As filed with the Securities and Exchange Commission on July 30,
1999
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.
Post-Effective Amendment No. 12
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
__________________
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):
[ ] 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)
[ X ] 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:
[ ] This post-effective amendment designates a new effective
date
for a previously filed post-effective amendment.
This Registration Statement contains fifteen 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
Prospectus
<PAGE>
Travelers Series Fund Inc.
Prospectus
October , 1999
Equity Funds
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Smith Barney Aggressive Growth Portfolio
Smith Barney Mid Cap Portfolio
Shares of each fund are offered only to insurance company
Separate Accounts
which fund certain variable annuity and variable life insurance
contracts. This
prospectus should be read together with the prospectus for those
contracts.
The Securities and Exchange Commission has not approved or
disapproved these
securities or determined whether this prospectus is accurate or
complete. Any
statement to the contrary is a crime.
<PAGE>
Contents
Travelers Series Fund Inc. is a series company consisting of
fifteen separate
investment funds, each with its own investment objective and
policies. Each
fund offers different levels of potential return and involves
different levels
of risk. This prospectus offers the Smith Barney Aggressive
Growth Portfolio
and the Smith Barney Mid Cap Portfolio. The other funds are
offered in a sepa-
rate prospectus.
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<TABLE>
<CAPTION>
Page
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<S>
<C>
Investments, Risks and Performance
2
Smith Barney Aggressive Growth Portfolio
2
Smith Barney Mid Cap Portfolio
4
More on the Funds' Investments and Related
Risks 6
Management
8
Share Transactions
9
Distributions, Dividends and Taxes
10
Share Price
10
</TABLE>
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You should know:
An investment in any fund is not a bank deposit and is not
insured or
guaranteed by the FDIC or any other government agency.
Travelers Series Fund
1
<PAGE>
Investments, Risks and Performance
Smith Barney Aggressive Growth Portfolio
Investment objective
Long-term capital appreciation.
Principal investment strategies
The fund invests primarily in common stocks of companies the
manager believes
are experiencing, or will experience, growth in earnings that
exceeds the
average rate of earnings growth of the companies comprising the
S&P 500
Index. The fund may invest in the securities of large, well-
known companies
that offer prospects of long-term earnings growth. However,
because higher
earnings growth rates are often achieved by small to medium-
sized companies,
a significant portion of the fund's assets are invested in the
securities of
such companies.
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How the manager selects the fund's investments
The manager emphasizes individual security
selection while
diversifying the fund's investments across
industries,
which may help to reduce risk. The manager
focuses
primarily on emerging growth companies that
have passed
their "start-up" phase and show positive
earnings and the
prospect of achieving significant profit gains
in the two
to three years after the fund acquires their
stocks.
When evaluating an individual stock, the
manager considers
whether the company may benefit from:
. New technologies, techniques, products or
services
. New cost reducing measures
. Changes in management, or
. Favorable changes in government regulations
Travelers Series Fund
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or
the fund may not
perform as well as other investments, if any of the following
occurs:
. Stock prices decline generally
. Small or medium capitalization companies fall out of favor with
investors
. The manager's judgment about the attractiveness, growth
prospects or
potential appreciation of a particular stock proves to be
incorrect.
. A particular product or service developed by a company in which
the fund
invests is unsuccessful, the company does not meet earnings
expectations or
other events depress the value of the company's stock
Compared to large capitalization companies, the securities of
small and medium
capitalization companies are more likely to:
. Have more volatile share prices
. Have more limited product lines
. Have fewer capital resources
. Have more limited management depth
. Experience sharper swings in market prices
. Be harder to sell at times and prices the manager believes
appropriate
. Offer greater potential for gains and losses
Who may want to invest
The fund may be an appropriate investment if you:
. Are seeking to participate in the long-term growth potential of
small and
medium capitalization companies
. Currently have exposure to the stocks commonly held by large
capitalization
and value oriented mutual funds and wish to broaden your
investment portfolio
. Are willing to accept the risks of the stock market and the
special risks and
potential long-term rewards of investing in smaller companies
with more
limited track records
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Fund performance
As the fund was added to the Travelers Series Fund Inc. this
year, the fund
does not yet have a sufficient operating history to generate the
performance
information which other Smith Barney funds show in bar and table
form in this
location of the prospectus.
Travelers Series Fund
3
<PAGE>
Investments, Risks and Performance
Smith Barney MidCap Portfolio
Investment objective
Long-term growth of capital.
Principal investment strategies
The fund invests primarily in equity securities of
medium sized companies. Medium sized companies are those
whose market capitalization is within the market
capitalization range of companies in the S&P MidCap
Index (the "Index") at the time of the fund's
investment. The size of the companies in the Index
changes with market conditions and the composition of
the Index. As of September , 1999, the largest market
capitalization of a company in the Index was $ billion
and the smallest market capitalization was $ billion.
Equity securities include exchange traded and over-the-
counter common stocks, preferred stocks, debt securities
convertible into equity securities and warrants and
rights relating to equity securities. The fund may also
invest up to 25% of its assets in securities of foreign
issuers both directly and through depositary receipts
for those securities.
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How the manager selects the fund's investments
The manager focuses on medium capitalization
companies that
exhibit attractive growth characteristics. The
manager
selects individual "growth" stocks for
investment in two
ways: by identifying those companies which
exhibit the most
favorable growth prospects and by identifying
those
companies which have favorable valuations
relative to their
growth characteristics. This strategy is
commonly known as
"growth at a reasonable price" and offers
investors style
diversification within a single mutual fund.
In selecting individual companies for
investment, the
manager considers:
. Growth characteristics, including high
historic growth
rates and high relative growth compared with
companies in
the same industry or sector
. Value characteristics, including low
price/earnings
ratios and other statistics indicating a
security is
undervalued
. Increasing profits and sales
. Competitive advantages that could be more
fully exploited
by a company
. Skilled management committed to long-term
growth
. Potential for a long-term investment by the
fund
The manager uses fundamental research to find
stocks with
strong growth potential and also uses
quantitative analysis
to determine whether these stocks are
relatively
undervalued or overvalued compared to stocks
with similar
fundamental characteristics. The manager's
quantitative
valuations determine whether and when the fund
will
purchase or sell the stocks it identifies
through
fundamental research.
Travelers Series Fund
4
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or
the fund may not
perform as well as other investments, if any of the following
occurs:
. The U.S. stock market goes down, or performs poorly relative to
other types
of investments
. Medim capitalization stocks fall out of favor with investors
. The manager's judgment about the attractiveness, growth
prospects, value or
potential appreciation of a particular stock proves to be
incorrect
. An adverse event, such as an unfavorable earnings report about
a company in
the fund, depresses the value of the company's stock
Because the fund invests primarily in medium capitalization
companies, an
investment in the fund may be more volatile and more susceptible
to loss than
an investment in a fund which invests primarily in large
capitalization
companies. Medium capitalization companies may have more limited
product lines,
markets and financial resources than large capitalization
companies. They may
also have shorter operating histories and more erratic
businesses, although
they generally have more established businesses than small
capitalization
companies. The prices of medium capitalization company stocks
tend to be more
volatile than the prices of large capitalization company stocks.
Who may want to invest
The fund may be an appropriate investment if you:
. Are willing to accept the risks of the stock market
. Are seeking to participate in the long-term growth potential of
medium
capitalization companies
. Are looking for an investment with potentially greater return
but higher risk
than a fund that invests primarily in large capitalization
companies
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Fund performance
As the fund was added to the Travelers Series Fund Inc. this
year, the fund
does not yet have a sufficient operating history to generate the
performance
information which other Smith Barney funds show in bar and table
form in this
location of the prospectus.
Travelers Series Fund
5
<PAGE>
More on the Funds' Investments and Related Risks
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The section
entitled "In-
vestments,
Risks and Per-
formance" de-
scribes the
funds' invest-
ment objec-
tives and
their princi-
pal investment
strategies and
risks. This
section pro-
vides some ad-
ditional in-
formation
about the
funds' invest-
ments and cer-
tain invest-
ment manage-
ment tech-
niques the
funds' may
use. More in-
formation
about the
funds' invest-
ments and
portfolio man-
agement tech-
niques, some
of which en-
tail risk, is
included in
the Statement
of Additional
Information
(SAI). To find
out how to ob-
tain an SAI,
please turn to
the back cover
of this pro-
spectus.
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Equity Equity securities include exchange-traded and
over-the-
Investments counter common and preferred stocks, warrants,
rights, con-
vertible securities, depositary receipts and
shares, trust
certificates, limited partnership interests,
shares of other
investment companies and real estate investment
trusts and
equity participations.
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Secondary The MidCap Portfolio may invest up to 35% of its
assets in
investment equity securities of companies with market
capitalizations
practices outside the market capitalization range of
companies in the
Index (i.e., small or large capitalization
companies).
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Foreign The funds' investments in securities of foreign
issuers in-
Investments volve greater risk than investments in
securities of U.S. is-
suers. Many foreign countries the funds invest
in have mar-
kets that are less liquid and more volatile than
markets in
the U.S. In some foreign countries, less
information is
available about foreign issuers and markets
because of less
rigorous accounting and regulatory standards
than in the U.S.
Currency fluctuations could erase investment
gains or add to
investment losses. The risks of investing in
foreign securi-
ties are greater for securities of emerging
market issuers
because political or economic instability, lack
of market li-
quidity, and negative government actions like
currency con-
trols or seizure of private businesses or
property are more
likely.
In Europe, Economic and Monetary Union (EMU) and
the intro-
duction of a single currency began on January 1,
1999. There
are significant political and economic risks
associated with
EMU, which may increase the volatility of the
Fund's European
investments and present valuation problems.
Travelers Series Fund
6
<PAGE>
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Travelers Series Fund
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Short-term While the MidCap Portfolio intends to be
substantially fully
debt invested in equity securities, the fund may
maintain up to
securities 35% of its assets in money market instruments
and/or cash to
pay expenses and meet redemption requests.
Generally, the
value of these fixed income obligations will go
down if in-
terest rates go up, the credit rating of the
security is
downgraded or the issuer defaults on its
obligation to pay
principal or interest.
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Derivatives The MidCap Portfolio may, but need not, use
derivative con-
and hedging tracts, such as futures and options on
securities, securities
techniques indices or currencies; options on these futures;
forward cur-
rency contracts; and interest rate or currency
swaps for any
of the following purposes:
. To hedge against the economic impact of
adverse changes in
the market value of its securities, because of
changes in
stock market prices, currency exchange rates
or interest
rates.
. As a substitute for buying or selling
securities.
A derivative contract will obligate or entitle
the fund to
deliver or receive an asset or cash payment
based on the
change in value of one or more securities,
currencies or
indices. Even a small investment in derivative
contracts can
have a big impact on the fund's stock market,
currency and
interest rate exposure. Therefore, using
derivatives can
disproportionately increase losses and reduce
opportunities
for gains when stock prices, currency rates or
interest rates
are changing. The fund may not fully benefit
from or may lose
money on derivatives if changes in their value
do not
correspond accurately to changes in the value of
the fund's
holdings.
The other parties to certain derivative
contracts present the
same types of credit risk as issuers of fixed
income securi-
ties. Derivatives can also make the fund less
liquid and
harder to value, especially in declining
markets.
