT Trust Company, Chancellor LGT Senior Secured
Management, Inc., Chancellor LGT Venture Partners, Inc., 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 Chancellor LGT, the Manager
pays to Chancellor LGT an annual fee calculated at the rate of
0.375% of the Portfolio's average daily net assets, paid monthly.

The MFS Total Return Portfolio is advised by Massachusetts
Financial Services Company ("MFS"). MFS is located at 500
Boylston Street, Boston, Massachusetts 02116 and is a subsidiary
of Sun Life of Canada (U.S.) Financial Services Holdings, Inc.,
which is an indirect 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. In
addition, the Van Kampen American Capital Enterprise Portfolio may
not deal with Morgan Stanley & Co., Inc. ("Morgan Stanley") (an
affiliate of VK/AC Holding, Inc.) in any transaction in which
Morgan Stanley acts as principal.

Shown below are the total brokerage fees paid by the Fund
for the fiscal years ended October 31, 1995, October 31, 1996 and
October 31, 1997 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 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. During the fiscal year ended
October 31, 1996 the total amount of commissionable transactions
was $948,677,922, $86,585,294 (9.13%) of which was directed to
Smith Barney and executed by unaffiliated brokers and $862,093,228
(90.87%) of which was directed to other brokers. During the fiscal
year ended October 31, 1997 the total amount of commissionable
transactions was $1,618,030,296, $115,051,655 (7.11%) of which was
directed to Smith Barney and executed by unaffiliated brokers and
$1,502,978,641 (92.89%) of which was directed to other brokers.

Commissions:

<TABLE>
<CAPTION>
Fiscal To Smith To Others (for
Year Ended Total Barney execution only)
<S> <C> <C> <C>
October 31, 1995 $ 684,356 $43,728 (6.4%) $640,628
(93.6%)
October 31, 1996 1,862,443 142,038 (7.63%) 1,720,405
(92.37%)
October 31, 1997 2,325,295 163,142 (7.02%) 2,162,153
(92.98%)
</TABLE>

The Fund attempts to obtain the most favorable execution of
each portfolio transaction that is, the best combination of net
price and prompt reliable execution. In making its decision as to
which broker or brokers are most likely to provide the most
favorable execution, the management of the Fund takes into account
the relevant circumstances. These include, in varying degrees,
the size of the order, the importance of prompt execution, the
breadth and trends of the market in the particular security,
anticipated commission rates, the broker's familiarity with such
security including its contacts with possible buyers and sellers
and its level of activity in the security, the possibility of a
block transaction and the general record of the broker for prompt,
competent and reliable service in all aspects of order processing,
execution and settlement.

Commissions are negotiated and take into account the
difficulty involved in execution of a transaction, the time it
took to conclude, the extent of the broker's commitment of its own
capital, if any, and the price received. Anticipated commission
rates are an important consideration in all trades and are weighed
along with the other relevant factors affecting order execution
set forth above. In allocating brokerage among those brokers who
are believed to be capable of providing equally favorable
execution, the Fund takes into consideration the fact that a
particular broker may, in addition to execution capability,
provide other services to the Fund such as research and
statistical information. It is not possible to place a dollar
value on such services nor does their availability reduce the
Manager's expenses in a determinable amount. These various
services may, however, be useful to the Manager or Smith Barney in
connection with its services rendered to other advisory clients
and not all such services may be used in connection with the Fund.

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 contract owner 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.

FINANCIAL STATEMENTS

The financial information contained under the following
headings is hereby incorporated by reference to the Fund's 1997
Annual Reports to Shareholders:

<TABLE>
<CAPTION>
Annual Report of: Pages(s)in:
<S> <C>
Smith Barney Large Cap Value Portfolio
Alliance Growth Portfolio
Van Kampen American Capital Enterprise Portfolio
Schedule of Investments 11-24
Statements of Assets and Liabilities 25
Statements of Operations 26
Statements of Changes in Net Assets 27-29
Notes to Financial Statements 30-35
Financial Highlights (for a share of capital stock of each series
outstanding through each year)
36-38
Independent Auditors' Report 39

MFS Total Return Portfolio
TBC Managed Income Portfolio
Smith Barney Money Market Portfolio
Schedule of Investments 9-28
Statements of Assets and Liabilities 30
Statements of Operations 31
Statements of Changes in Net Assets 32-34
Notes to Financial Statements 35-40
Financial Highlights (for a share of capital stock of each series
outstanding through each year)
41-43
Independent Auditors' Report 44