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Defensive The funds may depart from their principal
investment strate-
Investing gies in response to adverse market, economic or
political
conditions by taking temporary defensive
positions in all
types of money market instruments. If a fund
takes a tempo-
rary defensive position, it may be unable to
achieve its in-
vestment goal.
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Impact of high The funds may engage in active and frequent
trading to
portfolio achieve their principal investment strategies.
This may lead
turnover to the realization and distribution to
shareholders of higher
capital gains, which would increase their tax
liability. Fre-
quent trading also increases transaction costs,
which could
detract from the funds' performance.
7
<PAGE>
Management
Manager
The funds' investment manager is SSBC Fund Management Inc.
("SSBC"), an
affiliate of Salomon Smith Barney Inc. The manager's address is
388 Greenwich
Street, New York, NY 10013. The manager selects the funds'
investments and
oversees their operations. The manager and Salomon Smith Barney
are
subsidiaries of Citigroup Inc. Citigroup businesses produce a
broad range of
financial services -- asset management, banking and consumer
finance, credit
and charge cards, insurance, investments, investment banking and
trading -- and
use diverse channels to make them available to consumer and
corporate customers
around the world.
Management fees
The manager receives fees from the funds for its services at an
annual rate of
0.80% and 0.75% of the funds' average daily net assets for the
Smith Barney
Aggressive Growth Portfolio and Smith Barney Mid Cap Portfolio,
respectively.
Portfolio Managers
Richard Freeman, investment officer of the manager and managing
director of
Salomon Smith Barney is responsible for the day-to-day management
of the Smith
Barney Aggressive Growth Portfolio. Mr. Freeman has 16 years of
experience with
the manager or companies that are now part of Salomon Smith
Barney.
Lawrence Weissman, investment officer of the manager and managing
director of
Salomon Smith Barney is responsible for the day-to-day management
of the Smith
Barney Mid Cap Portfolio. Mr. Weissman has 2 years of experience
with the
manager or companies that are now part of Salomon Smith Barney
and 14 years of
experience as a portfolio manager in the financial services
industry.
Distributor
The funds have entered into an agreement with CFBDS, Inc. to
distribute the
funds' shares.
Year 2000 issue
Information technology experts are concerned about computer
systems' ability to
process date-related information on and after January 1, 2000.
This situation,
commonly known as the "Year 2000" issue, could have an adverse
impact on the
funds. The cost of addressing the Year 2000 issue, if
substantial, could
adversely affect companies and governments that issue securities
held by the
funds. The manager, Salomon Smith Barney and the distributor are
addressing the
Year 2000 issue for their systems. Each fund has been informed by
its other
service providers that they are taking similar measures. Although
the funds do
not expect the Year 2000 issue to adversely affect them, the
funds cannot
guarantee that the efforts of each fund or its service providers
to correct the
problem will be successful.
Travelers Series Fund
8
<PAGE>
Share Transactions
Availability of shares
Individuals may not purchase shares directly from the funds. You
should read
the prospectus for your insurance company's variable contract to
learn how to
purchase a variable contract based on the funds.
Each fund may sell its shares directly to separate accounts
established and
maintained by insurance companies for the purpose of funding
variable annuity
and variable life insurance contracts and to certain qualified
pension and
retirement plans. The variable insurance products and qualified
plans may or
may not make investments in all the funds described in this
prospectus. Shares
of the funds are sold at net asset value.
The interests of different variable insurance products and
qualified plans
investing in a fund could conflict due to differences of tax
treatment and
other considerations. The funds currently do not foresee any
disadvantages to
investors arising from the fact that each fund may offer its
shares to
different insurance company separate accounts that serve as the
investment
medium for their variable annuity and variable life products and
to qualified
plans. Nevertheless, the board of directors intends to monitor
events to
identify any material conflicts which may arise, and to determine
what action,
if any, should be taken in response to these conflicts. If a
conflict were to
occur, one or more insurance companies' separate accounts or
qualified plans
might be required to withdraw their investments in one or more
funds and shares
of another fund may be substituted.
The sale of shares may be suspended or terminated if required by
law or
regulatory authority or if it is in the best interests of the
funds'
shareholders. Each fund reserves the right to reject any specific
purchase
order.
Redemption of shares
Redemption requests may be placed by separate accounts of
participating
insurance companies and by qualified plans. The redemption price
of the shares
of each fund will be the net asset value next determined after
receipt by the
fund of a redemption request in good order. The value of redeemed
shares may be
more or less than the price paid for the shares. Sales proceeds
will normally
be forwarded to the selling insurance company or qualified plan
on the next
business day after receipt of a redemption request in good order
but in no
event later than 3 days following receipt of instructions. Each
fund may
suspend sales or postpone payment dates during any period in
which any of the
following conditions exist:
. the New York Stock Exchange is closed;
. trading on the New York Stock Exchange is restricted;
. an emergency exists as a result of which disposal by the fund
of securities
is not reasonably practicable or it is not reasonably
practicable for a fund
to fairly determine the value of its net assets; or
. as permitted by SEC order in extraordinary circumstances.
Travelers Series Fund
9
<PAGE>
Distributions, Dividends and Taxes
Taxes
Each fund intends to qualify and be taxed as a "regulated
investment company"
under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), as
amended. In order to qualify to be taxed as a regulated
investment company,
each fund must meet certain income and diversification tests and
distribution
requirements. As a regulated investment company meeting these
requirements, a
fund will not be subject to federal income tax on its net
investment income and
net capital gains that it distributes to its shareholders. All
income and
capital gain distributions are automatically reinvested in
additional shares of
the fund at net asset value and are includable in gross income of
the separate
accounts holding such shares. See the accompanying contract
prospectus for
information regarding the federal income tax treatment of
distributions to the
separate accounts and to holders of the contracts.
Each 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 fund 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.
An alternative diversification test may be satisfied under
certain
circumstances. If a fund should fail to comply with these
regulations or fails
to qualify for the special tax treatment afforded regulated
investment
companies under the Code, contracts invested in that fund would
not be treated
as annuity, endowment or life insurance contracts under the Code.
Share Price
Each fund's net asset value is the value of its assets minus its
liabilities.
Each fund calculates its net asset value every day the New York
Stock Exchange
is open. The Exchange is closed on certain holidays listed in the
SAI. This
calculation is done when regular trading closes on the Exchange
(normally 4:00
p.m., Eastern time).
Each fund generally values its fund securities based on market
prices or
quotations. To the extent a fund holds securities denominated in
a foreign
currency, the fund's currency conversions are done when the
London Stock
Exchange closes, which is 12 noon Eastern time. When reliable
market prices or
quotations are not readily available, the fund may price those
securities at
fair value. Fair value is determined in accordance with
procedures approved by
the fund's board. A fund that uses fair value to price securities
may value
those securities higher or lower than another fund using market
quotations to
price the same securities.
International markets may be open on days when U.S. markets are
closed, and the
value of foreign securities owned by a fund could change on days
when fund
shares may not be purchased or redeemed.
Short-term investments that have a maturity of more than 60 days
are generally
valued based on market prices or quotations. Short-term
investments that have a
maturity of 60 days or less are valued at amortized cost. Using
this method, a
fund constantly amortizes over the remaining life of a security
the difference
between the principal amount due at maturity and the cost of the
security to
the fund.
In order to buy, redeem or exchange shares at that day's price,
an insurance
company separate account or a qualified plan must place its order
with the
transfer agent before the New York Stock Exchange closes. If the
New York Stock
Exchange closes early, the order must be placed prior to the
actual closing
time. Otherwise, the investor will receive the next business
day's price.
Travelers Series Fund
10
<PAGE>
Travelers Series Fund Inc.
Smith Barney Aggressive Growth Portfolio
Smith Barney MidCap Portfolio
Additional Information About the Funds
Shareholder reports. Annual and semiannual reports to
shareholders provide
additional information about the funds' investments. These
reports discuss the
market conditions and investment strategies that affected each
fund's
performance.
Statement of additional information. The statement of additional
information
provides more detailed information about each fund. It is
incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the funds or obtain shareholder
reports or the
statement of additional information (without charge) by calling
1-800-842-8573
or by writing to Travelers Series Fund Inc., 388 Greenwich
Street, MF2,
New York, New York 10013.
You can also review and copy the funds' shareholder reports,
prospectus and
statement of additional information at the Securities and
Exchange Commission's
Public Reference Room in Washington, D.C. You can get copies of
these materials
for a duplicating fee by writing to the Public Reference Section
of the
Commission, Washington, D.C. 20549-6009. Information about the
public reference
room may be obtained by calling 1-800-SEC-0330. You can get the
same reports
and information free from the Commission's Internet web site--
http://www.sec.gov
If someone makes a statement about the funds that is not in this
prospectus,
you should not rely upon that information. Neither the funds nor
the
distributor is offering to sell shares of the funds to any person
to whom the
funds may not lawfully sell their shares.
(Investment Company Act file no. 811-08372)
[ 10/99]
PART B
Statement of Additional Information
October __, 1999
STATEMENT OF ADDITIONAL INFORMATION
TRAVELERS SERIES FUND INC.
Smith Barney Aggressive Growth Portfolio
Smith Barney Mid Cap Portfolio
388 Greenwich Street
New York, New York 10013
1-800-842-8573
This Statement of Additional Information ("SAI") supplements the
information contained in the current Prospectus (the
"Prospectus")
of Smith Barney Aggressive Growth Portfolio and Smith Barney Mid
Cap
Portfolio (each, a "fund"), separate series of Travelers Series
Fund
Inc. (the "Company"), dated October ___, 1999, and should be read
in
conjunction with the Prospectus. The Company is a series
investment
company consisting of the funds and thirteen other funds offered
in
a separate prospectus. The Prospectus for the funds may be
obtained,
without charge, from the Company or by contacting any Financial
Consultant of Salomon Smith Barney Inc. ("Salomon Smith Barney").
This Statement of Additional Information, although not in itself
a
prospectus, is incorporated by reference into the Prospectus in
its
entirety.
Shares of each fund are offered to and may only be purchased by
insurance company separate accounts (the "Separate Accounts"),
that
fund certain variable annuity and variable life insurance
contracts
(the "Contracts"). The Separate Accounts invest in shares of one
or
more of the funds in accordance with allocation instructions
received from Contract owners. Such allocation rights are further
described in the accompanying Contract prospectus. Shares of each
fund are offered to Separate Accounts without a sales charge at
their net asset value, next determined after receipt of an order
by
an insurance company. The offering of shares of a fund may be
suspended from time to time and the Company reserves the right to
reject any specific purchase order.
CONTENTS
Directors and Executive Officers 2
Investment Objectives, Management Policies and Risk Factors 3
Investment Restrictions 13
Portfolio Turnover 14
Portfolio Transactions and Distribution 14
Taxation 15
Performance Information 16
Determination of Net Asset Value 17
Availability of the Funds 17
Redemption of Shares 18
Investment Management and Other Services 18
Other Information about the Company 19
DIRECTORS AND EXECUTIVE OFFICERS
Overall responsibility for management and supervision of each
fund
rests with the Company's Board of Directors. The directors
approve
all significant agreements between the Company and the companies
that furnish services to the Company and the funds, including
agreements with the Company's distributor, investment manager,
custodian and transfer agent. The day-to-day operations of each
fund
are delegated by the directors to that fund's manager. The
directors
and officers of the Company are listed below.