Smith Barney High Income Portfolio
Putnam Diversified Income Portfolio
Schedule of Investments 10-39
Statements of Assets and Liabilities 41
Statements of Operations 42
Statements of Changes in Net Assets 43-44
Notes to Financial Statements 45-53
Financial Highlights (for a share of capital stock of each series
outstanding through each year)
54-55
Independent Auditors' Report 56

Smith Barney International Equity Portfolio
Smith Barney Pacific Basin Portfolio
GT Global Strategic Income Portfolio
Schedule of Investments 12-22
Statements of Assets and Liabilities 23
Statements of Operations 24
Statements of Changes in Net Assets 25-27
Notes to Financial Statements 28-36
Financial Highlights (for a share of capital stock of each series
outstanding through each year)
37-39
Independent Auditors' Report 40

AIM Capital Appreciation Portfolio
Schedule of Investments 7-17
Statements of Assets and Liabilities 18
Statements of Operations 19
Statements of Changes in Net Assets 20
Notes to Financial Statements 21-25
Financial Highlights (for a share of capital stock of each series
outstanding through each year)
26
Independent Auditors' Report 27
</TABLE>

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, 1997 *

Statements of Operations for the
period ended October 31, 1997 *

Statements Changes in Net Assets for
the period ended October 31, 1997 and 1996 *

Notes to Financial Statements *

Independent Auditors' Report *

* The Registrant's Annual Reports for the fiscal year ended
October 31, 1997 and the Reports of Independent
Accountants dated December 18, 1997 are incorporated by
reference to the N-30D filed on January 8, 1998 as
Accession # 0000091155-97-000016.

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 Large Cap Value Portfolio
(formerly known as Smith Barney Income and Growth
Portfolio) and Mutual Management Corp. ("MMC") is
incorporated by reference to Exhibit 5(a) to Pre-
Effective Amendment No. 1 on June 10, 1994.

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

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

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

(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. on June
10, 1994.

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

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

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

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

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

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

(l) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(m) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(n) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(o) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(p) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(q) Subadvisory Agreement among Registrant, MMC 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 to TIA.**

(r) Subadvisory Agreement between MMC 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 to
TIA.**

(s) Management Agreement among Registrant, MMC and AIM
Capital Management, Inc. is incorporated by reference
to Post-Effective Amendment No. 4 filed on February
28, 1996. Transfer and Assumption of Subadvisory
Agreement to TIA.**

(t) Subadvisory Agreement among Registrant, MMC and AIM
Capital Management, Inc. is incorporated by reference
to Post-Effective Amendment No. 4 filed on February
28, 1996.

(u) Management Agreement between Registrant on behalf of
its Smith Barney Large Capitalization Growth Portfolio
and MMC (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.**

(c) Custodian Agreement between Registrant and Morgan
Guaranty Trust Company of New York is incorporated by
reference to Exhibit 8(c) to Post-Effective Amendment
No. 4 filed on February 28, 1996.

(d) Global Custody Agreement between The Chase Manhattan
Bank and the Customer.

(9)(a) Transfer Agency Agreement between Registrant and
First Data Investor Services Group, Inc., (formerly
The Shareholder Services Group Inc.) is incorporated
by reference to Exhibit (9) to Post-Effective
Amendment No. 4 filed on February 28, 1996.

(b) Transfer Agency Agreement between Travelers Series
Fund Inc. and First Data Investor Services Group, Inc.

(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 (filed herewith).

(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.
__________________________
** To be filed by Amendment.

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 December 11,
1997

Smith Barney Large Cap Value Portfolio 4
Alliance Growth Portfolio 1
Van Kampen American Capital Enterprise Portfolio
1
Smith Barney International Equity Portfolio
3
Smith Barney Pacific Basin Portfolio 4
TBC Managed Income Portfolio 1
Putnam Diversified Income Portfolio 1
GT Global Strategic Income Portfolio 1
Smith Barney High Income Portfolio 2
MFS Total Return Portfolio 1
Smith Barney Money Market Portfolio 4
AIM Capital Appreciation Portfolio 1
Smith Barney Large Capitalization Growth Portfolio

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 Mutual
Management Corp. (formerly known as 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 Travelers
Investment Adviser is included in its Form ADV (File No.
801-52365), 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.