VICTOR K. ATKINS, Director
Retired; 120 Montgomery Street, San Francisco, CA. Former
President
of Lips Propellers, Inc., a ship propeller repair company.
Director
of two investment companies associated with Salomon Smith Barney;
78.
ABRAHAM E. COHEN, Director
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.
Director of two investment companies associated with Salomon
Smith
Barney; 62.
ROBERT A. FRANKEL, Director
Managing Partner of Robert A. Frankel Managing Consultants, 102
Grand Street, Croton-on-Hudson, NY. Director of nine investment
companies associated with Salomon Smith Barney. Former Vice
President of The Readers Digest Association, Inc.; 72.
**MICHAEL E. GELLERT, Director
Partner of Windcrest Partners, 122 E. 42nd Street, New York, NY
10168. Director of Devon Energy Corp.; Humana, Inc.; Premier
Parks,
Inc.; Seacor Smit Inc.; Cimilar A/S; Dalet Technologies and
numerous
private companies. Director of two investment companies
associated
with Salomon Smith Barney; 68
RAINER GREEVEN, Director
Partner of the law firm of Greeven & Ercklentz; 630 Fifth Avenue,
New York, NY. Director of two investment companies associated
with
Salomon Smith Barney; 62.
SUSAN M. HEILBRON, Director
Attorney; Lacey & Heilbron, 3 East 54th Street, New York, NY.
Prior
to November 1990, Vice President and General Counsel of
MacMillan,
Inc. and Executive Vice President of The Trump Organization.
Director of two investment companies associated with Salomon
Smith
Barney; 54.
*HEATH B. McLENDON, Chairman of the Board, President and Chief
Executive Officer
Managing Director of Salomon Smith Barney Inc. ("Salomon Smith
Barney"), President of SSBC Fund Management Inc. (''SSBC'');
Chairman or Co-Chairman of the Board of 59 investment companies
associated with Salomon Smith Barney; 66.
*LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Salomon Smith Barney, Senior Vice President
and
Treasurer (Chief Financial Officer) of the Smith Barney Mutual
Funds; Director and Senior Vice President of SSBC; 41
*RICHARD A. FREEMAN, Vice President and Investment Officer
Managing Director of Salomon Smith Barney; Portfolio manager of
other mutual funds managed by SSBC; 44.
*LAWRENCE B. WEISSMAN, Vice President and Investment Officer
Managing Director of Salomon Smith Barney. Formerly portfolio
manager with Neuberger & Berman, LLC (1994-1997) and portfolio
manager at TIAA-CREFF; 37.
*IRVING DAVID, Controller
Director of Salomon Smith Barney; Controller of certain funds and
various other Smith Barney Mutual Funds; Formerly Assistant
Treasurer of First Investment Management Company; 38.
*PAUL BROOK, Controller
Director of Salomon Smith Barney; Controller of certain funds and
various other Smith Barney Mutual Funds since 1998; Prior to
1998,
Managing Director of AMT Capital Services Inc.; Prior to 1997,
Partner with Ernst & Young LLP; 45
*CHRISTINA T. SYDOR, Secretary
Managing Director of Salomon Smith Barney and Secretary of Smith
Barney Mutual Funds; Secretary and General Counsel of SSBC; 48.
___________________
* Designates "interested persons" of the Company 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 Company officers or
directors.
** Director as of March 1999
On September __, 1999, Directors and Officers owned in the
aggregate
less than 1% of the outstanding securities of the Company.
The following table shows the compensation paid by the Company to
each director during the Company's last fiscal year and the total
compensation paid by the Smith Barney Mutual Funds complex for
the
calendar year ended December 31, 1998. None of the officers of
the
Company received any compensation from the Company for such
period.
Officers and interested directors of the Company are compensated
by
Salomon Smith Barney.
Director
Aggregate
Compensation
from the
Company
Total
Compensation
from Company
and
Complex Paid to
Director
Number of Fund
Companies for
Which Director
Serves
Within Fund
Complex
Victor K. Atkins
$18,889.00
$29,500.00
2
Abraham E. Cohen
16,524.00
20,100.00
2
Robert A. Frankel
18,989.00
72,250.00
9
Rainer Greeven
17,689.00
27,800.00
2
Susan M. Heilbron
17,689.00
27,800.00
2
Heath B. McLendon
0
0
59
James M. Shuart*
13,133.00
20,800.00
2
* Effective July 28, 1998, Mr. Shuart resigned from the
Company's
Board of Directors.
INVESTMENT OBJECTIVES, MANAGEMENT POLICIES AND RISK FACTORS
The Prospectus discusses each fund's investment objective and
policies. This section contains supplemental information
concerning
the types of securities and other instruments in which the funds
may
invest, the investment policies and portfolio strategies the
funds
may utilize and certain risks associated with these investments,
policies and strategies.
Each fund is an open-end, diversified, management investment
company. Each fund's investment objectives and certain investment
restrictions (described under Investment Restrictions) are deemed
to
be "fundamental," and therefore may be changed only by the "vote
of
a majority of the outstanding voting securities" as defined under
the 1940 Act. However, each fund's investment policies are
nonfundamental, and thus may be changed without shareholder
approval
by the Board of Directors, provided such change is not prohibited
by
that fund's fundamental investment restrictions or applicable
law,
and any such change will first be disclosed in the then current
Prospectus or SAI.
Equity Securities. Each fund invests primarily in equity
securities, including common stocks, securities convertible into
common stock and warrants or other rights to subscribe for common
stock. Although equity securities have a history of long-term
growth in value, their prices fluctuate based on changes in a
company's financial condition and on overall market and economic
conditions.
Common Stocks. Each fund invests primarily in common stocks.
Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the
corporation, if any, without preference over any other
shareholder
or class of shareholders, including holders of the entity's
preferred stock and other senior equity. Common stock usually
carries with it the right to vote and frequently an exclusive
right
to do so.
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. A unique feature of
convertible securities is that as the market price of the
underlying
common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market
value declines to the same extent as the underlying common stock.
When the market price of the underlying common stock increases,
the
prices of the convertible securities tend to rise as a reflection
of
the value of the underlying common stock. While no securities
investments are without risk, investments in convertible
securities
generally entail less risk than investments in common stock of
the
same issuer.
As fixed-income securities, convertible securities are
investments
that 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. There can be no
assurance of capital appreciation, however, because securities
prices fluctuate.
Convertible securities generally are subordinated to other
similar,
but nonconvertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, 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.
Warrants. Warrants or rights may be acquired by each fund in
connection with other securities or separately and provide the
funds
with the right to purchase other securities of the issuer at a
later
date. Because a warrant does not carry with it the right to
dividends or voting rights with respect to the securities that
the
warrant holder is entitled to purchase, and because it does not
represent any rights to the assets of the issuer, warrants may be
considered more speculative than certain other types of
investments.
Also, the value of a warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to its expiration date.
Real Estate Investment Trusts ("REITS"). The funds may invest in
REITS, which are pooled investment vehicles that invest primarily
in
either real estate or real estate related loans. The value of a
REIT
is affected by changes in the value of the properties owned by
the
REIT or secured mortgage loans held by the REIT. REITs are
dependent
upon cash flow from their investments to repay financing costs
and
the ability of the REIT's manager. REITs are also subject to
risks
generally associated with investments in real estate. Each fund
will
indirectly bear its proportionate share of any expenses,
including
management fees, paid by a REIT in which it invests.
When-Issued, Delayed-Delivery and Forward Commitment
Transactions.
The funds may purchase securities on a "when-issued" basis, for
delayed delivery (i.e., payment or delivery occur beyond the
normal
settlement date at a stated price and yield) or on a forward
commitment basis. The funds do not intend to engage in these
transactions for speculative purposes, but only in furtherance of
their investment goal. These transactions occur when securities
are
purchased or sold by a fund with payment and delivery taking
place
in the future to secure what is considered an advantageous yield
and
price to that fund at the time of entering into the transaction.
The
payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters
into
the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued, delayed-delivery basis or
forward commitment basis, the prices obtained on such securities
may
be higher or lower than the prices available in the market on the
dates when the investments are actually delivered to the buyers.
When a fund agrees to purchase when-issued or delayed-delivery
securities, its manager will set aside cash or liquid securities
equal to the amount of the commitment in a segregated account on
the
fund's books. Normally, a fund will set aside portfolio
securities
to satisfy a purchase commitment, and in such a case the fund may
be
required subsequently to place additional assets in a segregated
account in order to ensure that the value of the account remains
equal to the amount of the fund's commitment. The assets
contained
in the segregated account will be marked-to-market daily. It may
be
expected that the fund's net assets will fluctuate to a greater
degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. When a fund
engages in when-issued or delayed-delivery transactions, it
relies
on the other party to consummate the trade. Failure of the
seller
to do so may result in the fund's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
Foreign Securities. The Aggressive Growth Portfolio may invest
up
to 10% and the Mid Cap Portfolio has the authority to invest up
to
25% of its assets in foreign securities (including European
Depository Receipts ("EDRs") and Global Depository Receipts
("GDRs")) and American Depository Receipts ("ADRs") or other
securities representing underlying shares of foreign companies.
EDRs are receipts issued in Europe which evidence ownership of
underlying securities issued by foreign corporations. ADRs are
receipts typically issued by an American bank or trust company
which
evidence a similar ownership arrangement. Generally, ADRs which
are
issued in registered form, are designed for use in the United
States
securities markets and EDRs, which are issued in bearer form, are
designed for use in European securities markets. GDRs are
tradeable
both in the U.S. and Europe and are designed for use throughout
the
world.
There are certain risks involved in investing in foreign
securities
in addition to the usual risks inherent in domestic investments.
These risks include potential adverse political and economic
developments; potential imposition of currency exchange blockages
or
other foreign governmental restrictions; reduced availability of
public information concerning issuers and the lack of uniform
accounting, auditing and financial reporting standards or of
other
regulatory practices and requirements comparable to those
applicable
to domestic companies. The funds' yields may be adversely
affected
by fluctuations in value of one or more foreign currencies
relative
to the U.S. dollar. Moreover, securities of many foreign
companies
and their markets may be less liquid and their prices more
volatile
than securities of comparable domestic companies. In addition,
with
respect to certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the
funds, including the withholding of dividends. Foreign
securities
may be subject to foreign government taxes that could reduce the
yield on such securities. Because the funds 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. Investment in foreign securities
may
also result in higher expenses due to the cost of converting
foreign
currency to U.S. dollars; the payment of fixed brokerage
commissions
on foreign exchanges, which generally are higher than commissions
on
domestic exchanges; the expense of maintaining securities with
foreign custodians and the imposition of transfer taxes or
transaction charges associated with foreign exchanges. Moreover,
individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross
domestic
product, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payment positions. The funds may also
invest in securities of foreign governments (or agencies or
subdivisions thereof), which would cause them to be subject to
the
same risks described above. In addition, the funds may also
invest
in securities denominated in European Currency Units (ECUs). An
ECU
is a "basket" consisting of a specified amount of currencies of
certain of the twelve member states of the European Community.