Smith Barney Inc. ("Smith Barney") also serves as
distributor for each of the following investment companies:

(a) Smith Barney Inc. ("Smith Barney ") acts as principal
underwriter for
Consulting Group Capital Markets Funds
Global Horizons Investment Series (Cayman Islands)
Greenwich Street California Municipal Fund Inc.
Greenwich Street Municipal Fund Inc.
Greenwich Street Series Fund
High Income Opportunity Fund Inc.
The Italy Fund Inc.
Managed High Income Portfolio Inc.
Managed Municipals Portfolio II Inc.
Managed Municipals Portfolio Inc.
Municipal High Income Fund Inc.
Puerto Rico Daily Liquidity Fund Inc.
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Intermediate Municipal Fund, Inc.
Smith Barney Investment Funds Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Fund, Inc.
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Smith Barney Worldwide Special Fund N.V. (Netherlands
Antilles)
Travelers Series Fund Inc.
The USA High Yield Fund N.V.(Netherlands Antilles)
Worldwide Securities Limited (Bermuda)
Zenix Income Fund Inc. and various series of unit
investment trusts.

(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, Smith Barney Large
Capitalization Growth Portfolio and Smith Barney Money
Market Portfolio and The Chase Manhattan Bank, Chase
MetroTech Center, Brooklyn, NY 11245 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.

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 of February,
1998.

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, 1998

(Heath B.
McLendon)
(Chief Executive
Officer)

/s/ Abraham E.
Cohen
Director
February 27, 1998

(Abraham E. Cohen

/s/ Victor K.
Atkins*
Director
February 27, 1998

(Victor K.
Atkins)

/s/ Robert A.
Frankel*
Director
February 27, 1998

(Robert A.
Frankel)

/s/ Rainer
Greeven*
Director
February 27, 1998

(Rainer Greeven)

/s/ Susan M.
Heilbron*
Director
February 27, 1998

(Susan M.
Heilbron)

/s/ James Shuart*
Director
February 27, 1998

(James Shuart)

/s/Lewis E.
Daidone
Treasurer
February 27, 1998

(Lewis E.
Daidone)
(Principal Financial
and Accounting
Officer)

*By: /s/Lewis E. Daidone February 27, 1998
Lewis E. Daidone
Pursuant to Power of Attorney

FORM OF MANAGEMENT AGREEMENT

(TO BE USED WITHOUT SUBADVISORY AGREEMENT)

TRAVELERS SERIES FUND INC.

(Smith Barney Large Capitalization Growth Portfolio)

December , 1997

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

Dear Sirs:

Travelers Series Fund Inc. (the "Company"), a corporation
organized under the laws of the State of Maryland, on behalf of
the Smith Barney Large Capitalization Growth Portfolio (the
"Portfolio"), confirms its agreement with Smith Barney Mutual
Funds Management Inc. (the "Manager"), 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 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 Prospectus and the Statement have been or will be
submitted to the Manager. The Company agrees promptly to provide
copies of all amendments to the Prospectus and the Statement to
the Manager on an on-going basis. The Company desires to employ
and hereby appoints the Manager to act as manager of the
Portfolio. The Manager accepts the appointment and agrees to
furnish the services for the compensation set forth below.

2. Services as Investment Manager

Subject to the supervision, direction and approval of the
Board of the Company, the Manager shall (a) maintain compliance
procedures for the Portfolio that it reasonably believes are
adequate to ensure the Portfolio's compliance with (i) the
Investment Company Act of 1940, as amended (the "1940 Act") and
the rules and regulations promulgated thereunder and (ii) the
Portfolio's investment objective(s), policies and restrictions 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; (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, the Manager will conduct a continual
program of investment, evaluation and, if appropriate, sale and
reinvestment of the Portfolio's assets.

3. Brokerage

In selecting brokers or dealers (including, if permitted by
applicable law, Smith Barney Shearson Inc.) to execute
transactions on behalf of the Portfolio, the Manager will seek the
best overall terms available. In assessing the best overall terms
available for any transaction, the Manager will consider factors
it deems relevant, including, but not limited to, the breadth of
the market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In selecting
brokers or dealers to execute a particular transaction, and in
evaluating the best overall terms available, the Manager is
authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934), provided to the Portfolio and/or other
accounts over which the Manager or its affiliates exercise
investment discretion. Nothing in this paragraph shall be deemed
to prohibit the Manager from paying an amount of commission for
effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker, or dealer would
have charged for effecting that transaction, if the Manager
determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services
provided by such member, broker, or dealer, viewed in terms of
either that particular transaction or its overall responsibilities
with respect to the Portfolio and/or other accounts over which the
Manager or its affiliates exercise investment discretion.

4. 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.

5. Standard of Care

The Manager shall exercise its best judgment and shall act
in good faith in rendering the services listed in paragraphs 2 and
3 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.

6. 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 0.75% 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.

7. 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. The Portfolio
shall bear certain other expenses to be incurred in its operation,
including, but not limited to investment advisory, any sub-
advisory and any administration fees; 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.

8. 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 agreements, 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 8, 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.

9. 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.

10. Term of Agreement

This Agreement shall become effective December ___, 1997
(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 Manager. This Agreement
will also terminate automatically in the event of its assignment
(as defined in the 1940 Act and the rules thereunder).

11. 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,

TRAVELERS SERIES FUND INC.

By:

Name:
Title:

Accepted:

SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.

By:
Name:
Title:

4
u:\legal\funds\$sts\agreemts\lcgadvi.agr

Independent Auditors' Consent

To the Shareholders and Board of Trustees of
Travelers Series Fund Inc.:

We consent to the use of our reports dated December 18, 1997 for Smith
Barney Income and Growth Portfolio, Alliance Growth Portfolio, AIM
Capital Appreciation Portfolio, Van Kampen American Capital Enterprise
Portfolio, Smith Barney International Equity Portfolio, Smith Barney
Pacific Basin Portfolio, TBC Managed Income Portfolio, Putnam
Diversified Income Portfolio, GT Global Strategic Income Portfolio,
Smith Barney High Income Portfolio, MFS Total Return Portfolio and
Smith Barney Money Market Portfolio of 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.