The
funds may also invest in securities denominated in other currency
"baskets."
Short-Term Debt Securities. The Mid Cap Portfolio may invest in
short-term debt securities, including notes, bills, commercial
paper, obligations issued or guaranteed by the government or any
of
its political subdivisions, agencies or instrumentalities, and
certificates of deposit. Debt securities represent money
borrowed
that obligate the issuer (e.g., a corporation, municipality,
government, government agency) to repay the borrowed amount at
maturity (when the obligation is due and payable) and usually to
pay
the holder interest at specific times.
All debt securities are subject to market risk and credit risk.
Market risk relates to market-induced changes in a security's
value,
usually as a result of changes in interest rates. The value of
the
fund's investments in debt securities will change as the general
levels of interest rates fluctuate. During periods of falling
interest rates, the value of the fund's debt securities will
generally rise. Conversely, during periods of rising interest
rates, the value of the fund's debt securities will generally
decline. Credit risk relates to the ability of the issuer to
make
payments of principal and interest. The fund has no restrictions
with respect to the maturities or duration of the debt securities
it
holds. The fund's investment in fixed income securities with
longer
terms to maturity or greater duration are subject to greater
volatility than the fund's shorter-term securities.
Money Market Instruments. The funds may invest for temporary
defensive purposes in short-term instruments including corporate
and
government bonds and notes and money market instruments. Short-
term
instruments in which the funds may invest include obligations of
banks having at least $1 billion in assets (including
certificates
of deposit, time deposits and bankers' acceptances of domestic or
foreign banks, domestic savings and loan associations and similar
institutions); commercial paper rated no lower than A-2 by
Standard
& Poor's Ratings Group or Prime-2 by Moody's Investors Service,
Inc.
or the equivalent from another nationally recognized statistical
rating organization or, if unrated, of an issuer having an
outstanding, unsecured debt issue then rated within the two
highest
rating categories; and repurchase agreements with respect to any
of
the foregoing entered into with banks and non-bank dealers
approved
by the Board of Directors. Certificates of deposit ("CDs") are
short-term, negotiable obligations of commercial banks. Time
deposits ("TDs") are non-negotiable deposits maintained in
banking
institutions for specified periods of time at stated interest
rates.
Bankers' acceptances are time drafts drawn on commercial banks
by
borrowers, usually in connection with international transactions.
U.S. Government Securities. The funds may invest in U.S.
Government
securities. Generally, these securities include U.S. Treasury
obligations and obligations issued or guaranteed by U.S.
Government
agencies, instrumentalities or sponsored enterprises. U.S.
Government securities also include Treasury receipts and other
stripped U.S. Government securities, where the interest and
principal components of stripped U.S. Government securities are
traded independently. The funds may also invest in zero coupon
U.S.
Treasury securities and in zero coupon securities issued by
financial institutions, which represent a proportionate interest
in
underlying U.S. Treasury securities. A zero coupon security pays
no
interest to its holder during its life and its value consists of
the
difference between its face value at maturity and its cost. The
market values of zero coupon securities generally are more
volatile
than the market prices of securities that pay interest
periodically.
Repurchase Agreements. The funds may agree to purchase
securities
from a bank or recognized securities dealer and simultaneously
commit to resell the securities to the bank or dealer at an
agreed-
upon date and price reflecting a market rate of interest
unrelated
to the coupon rate or maturity of the purchased securities
("repurchase agreements"). Each fund would maintain custody of
the
underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on
the
date agreed to would be, in effect, secured by such securities.
If
the value of such securities were less than the repurchase price,
plus interest, the other party to the agreement would be required
to
provide additional collateral so that at all times the collateral
is
at least 102% of the repurchase price plus accrued interest.
Default
by or bankruptcy of a seller would expose a fund to possible loss
because of adverse market action, expenses and/or delays in
connection with the disposition of the underlying obligations.
The
financial institutions with which the funds may enter into
repurchase agreements will be banks and non-bank dealers of U.S.
Government securities that are on the Federal Reserve Bank of New
York's list of reporting dealers, if such banks and non-bank
dealers
are deemed creditworthy by each fund's manager. The manager will
continue to monitor the creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain
during
the term of the agreement, collateral which is equal to at least
102% of the repurchase price (including accrued interest). In
addition, the manager will require that the value of this
collateral, after transaction costs (including loss of interest)
reasonably expected to be incurred on a default, be equal to 102%
or
greater than the repurchase price (including accrued premium)
provided in the repurchase agreement or the daily amortization of
the difference between the purchase price and the repurchase
price
specified in the repurchase agreement. The manager will mark-to-
market daily the value of the securities. Repurchase agreements
are
considered to be loans by the fund under the 1940 Act.
Reverse Repurchase Agreements. The funds may enter into reverse
repurchase agreements with the same parties with which they may
enter into repurchase agreements. Reverse repurchase agreements
involve the sale of securities held by a fund pursuant to its
agreement to repurchase them at a mutually agreed upon date,
price
and rate of interest. At the time a fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price
(including accrued interest). The assets contained in the
segregated account will be marked-to-market daily and additional
assets will be placed in such account on any day in which the
assets
fall below the repurchase price (plus accrued interest). Each
fund's
liquidity and ability to manage its assets might be affected when
it
sets aside cash or portfolio securities to cover such
commitments.
Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline
below
the price of the securities a fund has sold but is obligated to
repurchase. If 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 fund's obligation to repurchase
the
securities, and the fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such
decision. The funds currently do not intend to invest more than
33%
of their net assets in reverse repurchase agreements.
Lending of Portfolio Securities. Consistent with applicable
regulatory requirements, each fund may lend portfolio securities
to
brokers, dealers and other financial organizations that meet
capital
and other credit requirements or other criteria established by
the
Board. The funds will not lend portfolio securities to
affiliates
of the manager unless they have applied for and received specific
authority to do so from the Securities and Exchange Commission
("SEC"). Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. Government Securities, which are
maintained at all times in an amount equal to at least 102% of
the
current market value of the loaned securities. Any gain or loss
in
the market price of the securities loaned that might occur during
the term of the loan would be for the account of each fund. From
time to time, the funds may return a part of the interest earned
from the investment of collateral received for securities loaned
to
the borrower and/or a third party that is unaffiliated with the
funds and that is acting as a "finder."
By lending its securities, a fund can increase its income by
continuing to receive interest and any dividends on the loaned
securities as well as by either investing the collateral received
for securities loaned in short-term instruments or obtaining
yield
in the form of interest paid by the borrower when U.S. Government
Securities are used as collateral. Although the generation of
income
is not the primary investment goal of the funds, income received
could be used to pay each fund's expenses and would increase an
investor's total return. The funds will adhere to the following
conditions whenever their portfolio securities are loaned: (i) a
fund must receive at least 102% cash collateral or equivalent
securities of the type discussed in the preceding paragraph from
the
borrower; (ii) the borrower must increase such collateral
whenever
the market value of the securities rises above the level of such
collateral; (iii) a fund must be able to terminate the loan at
any
time; (iv) a fund 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; (v) a fund may pay
only
reasonable custodian fees in connection with the loan; and (vi)
voting rights on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely affecting
the
investment occurs, the Board must terminate the loan and regain
the
right to vote the securities. Loan agreements involve certain
risks
in the event of default or insolvency of the other party
including
possible delays or restrictions upon a fund's ability to recover
the
loaned securities or dispose of the collateral for the loan.
Leveraging. The Aggressive Growth Portfolio may from time to
time
leverage its investments by purchasing securities with borrowed
money. The fund may borrow money only from banks and in an amount
not to exceed 33 1/3% of the total value of its assets less its
liabilities. The amount of the fund's borrowings also may be
limited
by the availability and cost of credit and by restrictions
imposed
by the Federal Reserve Board.
The fund is required under the 1940 Act to maintain at all times
an
asset coverage of 300% of the amount of its borrowings. If, as a
result of market fluctuations or for any other reason, the fund's
asset coverage drops below 300%, the fund must reduce its
outstanding bank debt within three business days so as to restore
its asset coverage to the 300% level.
Any gain in the value of securities purchased with borrowed money
that exceeds the interest paid on the amount borrowed would cause
the net asset value of the fund's shares to increase more rapidly
than otherwise would be the case. Conversely, any decline in the
value of securities purchased would cause the net asset value of
the
fund's shares to decrease more rapidly than otherwise would be
the
case. Borrowed money thus creates an opportunity for greater
capital
gain but at the same time increases exposure to capital risk. The
net cost of any borrowed money would be an expense that otherwise
would not be incurred, and this expense could restrict or
eliminate
the fund's net investment income in any given period.
Illiquid and Restricted Securities. The Aggressive Growth
Portfolio
may invest up to 15% of its net assets and the Mid Cap Portfolio
may
invest up to 10% of its net assets in illiquid securities, which
term includes securities subject to contractual or other
restrictions on resale and other instruments that lack readily
available markets. Some restricted securities can be offered and
sold to "qualified institutional buyers" under Rule 144A under
the
Securities Act of 1933. The Board of Directors may determine,
based
upon a continuing review of the trading markets for a specific
restricted security, that such restricted securities are liquid
and
therefore not subject to a fund's restriction on illiquid
investments. 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 fund'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
fund to the extent that qualified institutional buyers become for
a
time uninterested in purchasing these restricted securities.
Options, Futures and Currency Strategies. The Mid Cap Portfolio
may
use forward currency contracts and certain options and futures
strategies to attempt to hedge its portfolio, i.e., reduce the
overall level of investment risk normally associated with the
fund.
There can be no assurance that such efforts will succeed.
In order to ensure the fund will not be deemed a "commodity pool"
for purposes of the Commodity Exchange Act, regulations of the
Commodity Futures Trading Commission ("CFTC") require that the
fund
enter into transactions in futures contracts and options on
futures
only (i) for bona fide hedging purposes (as defined in CFTC
regulations), or (ii) for non-hedging purposes, provided the
aggregate initial margin and premiums on such non-hedging
positions
do not exceed 5% of the liquidation value of the fund's assets.
To
attempt to hedge against adverse movements in exchange rates
between
currencies, the fund may enter into forward currency contracts
for
the purchase or sale of a specified currency at a specified
future
date. Such contracts may involve the purchase or sale of a
foreign
currency against the U.S. dollar or may involve two foreign
currencies. The fund may enter into forward currency contracts
either with respect to specific transactions or with respect to
its
portfolio positions. For example, when the manager anticipates
making a purchase or sale of a security, it may enter into a
forward
currency contract in order to set the rate (either relative to
the
U.S. dollar or another currency) at which the currency exchange
transaction related to the purchase or sale will be made
("transaction hedging"). Further, when the manager believes a
particular currency may decline compared to the U.S. dollar or
another currency, the fund may enter into a forward contract to
sell
the currency the manager expects to decline in an amount
approximating the value of some or all of the fund's securities
denominated in that currency, or when the manager believes one
currency may decline against a currency in which some or all of
the
portfolio securities held by the fund are denominated, it may
enter
into a forward contract to buy the currency expected to decline
for
a fixed amount ("position hedging"). In this situation, the fund
may, in the alternative, enter into a forward contract to sell a
different currency for a fixed amount of the currency expected to
decline where the investment manager believes the value of the
currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the value of the currency in which
portfolio securities of the fund are denominated ("cross
hedging").
The fund places (i) cash, (ii) U.S. Government securities or
(iii)
equity securities or debt securities (of any grade) in certain
currencies, provided such assets are liquid, unencumbered and
marked
to market daily, or other high-quality debt securities
denominated
in certain currencies in a separate account of the fund having a
value equal to the aggregate account of the fund's commitments
under
forward contracts entered into with respect to position hedges
and
cross-hedges. If the value of the securities placed in a
separate
account declines, additional cash or securities are placed in the
account on a daily basis so the value of the amount will equal
the
amount of the fund's commitments with respect to such contracts.
For hedging purposes, the fund may write covered call options and
purchase put and call options on currencies to hedge against
movements in exchange rates and on debt securities to hedge
against
the risk of fluctuations in the prices of securities held by the
fund or which the manager intends to include in its portfolio.
The
fund also may use interest rates futures contracts and options
thereon to hedge against changes in the general level in interest
rates.
The fund may write call options on securities and currencies only
if
they are covered, and such options must remain covered so long as
the fund is obligated as a writer. A call option written by the
fund is "covered" if the fund owns the securities or currency
underlying the option or has an absolute and immediate right to
acquire that security or currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange
of
other securities or currencies held in its portfolio. A call
option
is also covered if the fund holds, on a share-for-share basis, a
call on the same security or holds a call on the same currency as
the call written where the exercise price of the call held is
equal
to less than the exercise price of the call written or greater
than
the exercise price of the call written, if the difference is
maintained by the fund in cash, Treasury bills or other high-
grade,
short-term obligations in a segregated account on the fund's
books.
The fund may purchase put and call options in anticipation of
declines in the value of portfolio securities or increases in the
value of securities to be acquired. If the expected changes
occur,
the fund may be able to offset the resulting adverse effect on
its
portfolio, in whole or in part, through the options purchased.
The
risk assumed by the fund in connection with such transactions is
limited to the amount of the premium and related transaction
costs
associated with the option, although the fund may be required to
forfeit such amounts if the prices of securities underlying the
options do not move in the direction or to the extent
anticipated.
Although the fund might not employ the use of forward currency
contracts, options and futures, the use of any of these
strategies
would involve certain investment risks and transaction costs to
which it might not otherwise be subject. These risks include:
dependence on the manager's ability to predict movements in the
prices of individual debt securities; fluctuations in the general
fixed-income markets and movements in interest rates and currency
markets; imperfect correlation between movements in the price of
currency, options, futures contracts or options thereon and
movements in the price of the currency or security hedged or used
for cover; the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the
securities in which the fund invests; lack of assurance that a
liquid market will exist for any particular option, futures
contract
or options thereon at any particular time and possible need to
defer
or accelerate closing out certain options, futures contracts and
options thereon in order to continue to qualify for the
beneficial
tax treatment afforded "regulated investment companies" under the
Internal Revenue Code of 1986, as amended (the "Code").
Over-the-counter options in which the fund may invest differ from
exchange traded options in that they are two-party contracts,
with
price and other terms negotiated between buyer and seller, and
generally do not have as much market liquidity as exchange-traded
options. The fund may be required to treat as illiquid over-the-
counter options purchased and securities being used to cover
certain
written over-the-counter options.
Options on Securities. As discussed more generally above, the
Mid
Cap Portfolio may engage in the writing of covered call options.
The
fund may also purchase put options and enter into closing
transactions.
The principal reason for writing covered call options on
securities
is to attempt to realize, through the receipt of premiums, a
greater
return than would be realized on the securities alone. In return
for
a premium, the writer of a covered call option forfeits the right
to
any appreciation in the value of the underlying security above
the
strike price for the life of the option (or until a closing
purchase
transaction can be effected). Nevertheless, the call writer
retains
the risk of a decline in the price of the underlying security.
Similarly, the principal reason for writing covered put options
is
to realize income in the form of premiums. The writer of a
covered
put option accepts the risk of a decline in the price of the
underlying security. The size of the premiums the fund may
receive
may be adversely affected as new or existing institutions,
including
other investment companies, engage in or increase their option-
writing activities.
Options written by the fund will normally have expiration dates
between one and six 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 at the times the options are
written. In the case of call options, these exercise prices are
referred to as "in-the-money," "at-the-money" and "out-of-the-
money," respectively.
The fund may write (a) in-the-money call options when the manager
expects the price of the underlying security to remain flat or
decline moderately during the option period, (b) at-the-money
call
options when the manager expects the price of the underlying
security to remain flat or advance moderately during the option
period and (c) out-of-the-money call options when the manager
expects that the price of the security may increase but not above
a
price equal to the sum of the exercise price plus the premiums
received from writing the call option. In any of the preceding
situations, if the market price of the underlying security
declines
and the security is sold at this lower price, the amount of any
realized loss will be offset wholly or in part by the premium
received. Out-of-the-money, at-the-money and in-the-money put
options (the reverse of call options as to the relation of
exercise
price to market price) may be utilized in the same market
environments as such call options are used in equivalent
transactions.
So long as the obligation of the fund as the writer of an option
continues, the fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring it to
deliver, in the case of a call, or take delivery of, in the case
of
a put, the underlying security against payment of the exercise
price. This obligation terminates when the option expires or the
fund effects a closing purchase transaction. The fund can no
longer
effect a closing purchase transaction with respect to an option
once
it has been assigned an exercise notice. To secure its obligation
to
deliver the underlying security when it writes a call option, or
to
pay for the underlying security when it writes a put option, the
fund will be required to deposit in escrow the underlying
security
or other assets in accordance with the rules of the Options
Clearing
Corporation ("Clearing Corporation") or similar clearing
corporation
and the securities exchange on which the option is written.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized
securities exchange or in the over-the-counter market. The fund
expects to write options only on national securities exchanges or
in
the over-the-counter market. The fund may purchase put options
issued by the Clearing Corporation or in the over-the-counter
market.
The fund may realize a profit or loss upon entering into a
closing
transaction. When the fund has written an option, it will realize
a
profit if the cost of the closing purchase transaction is less
than
the premium received upon writing the original option and will
incur
a loss if the cost of the closing purchase transaction exceeds
the
premium received upon writing the original option. Similarly,
when
the fund has purchased an option and engages in a closing sale
transaction, whether it recognizes a profit or loss will depend
upon
whether the amount received in the closing sale transaction is
more
or less than the premium the fund initially paid for the original
option, plus the related transaction costs.
Although the fund generally will purchase or write only those
options for which the manager believes there is an active
secondary
market so as to facilitate closing transactions, there is no
assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options
no
such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past,
for
example, higher than anticipated trading activity or order flow,
or
other unforeseen events, have at times rendered certain of the
facilities of the Clearing Corporation and national securities
exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain
types
of orders or trading halts or suspensions in one or more options.
There can be no assurance that similar events, or events that may
otherwise interfere with the timely execution of customers'
orders,
will not recur. In such event, it might not be possible to effect
closing transactions in particular options. If, as a covered call
option writer, the fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell
the
underlying security until the option expires or it delivers the
underlying security upon exercise.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class
which
may be held or written, or exercised within certain periods, by
an
investor or group of investors acting in concert (regardless of
whether the options are written on the same or different
securities
exchanges or are held, written or exercised in one or more
accounts
or through one or more brokers). It is possible that the fund
and
other clients of the manager and certain of their affiliates may
be
considered to be such a group. A securities exchange may order
the
liquidation of positions found to be in violation of these
limits,
and it may impose certain other sanctions.
In the case of options written by the fund that are deemed
covered
by virtue of the fund's holding convertible or exchangeable
preferred stock or debt securities, the time required to convert
or
exchange and obtain physical delivery of the underlying common
stocks with respect to which the fund has written options, may
exceed the time within which the fund must make delivery in
accordance with an exercise notice. In these instances, the fund
may
purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the fund will not
bear
any market risk because the fund will have the absolute right to
receive from the issuer of the underlying security an equal
number
of shares to replace the borrowed stock, but the fund may incur
additional transaction costs or interest expenses in connection
with
any such purchase or borrowing.
Although the manager will attempt to take appropriate measures to
minimize the risks relating to the fund's writing of call options
and purchasing of put and call options, there can be no assurance
that the fund will succeed in its option-writing program.
Stock Index Options. As described generally above, the Mid Cap
Portfolio may purchase put and call options and write call
options
on domestic stock indices listed on domestic exchanges in order
to
realize its investment objective of capital appreciation or for
the
purpose of hedging its portfolio. A stock index fluctuates with
changes in the market values of the stocks included in the index.
Some stock index options are based on a broad market index such
as
the New York Stock Exchange Composite Index or the Canadian
Market
Portfolio Index, or a narrower market index such as the Standard
&
Poor's 100. Indices are also based on an industry or market
segment
such as the American Stock Exchange Oil and Gas Index or the
Computer and Business Equipment Index.
Options on stock indices are generally similar to options on
stock
except that the delivery requirements are different. Instead of
giving the right to take or make delivery of stock at a specified
price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the
amount,
if any, by which the fixed exercise price of the option exceeds
(in
the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." Receipt of this
cash
amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a
call,
or less than, in the case of a put, the exercise price of the
option. The amount of cash received will be equal to such
difference
between the closing price of the index and the exercise price of
the
option expressed in dollars or a foreign currency, as the case
may
be, times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery
of
this amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing
transaction
on an exchange or it may let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as
a
hedging technique will depend upon the extent to which price
movements in the portion of the securities portfolio of the fund
correlate with price movements of the stock index selected.
Because
the value of an index option depends upon movements in the level
of
the index rather than the price of a particular stock, whether
the
fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain
indices, in an industry or market segment, rather than movements
in
the price of a particular stock. Accordingly, successful use by
the
fund of options on stock indices will be subject to the manager's
ability to predict correctly movements in the direction of the
stock
market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the
price
of individual stocks.
Futures Contracts and Options on Futures Contracts. As described
generally above, the Mid Cap Portfolio may invest in stock index
futures contracts and options on futures contracts that are
traded
on a domestic exchange or board of trade. Futures contracts
provide
for the future sale by one party and purchase by another party of
a
specified amount of a specific security at a specified future
time
and at a specified price. The fund may enter into futures
contracts
and options on futures to seek higher investment returns when a
futures contract is priced more attractively than stocks
comprising
a benchmark index, to facilitate trading or to reduce transaction
costs. The fund will only enter into futures contracts and
options
on futures contracts that are traded on a domestic exchange and
board of trade. Assets committed to futures contracts will be
segregated on the fund's books to the extent required by law.