KPMG Peat Marwick
LLP

New York, New York
February 26, 1998

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 1
<NAME> INCOME AND GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 245,228,225
<INVESTMENTS-AT-VALUE> 286,020,047
<RECEIVABLES> 1,552,343
<ASSETS-OTHER> 275
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 287,572,665
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 239,861
<TOTAL-LIABILITIES> 239,861
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,472,869
<SHARES-COMMON-STOCK> 16,018
<SHARES-COMMON-PRIOR> 9,318
<ACCUMULATED-NII-CURRENT> 4,340,906
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,727,207
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 40,791,822
<NET-ASSETS> 287,332,804
<DIVIDEND-INCOME> 5,067,898
<INTEREST-INCOME> 766,208
<OTHER-INCOME> 0
<EXPENSES-NET> 1,491,006
<NET-INVESTMENT-INCOME> 4,343,100
<REALIZED-GAINS-CURRENT> 10,733,184
<APPREC-INCREASE-CURRENT> 24,630,552
<NET-CHANGE-FROM-OPS> 39,706,836
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,809,911
<DISTRIBUTIONS-OF-GAINS> 1,779,060
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,685,160
<NUMBER-OF-SHARES-REDEEMED> 219,187
<SHARES-REINVESTED> 235,342
<NET-CHANGE-IN-ASSETS> 249,930,129
<ACCUMULATED-NII-PRIOR> 1,807,717
<ACCUMULATED-GAINS-PRIOR> 1,773,083
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,400
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,400
<AVERAGE-NET-ASSETS> 215,809
<PER-SHARE-NAV-BEGIN> 14.84
<PER-SHARE-NII> 00.25
<PER-SHARE-GAIN-APPREC> 03.16
<PER-SHARE-DIVIDEND> 00.18
<PER-SHARE-DISTRIBUTIONS> 00.17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.90
<EXPENSE-RATIO> 00.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 10
<NAME> MFS TOTAL RETURN PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 243,620,317
<INVESTMENTS-AT-VALUE> 270,037,257
<RECEIVABLES> 2,746,433
<ASSETS-OTHER> 369,740
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,116,173
<PAYABLE-FOR-SECURITIES> 9,338,379
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 229,921
<TOTAL-LIABILITIES> 9,568,300
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 218,637,072
<SHARES-COMMON-STOCK> 17,220,795
<SHARES-COMMON-PRIOR> 10,246,365
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 6,907,451
<ACCUMULATED-NET-GAINS> 11,623,317
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 26,417,290
<NET-ASSETS> 263,585,130
<DIVIDEND-INCOME> 2,880,738
<INTEREST-INCOME> 5,695,940
<OTHER-INCOME> 0
<EXPENSES-NET> 1,670,536
<NET-INVESTMENT-INCOME> 6,906,142
<REALIZED-GAINS-CURRENT> 11,632,148
<APPREC-INCREASE-CURRENT> 15,804,046
<NET-CHANGE-FROM-OPS> 34,342,336
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,166,892
<DISTRIBUTIONS-OF-GAINS> 1,937,784
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,821,186
<NUMBER-OF-SHARES-REDEEMED> 230,566
<SHARES-REINVESTED> 383,810
<NET-CHANGE-IN-ASSETS> 129,055,737
<ACCUMULATED-NII-PRIOR> 1,430,635
<ACCUMULATED-GAINS-PRIOR> 403,787
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,556,167
<INTEREST-EXPENSE> 114,369
<GROSS-EXPENSE> 1,670,536
<AVERAGE-NET-ASSETS> 194,967,388
<PER-SHARE-NAV-BEGIN> 13.13
<PER-SHARE-NII> 00.38
<PER-SHARE-GAIN-APPREC> 02.27
<PER-SHARE-DIVIDEND> 00.29
<PER-SHARE-DISTRIBUTIONS> 00.18
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.31
<EXPENSE-RATIO> 00.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 11
<NAME> SMITH BARNEY MONEY MARKET PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 111,510,759
<INVESTMENTS-AT-VALUE> 111,510,759
<RECEIVABLES> 196,471
<ASSETS-OTHER> 474
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 111,707,704
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 539,676
<TOTAL-LIABILITIES> 539,676
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 111,168,028
<SHARES-COMMON-STOCK> 111,168,028
<SHARES-COMMON-PRIOR> 99,150,498
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 111,168,028
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,058,095
<OTHER-INCOME> 0
<EXPENSES-NET> 702,403
<NET-INVESTMENT-INCOME> 5,355,692
<REALIZED-GAINS-CURRENT> 47
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5,355,739
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,355,692
<DISTRIBUTIONS-OF-GAINS> 47
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 199,654,882
<NUMBER-OF-SHARES-REDEEMED> 192,951,787
<SHARES-REINVESTED> 5,314,435
<NET-CHANGE-IN-ASSETS> 12,017,350
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 650,916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 726,949
<AVERAGE-NET-ASSETS> 108,485,969
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.049
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 12
<NAME> AIM CAPITAL APPRECIATION PORTFOLIO

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 170,129,550
<INVESTMENTS-AT-VALUE> 203,020,764
<RECEIVABLES> 1,327,826
<ASSETS-OTHER> 1,865
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 204,350,455
<PAYABLE-FOR-SECURITIES> 1,286,793
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 218,068
<TOTAL-LIABILITIES> 1,504,861
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 171,026,896
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<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
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<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
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<NAME> AMERICAN CAPITAL ENTERPRISE PORTFOLIO

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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 4
<NAME> SIMTH BARNEY INTERNATIONAL EQUITY PORTFOLIO

<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 5
<NAME> SMITH BARNEY PACIFIC BASIN PORTFOLIO

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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 6
<NAME> TBC MANAGED INCOME PORTFOLIO

<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 7
<NAME> PUTNAM DIVERSIFIED INCOME PORTFOLIO

<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 8
<NAME> G.T. GLOBAL STRATEGIC INCOME PORTFOLIO

<S> <C>
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</TABLE>

<ARTICLE> 6
<CIK> 0000919557
<NAME> TRAVELERS SERIES FUND INC.
<SERIES>
<NUMBER> 9
<NAME> HIGH INCOME PORTFOLIO

<S> <C>
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<AVERAGE-NET-ASSETS> 93,357,168
<PER-SHARE-NAV-BEGIN> 12.09
<PER-SHARE-NII> 00.88
<PER-SHARE-GAIN-APPREC> 01.00
<PER-SHARE-DIVIDEND> 00.66
<PER-SHARE-DISTRIBUTIONS> 00.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.25
<EXPENSE-RATIO> 00.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>