The fund's primary purpose in entering into a futures contract is
to
protect the fund from fluctuations in the value of securities
without actually buying or selling the securities. For example,
in
the case of stock index futures contracts, if the fund
anticipates
an increase in the price of stocks that it intends to purchase at
a
later time, the fund could enter into contracts to purchase the
stock index (known as taking a "long" position) as a temporary
substitute for the purchase of stocks. If an increase in the
market
occurs that influences the stock index as anticipated, the value
of
the futures contracts increases and thereby serves as a hedge
against the fund's not participating in a market advance. The
fund
then may close out the futures contracts by entering into
offsetting
futures contracts to sell the stock index (known as taking a
"short"
position) as it purchases individual stocks. The fund can
accomplish
similar results by buying securities with long maturities and
selling securities with short maturities. But by using futures
contracts as an investment tool to reduce risk, given the greater
liquidity in the futures market, it may be possible to accomplish
the same result more easily and more quickly.
No consideration will be paid or received by the fund upon the
purchase or sale of a futures contract. Initially, the fund will
be
required to deposit with the broker an amount of cash or cash
equivalents equal to approximately 1% to 10% of the contract
amount
(this amount is subject to change by the exchange or board of
trade
on which the contract is traded and brokers or members of such
board
of trade may charge a higher amount). This amount is known as
"initial margin" and is in the nature of a performance bond or
good
faith deposit on the contract which is returned to the fund, upon
termination of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as
the price of the index or securities underlying the futures
contract
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking-to-
market." In addition, when the fund enters into a long position
in
a futures contract or an option on a futures contract, it must
deposit into a segregated account on the fund's books an amount
of
cash or liquid securities equal to the total market value of the
underlying futures contract, less amounts held in the fund's
commodity brokerage account at its broker. At any time prior to
the
expiration of a futures contract, the fund may elect to close the
position by taking an opposite position, which will operate to
terminate the fund's existing position in the contract.
There are several risks in connection with the use of futures
contracts as a hedging device. Successful use of futures
contracts
by the fund is subject to the manager's ability to predict
movements
in the stock market or in the direction of interest rates. These
predictions involve skills and techniques that may be different
from
those involved in the management of investments in securities. In
addition, there can be no assurance that there will be a perfect
correlation between movements in the price of the securities
underlying the futures contract and movements in the price of the
securities that are the subject of the hedge. A decision of
whether,
when and how to hedge involves the exercise of skill and
judgment,
and even a well-conceived hedge may be unsuccessful to some
degree
because of market behavior or unexpected trends in market
behavior
or interest rates.
Positions in futures contracts may be closed out only on the
exchange on which they were entered into (or through a linked
exchange) and no secondary market exists for those contracts. In
addition, although the fund intends to enter into futures
contracts
only if there is an active market for the contracts, there is no
assurance that an active market will exist for the contracts at
any
particular time. Most futures exchanges and boards of trade limit
the amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been
reached
in a particular contract, no trades may be made that day at a
price
beyond that limit. It is possible that futures contract prices
could
move 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. In such event, and in the event of adverse price
movements,
the fund would be required to make daily cash payments of
variation
margin; in such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or
completely offset losses on the futures contract. As described
above, however, no assurance can be given that the price of the
securities being hedged will correlate with the price movements
in
a futures contract and thus provide an offset to losses on the
futures contract.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 7 below and each
fund's investment objective have been adopted by the Company as
fundamental policies of the funds. Under the 1940 Act, a
fundamental policy may not be changed with respect to a fund
without
the vote of a majority of the outstanding voting securities of
that
fund. Majority is defined in the 1940 Act as the lesser of (a)
67%
or more of the shares present at a fund meeting, if the holders
of
more than 50% of the outstanding shares of the fund are present
or
represented by proxy, or (b) more than 50% of outstanding shares.
The remaining restrictions may be changed by a vote of a majority
of
the Company's Board of Directors at any time.
Under the investment restrictions adopted by the Board with
respect
to each fund, each fund 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. 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.
4. Borrow money, except that (a) a fund 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) a fund
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), a fund 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), is
derived from such transactions.
5. Make loans. This restriction does not apply to: (a)
the
purchase of debt obligations in which a fund may invest
consistent
with its investment objective 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 a fund may
technically
be deemed to be an underwriter under the Securities Act of 1933,
as
amended, in disposing of portfolio securities.
7. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not
prevent a fund 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 a fund's
investment objective and policies); or (d) investing in real
estate
investment trust securities.
8. 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 a 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.
9. Invest in oil, gas or other mineral exploration or
development programs.
10. Purchase or otherwise acquire any security if, as a
result, more than 15% of each fund's net assets would be invested
in
securities that are illiquid.
11. Invest for the purpose of exercising control of
management.
If any percentage restriction described above is complied with at
the time of an investment, a later increase or decrease in
percentage resulting from a change in values or assets will not
constitute a violation of such restriction.
PORTFOLIO TURNOVER
Each fund's investment policies may result in its experiencing a
greater portfolio turnover rate than those of investment
companies
that seek to produce income or to maintain a balanced investment
position. A fund's turnover rate is the lesser of purchases or
sales
of portfolio securities during the year, excluding purchases or
sales of short-term securities, divided by the monthly average
value
of portfolio securities. Although each fund's portfolio turnover
rate cannot be predicted and will vary from year to year, the
manager expects that each fund's annual portfolio turnover rate
will
not exceed 100%. A 100% portfolio turnover rate would occur, for
instance, if all securities in a fund's portfolio were replaced
once
during a period of one year. A high rate of portfolio turnover
in
any year will increase brokerage commissions paid and could
result
in high amounts of realized investment gain subject to the
payment
of taxes by shareholders. Any realized short-term investment
gain
will be taxed to shareholders as ordinary income.
PORTFOLIO TRANSACTIONS AND DISTRIBUTION
The Company's Board of Directors has determined that agency
transactions in equity securities for the Company may be executed
through Salomon Smith Barney or any broker-dealer affiliate of
Salomon 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
Company
as those obtainable through other qualified broker-dealers, and
if,
in the transaction, the Affiliated Broker charges the Company a
fair
and reasonable rate consistent with that charged to comparable
unaffiliated customers in similar transactions. The Company will
not
deal with Salomon Smith Barney in any transactions in which
Salomon
Smith Barney acts as principal.
The Company 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 manager 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 Company
takes
into consideration the fact that a particular broker may, in
addition to execution capability, provide other services to the
Company 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
Salomon Smith Barney in connection with its services rendered to
other advisory clients and not all such services may be used in
connection with the Company.
The Board of Directors has adopted certain policies and
procedures
incorporating the standards of Rule l7e-l under the 1940 Act.
The
Rule 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.
CFBDS, Inc., located at 21 Milk Street, Boston MA 02109-5408 (the
"Distributor"), distributes shares of the funds as principal
underwriter.
TAXATION
The following is a summary of certain federal income tax
considerations that may affect the funds and their shareholders.
The discussion relates only to Federal income tax law as
applicable
to U.S. citizens. Distributions by the funds may also be subject
to
state, local and foreign taxes, and their treatment under state,
local and foreign income tax laws may differ from the Federal
income
tax treatment. The summary is not intended as a substitute for
individual tax advice, and investors are urged to consult their
tax
advisors as to the tax consequences of an investment in any fund.
Each fund will be treated as a separate taxpayer for federal
income
tax purposes with the result that: (a) each fund must qualify
separately as a regulated investment company; and (b) the amounts
of
investment income and capital gains earned will be determined on
a
fund-by-fund (rather than on a Company-wide) basis.
Each fund intends to qualify separately each year as a "regulated
investment company" under Subchapter M of the Code. A qualified
fund will not be liable for federal income taxes to the extent
its
taxable net investment income and net realized capital gains are
distributed to its shareholders, provided each fund receives
annually at least 90% of its net investment income from
dividends,
interest, payments with respect to securities loans and gains
from
the sale or other disposition of stock or securities, or foreign
currencies, or other income derived with respect to its business
of
investing in such stock, securities or currencies. In addition,
each fund must distribute at least 90% of its net investment
income
each year.
Each fund intends to accrue dividend income for Federal income
tax
purposes in accordance with the rules applicable to regulated
investment companies. In some cases, these rules may have the
effect of accelerating (in comparison to other recipients of the
dividend) the time at which the dividend is taken into account by
a fund as taxable income.
Each fund intends at least annually to declare and make
distributions of substantially all of its taxable income and net
taxable capital gains to its shareholders (i.e., the Separate
Accounts). Such distributions are automatically reinvested in
additional shares of that fund 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.
The Company has undertaken to meet the diversification
requirements of Section 817(h) of the Code. This undertaking may
limit the ability of a particular fund to make certain otherwise
permitted investments.
If, in any taxable year, a fund fails to qualify as a regulated
investment company under the Code or fails to meet the
distribution
requirement, it would be taxed in the same manner as an ordinary
corporation and distributions to its shareholders would not be
deductible by the fund in computing its taxable income. In
addition, in the event of a failure to qualify, the fund's
distributions, to the extent derived from the fund's current or
accumulated earnings and profits would constitute dividends
(eligible for the corporate dividends-received deduction) which
are
taxable to shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have been
treated
in the shareholders' hands as long-term capital gains. If a fund
fails to qualify as a regulated investment company in any year,
it
must pay out its earnings and profits accumulated in that year in
order to qualify again as a regulated investment company. In
addition, if a fund failed to qualify as a regulated investment
company for a period greater than one taxable year, that fund may
be
required to recognize any net built-in gains (the excess of the
aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order
to
qualify as a regulated investment company in a subsequent year.
PERFORMANCE INFORMATION
From time to time the Company may include a fund'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. Total return is computed for a specified period of
time assuming reinvestment of all income dividends and capital
gains
distributions at net asset value on the ex-dividend dates at
prices
calculated as stated in the Prospectus, then dividing the value
of
the investment at the end of the period so calculated by the
initial
amount invested and subtracting 100%. The standard average annual
total return, as prescribed by the 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 standard total return shows what an investment in
the
fund would have earned over a specified period of time (one, five
or
ten years) assuming that all distributions and dividends by the
fund
were invested on the reinvestment dates during the period less
all
recurring fees.
Yield. The yield of a fund refers to the net investment income
earned by investments in the fund over a thirty-day period. Each
fund'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. 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.
Current Distribution Return. The Company calculates current
distribution return for each fund by dividing the distributions
from
gross investment income declared during the most recent period by
the net asset value per share on the last day of the period for
which current distribution return is presented. A fund'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 fund's current
distribution
return to yields published for other investment companies and
other
investment vehicles. From time to time, a fund may include its
current distribution return in information furnished to present
or
prospective shareowners.
Current distribution return should also be considered relative to
changes in the value of a fund's shares and to the risks
associated
with each fund'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 fund and
for
providing a basis for comparison with other financial
alternatives.
Since the performance of each fund changes in response to
fluctuations in market conditions, interest rate and fund
expenses,
no performance quotation should be considered a representation as
to
that fund's performance for any future period.
DETERMINATION OF NET ASSET VALUE
Each fund's net asset value per share will be determined on any
day
that the New York Stock Exchange is open. The New York Stock
Exchange is closed in celebration of the following holidays: New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day
and Christmas Day.
Net asset value is determined by dividing a fund's net assets by
the
number of its shares outstanding. Securities owned by a fund 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 fund's net assets, and current market value of such options
sold
by a fund will be subtracted from that fund's net assets. Any
other
investments of a fund, 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 fund 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 fund may not take place
contemporaneously with the determination of the prices of
investments held by such fund. 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 fund's net asset value unless management under the
supervision of the Company's Board of Directors, determines that
the
particular event would materially affect the net asset value. As
a
result, a fund's net asset value may be significantly affected by
such trading on days when a shareholder has no access to such
fund.
AVAILABILITY OF THE FUNDS
Investment in the Company 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 Company. However, the Company does not
currently foresee any disadvantages to the contract owners 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 a fund. Material irreconcilable conflicts
could result from, for example: (a) changes in state insurance
laws;
(b) changes in U.S. federal income tax laws; or (c) differences
in
voting instructions between those given by variable annuity
contract
owners and those given by variable life insurance contract
owners.
If the Board were to conclude that separate series of the Company
should be established for variable annuity and variable life
separate accounts, each insurance company would bear the
attendant
expenses. Should this become necessary, contract owners would
presumably no longer have the economies of scale resulting from a
larger combined mutual fund.
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 fund and
its
remaining shareowners. If a redemption is paid in portfolio
securities, such securities will be valued in accordance with the
procedures described under "Determination of Net Asset Value" in
the
Prospectus and a shareholder would incur brokerage expenses if
these
securities were then converted to cash.
INVESTMENT MANAGEMENT AND OTHER SERVICES
SSBC Fund Management Inc. ("SSBC"). SSBC is an affiliate of
Salomon
Smith Barney, which in turn, is a wholly owned subsidiary of
Citigroup Inc. SSBC serves as the investment manager to the
funds.
SSBC manages the day to day operations of each fund pursuant to a
management agreement entered into by the Company on behalf of
each
fund. Under each management agreement, SSBC will (a) manage the
fund's assets in accordance with the fund's investment
objective(s)
and policies as stated in the Prospectus and the SAI; (b) make
investment decisions for the fund; (c) place purchase and sale
orders for portfolio transactions on behalf of the fund; (d)
employ
professional portfolio managers and securities analysts who
provide
research services to the fund; (e) administer the fund's
corporate
affairs and, in connection therewith, furnish the fund 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, SSBC will
conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of each fund's assets.
By written agreement, the Research Department and other
departments
and staff of Salomon Smith Barney will furnish SSBC with
information, advice and assistance and will be available for
consultation on the Company's funds. Thus, Salomon Smith Barney
may
also be considered an investment adviser to the Company. Salomon
Smith Barney's services are paid for by SSBC; there is no charge
to
the Company for such services.
Under each management agreement SSBC will administer each fund's
corporate affairs, and, in connection therewith, is responsible
for
furnishing or causing to be furnished to each applicable fund
advice
and assistance with respect to the acquisition, holding or
disposal
of investments and recommendations with respect to other aspects
and
affairs of the fund, bookkeeping, accounting and administrative
services, office space and equipment, and the services of the
officers and employees of the Company. Each fund receives
discretionary advisory services provided by the manager.
Each management agreement further provides that all other
expenses
not specifically assumed by SSBC under the management agreement
on
behalf of a fund are borne by the Company. Expenses payable by
the
Company 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 Company's shares and the
Company under federal and state securities laws and maintaining
such
registrations and qualifications (including the printing of the
Company'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" of the Company as defined under 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 Company's existence and extraordinary expenses such as
litigation and indemnification expenses. Direct expenses are
charged
to each of the Company's funds. General corporate expenses are
allocated on the basis of relative net assets.
SSBC is subject to the supervision and direction of the Company's
Board of Directors and manages the applicable fund in accordance
with its investment objective and policies, makes investment
decisions for the funds, places orders to purchase and sell
securities and employs professionals who provide research
services.
All orders for transactions in securities on behalf of a fund 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.
Each management agreement shall continue from year to year if
specifically approved at least annually as required by the 1940
Act.
Each management 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.
The manager has agreed to waive its fee to the extent
that the aggregate expenses of the funds, 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 fund. Each of these
voluntary expense limitations shall be in effect until it is
terminated by notice to shareholders and by supplement to the
then
current Prospectus or SAI.
Each management agreement also provides that SSBC shall not be
liable to the Company for any error of judgment or mistake of law
or
for any loss suffered by the Company 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.
OTHER INFORMATION ABOUT THE COMPANY
The Company, an open-end management investment company, was
incorporated in Maryland on February 22, 1994. The Company 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 fifteen series of shares, each representing shares in
one of fifteen separate funds - Smith Barney Aggressive Growth
Portfolio, Smith Barney Mid Cap Portfolio, Smith Barney Pacific
Basin Portfolio, Smith Barney International Equity Portfolio,
Smith
Barney Large Cap Value Portfolio, Smith Barney Large
Capitalization
Growth Portfolio, Alliance Growth Portfolio, AIM Capital
Appreciation Portfolio, Van Kampen Enterprise Portfolio, MFS
Total
Return Portfolio, GT Global Strategic Income Portfolio, Travelers
Managed Income Portfolio, Putnam Diversified Income Portfolio,
Smith
Barney High Income Portfolio and Smith Barney Money Market
Portfolio. The assets of each fund will be segregated and
separately managed and a shareholder's interest is in the assets
of
the fund in which he or she holds shares.
The Board of 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
funds
would be established by the Directors at the time such funds were
established and may differ from those set forth in the Prospectus
and this SAI. In the event of liquidation or dissolution of a
fund
or of the Company, the shareholders of a fund are entitled to
receive the assets belonging to that fund and a proportionate
distribution, based on the relative net assets of the respective
funds, of any general assets not belonging to any particular fund
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 Company
outstanding
and entitled to vote, and in accordance with applicable law,
except
for certain amendments that may be made by the Board of
Directors.
The Articles of Incorporation further provide that the Company
shall
indemnify its directors, officers and employees against any
liability to the Company or to a shareholder, 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 Company.
The Company 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 shareholders or by action of the Board of Directors upon
notice to the shareholders.
Voting Rights. The Company offers its shares only for purchase by
insurance company separate accounts. Thus, the insurance company
is
technically the shareholder of the Company and, under the 1940
Act,
is deemed to be in control of the Company. Nevertheless, with
respect to any Company shareholder meeting, an 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 Company 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 Company attributable to
contract owner 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 fund represents an equal proportionate interest
in
that fund with each other share of the same fund and is entitled
to
such dividends and distributions out of the net income of that
fund
as are declared in the discretion of the directors. Shareholders
are
entitled to one vote for each share held and will vote by
individual
fund except to the extent required by the 1940 Act. The Company
is
not required to hold annual shareholder meetings, although
special
meetings may be called for the Company as a whole, or a specific
fund, for purposes such as electing or removing directors,
changing
fundamental policies or approving a management contract.
Shareholders may cause a meeting of shareholders to be held upon
a
vote of 10% of the Company's outstanding shares for the purpose
of
voting on the removal of directors.
Shares of the Company entitle their holders to one vote per
share;
however, on any matter submitted to a vote of the shareholders,
all
shares then entitled to vote will be voted by individual fund
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 fund would be voted upon only by shareholders of the fund
involved. Additionally, approval of an amendment to a fund's
advisory agreement is a matter to be determined separately by
that
fund. Approval of a proposal by the shareholders of one fund is
effective as to that fund whether or not enough votes are
received
from the shareholders of the other funds to approve the proposal
as
to that fund.
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 shareholders of the Company.
Shares do not have cumulative voting rights and therefore the
holders of more than 50% of the outstanding shares of the Company
may elect all of the directors irrespective of the votes of other
shareholders.
Custodian. Portfolio securities and cash owned by the Company on
behalf of the funds 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).
Transfer Agent. First Data, located at Exchange Place, Boston,
Massachusetts 02109, serves as each fund's transfer and dividend-
paying agent. Under the transfer agency agreement, the transfer
agent maintains the shareholder account records for the funds,
handles certain communications between shareholders and the
funds,
distributes dividends and distributions payable by the funds and
produces statements with respect to account activity for the
funds
and their shareholders. For these services, the transfer agent
receives fees from the funds computed on the basis of the number
of
shareholder accounts that the transfer agent maintains for the
funds
during the month and is reimbursed for out-of-pocket expenses.
Independent Auditors. KPMG LLP, 345 Park Avenue, New York, New
York
10154, has been selected as the Company's independent auditors
for
its fiscal year ending October 31, 1999, to examine and report on
the financial statements and financial highlights of the Company.
PART C. Other Information
Item 23. Exhibits
a.1 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.
a.2 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.
a.3 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.
a.4 Amendment to Articles of Incorporation dated as of
February 17, 1999 is incorporated by reference to
Exhibit a.4 to Post-Effective Amendment No. 11 filed
February 26, 1999.
a.5 Amendment to Articles of Incorporation dated as of
February 24, 1999 is incorporated by reference to
Exhibit a.5 to Post-Effective Amendment No. 11 filed
February 26, 1999.
b. Bylaws of the Fund are incorporated by reference to
Exhibit 2 to Pre-Effective Amendment No. 1 on June
10, 1994.
c. Not applicable
d.1 Management Agreement between Registrant on behalf of
the Smith Barney Large Cap Value Portfolio (formerly
known as Smith Barney Income and Growth Portfolio)
and SSBC Fund Management Inc., formerly Mutual
Management Corp. ("MMC") is incorporated by reference
to Exhibit 5(a) to Pre-Effective Amendment No. 1 on
June 10, 1994 and Post-Effective Amendment No. 1
filed December 29, 1994.
d.2 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 and Post-Effective
Amendment No. 1 filed December 29, 1994. Form of
Transfer and Assumption of Management Agreement from
MMC to Travelers Investment Adviser, Inc. ("TIA") is
incorporated by reference to Exhibit d.21 to Post-
Effective Amendment No. 11 filed February 26, 1999.
d.3 Management Agreement between Registrant on behalf of
the Van Kampen Enterprise Portfolio and MMC is
incorporated by reference to Exhibit 5(c) to Pre-
Effective Amendment No. 1 on June 10, 1994 and Post-
Effective Amendment No. 1 filed December 29, 1994.
Form of Transfer and Assumption of Management
Agreement from MMC to Travelers Investment Adviser,
Inc. ("TIA") is incorporated by reference to Exhibit
d.21 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.4 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 and
Post-Effective Amendment No. 1 filed on December 29,
1994.
d.5 Management Agreement between Registrant on behalf of
the Smith Barney Pacific Basin Portfolio and MMC is
incorporated by reference to Exhibit 5(e) to Pre-
Effective Amendment No. 1 on June 10, 1994 and Post-
Effective Amendment No. 1 filed on December 29, 1994.
d.6 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 and Post-
Effective Amendment No. 1 filed December 29, 1994.
Form of Transfer and Assumption of Management
Agreement from MMC to Travelers Investment Adviser,
Inc. ("TIA") is incorporated by reference to Exhibit
d.21 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.7 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 and Post-
Effective Amendment No. 1 filed December 29, 1994.
Form of Transfer and Assumption of Management
Agreement from MMC to Travelers Investment Adviser,
Inc. ("TIA") is incorporated by reference to Exhibit
d.21 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.8 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 and Post-
Effective Amendment No. 1 filed December 29, 1994.
d.9 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 and Post-
Effective Amendment No. 1 filed December 29, 1994.
Form of Transfer and Assumption of Management
Agreement from MMC to Travelers Investment Adviser,
Inc. ("TIA") is incorporated by reference to Exhibit
d.21 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.10 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 and Post-
Effective Amendment No. 1 filed December 29, 1994.
d.11 Subadvisory Agreement for Alliance Growth Portfolio
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 and
Post-Effective Amendment No. 1 filed December 29,
1994. Form of Agreement replacing MMC with TIA as
the adviser under the Subadvisory Agreement is
incorporated by reference to Exhibit d.22 to Post-
Effective Amendment No. 11 filed February 26, 1999.
d.12 Subadvisory Agreement for Van Kampen Enterprise
Portfolio among Registrant, MMC and Van Kampen Asset
Management, Inc. is incorporated by reference to
Exhibit 5(m) to Pre-Effective Amendment No. 1 on June
10, 1994 and Post-Effective Amendment No. 1 filed
December 29, 1994. Form of Agreement replacing MMC
with TIA as the adviser under the Subadvisory
Agreement is incorporated by reference to Exhibit
d.22 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.13 Subadvisory Agreement for Putnam Diversified Income
Portfolio 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 and Post-Effective Amendment No. 1 filed
December 29, 1994. Form of Agreement replacing MMC
with TIA as the adviser under the Subadvisory
Agreement is incorporated by reference to Exhibit
d.22 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.14 Subadvisory Agreement for GT Global Strategic Income
Portfolio among Registrant, MMC and Invesco (NY),
formerly, G.T. Capital Management, Inc., is
incorporated by reference to Exhibit 5(p) to Pre-
Effective Amendment No. 1 on June 10, 1994 and Post-
Effective Amendment No. 1 filed December 29, 1994.
Form of Agreement replacing MMC with TIA as the
adviser under the Subadvisory Agreement is
incorporated by reference to Exhibit d.22 to Post-
Effective Amendment No. 11 filed February 26, 1999.
d.15 Subadvisory Agreement for MFS Total Return Portfolio
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 and Post-Effective Amendment No. 1 filed
December 29, 1994. Form of Agreement replacing MMC
with TIA as the adviser under the Subadvisory
Agreement is incorporated by reference to Exhibit
d.22 to Post-Effective Amendment No. 11 filed
February 26, 1999.
d.16 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 and
Post-Effective Amendment No. 1 filed December 29,
1994.
d.17 Management Agreement between Registrant, on behalf of
AIM Capital Appreciation Portfolio and MMC is
incorporated by reference to Post-Effective Amendment
No. 4 filed on February 28, 1996. Form of Transfer
and Assumption of Management Agreement from MMC to
TIA is incorporated by reference to Exhibit d.21 to
Post-Effective Amendment No. 11 filed February 26,
1999.
d.18 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. Form of Agreement replacing MMC with TIA as
the adviser under the Subadvisory Agreement is
incorporated by reference to Exhibit d.22 to Post-
Effective Amendment No. 11 filed February 26, 1999.
d.19 Form of Management Agreement between Registrant on
behalf of its Smith Barney Large Capitalization
Growth Portfolio and MMC is incorporated by reference
to Exhibit 5(u) to Post-Effective Amendment No. 9
filed on February 27, 1998.
d.20 Form of Management Agreement between Registrant on
behalf of Travelers Managed Income Portfolio and
Travelers Asset Management International Corporation
is incorporated by reference to Exhibit d.22 to Post-
Effective Amendment No. 10 filed on December 23,
1998.
d.21 Form of Transfer and Assumption of Management
Agreement between MMC and TIA is incorporated by
reference to Exhibit d.21 to Post-Effective Amendment
No. 11 filed February 26, 1999.
d.22 Form of Agreement replacing MMC with TIA as adviser
under Subadvisory Agreement is incorporated by
reference to Exhibit d.22 to Post-Effective Amendment
No. 11 filed February 26, 1999.
e.1 Distribution Agreement between Registrant and CFBDS,
Inc. is incorporated by reference to Exhibit e.1 to
Post-Effective Amendment No. 10 filed on December 23,
1998.
e.2 Form of Selected Dealer Agreement between Registrant
and CFBDS, Inc. is incorporated by reference to
Exhibit e.2 to Post-Effective Amendment No. 11 filed
on February 26, 1999.
f. Not applicable.
g.1 Custodian Agreement between Registrant and PNC Bank,
National Association is incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 1 filed on
December 29, 1994.
g.2 Global Custody Agreement between Barclays Bank PLC
and PNC Bank is incorporated by reference to Exhibit
8 to Post-Effective Amendment No. 1 filed on December
29, 1994.
g.3 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.
g.4 Global Custody Agreement between The Chase Manhattan
Bank and the Customer is incorporated by reference to
Exhibit 8(d) to Post-Effective Amendment No. 7 filed
on February 25, 1997.
h.1 Transfer Agency Agreement between Registrant and
First Data Investor Services Group, Inc. is
incorporated by reference to Exhibit 9 (b) to Post-
Effective Amendment No. 7 filed on February 25, 1997.
i. Opinion and Consent of Sullivan & Cromwell is
incorporated by reference to Exhibit 10 to Pre-
Effective Amendment No. 1 on June 10, 1994.
j. Auditors' Consent to be filed by amendment.
k. Not applicable.
l. Subscription Agreement between Registrant and The
Travelers, Inc. is incorporated by reference to
Exhibit 8 to Post-Effective Amendment No. 1 filed on
December 29, 1994.
m. not applicable
n. Financial Data Schedule to be filed by amendment.
o. not applicable
_________________________
Item 24. Persons Controlled by or under Common Control with
Registrant.
The Registrant is not controlled directly or indirectly by
any person. Information with respect to
the Registrant's investment manager and each subadviser is
set forth under the caption
"Management" in the prospectus included in Part A of this
Amendment to
the Registration Statement on Form N-1A.
Item 25. Indemnification.
Reference is made to ARTICLE 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 26. Business and other Connections of the Manager and each
Subadviser.
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 SSBC Fund
Management Inc. (formerly known as Mutual Management Corp.)
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 Travelers
Asset Management International Corporation is included in
its Form ADV File No. 801-17003, 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 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 INVESCO
(NY), Inc. (formerly G.T. 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
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 27. Principal Underwriters
(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor,
is also the distributor for the following Smith Barney
funds: Concert Investment Series, Consulting Group Capital
Markets Funds, Greenwich Street Series Fund, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney
Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Arizona Municipals Fund Inc., Smith
Barney California Municipals Fund Inc., Smith Barney
Concert Allocation Series Inc., Smith Barney Equity Funds,
Smith Barney Fundamental Value Fund Inc., Smith Barney
Funds, Inc., Smith Barney Income Funds, Smith Barney
Institutional Cash Management Fund, Inc., Smith Barney
Investment 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 Money Market 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., Travelers Series
Fund Inc., and various series of unit investment trusts.
CFBDS also serves as the distributor for the following
funds: The Travelers Fund UL for Variable Annuities, The
Travelers Fund VA for Variable Annuities, The Travelers
Fund BD for Variable Annuities, The Travelers Fund BD II
for Variable Annuities, The Travelers Fund BD III for
Variable Annuities, The Travelers Fund BD IV for Variable
Annuities, The Travelers Fund ABD for Variable Annuities,
The Travelers Fund ABD II for Variable Annuities, The
Travelers Separate Account PF for Variable Annuities, The
Travelers Separate Account PF II for Variable Annuities,
The Travelers Separate Account QP for Variable Annuities,
The Travelers Separate Account TM for Variable Annuities,
The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable
Annuities, The Travelers Separate Account Seven for
Variable Annuities, The Travelers Separate Account Eight
for Variable Annuities, The Travelers Fund UL for Variable
Annuities, The Travelers Fund UL II for Variable Annuities,
The Travelers Variable Life Insurance Separate Account One,
The Travelers Variable Life Insurance Separate Account Two,
The Travelers Variable Life Insurance Separate Account
Three, The Travelers Variable Life Insurance Separate
Account Four, The Travelers Separate Account MGA, The
Travelers Separate Account MGA II, The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers
Quality Bond Account for Variable Annuities, The Travelers
Money Market Account for Variable Annuities, The Travelers
Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for
Variable Annuities, The Travelers Timed Aggressive Stock
Account for Variable Annuities, The Travelers Timed Bond
Account for Variable Annuities.
In addition, CFBDS, the Registrant's Distributor, is also
the distributor for CitiFunds Multi-State Tax Free Trust,
CitiFunds Premium Trust, CitiFunds Institutional Trust,
CitiFunds Tax Free Reserves, CitiFunds Trust I, CitiFunds
Trust II, CitiFunds Trust III, CitiFunds International
Trust, CitiFunds Fixed Income Trust, CitiSelect VIP Folio
200, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400,
CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP
Portfolio. CFBDS is also the placement agent for Large Cap
Value Portfolio, Small Cap Value Portfolio, International
Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio,
U.S. Fixed Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio.
In addition, CFBDS is also the distributor for the
following Salomon Brothers funds: Salomon Brothers
Opportunity Fund Inc., Salomon Brothers Investors Fund
Inc., Salomon Brothers Capital Fund Inc., Salomon Brothers
Series Funds Inc., Salomon Brothers Institutional Series
Funds Inc., Salomon Brothers Variable Series Funds Inc.
In addition, CFBDS is also the distributor for the
Centurion Funds, Inc.
(b) The information required by this Item 27 with respect
to each director and officer of CFBDS is incorporated by
reference to Schedule A of Form BD filed by CFBDS pursuant
to the Securities and Exchange Act of 1934 (File No. 8-
32417).
(c) Not applicable.
Item 28. Location of Accounts and Records.
PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, 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, Travelers 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 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, Travelers
Series Fund, Inc., has duly caused this Post-Effective Amendment
to its Registration Statement to be signed on its behalf by the
undersigned or, 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 30th of July, 1999.
TRAVELERS SERIES FUND INC.
By: /s/Heath B. McLendon
Heath B. McLendon
Chairman of the Board,
President 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
(Heath B. McLendon)
Chairman of the
Board, President
and Chief
Executive Officer
July 30, 1999
July 30, 1999
Abraham E. Cohen
Director
Michael E. Gellert
Director
July 30, 1999
/s/ Victor K. Atkins*
Director
July 30, 1999
(Victor K. Atkins)
/s/ Robert A. Frankel*
Director
July 30, 1999
(Robert A. Frankel)
/s/ Rainer Greeven*
Director
July 30, 1999
(Rainer Greeven)
/s/ Susan M. Heilbron*
Director
July 30, 1999
(Susan M. Heilbron)
/s/Lewis E. Daidone
(Lewis E. Daidone)
Senior Vice
President and
Treasurer (Chief
Financial and
Accounting
Officer)
July 30, 1999
_________________________________________________________________
______________
*Signed by Lewis E. Daidone, their duly authorized attorney-in-
fact, pursuant to power of attorney dated June 8, 1994.
By: /s/Lewis E. Daidone July 30, 1999
Lewis E. Daidone
EXHIBIT INDEX
j. Auditors' Consent to be filed by amendment
n. Financial Data Schedules to be filed by amendment
